EXHIBIT 10.16
Note:Portions of this Exhibit are the subject of a Confidential Treatment Request by the registrant to the Securities and Exchange Commission. Such portions have been redacted and are marked with ***** in place of the redacted language.
EXCLUSIVE MARKETING AGREEMENT
THIS EXCLUSIVE MARKETING AGREEMENT ("Agreement") dated October 18, 2001 ("Effective Date"), is made and entered into by and between Align Technology, Inc., with principal offices at 851 Martin Ave., Santa Clara, California 95050 ("Align"), and Discus Dental Impressions, Inc., with principal offices at 8550 Higuera Street, Culver City, California 90232 ("Discus").
NOW THEREFORE, in consideration of recitals and the covenants and conditions contained in this Agreement, the parties mutually agree as follows:
Terms used herein shall have the meanings associated with common usage or general acceptance, whether industry specific or as used in general business transactions; except that as used in this Agreement the following terms shall have the meanings specified:
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(a) If the Product Sales in any calendar year exceed the Discus Minimum Sales Quota for such calendar year by an amount equal to *****;
(b) If the Product Sales in any calendar year exceed the Minimum Sales Quota for such year by an amount equal to *****
(c) If the Product Sales in any calendar year exceed the Minimum Sales Quota for such year by an amount equal to *****
For the purpose of calculating these bonus payments in calendar year 2002, the three Minimum Sales Quotas that correspond with the three sales periods that fall within calendar year 2002 shall be added together and treated as a single Minimum Sales Quotas for calendar year 2002 and all sales attributable to meeting each of those Minimum Sales Quotas shall be added together to calculate whether Discus is entitled to a bonus under this Section III(G) for calendar year 2002.
For the purpose of calculating these bonus payments in calendar year 2003, the two Minimum Sales Quotas that correspond with the two sales periods that fall within calendar year 2003 shall be added together and treated as a single Minimum Sales Quotas for calendar year 2003 and all sales attributable to meeting each of those two Minimum Sales Quotas shall be added together to calculate whether Discus is entitled to a bonus under this Section III(G) for calendar year 2003. Any bonus amount payable under this Section III(G) shall be paid by Align within ninety (90) days of the end of the calendar year to which it applies.
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Should this Agreement be renewed for the additional five-year period pursuant to Section VIII(B), the Consumer Advertising to Non-Orthodontic Dentists will be specified in the renewal agreement.
Without limiting the generality of the foregoing, Align specifically agrees that for no calendar year during the term of this Agreement or any renewal thereof, shall the Consumer Advertising spent by Align be less than ***** of the Minimum Sales Quota for such calendar year.
(1) Dentists shall be assigned to one of three (3) tiers of preference for receiving Leads depending on factors ("Tiering Criteria") which include, without limitation: (a) the productivity of a Dentist (measured by the number of cases submitted on a monthly basis), and (b) a Dentist's proximity to a caller. Where possible, preference will be given by Align in assigning Leads to Dentists in higher tiers and no preference will be given to Orthodontic Dentists over Non-Orthodontic Dentists.
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(2) Non-Orthodontic Dentists who have completed Training and been certified to use the Invisalign System but who have not yet submitted cases, will be placed in the top tier for a sixty (60) day trial period during which they will have the opportunity to demonstrate that they have the ability to performin accordance with the then-applicable Tiering Criteria for the top tier. At the expiration of such sixty (60) day trial period one of the following things will happen: (a) if the Non-Orthodontic Dentist has performed in accordance with such Tiering Criteria, then he or she will remain in such tier, (b) if the Non-Orthodontic Dentist has failed to perform in accordance with such Tiering Criteria, then he or she will be re-assigned to the appropriate tier.
(3) The parties agree to review Tiering Criteria every six (6) months for modification, however Align shall have sole discretion over final decisions regarding Tiering Criteria and the assignments made pursuant thereto.
(4) The Tiering Criteria will be communicated to all Dentists who have been certified to use the Invisalign System.
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(1) The Minimum Sales Quotas for each calendar year during the renewal period shall increase from the previous calendar year's Minimum Sales Quota by fifteen percent (15%); or
(2) Discus shall have an option, exercisable until June 30, 2006, to sell back all of its rights under this Agreement for a payment equal to three (3) multiplied by the total Discus Commissions earned by Discus during the twelve (12) month period beginning on July 1, 2005 and ending on June 30, 2006. Align shall make such payment in five equal installments of twenty percent (20%), each of which shall be paid no later than the following dates: September 30, 2006, October 31, 2006, November 30, 2006, December 31, 2006 and January 31, 2007.
(1)Align's Termination Rights.
Except as expressly provided otherwise below, Align shall have the right to give written notice of termination of this Agreement to Discus within forty-five (45) days after the end of any sales period set forth below where Discus has failed to meet the following minimum sales quotas (each, a "Minimum Sales Quota"). In the event Align provides such termination notice, Align shall have the right to set the effective date of such termination to be any date within 180 days after the date of such termination notice. In the event that Align does not provide such notice or terminate this Agreement within the time periods provided, Align shall be deemed to have waived its termination rights with respect to that particular sales period although such waiver shall not affect Align's termination rights with respect to future sales periods.
2.Exceptions to Align's Termination Rights.
Align's termination rights under this subsection (D) shall be subject to following:
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(a) Align shall not have the right to terminate in any sales period if the cumulative sales for that sales period when combined with the sales during the immediately preceding two (2) sales periods meet or exceed the combined Minimum Sales Quotas for the three (3) sales periods.
(b) In addition, in the event that Discus meets eighty percent (80%) of any particular Minimum Sales Quota, Discus shall have one-half (1/2) of the following sales period (the "Cure Period") to achieve thirty-five percent (35%) of the Minimum Sales Quota for the Cure Period, in which case Align shall not have the right to terminate this Agreement for Discus' failure to meet the Minimum Sales Quota for the sales period immediately preceding the Cure Period. However, if Discus fails to achieve thirty-five percent (35%) of the Minimum Sales Quota during the Cure Period, Align shall have the right to (a) give written notice of termination of this Agreement to Discus within forty-five (45) days after the end of such Cure Period, and (b) set the effective date of such termination to be any date within 180 days after the date of such termination notice. In the event that Align does not provide such notice or terminate this Agreement within the time periods provided, Align shall be deemed to have waived its rights with respect to that particular sales period and Cure Period although such waiver shall not affect Align's rights with respect to future sales periods or Cure Periods.
(c) In the event Discus achieves at least sixty percent (60%) of the Minimum Sales Quota for such sales period and Align then elects to terminate this Agreement at the end of such sales period (the "Final Sales Period") or following the failure to cure as provided for in the preceding section, then Align will pay Discus the following amounts for all orders received from Non-Orthodontic Dentists who (i) have submitted an order for at least one case prior to the effective date of any termination of this Agreement under this Section (D), and (ii) either paid for such order prior to or within ninety (90) days of the effective date of any termination of this Agreement under this Section (D)(X) fifty percent (50%) of the Discus Commission for all orders received from such Non-Orthodontic Dentists in the next twelve (12) month period immediately following the Final Sales Period; (Y) thirty-three percent (33%) of the Discus Commission for all orders received from such Non-Orthodontic Dentists in the second twelve (12) month period following the Final Sales Period; and (Z) twenty percent (20%) of the Discus Commission for all orders received from such Non-Orthodontic Dentists in the third twelve (12) month period following the Final Sales Period.
(H)Effect of a Change of Control of Discus.
1.Definitions. For purposes of this Section VIII(H), the following terms shall have the meanings specified:
(a) The term "Excess Sales Quota Percentage" for any period of time shall mean the percentage derived from the following calculation: (i) the Product Sales for such period of time calculated on an annualized basis (e.g., multiplied by the number two (2) if the period of time is six (6) months or two calendar quarters, and multiplied by four (4) if the period of time is three (3) months or one (1) calendar quarter);minus (ii) the applicable Original Annual Minimum Sales Quota;divided by(iii) the applicable Original Annual Minimum Sales Quota.
(b) The term "Original Minimum Annual Sales Quota" shall mean: (i) ***** in the case of calendar year 2002; (ii) ***** in the case of calendar year 2003; (iii) ***** in the case of calendar year 2004; (iv) ***** in the case of calendar year 2005; and (v) *****.
2. (H)Effect of a Change of Control of Discus.
1.Definitions. For purposes of this Section VIII(H), the following terms shall have the meanings specified:
(a) The term "Excess Sales Quota Percentage" for any period of time shall mean the percentage derived from the following calculation: (i) the Product Sales for such period of time calculated on an annualized basis (e.g., multiplied by the number two (2) if the period of time is six (6) months or two calendar quarters, and multiplied by four (4) if the period of time is three (3) months or one (1) calendar quarter); minus (ii) the applicable Original Annual Minimum Sales Quota; divided by (iii) the applicable Original Annual Minimum Sales Quota.
(b) The term "Original Minimum Annual Sales Quota" shall mean: (i) ***** in the case of calendar year 2002; (ii) *****in the case of calendar year 2003; (iii) ***** in the case of calendar year 2004; (iv) ***** in the case of calendar year 2005; and (v) ***** in the case of calendar year 2006.
2.Effect of a Change of Control of Discus. A Change of Control of Discus (as defined in Section I(F) above) shall have the following effects:
(a) Effective the first day of the first full calendar quarter following the effective date of the Change of Control of Discus, the Minimum Sales Quotas set forth in Section (VIII)(D)(1) above shall become quarterly Minimum Sales Quotas which shall be calculated as follows.
(i) The Minimum Sales Quota for the first quarter of any calendar year during the remaining term of this Agreement shall be equal to the applicable Original Annual Minimum Sales Quotamultiplied bythe higher of (X) 18%, or (Y) the Excess Sales Quota Percentage for the prior six (6) months.
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(ii) The Minimum Sales Quota for the second quarter of any calendar year during the remaining term of this Agreement shall be equal to the applicable Original Minimum Annual Sales Quota,multiplied bythe higher of (X) 22%, or (Y) the average of (I) the Excess Sales Quota Percentage the prior three (3) months (i.e., the just-ended first quarter in such calendar year), and (II) the Excess Sales Quota Percentage for the prior fourth, fifth and six months (i.e., the fourth quarter from the immediately preceding calendar year).
(iii) The Minimum Sales Quota for the third quarter of any calendar year during the remaining term of this Agreement shall be equal to the applicable Original Minimum Annual Sales Quota,multiplied bythe higher of (X) 28%, or (Y) the Excess Sales Quota Percentage for the prior six (6) months.
(b) Section VIII(D)(2)(c) shall terminate in its entirety.
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ALIGN'S INITIALS _________ DISCUS' INITIALS ____________
(1)Align Indemnification for Infringement Actions. Align has the obligation to defend Discus, its officer, directors, and/or shareholders, or at Align's option to settle, and Align agrees, at Align's own expense, to defend Discus, its officer, directors, and/or shareholders, or at Align's option to settle, any third party claim, suit or proceeding brought against Discus, its officer, directors, and/or shareholders to the extent such claim, suit or proceeding alleges that use of a Product infringes on such third party's United States or Canadian Patent or United States or Canadian Trademark and Align agrees to indemnify Discus, its officer, directors, and/or shareholders against any and all damages, costs and expenses (including legal fees) that a court awards in a final judgment against Discus under any such claim or action. The foregoing obligation of Align does not apply with respect to Product or portions or components thereof (a) that are not supplied by Align, (b) that are used in violation of this Agreement or in a manner not provided for or described in documentation accompanying the Products, (c) that are modified after shipment by Align, if the alleged infringement relates to such modification, (d) that are combined with other products, processes or materials where the alleged infringement relates to such combination, (e) with respect to which the Customer or patient continues allegedly infringing activity after being notified thereof or after being informed of modifications that would have avoided the alleged infringement, or (f) where use of the Product is incident to an infringement not resulting primarily from the Products. Align's obligation also shall not apply to trademark infringements involving any marking or branding not applied by Align or involving any marking or branding applied at the request of Discus. If any Product or any portion of a Product becomes, or in Align's opinion is likely to become, the subject of a claim of infringement, then Align may, at its option and expense, (i) procure for the Customer(s) the right to continue using the Product or portion of a Product, as the case may be, or (ii) replace or modify the affected Product or portion of a Product, as the case may be, so that it becomes non-infringing. If neither alternative is reasonably available, Align may terminate this Agreement.
(2)Align Indemnification for Product Liability Actions. Align has the obligation to defend Discus, its officer, directors, and/or shareholders, or at Align's option to settle, and Align agrees, at Align's own expense, to defend Discus, its officer, directors, and/or shareholders, or at Align's option to settle, any third party claim, suit or proceeding brought against Discus, its officer, directors, and/or shareholders to the extent such claim, suit or proceeding alleges that use of any of the Products cause injury to anyone, except to the extent that the injury was caused by negligence or intentional acts of Discus. Align further agrees to indemnify Discus, its officer, directors, and shareholders against any and all damages, costs and expenses (including legal fees) that a court awards in a final judgment against Discus, its officer, directors, and/or shareholders under any such claim or action.
(3)Discus Indemnification for Infringement Actions. Discus has the obligation to defend Align, its officer, directors, and/or shareholders, or at Discus's option to settle, and Discus agrees, at Discus's own expense, to defend Align, its officer, directors, and/or shareholders, or at Discus's option to settle, any third party claim, suit or proceeding brought against Align, its officer, directors, and/or shareholders to the extent such claim, suit or proceeding alleges that use of a Discus Product infringes on such third party's United States or Canadian Patent or United States or Canadian Trademark and Discus agrees to indemnify Align, its officer, directors, and/or shareholders against any and all damages, costs and expenses (including legal fees) that a court awards in a final judgment against Align under any such claim or action. The foregoing obligation of Discus does not apply with respect to Discus Product or portions or components thereof (a) that are not supplied by Discus, (b) that are used in violation of this Agreement or in a manner not provided for or described in documentation accompanying the Discus Products, (c) that are modified after shipment by Discus, if the alleged infringement relates to such modification, (d) that are combined with other products, processes or materials where the alleged infringement relates to such combination, (e) with respect to which the Customer or patient continues allegedly infringing activity after being notified thereof or after being informed of modifications that would have avoided the alleged infringement, or (f) where use of the Product is incident to an infringement not resulting primarily from the Discus Products. Discus's obligation also shall not apply to trademark infringements involving any marking or branding not applied by Discus or involving any marking or branding applied at the request of Align. If any Discus Product or any portion of a Discus Product becomes, or in Discus's opinion is likely to become, the subject of a claim of infringement, then Discus may, at its option and expense, (i) procure for the Customer(s) the right to continue using the Discus Product or portion of a Discus Product, as the case may be, or (ii) replace or modify the affected Discus Product or portion of a Discus Product, as the case may be, so that it becomes non- infringing. If neither alternative is reasonably available, Discus may terminate this Agreement.
(4)Discus Indemnification for Product Liability Actions. Discus has the obligation to defend Align, its officer, directors, and/or shareholders, or at Discus's option to settle, and Discus agrees, at Discus's own expense, to defend Align, its officer, directors, and/or shareholders, or at Discus's option to settle, any third party claim, suit or proceeding brought against Align, its officer, directors, and/or shareholders to the extent such claim, suit or proceeding alleges that use of a Discus Product causes injury to anyone, except to the extent that the injury was caused by negligence or intentional acts of Align. Discus further agrees to indemnify Align, its officer, directors, and/or shareholders against any and all damages, costs and expenses (including legal fees) that a court awards in a final judgment against Align under any such claim or action.
(1) Discus agrees that (a) Align owns all right, title, and interest in the product lines that include the Products and in and to all Align's Intellectual Property Rights, and (b) except as expressly provided otherwise herein, Discus shall not, by virtue of this Agreement, acquire any right, title or interest in or to any Align's Intellectual Property Right. The use by Discus of any Align's Intellectual Property Rights is authorized only for the purposes herein set forth, and upon termination of this Agreement for any reason such authorization shall cease.
(2) Except as expressly provided otherwise herein, Align agrees that shall not by virtue of this Agreement, acquire any right, title or interest in or to any of Discus' Intellectual Property Rights.
(1) Each party acknowledges that by reason of its relationship to the other hereunder, it will have access to certain proprietary information and materials designated "proprietary" concerning the other party's business, plans, customers, technology, and products (the "Confidential Information"). Without limiting the generality of the foregoing, Align's Intellectual Property Rights shall be considered Confidential Information of Align and Discus' Intellectual Property Rights shall be considered Confidential Information of Discus. Each party agrees that it will not use in any way for its own account or the account of any third party (except for the purpose of performing its obligations under this Agreement), nor disclose to any third party, any such Confidential Information revealed to it by the other party without the express written consent of the disclosing party. Each of the parties further agrees to use the same degree of care concerning Confidential Information as it uses to protect its own confidential and proprietary technical information to prevent the unauthorized disclosure to any third party of the Confidential Information received from the disclosing party hereunder. The parties agree that they shall acquire no rights with respect to Confidential Information of the other party received hereunder. The parties agree that the Confidential Information received by a disclosing party hereunder shall not be disclosed to any third party or to any employee, officer or director of the receiving party, except to those employees, officers and directors whose responsibilities require such disclosure for purposes of performing the parties' obligations under this Agreement; provided that such employees, officers and directors have entered into confidentiality agreements with provisions substantially similar to those set forth in this Section X(E).
(2) The obligations hereunder shall not apply to Confidential Information:
(3) Upon termination of this Agreement, the receiving party shall return to the disclosing party any tangible copies of any Confidential Information provided to it by the disclosing party hereunder, and any notes taken by employees, officers and directors of the receiving party regarding the Confidential Information disclosed to it.
(4) The obligations of this Section X(E) shall (a) apply to Confidential Information relating to the subject matter of this Agreement disclosed during or prior to the execution hereof and (b) survive termination of this Agreement for any reason.
(5) Neither party shall issue a press release which discusses this Agreement or the other party without text approval from the other party, which approval shall not be unreasonably withheld or delayed, except that either party may issue a press release which that party in good faith deems necessary to comply with securities or other governmental rules or requirements.
(1)Use. Subject to subsection (F)(2) below, during the term of this Agreement, Discus shall have the right to indicate to the public that Discus is an authorized representative of the Align Product Trademarks and to advertise within the Territory such Products under the Align Product Trademarks. Discus shall not alter or remove any Align Product Trademark applied to the Products at the factory. Except as set forth in this Section X(F), nothing contained in this Agreement shall grant to Discus any right, title or interest in the Align Product Trademarks and Discus is prohibited from seeking or assisting in the registration of Align Product Trademarks on behalf of Discus or anyone other than Align.
(2)Approval of Representations. All representations of the Align Product Trademarks that Discus intends to use shall first be submitted to Align for approval, which shall not be unreasonably withheld or delayed, of design, color, and other details or shall be exact copies of those used by Align. If any Align Product Trademarks are to be used in conjunction with another trademark on or in relation to the Products, then the Align Product Trademark shall be presented equally legibly, equally prominently, and of equal or greater size than the other but nevertheless separated from the other so that each appears to be a mark in its own right, distinct from the other mark.
(3)Further Assurances Regarding Align Product Trademarks. At no time during or after the term of this Agreement shall Discus challenge or assist others to challenge any Align Product Trademarks or the registration thereof, or use or register, or attempt to use or register, any Trademarks, marks or trade names confusingly similar to any Align Product Trademarks.
(4)Further Assurance Regarding General Trademarks. Without in any way limiting subsection (F)(3) above, the parties hereby agree that at no time during or for a period of eighteen (18) months after the term of this Agreement shall either party challenge or assist others to challenge any Trademark of the other party or the registration thereof, or use or register, or attempt to use or register, any Trademarks, marks or trade names confusingly similar to those of the other party.
(1) In the case of Discus, to Mr. Robert Hayman, President, Discus Dental Impressions, Inc., at the address set forth in Recital I(C) hereof, or by Facsimile at (310) 845- 1513, or to such other person or address as Discus may from time to time furnish to Align.
(2) In the case of Align to, Mr. Zia Chishti, Chief Executive Officer, Align Technology, Inc., at the address set forth in Recital I(A) hereof, or by Facsimile at (408) 727- 1393, or to such other person or address as Align may from time to time furnish to Discus.
EXECUTED on the date first above written.
/S/ Robert Hayman
Robert Hayman
President & Chief Executive Officer
Discus Dental Impressions, Inc.
/S/ Zia Chishti
Zia Chishti
Chief Executive Officer
Align Technology, Inc.
EXHIBIT A
LIST OF PRODUCTS, SERVICES AND PRICES
EXHIBIT A
LIST OF PRODUCTS, SERVICES AND PRICES
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Notes:
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