Exclusive Marketing Agreement

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").

RECITALS

Align is a corporation having its principal office and place of business at 851 Martin Ave., Santa Clara, California 95050. Align is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with the corporate power to own property and carry on its business as contemplated by this Agreement.

Align is engaged in the manufacture, marketing and sale of clear orthodontic appliances to Orthodontic Dentists throughout the world. Each set of appliances, commonly referred to as an Invisalignae System, is custom manufactured by Align to fit an individual patient.

Discus is a corporation having its principal office and place of business at 8550 Higuera Street, Culver City, California 90232. Discus is a corporation duly organized, validly existing, and in good standing under the laws of the State of California, with the corporate power to own property and carry on its business as contemplated by this Agreement.

Discus is experienced in the direct marketing and distribution of professional dental products to dental professionals.

Align is desirous of having Discus become the exclusive, except as to Align and IASG (as defined below), marketing and sales representative for the Invisalignae System to Non-Orthodontic Dentists (as defined below) throughout the Territory (as defined below). As such representative Discus will solicit orders and provide Training and Sales Support (as such terms are defined below) for the Invisalignae System from Customers. The Invisalignae System will be shipped directly to the Non-Orthodontic Dentists by Align. Billing and collection will be performed by Align and Discus shall receive the Discus Commission (as defined below).

Align shall continue to market and sell the Invisalignae System to Orthodontic Dentists (as defined below) and, subject to the terms of Section II(D) hereof, IASG shall continue to market and sell the Invisalignae System to Non-Orthodontic Dentists within IASG's network.

The purpose of this Agreement is to set forth the respective rights, duties, obligations, and responsibilities of Align and Discus with respect to the marketing of the Invisalignae System and the provision of Training and Sales Support by Discus to Non-Orthodontic Dentists throughout the Territory.

NOW THEREFORE , in consideration of recitals and the covenants and conditions contained in this Agreement, the parties mutually agree as follows:

DEFINITIONS

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:

Affiliate - the term "Affiliate" as used in this Agreement shall mean, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

Align Product Trademark - the term "Align Product Trademark" as used in this Agreement shall mean a United States or Canadian Trademark that identifies a Product.

Align Site - the term "Align Site" as used in this Agreement shall mean Align's web site which is currently located at www.invisalign.com; or such successor web site(s) or URL as Align may designate.

Case Accepted - the term "Case Accepted" as used in this Agreement shall mean acceptance by Align, which acceptance shall not be unreasonably withheld or delayed, of a purchase order from a Non-Orthodontic dentist for an Invisalignae System from within the Territory, regardless of whether the Invisalignae System is for single arch or a dual arch.

Case Evaluation - the term "Case Evaluation" as used in this Agreement shall mean the review of the patient's initial tooth arrangement to determine whether the Invisalignae System is an appropriate treatment for the patient's malocclusion.

Change of Control of Discus - the term "Change of Control of Discus" as used in this Agreement shall mean the occurrence of any of the following with respect to Discus at any time after the date hereof: (1) the sale or transfer (in any one or more of a series of related transactions) of all or substantially all of the assets of Discus or of more than fifty percent (50%) of the outstanding voting stock of Discus, other than an offering of voting stock of Discus to the public pursuant to the rules of the Securities Act of 1933, as amended, to: (a) any Person who sells products that directly compete with clear polymeric shell appliance systems used to reposition teeth, (b) any Person who manufactures products that directly compete with clear polymeric shell appliance systems used to reposition teeth, or (c) any Person who has a financial interest material to such Person described in the foregoing clauses (a) or (b) (collectively, "Prohibited Persons"); or (2) the merger of Discus with or into any Prohibited Person.

Co-Branded Site - the term "Co-Branded Site" as used in this Agreement shall mean the portion of the Align Site which is established and co-branded by the parties in order to accept purchase orders for Products that are submitted by Customers.

Customer - the term "Customer" as used in this Agreement shall mean a Non-Orthodontic Dentist within the Territory.

Consumer Advertising - the term "Consumer Advertising" as used in this Agreement shall mean television, radio, print, outdoor, direct mail or other marketing or advertising used to create awareness in the general public of the availability of the Invisalignae System as a form of treatment for malocclusion.

Dentist - the term "Dentist" as used in this Agreement shall mean either a Non-Orthodontic Dentist or an Orthodontic Dentist.

Design Plan - the term "Design Plan" as used in this Agreement shall mean the set-up of a model of a patient's initial tooth arrangement in a three dimensional CAD program and the subsequent morphing (sometimes referred to as "staging") of the initial tooth arrangement by the CAD program to create each intermediate tooth arrangement for that patient.

Discus Commission - the term "Discus Commission" as used in this Agreement shall mean a commission equal to ***** of all payments received by Align in accordance with this Agreement for Product Sales to Customers.

Discus Products - the term "Discus Products" as used in this Agreement shall mean a product made or distributed by Discus, other than the Products, including, but not limited to, the Discus whitening gel and Splash Impression Material.

Fabrication - the term "Fabrication" as used in this Agreement shall mean the creation of an Invisalignae System including aligners for each anticipated intermediate tooth arrangement created pursuant to the patient's Design Plan.

Financing - the term "Financing" as used in this Agreement shall mean financing provided through a third party financial services company of the Non- Orthodontic Dentist's fee for the Invisalignae System.

IASG - the term "IASG" shall mean Invisalign Administrative Services Group, Incorporated, a wholly-owned subsidiary of Align.

Intellectual Property Rights - the term "Intellectual Property Rights" as used in this Agreement means the Patents, the Trademarks, and all inventions, copyrights, know-how, trade secrets and all other proprietary rights that relate to the design, manufacture, operation or service of a parties' products or services or with respect to which a party has been granted rights by a third party. ***** Confidential treatment requested for redacted portion.

Invisalignae System - the term "Invisalignae System" as used in this Agreement shall mean a system for repositioning teeth, comprising a plurality of individual appliances, and all improvements thereto as Align makes such improvements generally available to its customers. Each appliance is configured to be placed successively on the patient's teeth so as to reposition incrementally the teeth from an initial tooth arrangement, through a plurality of intermediate tooth arrangements, to a final tooth arrangement. The Invisalignae System is covered by a series of Patents, properly assigned to Align in the United States Patent and Trademark Office, including but not limited to United States Patent Nos. 5,975,893, 6,183,248, 6,210,162, 6,217,325, 6,227,850 and 6,227,851.

Leads - the term "Leads" as used in this Agreement shall mean a telephone call made by any interested consumer to Align's call center to gather information about the Invisalign System and seek referral to a Dentist who is certified to use the Invisalign System.

Minimum Sales Quota - the term "Minimum Sales Quota" as used in this Agreement shall have the meaning set forth in Section VIII(D).

Non-Orthodontic Dentist - the term "Non-Orthodontic Dentist" as used in this Agreement shall mean a dentist, other than an Orthodontic Dentist, who is licensed in the Territory.

Non-Orthodontic Training Day - the term "Non-Orthodontic Training Day" shall mean a single full day of training provided by Discus to Customers in which all attending Customers become certified to use the Invisalign System.

On-Going Design Management - the term "On-Going Design Management" as used in this Agreement shall mean helping Non-Orthodontic Dentists work through problems that arise in the treatment of malocclusion that may or may not result during treatment with the Invisalignae System. Such On-Going Design Management may include a Design Plan and the Fabrication and delivery of a new Invisalignae System for a particular patient.

Orthodontic Dentist - the term "Orthodontic Dentist" as used in this Agreement shall mean a licensed practicing dentist, who has received a certificate in advanced graduate studies in orthodontics at an accredited dental institution.

Patents - the term "Patents" as used in this Agreement shall mean any U.S. or foreign patents or any utility models that are in force and have not been declared wholly invalid by a court of competent jurisdiction.

Patient Insurance Reimbursement - the term "Patient Insurance Reimbursement" as used in this Agreement shall mean the assignment of a procedure reimbursement code to allow patients to obtain reimbursement from dental insurance providers.

Patient Prescription and Diagnosis Form- the term "Patient Prescription and Diagnosis Form" as used in this Agreement shall mean Align's standard form, or any modification thereof that Discus and Align may jointly agree upon, used to help qualify whether treatment of malocclusion with the Invisalignae System is appropriate for a particular patient.

Person - the term "Person" as used in this Agreement shall mean an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), trust, association, entity or government or political subdivision, agency or instrumentality of a government.

Products - The term "Products" shall mean the products and services provided by Align to Dentists as listed on Exhibit A.

Professional Liability Insurance Coverage - the term "Professional Liability Insurance Coverage" as used in this Agreement shall mean professional liability insurance which will cover incidents that may arise from treatment by a Non-Orthodontic Dentist through the use of the Invisalignae System, regardless of whether the particular Non-Orthodontic Dentist's primary professional liability policy excludes orthodontic treatment.

Practice Based Marketing - the term "Practice Based Marketing" as used in this Agreement shall mean all marketing that may be used by Non-Orthodontic Dentists to create awareness among their existing patients, or in some cases potential patients, of the availability of the Invisalignae System as a form of treatment. Such Practice Based Marketing shall include but not be limited to counter cards, Invisalignae System product brochures, point of sale items within the dental office, direct mail, in-office Invisalignae System videos, and other advertising offered to Non-Orthodontic Dentists.

Product Sales - the term "Product Sales" as used in this Agreement shall mean sales of Products to Customers.

Sales Price - the term "Sales Price" as used in this Agreement shall mean the price for each Product set forth on Exhibit A.

Sales Support - the term "Sales Support " as used in this Agreement shall include, without limitation, the following services: (1) training for Non-Orthodontic Dentists and their staffs on how to integrate the Invisalign System into their practice, (2) ongoing education regarding the ways in which Align processes cases and how Dentists can best and most effectively clinically treat a case, and (3) such other reasonable troubleshooting and sales support services as Align may reasonably request from time to time.

Splash Impression Material - the term "Splash Impression Material" as used in this Agreement shall mean any hydrophilic vinyl polysiloxany impression material that Discus sells to Dentists under the Trademark "Splash" or any successor Trademark developed by Discus for the same products.

Territory - the term "Territory" as used in this Agreement shall mean the United States and Canada.

Trade Advertising - the term "Trade Advertising" as used in this Agreement shall mean all marketing and advertising to Customers.

Trademark - the term "Trademark" as used in this Agreement shall mean a trademark, service mark, logotype or symbol which has achieved common law trademark status in any jurisdiction and which identifies the products or services of a party or a third party, as the case may be.

Training - the term "Training" as used in this Agreement shall mean teaching the Non-Orthodontic Dentists and their staffs: (1) the features and benefits of the Invisalignae System, (2) how to market the Invisalignae System using the Practice Based Marketing in order to generate cases, (3) how to evaluate a patient to determine whether the Invisalignae System may be an appropriate form of treatment, (4) how to gather, prepare and submit adequate information about the patient such that Align can properly prepare a Design Plan for that patient, including but not limited to the proper technique for taking an impression of sufficient quality as to permit Case Evaluation and a Design Plan, (5) how to teach patients the appropriate way to use the Invisalignae System, (6) how to use equipment and software that may be required to treat patients using the Invisalignae System, and (7) all aspects of prescribing, using, and promotion of Products in the Territory.

APPOINTMENT AND AUTHORITY

Appointment. Subject to the terms and conditions set forth herein, Align does hereby appoint Discus as the exclusive, except as to Align and IASG as provided herein, marketing and sales representative to solicit orders for Products from Customers and to perform the other obligations specified in this Agreement. Discus hereby accepts such appointment.

Restrictions. Discus shall not sell, offer to sell, or promote the Products outside the Territory, or to Orthodontic Dentists anywhere.

Referrals. Discus shall forward to Align all inquiries relating to the Products that Discus receives from Orthodontic Dentists within the Territory and from all customers or potential customers outside the Territory.

Exclusivity. In the event that Align receives requests for purchase of or information relating to the Products from Customers, Align shall forward such requests to Discus. Under no circumstances shall Align fabricate or accept orders for the Products (1) from Customers, (2) from IASG or a subagent of IASG for sales by IASG or any IASG subagent to Customers, or (3) from any Person, other than IASG, who Align knows intends to resell the Products to Customers, unless Align complies with Section III(F) below.

Subagents of Discus. Discus may appoint subagents with Align's prior written consent, which consent shall not be unreasonably withheld or delayed. Regardless of the appointment of subagents, Discus shall remain responsible for the performance of all its obligations hereunder. Discus shall notify Align in advance of all proposed agreements with subagents and shall submit to Align for its review any and all agreements and other documents between or involving Discus and any proposed subagent with respect to the sale of Products. All subagents must agree to be bound by the provisions of this Agreement, as well as any further reasonable terms and conditions which Align may at its sole discretion reasonably choose to impose.

Conflict of Interest. Discus warrants to Align that (1) neither Discus nor any Affiliate of Discus currently represents or promotes any lines or products that directly compete with clear polymeric shell appliance systems used to reposition teeth., and (2) during the term of this Agreement, neither Discus nor any Affiliate of Discus shall, without Align's prior written consent, distribute, sell, promote, or market within the Territory any lines or products that directly compete with clear polymeric shell appliance systems used to reposition teeth.

Independent Contractors. The relationship of Align and Discus established by this Agreement is that of independent contractors, and nothing contained in this Agreement shall be construed to give either party the power to direct and control the day-to-day activities of the other or allow one party to create or assume any obligation on behalf of the other for any purpose whatsoever, except for (1) the marketing of Products in accordance with the terms of this Agreement; (2) the solicitation and referral of orders from Non-Orthodontic Dentists to purchase Products from Align; and (3) the performance of other obligations specified in this Agreement. All financial obligations associated with Discus's business are the sole responsibility of Discus.

TERMS OF SALES OF PRODUCTS BY DISCUS

Purchase Orders. This Agreement contemplates that Customers shall submit purchase orders for Products (i) electronically using the Co-Branded Site, (ii) using written order forms, or (iii) otherwise. No Products shall be furnished to a Customer by virtue of this Agreement alone, but shall require that a Customer submit a purchase order through one of the enumerated methods. All such purchase orders are subject to Align's acceptance, which acceptance shall not be unreasonably withheld or delayed.

Terms and Conditions. All purchase orders for Products submitted by Customers during the term of this Agreement shall be subject to the terms and conditions of this Agreement which shall supercede any terms or conditions contained in any communications between a Customer and Align or between Discus and Align, whether through the Co- Branded Site or otherwise.

Orders Submitted through Co-Branded Site. The parties will use reasonable efforts to create a mechanism within the Co-Branded Site, for example a unique identifier number, to enable the tracking of sales of Products to Customers who have completed the Training provided by Discus.

Sales Price Changes. The Sales Price for each Product may be changed by Align from time to time provided that (1) Align shall give Discus sixty (60) days prior notice before the change in Sales Prices becomes effective, and (2) the price of Invisalign Systems to Customers shall at all times be substantially the same as the prices charged by Align to Orthodontic Dentists.

Billing, Collection and Payments. Align shall be responsible for billing and collection of the Sales Price from the Customers for orders placed and fulfilled under this Agreement. Within fifteen (15) days of the end of each calendar month, Align shall pay Discus the Discus Commission for all Product Sales that are shipped by Align to Customers in such month. Align shall include with the monthly remittance the gross detail of invoices being remitted against such that Discus can verify the accuracy of the remittance. Any amounts owed to Discus by Align which have been received by Align and have not been remitted to Discus as required herein shall be subject to a service charge at the lower of the rate of one and one-half percent (1.5%) per month or the maximum rate permitted by law.

Orders Accepted by Align or IASG. In the event that Align fabricates or accepts orders for the Products (1) from Customers, (2) from IASG or a subagent of IASG for sales by IASG or any subagent of IASG to Customers, or (3) from any Person, other than IASG, who Align knows intends to resell the Products to Customers, Align agrees to do the following: (a) within ten (10) days of fabrication or receipt of the order, notify Discus of receipt of the order by providing to Discus a copy of the invoice for the order, (b) pay to Discus the Discus Commission for such Product sale in accordance with subsection (E) above, and (c) credit the Sales Price of the Product sale toward Discus' Minimum Sales Quota for the relevant sales period and the bonus calculations set forth in Section IV(G) below.

Bonus. If Discus exceeds the Minimum Sales Quota for a particular calendar year by an amount of Product Sales equal to ***** (a "Bonus Increment"), then Align shall pay to Discus, in addition to the normal Discus Commission the following bonus payments: ***** For example:

(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.

DISCUS RESPONSIBILITIES

Training and Sales Support by Discus. Discus shall, at its sole expense, provide initial and continuing Training of and Sales Support to Customers. The Training and Sales Support shall (1) be performed only by specially and properly trained personnel of Discus or agents of Discus, (2) be of the highest quality, and (3) be performed promptly. Discus shall at its sole expense develop and deliver to the Non-Orthodontic Dentists Practice Based Marketing materials and strategies. Align shall have the right to review and approve of all such materials, which approval shall not be unreasonably withheld or delayed. Discus hereby agrees that (a) it shall use best efforts to provide Training to (i) at least 3000 Customers between the Effective Date and March 31, 2002 and (ii) at least 5000 Customers in each of the first four (4) years following the date of this Agreement, and (b) subject to Section IV(B)(2) below, it shall conduct eight (8) Non-Orthodontic Training Days by December 31, 2001, and an additional twenty-four (24) Non-Orthodontic Training Days by March 31, 2002 ***** Confidential treatment requested for redacted portion.

Support of Discus by Align. Align shall provide reasonable sales and technical training, and technical support to Discus's personnel, with the frequency and content of the training to be determined by agreement between Discus and Align. Align and Discus shall each pay its own costs for travel, food, and lodging during the training period. In addition to sales and technical training, Align shall cooperate with Discus in establishing efficient promotional procedures and policies, as set forth in Section VI(E) below. Align shall promptly respond to Discus's reasonable technical questions relating to the Products. Align agrees that (1) it shall provide any and all reasonable assistance requested by Discus (a) for the training of Discus' staff, (b) for the training of Discus' trainers, (c) for the training of Discus' sales force, and (d) with respect to the performance of Discus' obligations under this Agreement, and (2) in consideration of the Discus Non-Orthodontic Training Day commitments set forth in Section IV(A)(b) above, Align shall (a) provide two (2) full days of training to Discus' sales force by December 31, 2001, (b) it shall ensure that one (1) Align sales representative and one (1) Orthodontist certified to use the Invisalign System attend each of the Non-Orthodontic Training Days referenced in Section IV(A)(b) above.

Marketing and Promotion to Non-Orthodontic Dentists. Discus shall, at its sole expense, vigorously promote the sale of the Products to Customers, beginning as soon as feasible after the date of this Agreement, using generally the same channels and methods, exercising the same diligence, and adhering to the same standards that it employs with respect to other products sold by Discus. Discus shall advertise the Products in trade publications within the Territory, participate in appropriate trade shows, and directly solicit orders from Customers for the Products. Discus shall place twenty-four (24) or more national trade magazine advertisements per calendar year and exhibit Products at every non-orthodontic dental trade show in the Territory with two thousand (2000) or more Non-Orthodontic Dentists in attendance. Discus shall use reasonable efforts to keep Align apprised of Discus' plans and efforts with respect to such promotions, and Align may comment to Discus with respect to such promotions. Discus, however, shall have complete discretion with respect to all decisions.

Training Fees. For Training provided by Discus, Discus may charge each Customer a fee. Discus shall submit to Align for approval, which approval shall not be unreasonably withheld or delayed, the amount of the fee that each Customer shall be charged for the Training. The fee shall be no less than ***** per Non-Orthodontic Dentist. The fee for the Training shall be paid directly to Align by the Non-Orthodontic Dentist. Within ten (10) days of the end of any month in which Align receives fees from Non-Orthodontic Dentists to whom Discus provided Training, Align shall pay Discus a fee per Non-Orthodontic Dentist equal *****, plus *****.

Customer Service. Discus shall, at Discus's sole expense, provide any and all support for Customers and/or their staffs with regard to billing and payment collection.

Compliance with Laws and Good Commercial Practices. Discus shall use its best efforts to promote and sell the Products for use only by qualified Customers in compliance with local laws and regulations and good commercial practice and for uses and applications reasonably approved by Align for the Products. Discus and its employees and agents shall not promote the Products for any indications or applications, as the case may be, not approved for such Products by applicable regulatory authorities. ***** Confidential treatment requested for redacted portion.

Customer Relationships and Reporting. Discus shall, at Discus's sole expense and consistent with the sales policies of Align and with good business practice: (1) place the Products in Discus's literature as soon as possible; (2) provide adequate contact with existing and potential customers within the Territory on a regular basis; and (3) assist Align in assessing customer requirements for the Products, including modifications and improvements thereto, in terms of quality, design, functional capability, and other ...