Exhibit 10.1
CONFIDENTIAL AND BINDING SETTLEMENT TERM SHEET
This Confidential and Binding Settlement Term Sheet ("Term Sheet") sets forth
the terms of a settlement between and among the following parties: Align
Technology, Inc. ("Align"); OrthoClear Holdings, Inc., OrthoClear, Inc., and
OrthoClear Pakistan Pvt. Ltd. (collectively, "OrthoClear"); Xxx Xxxxxxxx, Xxx
Xxxxxxx, Xxxxxxxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxxxxxxxx, Xxxx Xxxxxxx, and
Xxxxxxx Xxx (collectively, the "OrthoClear Individuals") and Xxxx X. Xxxxxx,
DDS, a Professional Corporation, and Xxx Xxxx; and Xxxxxx X. Xxxxxxxx, Xxxxx X.
Xxxxxx, Xxxxx X. Xxxxxxxxxx, Xxxxxxxx Xxxxxx, Xxx Xxxx, Xxxxxx Xxxxx and Xxxxx
Xxxxxxx (collectively, the "Align Individuals"). The purpose of the settlement
is global peace between Align, OrthoClear, the OrthoClear Individuals, and the
Align Individuals (collectively, the "Parties"). The Parties will enter a formal
settlement agreement effectuating these terms within fifteen (15) days
("Closing"); provided, however, that if they fail to do so, this Term Sheet
shall control and constitute Closing at noon Pacific on the fifteenth day after
this Term Sheet is signed.
1. Exclusion Order. OrthoClear consents to the entry by the ITC of an
exclusion order upon Closing, effective upon entry by the International Trade
Commission. Said exclusion order shall apply to all OrthoClear removable dental
aligners.
2. Settlement Payment by Align. a. In consideration of the global
settlement and mutual releases and other agreements and mutual covenants set
forth herein other than Section 4, Align shall pay $10 million to OrthoClear
Holdings, Inc. by wire transfer simultaneously with the execution and delivery
to Align of (a) a consent to a joint motion to terminate the ITC investigation
and enter the exclusion order provided in paragraph 1 and (b) assignments of
Intellectual Property and covenants not to compete as provided in paragraph 5.
b. If OrthoClear shall at or prior to Closing certify that the
requisite shareholder approval referred to in Section 4 has been obtained, Align
shall pay an additional $10 million to OrthoClear Holdings, Inc. by wire
transfer simultaneously with the making of the payment described in Section 2(a)
above. If at the Closing OrthoClear shall not have certified that such approval
has been obtained, Align shall instead pay $10 million to O'Melveny and Xxxxx
LLP, by wire transfer simultaneously with the making of the payment described in
Section 2(a) above. O'Melveny and Xxxxx LLP shall hold such amount in escrow for
a period of 30 days after Closing. If OrthoClear shall certify that the approval
has been obtained on or prior to the 30th day after Closing, the escrowed amount
and accrued interest thereon shall be released to OrthoClear Holdings. If no
such certification is made on or prior to the 30th day after Closing, then the
escrowed amount and accrued interest thereon shall be released to Align and
Align shall have no further payment obligation under this paragraph 2 b.
3. Patient Transition.
a. Effective upon the execution of this Term Sheet, OrthoClear will
accept no additional patient cases for treatment of malocclusion, for treatment
using removable dental positioners, or for treatment involving other activities
using OrthoClear's existing proprietary technology.
b. Upon Closing, Align will make treatment using removable plastic
dental aligners available for all existing OrthoClear patient cases in the
United States, Canada, and Hong Kong, at no charge from Align to the patient,
the doctor, or OrthoClear. OrthoClear will provide patient case numbers and
dentist contact information for the purposes of facilitating the transfer of
patient cases to Align, which information Align shall maintain in accordance
with the same privacy protections as it does its own customer and patient
information.
c. Align and OrthoClear will cooperate to determine plans for and
to implement the transfer of OrthoClear's patient cases to Align.
4. Shutdown. Upon the later to occur of Closing and the certification by
OrthoClear Holdings, Inc. that all requisite approval of its shareholders for
such action has been obtained, OrthoClear will discontinue, worldwide, all
design, manufacture, marketing and sales of removable dental aligners. This
obligation shall not take effect unless both the Closing and such certification
occur. OrthoClear Holdings, Inc. will take such steps as it determines necessary
or appropriate to solicit such shareholder approval.
5. Transfer Of Intellectual Property. In consideration of the global
settlement and mutual releases and other agreements and mutual covenants set
forth herein, OrthoClear shall assign to Align all of its world-wide
intellectual property rights disclosed in the litigation and any other
intellectual property rights with application to the correction of
malocclusions, including but not limited to OrthoClear's process for designing
and manufacturing removable plastic dental aligners or other activities using
OrthoClear's existing proprietary technology and Xxx Xxxxxxx and Xxxxxxx Xxx
shall assign to Align all of their worldwide intellectual property rights with
application to the correction of malocclusions (the "Transferred Rights") on the
following terms:
a. Scope. The Transferred Rights shall include, but are not limited
to, patents and patent applications, software and confidential process
information, trademarks, copyrights, and trade secrets;
b. Representations and Warranties. OrthoClear, Chishti and Xxx will
provide standard representations and warranties regarding ownership of and right
to transfer the Transferred Rights, including confirmation that there have been
no transfers of rights to third parties between September 19, 2005 and Closing.
In addition, prior to Closing, Xxxxxxx and Xxx will disclose to Xxxxx's
representatives, on a confidential basis, any intellectual property rights
outside the scope of this section but which have application or potential
application to the dental field;
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c. Delivery. OrthoClear shall deliver to Align all copies of those
materials reasonably necessary to prosecute all patent applications and to
maintain any issued patents. OrthoClear shall make reasonable efforts to locate
and deliver to Align all materials relating to or embodying the transferred
intellectual property and shall make reasonable efforts to destroy all copies of
such material not delivered to Align; provided, however, that OrthoClear may
retain an archival copy of all business records. OrthoClear consents to the
disclosure to Align of all discovery responses produced by OrthoClear during
discovery in the ITC investigation that describe or embody the Transferred
Rights (including software, training materials, process manuals, and FDA January
and July filings); provided, however, that Align shall return or destroy (at
OrthoClear's option) all confidential discovery responses that relate to
OrthoClear's finances, sales, marketing strategic plans, disk images, personal
information, regulatory filings other than the January and July FDA submission,
patient data, employees, customers, suppliers, contractors, and/or business
plans;
d. Covenants not to compete for five years in the field of
removable aligner therapy and related software throughout the world by the
following individuals: Xxx Xxxxxxx, Xxxxxxxxxxx Xxxxxx, Xxxxx Xxxxxxxxxxxx,
Xxxxxxx Xxx;
e. Covenants not to compete for five years in the field of
removable aligner therapy and related software in the United States by the
following individuals: Xxxxxx Xxxxxxxx and Xxxx Xxxxxxx. These two individuals
are permitted to work for a company that competes in the field of removable
aligner therapy and related software, so long as the individuals are not
personally involved with those products.
6. Immediate Stays And Future Dismissals.
a. Upon the execution of this Term Sheet, the Parties shall
immediately seek the stay of all pending actions, including without limitation
the state case between Align and OrthoClear, the two pending federal cases
between Align and OrthoClear, and federal case between Xxxxx and Xxxx Xxxxxx. In
seeking such stays, the Parties shall indicate that they have reached a
settlement and seek the stay to complete the documentation to memorialize its
terms. To the maximum extent possible, the Parties shall file under seal all
requests to stay unless a press release or securities filing has already been
issued as described in Paragraph 9, below. Immediately following the Closing,
the Parties shall dismiss with prejudice all pending actions and proceedings,
with each party bearing its own costs and attorney fees. In addition, XxxxxXxxxx
shall take no further action with respect to any inter partes patent
reexamination proceedings instituted by XxxxxXxxxx against Align.
b. In the event that OrthoClear, any OrthoClear employees or
agents, or any former OrthoClear employees or agents (collectively, "OrthoClear
Witnesses") are subpoenaed or otherwise required by Align to produce documents
or provide testimony in connection with any litigation between Align and Xxx
Xxxx (including the state case between Align and Xxx Xxxx if any portion of such
action continues), Align shall reimburse OrthoClear, its successors, or
OrthoClear Witnesses for any and all attorneys' fees, costs, and other related
expenses associated with responding to any such subpoena or producing documents
or providing testimony. Nothing in this section shall be construed as consent by
any current or former OrthoClear Witness to deposition in any location other
than his or her principal residence.
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7. Releases. The Parties shall execute general releases of all claims,
known or unknown, between them, with the exception that as between Align and
Xxxx, Align and Xxxx shall mutually release each other from all claims, known or
unknown, that are related to OrthoClear or any current litigation. The Parties
shall covenant that neither they nor their agents shall directly or indirectly
initiate or assist with, in any manner whatsoever, litigation against any or all
of the Parties, based on any of the subject matter of or information obtained in
any of the dismissed actions, and will not voluntarily provide information or
otherwise cooperate with any person or entity to assert a claim based on the
subject matter of or information obtained in any of those actions except as
required by law. However, in the event any party violates this provision, then
the party or parties against whom the claim is asserted shall not be precluded
from asserting any claims or defenses it may have against the party who violated
this provision.
8. Confidentiality and Nondisparagement. The terms of this Term Sheet shall
be confidential unless and until such terms are disclosed in a press release
and/or securities filing in accordance with Paragraph 9, below. The Parties
shall each take reasonable steps to assure that they and their employees will
not disparage any other Party or make public statements accusing another Party
of criminal or unethical conduct in connection with any of the settled claims.
9. Press Release. Only after execution of the Term Sheet, which is
currently anticipated to be before Wednesday, September 27, 2006, any Party may
issue press releases and/or make securities law filings regarding the settlement
and the terms of the settlement. Prior to issuing any such release, the parties
shall make reasonable efforts to consult and to agree as to its contents. Any
press release issued by Xxxxx regarding the settlement and/or the terms of the
settlement shall name each of the OrthoClear Parties specifically and shall
state that there has been no finding of wrongdoing by any Party or any of the
individuals referenced herein.
10. Definitive Agreement. The Parties shall each use all reasonable efforts
to finalize and execute a final agreement as promptly as reasonably possible.
However, if no such agreement is executed within fifteen (15) days of the
execution of this Term Sheet, this Term Sheet shall control and shall be binding
at Closing as if it were the final, definitive agreement of the Parties.
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IN WITNESS WHEREOF, each Party has caused this Agreement to be executed as of
the Effective Date.
ALIGN TECHNOLOGY, INC. ORTHOCLEAR HOLDINGS, INC.
/s/ Xxxxxx X. Xxxxxxxx /s/ X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxxx Name: Xxxxxxxx Xxxxxxxx Xxxxxxx
Title: President & CEO Title: Chief Executive Officer
Date: September 27, 2006 Date: September 27, 2006
ORTHOCLEAR, INC. ORTHOCLEAR PAKISTAN PVT LTD.
/s/ X. Xxxxxxx /s/ Xxxxxxxx Xxxxxxx
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Name: Xxxxxxxx Xxxxxxxx Xxxxxxx Name: Xxxxxxxx Xxxxxxx
Title: Chief Executive Officer Title: Director
Date: September 27, 2006 Date: September 27, 2006
XXXXXXXX XXXXXXXX XXXXXXX XXX XXXX "XXXXXXX" WEN
/s/ X. Xxxxxxx
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Date: September 27, 2006 Date:
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XXXXX XXXXXXXXXXXX XXXXXXXXXXX XXXXXX
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Date: Date:
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XXXXXXX XXXXXXX XXXXXX XXXXXXXX
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Date: Date:
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XXX XXXX XXXX X. XXXXXX, DDS, P.C.
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Name:
Date: Title:
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Date:
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