-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P8k5xoh5PwYiuQgfvCr7U/d+eZTnC/dKz3LQQMB2xa4+4Q3DMsooMltqOBb2jQgb qkM1bfvYlIbp3hRuwitGOQ== 0001017062-02-000993.txt : 20020515 0001017062-02-000993.hdr.sgml : 20020515 20020515151200 ACCESSION NUMBER: 0001017062-02-000993 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOLASE TECHNOLOGY INC CENTRAL INDEX KEY: 0000811240 STANDARD INDUSTRIAL CLASSIFICATION: DENTAL EQUIPMENT & SUPPLIES [3843] IRS NUMBER: 870442441 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19627 FILM NUMBER: 02651497 BUSINESS ADDRESS: STREET 1: 981 CALLE AMANECER CITY: SAN CLEMENTE STATE: CA ZIP: 92673 BUSINESS PHONE: 7143611200 MAIL ADDRESS: STREET 1: 981 CALLE AMANECER CITY: SAN CLEMENTE STATE: CA ZIP: 92673 FORMER COMPANY: FORMER CONFORMED NAME: PAMPLONA CAPITAL CORP DATE OF NAME CHANGE: 19911104 FORMER COMPANY: FORMER CONFORMED NAME: LASER ENDO TECHNIC CORP DATE OF NAME CHANGE: 19920708 FORMER COMPANY: FORMER CONFORMED NAME: LASER MEDICAL TECHNOLOGY INC DATE OF NAME CHANGE: 19941117 10-Q 1 d10q.txt FORM 10-Q FOR PERIOD ENDING 03/31/2002 ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2002 or [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to _______ Commission File Number 000-19627 BIOLASE TECHNOLOGY, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 87-0442441 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 981 Calle Amanecer, San Clemente, CA 92673 (Address of Principal Executive Offices) (949) 361-1200 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.001 par value 20,027,948 Title of Class Number of Shares Outstanding at April 22, 2002 ================================================================================ BIOLASE TECHNOLOGY, INC. INDEX -----
Page Number ----------- PART 1. FINANCIAL INFORMATION ITEM 1. Financial Statements: Consolidated Balance Sheets 3 Consolidated Statements of Operations 4 Consolidated Statement of Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 23 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 24 ITEM 2. Changes in Securities and Use of Proceeds 24 ITEM 3. Defaults Upon Senior Securities 24 ITEM 4. Submission of Matters to a Vote of Security Holders 24 ITEM 5. Other Information 24 ITEM 6. Exhibits and Reports on Form 8-K 24 SIGNATURES 26
2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. - ------------------------------ BIOLASE TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 2002 December 31, 2001 ---------------------------------------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 2,469,000 $ 2,670,000 Accounts receivable, less allowance of $100,000 and $195,000 in 2002 and 2001, respectively 2,428,000 2,095,000 Inventories, net of reserves of $228,000 and $232,000 in 2002 and 2001, respectively 2,232,000 1,887,000 Prepaid expenses and other current assets 259,000 260,000 ---------------------------------------- Total current assets 7,388,000 6,912,000 Property, plant and equipment, net 1,431,000 392,000 Patents and trademarks, net 85,000 91,000 Other assets 247,000 166,000 ---------------------------------------- Total assets $ 9,151,000 $ 7,561,000 ======================================== Liabilities and Stockholders' Equity Current liabilities: Line of credit $ 1,792,000 $ 1,792,000 Accounts payable 1,740,000 1,656,000 Accrued liabilities 1,855,000 1,976,000 Customer deposits 87,000 290,000 Deferred gain on sale of building, current portion 63,000 63,000 Current portion of long-term debt 300,000 - ---------------------------------------- Total current liabilities 5,837,000 5,777,000 Deferred gain on sale of building 189,000 205,000 Long term debt 700,000 - ---------------------------------------- Total liabilities 6,726,000 5,982,000 ---------------------------------------- Stockholders' equity: Preferred stock, par value $0.001, 1,000,000 shares authorized, no shares issued and outstanding - - Common stock, par value $0.001, 50,000,000 shares authorized, issued and outstanding 20,018,000 in 2002 and 19,734,000 in 2001 20,000 20,000 Additional paid-in capital 49,185,000 48,462,000 Accumulated other comprehensive income 4,000 - Accumulated deficit (46,784,000) (46,903,000) ---------------------------------------- Total stockholders' equity 2,425,000 1,579,000 ---------------------------------------- Total liabilities and stockholders' equity $ 9,151,000 $ 7,561,000 ========================================
See accompanying notes to consolidated financial statements. 3 Item 1. Financial Statements (continued). - ------------------------------------------ BIOLASE TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, ------------------------------------------------ 2002 2001 ---------------------- ---------------------- Net sales $ 5,230,000 $ 3,083,000 Cost of sales 2,109,000 1,354,000 ---------------------- ---------------------- Gross profit 3,121,000 1,729,000 Operating expenses: Sales and marketing 2,095,000 1,597,000 General and administrative 474,000 474,000 Engineering and development 419,000 360,000 ---------------------- ---------------------- Total operating expenses 2,988,000 2,431,000 ---------------------- ---------------------- Income (loss) from operations 133,000 (702,000) Gain on sale of asset 16,000 - Interest income 3,000 6,000 Interest expense (33,000) (76,000) ---------------------- ---------------------- Income (loss) before income taxes 119,000 (772,000) Provision for income taxes - - ---------------------- ---------------------- Net income (loss) $ 119,000 $ (772,000) ====================== ====================== Net earnings (loss) per share - Basic $ 0.01 $ (0.04) ====================== ====================== Diluted $ 0.01 $ (0.04) ====================== ====================== Weighted average shares outstanding - Basic 19,791,000 19,430,000 ====================== ====================== Diluted 21,250,000 19,430,000 ====================== ======================
See accompanying notes to consolidated financial statements. 4 Item 1. Financial Statements (continued). - ------------------------------------------ BIOLASE TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
Accumulated Common Stock and Other Total Preferred Stock Additional Paid-in Capital Comprehensive Accumulated Stockholders' Shares Amount Shares Amount Income Deficit Equity --------- ---------- ----------- ----------- ------------- -------------- -------------- Balances at December 31, 2001 - $ - 19,734,000 $48,482,000 $ - $ (46,903,000) $ 1,579,000 Exercise of stock options - - 119,000 310,000 - - 310,000 Exercise of warrants - - 165,000 413,000 - - 413,000 Comprehensive income (loss): Net income - - - - - 119,000 119,000 Foreign currency translation adjustment - - - - 4,000 - 4,000 --------- ---------- ----------- ----------- ------------- -------------- -------------- Total comprehensive income - - - - 4,000 119,000 123,000 --------- ---------- ----------- ----------- ------------- -------------- -------------- Balances at March 31, 2002 - $ - 20,018,000 $49,205,000 $ 4,000 $ (46,784,000) $ 2,425,000 ========= ========== =========== =========== ============= ============== ==============
See accompanying notes to consolidated financial statements. 5 Item 1. Financial Statements (continued). - ------------------------------------------ BIOLASE TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, ----------------------------------------------- 2002 2001 --------------------- ---------------------- Cash flows from operating activities: Net income (loss) $ 119,000 $ (772,000) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 40,000 59,000 Gain on disposal of assets (16,000) - Provision for bad debts (91,000) - Provision for inventory excess and obsolescence (4,000) 5,000 Changes in assets and liabilities: Accounts receivable (242,000) (334,000) Inventory (341,000) 269,000 Prepaid expenses and other assets (81,000) (7,000) Accounts payable and accrued expenses (37,000) 1,000 Customer deposits (203,000) 14,000 --------------------- ---------------------- Net cash used in operating activities (856,000) (765,000) --------------------- ---------------------- Cash flows from investing activities: Additions to property, plant and equipment (72,000) (12,000) Proceeds from the sale of property, plant and equipment - 2,261,000 --------------------- ---------------------- Net cash (used in) provided by investing activities (72,000) 2,249,000 --------------------- ---------------------- Cash flows from financing activities: Payments on mortgage note payable - (1,195,000) Proceeds from exercise of stock options and warrants 723,000 243,000 --------------------- ---------------------- Net cash provided by (used in) financing activities 723,000 (952,000) --------------------- ---------------------- Effect of exchange rate changes on cash 4,000 - --------------------- ---------------------- (Decrease) increase in cash and cash equivalents (201,000) 532,000 Cash and cash equivalents at beginning of period 2,670,000 2,002,000 --------------------- ---------------------- Cash and cash equivalents at end of period 2,469,000 2,534,000 ===================== ====================== Supplemental cash flow disclosure: Cash paid during the period for interest $ 13,000 $ 61,000 ===================== ====================== Cash paid during the period for taxes $ 2,000 $ - ===================== ====================== Noncash financing activities: Debt incurred in connection with acquisition of production facility $ 1,000,000 $ - --------------------- ---------------------- $ 1,000,000 $ - ===================== ======================
See accompanying notes to consolidated financial statements. 6 BIOLASE TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 - -------------------------------------------------------------------------------- NOTE 1 - BASIS OF PRESENTATION The unaudited consolidated financial statements included herein have been prepared on a basis consistent with the December 31, 2001 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein. These unaudited interim consolidated financial statements do not include all the footnotes, presentations and disclosures normally required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the December 31, 2001 audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on April 1, 2002. The consolidated financial statements include the accounts of BioLase Technology, Inc. and its two wholly-owned subsidiaries: Societe Endo Technic, which is inactive and which we intend to dissolve, and BIOLASE Europe GmbH ("BIOLASE Europe"), a foreign subsidiary incorporated in Germany in December 2001. We have eliminated all material intercompany transactions and balances in the accompanying financial statements. As of March 31, 2002, $1.1 million of net assets were located outside of the United States, in BIOLASE Europe. We follow the provisions of all applicable Statements of Financial Accounting Standards ("SFAS") and related accounting pronouncements to prepare the accompanying financial statements in accordance with generally accepted accounting principles ("GAAP"). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based on amounts that differ materially from those estimates. The results of operations for the three months ended March 31, 2002 are not necessarily indicative of the results to be expected for the full fiscal year. NOTE 2 - SUPPLEMENTARY BALANCE SHEET INFORMATION
March 31, 2002 December 31, Inventories (unaudited) 2001 --------------------- ------------------ Materials $ 990,000 $ 1,020,000 Work-in-process 760,000 656,000 Finished goods 482,000 211,000 --------------------- ------------------ Inventories $ 2,232,000 $ 1,887,000 ===================== ==================
7 BIOLASE TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 - -------------------------------------------------------------------------------- March 31, 2002 December 31, 2001 Property, plant and equipment, (unaudited) net ----------------- ------------------ Building $ 1,000,000 $ - Leasehold improvements 57,000 54,000 Equipment and computers 508,000 448,000 Furniture and fixtures 212,000 202,000 ----------------- ------------------ Total 1,777,000 704,000 Less accumulated depreciation (346,000) (312,000) ----------------- ------------------ Property, plant and equipment, $ 1,431,000 $ 392,000 net ================= ================== March 31, 2002 December 31, 2001 Patents and trademarks, net (unaudited) ----------------- ------------------ Patents $ 112,000 $ 112,000 Trademarks 69,000 69,000 ----------------- ------------------ Total 181,000 181,000 Less accumulated amortization (96,000) (90,000) ----------------- ------------------ Patents and trademarks, net $ 85,000 $ 91,000 ================= ================== March 31, 2002 December 31, 2001 Accrued liabilities (unaudited) ----------------- ----------------- Accrued payroll and benefits $ 648,000 $ 652,000 Accrued warranty expense 506,000 561,000 Other accrued liabilities 701,000 763,000 ----------------- ----------------- Accrued liabilities $ 1,855,000 $ 1,976,000 ================= =================
NOTE 3 - ACCOUNTS RECEIVABLE At March 31, 2002 our allowance for uncollectible accounts was $100,000, principally as a reserve for accounts receivable on sales to a foreign distributor. This amount reflects a reduction of $95,000 from our allowance at December 31, 2001 due to previously unanticipated payments received from that distributor. NOTE 4 - PROPERTY, PLANT AND EQUIPMENT In January 2002, our wholly owned subsidiary, BIOLASE Europe, purchased a production facility in Germany with ten employees. The stated purchase price is $1,000,000. We are required to pay the first installment of the purchase price by May 31, 2002. The amount of the first installment will be determined by us, but must be between $300,000 and $500,000. Thereafter, we must pay $500,000 by April 1, 2003 and the balance of the purchase price, if any, must be paid by December 1, 2003. We are currently negotiating with a third party for that party to pay all or a portion of the first installment in exchange for certain rights that we would grant to the third party. In the event we do not reach an agreement with this third party, then both the purchase price and the initial installment will be reduced by $150,000. 8 BIOLASE TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 - -------------------------------------------------------------------------------- NOTE 5 - LINE OF CREDIT At March 31, 2002, we had approximately $1,792,000 outstanding under a revolving credit agreement with a bank. The agreement provides for borrowings up to $2,500,000 for financing inventories and is collateralized by substantially all accounts receivable and inventories. The interest rate is based upon LIBOR plus 0.5% at the time of any borrowings. At March 31, 2002, the interest rate on the outstanding balance was 2.4%. The effective interest rate for the three months ended March 31, 2002, including the amortization of the fair value of warrants in connection with issuing our line of credit was 5.91%. The revolving credit agreement expires on January 31, 2003. The maximum available under the line will decrease to $1,800,000 on May 1, 2002. NOTE 6 - COMMITMENTS AND CONTINGENCIES In March 2001, we entered into a sale-leaseback transaction in which we sold and leased back our manufacturing facility. The result of the sale was a $316,000 gain, which has been deferred and is being amortized over the five-year lease term. The related lease is being accounted for as an operating lease. We also lease certain office equipment under operating lease arrangements. Future minimum rental commitments under operating leases for each of the periods ending March 31 are as follows: 2002 $ 258,000 2003 256,000 2004 253,000 2005 247,000 ----------------- Total $ 1,014,000 ================= NOTE 7 - EARNINGS PER SHARE We compute basic earnings (loss) per share by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares outstanding. We compute diluted earnings per share by dividing net income by the weighted average number of shares outstanding including potentially dilutive securities such as stock options and warrants. Potential common shares totaling 78,000 were not included in the diluted earnings per share amounts for the three months ended March 31, 2002 as their effect would have been anti-dilutive. Three Months Ended March 31, ------------------------------- 2002 2001 --------------- --------------- Net income (loss) $ 119,000 $ (772,000) =============== =============== Weighted average shares outstanding - basic 19,791,000 19,430,000 Dilutive effect of stock options and warrants 1,459,000 - --------------- --------------- Weighted average shares outstanding - diluted 21,250,000 19,430,000 =============== =============== 9 BIOLASE TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 - -------------------------------------------------------------------------------- NOTE 8 - DERIVATIVE FINANCIAL INSTRUMENTS At January 1, 2001, we adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (FAS 133) as amended by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FAS 133. The adoption of FAS 133 did not have a material impact on our consolidated financial position or results of operations. Our derivative financial instruments under FAS 133 are discussed below. All derivatives are recorded in our consolidated balance sheet at fair value. The estimated fair value of derivative financial instruments represents the amount required to enter into similar offsetting contracts with similar remaining maturities based on quoted market prices. Our foreign exchange forward contracts are not designated as hedges. Changes in the fair value of these derivatives are recorded in current earnings. The notional amount of forward exchange contracts is the amount of foreign currency bought or sold at maturity. Notional amounts are indicative of the extent of our involvement in the various types and uses of derivative financial instruments and are not a measure of our exposure to credit or market risks through its use of derivatives. Credit exposure for derivative financial instruments is limited to the amounts, if any, by which the counterparties obligations under the contracts exceed the obligations of us to the counterparties. Potential credit losses are minimized through careful evaluation of counterparty credit standing, selection of counterparties from a limited group of high-quality institutions and other contract provisions. At March 31, 2002, derivative financial instruments comprise of foreign exchange forward contracts with notional amounts of $702,000 and estimated fair value of $5,000. 10 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations. - -------------- Cautionary Statement With Respect To Forward-Looking Information This Report contains forward-looking statements, which include, but are not limited to, statements concerning the need for additional capital, our ability to renegotiate our line of credit and to continue to achieve profitability, the market acceptance of our products, the competitive nature of and anticipated growth in our markets, and our projected revenues, expenses, gross profit and net income. These forward-looking statements are based on our current expectations, estimates and projections about our industry, and reflect management's beliefs and certain assumptions made by us based upon information available to us at the time of this Report. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will" and variations of these words or similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict, including those set forth under the heading "Risk Factors" below. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. You should read the following discussion and analysis in conjunction with the Consolidated Financial Statements and related Notes thereto contained elsewhere in this Report before deciding to invest in our company or to maintain or increase your investment. The information contained in this Report is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Report and in our other reports filed with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the year ended December 31, 2001, and our subsequent reports on Forms 10-Q and other filings with the SEC that discuss our business in greater detail. Overview BioLase Technology, Inc. is a medical technology company that designs, develops, manufactures and markets advanced dental, cosmetic and surgical products. We currently market two primary products. The Waterlase(TM) system, utilizing our patented Hydrokinetic(R) technology of combining water and laser energy, is a device which can be applied to the treatment of both hard and soft dental tissues. The LaserSmile(TM) system incorporates a diode semiconductor laser for a broad range of soft tissue and cosmetic procedures. In January 2002, we received from the United States Food and Drug Administration ("FDA") clearance for the application of our Hydrokinetic technology to perform complete root canal therapy (EndoLase(TM)). In February 2002, we received FDA clearance for the use of Hydrokinetic technology to cut oral bone tissue (OsseoLase(TM)). We believe these clearances substantially broaden the application of our technology within the dental market. We have patents and have received clearances from the FDA for applications in markets other than dentistry, such as dermatology. However, our current business plan is focused on the dental market because of the significant market potential and our leading position in that market. In January we acquired a production facility in Germany to strengthen our international sales plan in Europe and neighboring regions. This transaction significantly increased our overall manufacturing capacity and provided us with an improved ability to service European sales. 11 Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses for each period. The following represents a summary of our critical accounting policies, defined as those policies that we believe are: (a) the most important to the portrayal of our financial condition and results of operations, and (b) that require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain Sales. We record sales in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB 101"), as amended by SAB 101A and 101B. SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the price is fixed and determinable; and (4) collectibility is reasonably assured. Warranty Cost. Products sold are generally covered by a warranty against defects in material and workmanship for a period of one year. We accrue a warranty reserve to measure the risk of incurring costs to provide warranty services. We estimate costs to service warranty obligations based on historical experience and expectation of future conditions. Valuation of Accounts Receivable. We maintain an allowance for uncollectible accounts receivable to measure the risk of extending credit to customers. The allowance is estimated based on customer compliance with credit terms, the financial condition of the customer and collection history where applicable. Valuation of Inventory. Inventory is valued at the lower of cost (estimated using the first-in, first-out method) or market. We periodically evaluate the carrying value of inventories and maintain an allowance for obsolescence to adjust the carrying value as necessary to the lower of cost or market. The allowance is based on physical and technical functionality as well as other factors affecting the recoverability of the asset through future sales. Valuation of Long-Lived Assets. Property, plant and equipment, intangible and certain other long-lived assets are amortized over their useful lives. Useful lives are based on our estimate of the period that the assets will productively support the business goals of the Company. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through future business operations. Litigation and Other Contingencies. We regularly evaluate our exposure to threatened or pending litigation and other business contingencies. Because of the uncertainties related to the amount of loss from litigation and other business contingencies, the recording of losses relating to such exposures requires significant judgment about the potential range of outcomes. To date, we have not been affected by any litigation or other contingencies that have had, or are currently anticipated to have, a material impact on our results of operations or financial position. As additional information about current or future litigation or other contingencies becomes available, we will assess whether such information warrants the recording of additional expense relating to its contingencies. Such additional expense could potentially have a material impact on our results of operations and financial position. 12 Results of Operations The following table sets forth certain statement of operations data expressed as a percentage of net sales: Three Months Ended March 31, 2002 2001 ------------------------ Net sales 100.0% 100.0% Cost of sales 40.3 43.9 ----------- ----------- Gross profit 59.7 56.1 Operating expenses: Sales and marketing 40.1 51.8 General and administrative 9.1 15.3 Engineering and development 8.0 11.7 ----------- ----------- Total operating expenses 57.2 78.8 ----------- ----------- Income (loss) from operations 2.5 (22.7) Gain on sale of asset 0.3 -- Interest income 0.1 0.2 Interest expense (0.6) (2.5) ------------ ----------- Net income (loss) 2.3% (25.0)% ============ =========== During the first fiscal quarter of 2002, demand for our products continued to increase when compared to the same period in previous years. Net sales for the three months ended March 31, 2002 were $5.2 million, an increase of $2.1 million or 70%, as compared with net sales of $3.1 million for the three months ended March 31, 2001. The growth was attributable to strong domestic increase in unit volume of both our Waterlase and LaserSmile systems. The addition of the cosmetic tooth whitening application in the third quarter of last year was a key factor in the increase of LaserSmile sales. International sales were not a factor in sales growth for the quarter. Sales of consumables increased to 4% of total sales this quarter compared to 2% in the first quarter of 2001. Consistent with the seasonality we have experienced in prior years, sales for the first quarter were lower than the preceding fourth quarter despite the overall increasing trend in sales. Gross profit for the three months ended March 31, 2002 increased 81% to $3.1 million as a result of the increase in sales and consequent greater absorption of fixed manufacturing costs. Gross margin for the quarter was 60% compared to 56% for the quarter ended March 31, 2001. Increased manufacturing efficiencies contributed to the increase in gross margin, offset partially by start-up costs for our German facility and the addition of resources to manufacturing in anticipation of greater production. Operating expenses were 57% of net sales for the three months ended March 31, 2002, compared to 79% for the first quarter of 2001. The decrease in operating expenses as a percentage of sales was due to the gain in sales relative to the change in costs required to support the increased level of operations. In terms of absolute dollars, operating expenses for the three months ended March 31, 2002 increased $0.5 million or 23% to $3.0 million. Increases relate primarily to higher sales and marketing costs. Sales and marketing expenses increased 31% to $2,095,000 at March 31, 2002 compared to $1,597,000 for the quarter ended March 31, 2001. Primary reasons for the increase are labor increases due to growth in the size of the sales force, commission expense on a higher level of sales and an increase in the scope of our nationwide seminar marketing program for 2002. General and administrative expenses remained constant with the prior year quarter. However, there were increases due principally to higher labor expense and consulting fees plus start-up expenses 13 related to our German subsidiary, increase in insurance rates and the cost of infrastructure needed to support the growth of the business, which were offset by a reduction in the allowance for doubtful accounts. Engineering and development expenses increased $59,000 or 16% to $419,000 for the first quarter of 2002 compared to $360,000 for the first quarter of 2001. Increased expenses primarily related to materials and consulting fees on new product development. Gain on Sale of Assets. The gain on sale of assets of for the three months ended March 31, 2002 increased $16,000 primarily related to two transactions. In 2000, we purchased our San Clemente manufacturing facility and offices in order to avoid moving our operations. In 2001, we sold the facility and leased it back for a five-year term with an additional five year option, resulting in a gain of $316,000. We are recognizing that gain for accounting purposes over the term of the lease. Net interest expense decreased from $70,000 in the first quarter of 2001 to $30,000 in the first quarter of 2002 as a result of the payoff of the mortgage note payable on our manufacturing facility in 2001. Liquidity and Capital Resources At March 31, 2002, we had $1.6 million in working capital. Our principal source of liquidity at March 31, 2002 consists of our cash balance of $2.5 million. For the quarter, significant sources of cash were from the exercise of stock options and warrants of $723,000. These sources of cash were offset by increases in accounts receivable and inventory of $583,000 and other working capital items totaling $321,000. Accounts receivable, net, increased to $2.4 million at March 31, 2002 from $2.1 million at December 31, 2001. The increase was due to the higher sales volume experienced in the first quarter for which the receivable will be collected in the second quarter of 2002. We believe that the allowance for doubtful accounts at March 31, 2002 of $100,000 is adequate to provide for anticipated losses on uncollectible amounts. Inventories, net, increased to $2.2 million at March 31, 2002 from $1.9 million at December 31, 2001. The increase was due to increased production necessary to meet expected 2002 demand. Our business continues to focus on the manufacturing and marketing of laser-based technologies the Waterlase(TM) and the LaserSmile(TM) laser systems. Financing the development of our products and our operations has been achieved principally through the private placements of common stock and the exercise of stock options and warrants, though we have experienced significant increased sales over the last two years. In January 2002, our wholly owned subsidiary, BIOLASE Europe, purchased a production facility in Germany with ten employees for $1,000,000. We are required to pay the first installment of the purchase price by May 31, 2002. The amount of the first installment will be determined by us, but must be between $300,000 and $500,000. Thereafter, we must pay $500,000 by April 1, 2003 and the balance of the purchase price, if any, must be paid by December 1, 2003. We are currently negotiating with a third party for that party to pay all or a portion of the first installment in exchange for certain rights that we would grant to the third party. In the event we do not reach an agreement with this third party, then both the purchase price and the initial installment will be reduced by $150,000. The German facility, which is ISO 9001 certified, consists of two buildings equipped for laser production. This facility will substantially increase our production capacity. BIOLASE Europe also has a highly qualified technical staff experienced in laser principles and design, delivery systems, optics, 14 technical service and field support. BIOLASE Europe will manufacture our products in Germany, provide direct support for our expanding international dealer network and contribute to our ongoing research and development of new products. We have no other material commitments for capital expenditures as of March 31, 2002. At March 31, 2002, we had $1.8 million outstanding under a revolving credit agreement with a bank. The revolving credit agreement provides for borrowings of up to $2.5 million for the financing of inventory and is collateralized by substantially all of our accounts receivable and inventories. The interest rate is computed based upon LIBOR plus 0.5%. The balance at December 31, 2001 was $1.8 million and during the quarter, there were no draws or repayments. We do not intend to make any further borrowings under this line of credit in the immediate future. In May 2002, the maximum borrowings available under this line of credit will be reduced to $1.8 million. The current revolving credit agreement expires on January 31, 2003, at which point we will be required either to pay any remaining balance of the credit facility or refinance the credit facility. Our liquidity and cash requirements fluctuate based on the timing and extent of a number of factors. For instance, during periods of sales growth, net changes in assets and liabilities will tend to represent a use of cash because we will incur costs and expend cash in advance of receiving cash from our customers. We believe that our current cash balances plus cash to be generated from operations will be adequate to meet our debt service requirements, capital expenditures and sustain our operations through the end of fiscal 2002. In addition, during 2002, we expect that additional warrants expiring in 2002 will be exercised, generating up to an additional $1.7 million from external sources. Should we require further capital resources in 2002, we would most likely address such requirement through a combination of product sales, sales of equity securities through private placements, and/or debt financing. If such additional debt or equity is needed, no assurances can be given that we would be able to obtain such additional capital resources. If unexpected events occur requiring us to obtain additional capital and we are unable to do so, we then might attempt to preserve our available resources by deferring the creation or satisfaction of various commitments, deferring the introduction of various products or entry into various markets, or otherwise scaling back our operations. If we were unable to raise such additional capital or defer certain costs as described above, such inability would have an adverse effect on our financial position, results of operations and cash flows. Risk Factors Before investing in our company or deciding to maintain or increase your investment, you should carefully consider the risks described below, in addition to the other information contained in this report and in our other filings with the SEC. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business operations. If any of these risks actually occur, our business, financial condition or results of operations could be seriously harmed. In that event, the market price for our common stock could decline and you may lose all or part of your investment. We May Not Be Able to Continue or Increase Our Net Income in the Future, Which May Cause the Trading Price of Our Common Stock to Decline. We may not be able to continue to achieve net income. Prior to the third quarter of 2001, we had not reached the break-even point as we transitioned from our research and development phase and began commercializing our technology. Even if we continue to achieve net income, we may not be able to increase net income on a quarterly or annual basis in the future. Our ability to achieve sustained or increased net income is, in turn, dependent on many of the other risk factors identified in this report 15 below. If we are unable to continue or increase our net income in the future, we may not be able to successfully operate our business and our stock price may decline. We May Not Be Able to Secure Additional Financing to Meet Our Future Capital Needs. Our line of credit expires on January 31, 2003. If we are unable to renew our line of credit at that time on acceptable terms, or at all, and we are required to repay the line of credit, absent sufficient cash flow from operations or the sale of securities, the diversion of resources for that purpose will adversely affect our operations and financial condition and our ability to achieve future growth in our net sales. In addition, during 2002 and 2003 all of our long-term debt will become due and payable. Unless we can generate sufficient cash flow from sustained profitability, we will continue to be dependent on the availability of external financing to meet our operating and capital needs, including the repayment of current debt obligations. We may not be able to secure additional debt or equity financing on terms acceptable to us, or at all, at the time when we need such funding. If we do raise funds by issuing additional equity or convertible debt securities, the ownership percentages of existing stockholders would be reduced, and the securities that we issue may have rights, preferences or privileges senior to those of the holders of our common stock. If we raise additional funds by issuing debt, we may be subject to limitations on our operations, including limitations on the payment of dividends. Our inability to raise additional funds on a timely basis will make it difficult for us to achieve our business plan and will have a material adverse effect on our business, financial condition and results of operations. Our Quarterly Revenues and Operating Results May Fluctuate in Future Periods and We May Fail to Meet Expectations, Which May Cause The Price of Our Common Stock to Decline. Our quarterly revenues and operating results have fluctuated and are likely to continue to vary from quarter to quarter due to a number of factors, many of which are not within our control. If quarterly revenues or operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Factors that might cause quarterly fluctuations in our revenues and operating results include the factors described in the subheadings below as well as: . The evolving and varying demand for dental and medical lasers; . Our ability to develop, introduce, market and gain market acceptance of new products and product enhancements in a timely manner; . Our ability to control costs; . The size, timing, rescheduling or cancellation of significant customer orders; . The introduction of new products by competitors; . The availability and reliability of components used to manufacture our products; . Changes in our pricing policies or those of our suppliers and competitors, as well as increased price competition in general; . The mix of our domestic and international sales, and the risks and uncertainties associated with our international business; . Costs associated with any future acquisitions of technologies and businesses; and . General global economic and political conditions, including international conflicts and acts of terrorism. In addition, a significant amount of our sales in any quarter may consist of sales through a single distributor. As a result, the timing of orders by this distributor may impact our quarter-to-quarter results. The loss of or a substantial reduction in orders from this distributor could seriously harm our business, financial condition and results of operations. Due to all of the factors listed above and the other risks 16 discussed in this report, you should not rely on quarter-to-quarter comparisons of our operating results as an indication of our future performance. Our Business Depends on the Acceptance of Our Products, and It Is Uncertain Whether the Market Will Broadly Accept Our Products. Our future success will depend on our ability to demonstrate to dentists and physicians the potential cost and performance advantages of our laser systems over traditional methods of treatment and, to a lesser extent, over competitive laser systems. Our products represent relatively new technologies in the dental market, and have not yet achieved widespread market acceptance. Factors that may inhibit mass adoption of laser technologies by dentists and physicians include the cost of the products, concerns about the safety, efficacy and reliability of lasers and the ability to obtain reimbursement of laser procedures under health plans. Current economic pressure may make dentists and physicians reluctant to purchase substantial capital equipment or invest in new technologies. The failure of medical lasers to achieve broad market acceptance would have an adverse effect on our business, financial condition and results of operations. We cannot assure you that we will have sufficient resources to continue to successfully market our products to achieve broad market acceptance. We Depend on a Limited Number of Suppliers, and If We Cannot Secure Alternate Suppliers, Our Business May Be Harmed. We purchase certain raw materials and components included in our products from a limited group of qualified suppliers, and we do not have long-term supply contracts with any of our key suppliers. Our growth and ability to meet customer demand depends in part on our ability to obtain timely deliveries of materials and components from our suppliers. Certain components of our products are currently available only from a single source or limited sources. Although we believe that alternate sources of supply are available for most of our single-sourced materials and components, a change in a single or limited source supplier, or an inability to find an alternate supplier, could create manufacturing delays, disrupt sales and cash flow, and harm our reputation, any of which could adversely affect our business, financial condition and results of operations. If We Are Unable to Protect Our Intellectual Property Rights, Our Competitive Position Could Be Harmed or We Could Be Required to Incur Expenses to Enforce Our Rights. Our success will depend, in part, on our ability to obtain patent protection for our products and technology, to preserve our trade secrets and to operate without infringing the intellectual property of others. We rely on patents to establish and maintain proprietary rights in our technology and products. However, we cannot assure you that we will be able to obtain any further patents, that any of our proprietary rights will not be challenged, invalidated or circumvented, or that any such rights will provide a sustainable competitive advantage. Competitors may claim that we have infringed their current or future intellectual property rights. We may not prevail in any future intellectual property infringement litigation given the complex technical issues and inherent uncertainties in litigation. Any claims, with or without merit, could be time-consuming and distracting to management, result in costly litigation, cause product shipment delays, or require us to enter into royalty or licensing agreements. Additionally, in the event an intellectual property claim against us is successful, we might not be able to obtain a license on acceptable terms or license a substitute technology or redesign our products to avoid infringement. Any of the foregoing adverse events could seriously harm our business, financial condition and results of operations. 17 We Have Significant International Sales and Are Subject to Risks Associated with Operating in International Markets. In the past few years, international sales have comprised a significant portion of our net sales. Our international sales declined in the prior year, and political and economic conditions outside the United States could make it difficult for us to increase our international sales or to operate abroad. In addition, in February of this year we made a significant investment in a production facility in Germany to manufacture and service devices to be sold in Europe. In the future, we intend to continue to pursue and expand our international business activities. International operations, including our production facility in Germany, are subject to many inherent risks, including: . Political, social and economic instability and increased security concerns; . Fluctuations in currency exchange rates; . Exposure to different legal standards; . Reduced protection for our intellectual property in some countries; . Burdens of complying with a variety of foreign laws; . Import and export license requirements and restrictions of the United States and each other country in which we operate; . Trade restrictions; . The imposition of governmental controls; . Unexpected changes in regulatory or certification requirements; . Changes in tariffs; . Difficulties in staffing and managing international operations; . Longer collection periods and difficulties in collecting receivables from foreign entities; and . Potentially adverse tax consequences. We believe that international sales will continue to represent a significant portion of our net sales, and that continued growth and profitability may require further expansion of our international operations. A substantial percentage of our international sales are denominated in the local currency. As a result, an increase in the relative value of the dollar could make our products more expensive and potentially less price competitive in international markets. Other than a forward contract to offset the risk related to the amounts payable for the German production facility, we do not currently engage in any transactions as a hedge against risks of loss due to foreign currency fluctuations. Any of these factors may adversely affect our future international sales and, consequently, affect our business, financial condition and operating results. If We Are Not Successful In Generating Revenue From Our German Production Facility, Our Business And Financial Condition May Be Materially Adversely Affected. In January 2002, we committed to invest a significant amount of our available cash in purchasing a German production facility with ten employees and various contracts held by the facility. The production facility is a new operation and we will face significant challenges in integrating it with our existing business and operations, including but not limited to the following: . entering into service agreements for devices sold in Europe; . retraining existing employees in our operations, and hiring additional employees for the facility; . integrating the facility's operations with our existing operations; and . generating German facility revenue and achieving profitability. 18 The German facility has a very limited operating history upon which to assess whether it will be able to meet all of the challenges required to successfully operate and generate revenue. If we are not able to develop a successful operation with revenue and profits at the German facility, we will not receive the anticipated benefits of our investment in the German facility and our business, financial condition and results of operations would be materially and adversely affected. Product Liability Claims Against Us Could Be Costly and Could Harm Our Reputation. The sale of dental and medical products involves the inherent risk of product liability claims against us. While we currently maintain product liability insurance coverage in an amount that we believe is adequate for our level of sales, this insurance is expensive, is subject to various coverage exclusions and may not be obtainable in the future on terms acceptable to us, or at all. We do not know whether claims against us, if any, with respect to our products will be successfully defended or whether our insurance will be sufficient to cover liabilities resulting from such claims. Rapid Changes in Technology Could Harm the Demand for Our Products or Result in Significant Additional Costs. The markets in which our laser products compete are subject to rapid technological change, evolving industry standards, changes in the regulatory environment, frequent new device and pharmaceutical introductions and evolving dental and surgical techniques. These changes could render our products noncompetitive or obsolete. The success of our existing and future products is dependent on the differentiation of our products from those of our competitors, the timely introduction of new products and the perceived benefit to the customer in terms of patient service and return on investment. The process of developing new medical devices is inherently complex and requires regulatory approvals or clearances that can be expensive, time-consuming and uncertain. We have in the past experienced delays in product development. We cannot assure you that we will successfully identify new product opportunities, be financially or otherwise capable of the research and development to bring new products to market in a timely manner or that product and technologies developed by others will not render our products obsolete. We May Not Be Able to Compete Successfully Against Our Current and Future Competitors. Our products compete with those of a number of foreign and domestic companies, including those companies that market traditional dental products such as dental drills, as well as other companies that market laser technologies in the dental and medical markets that we address. Some of our competitors have greater financial, technical, marketing or other resources than us. This may allow them to respond more quickly to new or emerging technologies and to devote greater resources to the development and introduction of enhanced products than we can. In addition, the rapid technological changes occurring in the healthcare industry are expected to lead to the entry of new competitors, especially as dental and medical lasers gain increasing market acceptance. Our ability to anticipate technological changes and to introduce enhanced products on a timely basis will be a significant factor in our ability to grow and remain competitive. New competitors or technology changes in laser products and methods could cause commoditization of such products, require price discounting or otherwise adversely affect our gross margins. Changes in Government Regulation or the Inability to Obtain Necessary Government Approvals Could Harm Our Business. Our products are subject to extensive government regulation, both in the United States and other countries. To clinically test, manufacture and market products for human diagnostic and therapeutic use, 19 we must comply with regulations and safety standards set by the U.S. Food and Drug Administration and comparable state and foreign agencies. Generally, products must meet regulatory standards as safe and effective for their intended use prior to being marketed for human applications. The clearance process is expensive, time-consuming and uncertain. The failure to receive requisite approvals for the use of our products or processes, or significant delays in obtaining such approvals, could prevent us from developing, manufacturing and marketing products and services necessary for us to remain competitive. If Our Customers Cannot Obtain Third Party Reimbursement for Their Use of Our Products, They May Be Less Inclined to Purchase Our Products. Our products are generally purchased by dental or medical professionals who then bill various third party payors, such as government programs or private insurance plans, for the procedures conducted using these products. In the United States third party payors review and frequently challenge the prices charged for medical services. In many foreign countries, the prices are predetermined through government regulation. Payors may deny coverage and reimbursement if they determine that the procedure was not medically necessary (for example, cosmetic) or that the device used in the procedure was investigational. We believe that most of the procedures being performed with our current products generally have been reimbursed, with the exception of cosmetic applications such as tooth whitening. The inability to obtain reimbursement for services using our products could deter dentists and physicians from purchasing or using our products. We cannot predict the effect of future healthcare reforms or changes in financing for health and dental plans. Any such changes could have an adverse effect on the ability of a dental or medical professional to generate a return on investment using our current or future products. Such changes would act as disincentives for capital investments by dental and medical professionals and could have an adverse effect on our business, financial condition and results of operations. The Failure to Attract and Retain Key Personnel Could Adversely Affect Our Business. Our future success depends in part on the continued service of certain key personnel, including Jeffrey W. Jones, our Chief Executive Officer, Edson J. Rood, our Chief Financial Officer, Ioana Rizoiu, our Vice President of Clinical Research, and Keith Bateman, our Vice President of Global Sales. We do not have employment agreements with any of our key employees, other than with Mr. Jones, whose employment agreement was renewed in January 2002 for an additional two-year term. Our success will also depend in large part on our ability to continue to attract, retain and motivate qualified engineering and other highly skilled technical personnel. Competition for employees, particularly development engineers, is intense. We may not be able to continue to attract and retain sufficient numbers of such highly skilled employees. Our inability to attract and retain additional key employees or the loss of one or more of our current key employees could adversely affect our business, financial condition and results of operations. Potential Future Acquisitions Could Have Unintended Negative Consequences Which Could Harm Our Business and Cause Our Stock Price to Decline. We may consider pursuing acquisitions of businesses, products or technologies in the future as a part of our growth strategy. Acquisitions could require significant capital infusions and could involve many risks, including but not limited to the following: . We may encounter difficulties in assimilating and integrating the perations, products and workforce of the acquired companies; . Acquisitions may materially and adversely affect our results of operations because they may require large one-time charges or could result in increased debt or contingent liabilities, 20 adverse tax consequences, substantial depreciation or deferred compensation charges, or the amortization of amounts related to deferred compensation, goodwill and other intangible assets; . Acquisitions may be dilutive to our existing stockholders; . Acquisitions may disrupt our ongoing business and distract our management; and . Key personnel of the acquired company may decide not to work for us. We cannot assure you that we will be able to identify or consummate any future acquisitions on acceptable terms, or at all. In the event we do pursue any acquisitions, it is possible that we may not realize the anticipated benefits from such acquisitions. Our Common Stock Price Has Been Volatile, Which Could Result in Substantial Losses for Individual Stockholders. Our common stock is currently traded on the Nasdaq Small Cap Market and has only limited daily trading volume. The trading price of our common stock has been and may continue to be volatile. The market for technology companies, in particular, has, from time to time, experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may significantly affect the trading price of our common stock, regardless of our actual operating performance. For example, the closing per share sale price of our common stock fluctuated from $7.00 to $1.03 over the course of 2001 despite steady improvement in our financial performance. On August 9, 2001, the closing sale price of our common stock declined 12% from $5.87 per share on volume of approximately 900,000 shares, absent any news about or announcements by us. The trading price of our common stock could be affected by a number of factors, including, but not limited to, changes in expectations of our future performance, changes in estimates by securities analysts (or failure to meet such estimates), quarterly fluctuations in our revenue and financial results and a variety of risk factors, including the ones described elsewhere in this report. Periods of volatility in the market price of a company's securities sometimes result in securities class action litigation. If this were to happen to us, such litigation would be expensive and would divert management's attention. In addition, with only a limited public market for our stock, it would be difficult to sell a significant amount of our stock, which could cause a significant decline in the trading price of our stock. If our stock price drops below $1.00 per share for an extended period of time or we are otherwise unable to satisfy the continued listing requirements of the Nasdaq Small Cap Market, our shares could be delisted from the Nasdaq Small Cap Market and the marketability, liquidity and price of our common stock would be adversely affected. We are exposed to Risks Associated with the Recent Worldwide Economic Slowdown and Related Uncertainties. Concerns about decreased consumer confidence, reduced corporate profits and capital spending, and recent international conflicts and terrorist and military activity have resulted in a downturn in economic conditions, both domestically and internationally. These unfavorable economic conditions could ultimately cause a slowdown in customer orders, an increase in the number of cancellations and the rescheduling of backlog, if any. In addition, recent political and social turmoil related to international conflicts and terrorist acts may put further pressure on economic conditions in the U.S. and worldwide. Unstable political, social and economic conditions make it difficult for our customers, our suppliers and us to accurately forecast and plan future business activities. If such conditions continue or worsen, our business, financial condition and results of operations could be materially and adversely affected. 21 Future Sales of Our Common Stock Could Affect the Stock Price. If our stockholders sell substantial amounts of our common stock, including shares issued on the exercise of options and warrants, in the public market, the market price of our common stock could fall. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. As of March 31, 2002, we had 20,018,000 shares of common stock outstanding. All of these shares, other than shares held by affiliates, are freely tradable. We Have Adopted Anti-Takeover Defenses That Could Delay or Prevent an Acquisition of Our Company and May Affect the Price of Our Common Stock. Certain provisions of our certificate of incorporation and stockholder rights plan could make it difficult for a third party to acquire us, even though an acquisition might be beneficial to our stockholders. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. Our certificate of incorporation authorizes the issuance of up to 1,000,000 shares of "blank check" preferred stock, which will have terms as may be determined from time to time by our Board of Directors. Accordingly, our Board of Directors may, without obtaining stockholder approval, issue preferred stock with terms, which could have preference over and adversely affect the rights of the holders of common stock. This issuance may make it more difficult for a third party to acquire a majority of our outstanding voting stock. We are also subject to the Delaware anti-takeover laws, which may prevent, delay or impede a merger or takeover of our company, and we have not opted out of the provisions of such laws through either our certificate of incorporation or our bylaws. In December 1998, we adopted a stockholder rights plan pursuant to which one preferred stock purchase right is distributed to our stockholders for each share of our common stock held by them. In the event that a third party acquires 15% or more of our outstanding common stock, the holders of these rights will be able to purchase the underlying junior participating preferred stock as a way to discourage, delay or prevent a change in control of our company. The mere existence of a stockholder rights plan often delays or makes a merger, tender offer or proxy contest more difficult. The existence of these features could prevent others from seeking to acquire shares of our common stock in transactions at premium prices. 22 Item 3. Quantitative and Qualitative Disclosures about Market Risk. ----------------------------------------------------------- Our debt currently consists of a revolving credit facility of up to $2.5 million, and is collateralized by substantially all accounts receivable and inventories. The interest rate on our line of credit varies with the short-term interest markets and is adjusted quarterly to match LIBOR plus 0.5%. At March 31, 2002, we had an outstanding balance of $1.8 million and the interest rate on the outstanding balance was 5.91%. The revolving credit agreement expires on January 31, 2003. In May 2002, the maximum available under this line of credit will be reduced to $1.8 million. We have sales to, and purchase a small amount of components from, foreign countries. Foreign currency exchange risks in these transactions have been minimal. Until our acquisition of the laser production facility in Germany in January 2002, we had no assets located outside of the United States. In conjunction with the $700,000 of promissory notes issued by us in that acquisition, which are due in 2003, we purchased a forward contract to hedge the risk of currency fluctuations. We do not believe that the future market risks related to the above debt and derivatives will have a material adverse impact on our financial position, results of operations or liquidity. 23 PART II - OTHER INFORMATION Item 1. Legal Proceedings. ------------------ From time to time, we are involved in legal proceedings incidental to our business. We believe that pending actions, individually and in the aggregate, will not have a material adverse effect on our financial condition, results of operations or cash flows, and that adequate provision has been made for the resolution of such actions and proceedings. Item 2. Changes in Securities and Use of Proceeds. ------------------------------------------ Sale of Unregistered Securities On March 27, 2002, Corner Bank Ltd. and Corner Banque S.A. partially exercised warrants to purchase an aggregate of 360,000 shares and 100,000 shares, respectively, of our common stock. Upon the partial exercise of the warrants, we issued 100,000 shares of unregistered common stock to Corner Bank Ltd. and 65,000 shares of unregistered common stock to Corner Banque S.A., in consideration for an aggregate exercise price of $412,500. The issuance of the common stock to Corner Bank Ltd. and Corner Banque S.A. was exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to the provisions of Section 4(2) of the Securities Act as a transaction by an issuer not involving any public offering. Item 3. Defaults Upon Senior Securities. -------------------------------- None. Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- None. Item 5. Other Information. ------------------ None. Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) Exhibits 3.1 Restated Certificate of Incorporation, as Amended. Incorporated by reference to the Registrant's Annual Report on Form 10-K filed on April 14, 1994 3.2 Amended and Restated Bylaws. Incorporated by reference to the Registrant's Quarterly Report on Form 10-QSB filed on September 15, 1995. 10.1+ Employment Offer Letter dated January 8, 1999 from Jeffrey W. Jones, the Registrant's CEO, to Keith G. Bateman, the Registrant's Vice President, Global Sales. 10.2 Employment Agreement dated January 1, 2002 between the Registrant and Jeffrey W. Jones. 24 10.3+ Asset Purchase Agreement, dated January 29, 2002, between Asclepion-Meditec AG and the Registrant's subsidiary, BIOLASE Europe GmbH. 10.4 Agreement for the Purchase of a Built-Up Property, dated January 29, 2002, between Asclepion-Meditec AG and the Registrant's subsidiary, BIOLASE Europe GmbH. 10.5+ Agreement, dated January 29, 2002, between Asclepion-Meditec AG and the Registrant's subsidiary, BIOLASE Europe GmbH. - ------------------- + Confidential treatment has been requested for certain confidential portions of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. In accordance with Rule 24b-2, these confidential portions have been omitted from this exhibit and filed separately with the SEC. (b) Reports on Form 8-K None 25 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. May 15, 2002 BIOLASE TECHNOLOGY, INC., (Registrant) By: /s/ Edson J. Rood ----------------------------------- Edson J. Rood Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 26 EX-10.1 3 dex101.txt EMPLOYMENT LETTER-KEITH G. BATEMAN EXHIBIT 10.1 January 8, 1999 TO: Jeff Jones, President and CEO, BIOLASE FROM: Keith G. Bateman SUBJECT: Offer of Employment This letter hereby acknowledges the agreement between Jeffrey Jones, President and CEO of BioLase and Keith G. Bateman. Following is a synopsis of the position and compensation agreed upon: Position/Title: Vice President, Global Sales Responsibility: All sales of all products, global. Management of all sales personnel. Reports to: CEO Compensation: Base Salary: $110,000 Tiered Commission Rate Total compensation including base salary, commissions & Year End Bonus: and year end bonus is approximately $200,000 at quota. See the attached Tables A & B for the base salary component, the commission rate component and the year bonus component of the total compensation. Sales goals, targets, year end bonus and stock options will be based on all sales of all products from January 1, 1999 through December 31, 1999. Quota: Quota per plan is $*****. In the event the DermaLase is not available for sales and shipment by August 1, 1999, quota will be reduced to $*****. Stock Options: 50,000 incentive stock options at $2 1/8 to accrue over the first six months of employment and an additional 50,000 vested options at $2 1/8 if year end sales quota is met (see Tables A & B for details). It is the intention of BioLase to offer similar stock options in the year 2000. These year 2000 options will have similar performance stipulations. - --------------------- * Confidential Treatment Requested. Page 1 of 4 Start Date: January 8, 1999 Terms of Employment: Either party may terminate this agreement at will with the following exceptions: in the event BioLase is acquired or merged, the new entity has the option of (1) offering Bateman a one year contract at the same or a better compensation plan, or (2) paying Bateman a severance pay for nine months equal to his previous nine months total compensation including base salary, commissions and bonuses. Both parties agree that this preliminary agreement may be replaced with a refined version so long as the basic terms defined herein remain intact. /s/ KEITH G. BATEMAN - ------------------------------------------------------------------------- I agree to the above terms and conditions of employment Keith G. Bateman/Date /s/ JEFFREY W. JONES - ------------------------------------------------------------------------- I agree to the above terms and conditions of employment for Keith G. Bateman Jeffrey W. Jones President & CEO BIOLASE TECHNOLOGY, INC. Page 2 of 4 COMPENSATION PLAN FOR KEITH G. BATEMAN VP GLOBAL SALES Table A:
- ---------------------------------------------------------------------------------------------------------------- Monthly Sales Amount Monthly Sales Commission Rate Monthly Annualized Sales Annualized Amount Commission Amount Commission - ---------------------------------------------------------------------------------------------------------------- $*****-***** $***** *****% $***** $***** $***** - ---------------------------------------------------------------------------------------------------------------- $*****-$***** $***** *****% $***** $***** $***** - ---------------------------------------------------------------------------------------------------------------- TOTALS $***** $***** $***** $***** - ---------------------------------------------------------------------------------------------------------------- Base Salary $***** $***** - ---------------------------------------------------------------------------------------------------------------- TOTALS $***** $***** - ---------------------------------------------------------------------------------------------------------------- Year End Bonus/Quick Zone Quick Zone $***** based on sales from $*****- Amt. At $***** *****% $***** - ---------------------------------------------------------------------------------------------------------------- TOTAL $***** - ----------------------------------------------------------------------------------------------------------------
- --------------------- * Confidential Treatment Requested. Page 3 of 4 Table B (applicable retroactively for Bateman's compensation if the DermaLase is not available for sale and shipment by August 1, 1999):
- ---------------------------------------------------------------------------------------------------------------- Monthly Sales Amount Monthly Sales Commission Rate Monthly Annualized Sales Annualized Amount Commission Amount Commission - ---------------------------------------------------------------------------------------------------------------- $*****-***** $***** *****% $***** $***** $***** - ---------------------------------------------------------------------------------------------------------------- $*****-$***** $***** *****% $***** $***** $***** - ---------------------------------------------------------------------------------------------------------------- TOTALS $***** $***** $***** $***** - ---------------------------------------------------------------------------------------------------------------- Base Salary $***** $***** - ---------------------------------------------------------------------------------------------------------------- TOTALS $***** $***** - ---------------------------------------------------------------------------------------------------------------- Year End Bonus/Quick Zone Quick Zone $***** based on sales from $*****- Amt. At $***** *****% $***** - ---------------------------------------------------------------------------------------------------------------- TOTAL $***** - ----------------------------------------------------------------------------------------------------------------
- --------------------- * Confidential Treatment Requested. Page 4 of 4 EX-10.2 4 dex102.txt EMPLOYMENT AGREEMENT W/JEFFREY W. JONES EXHIBIT 10.2 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement (the "Agreement") is made and entered into on the first day of January 2002 by and between BioLase Technology, Inc., a Delaware corporation (the "Company"), and Jeffrey W. Jones ("Executive"). RECITALS -------- WHEREAS, the Company desires to employ Executive as its President and Chief Executive Officer, and Executive is willing to accept such employment on certain terms and conditions; WHEREAS, the Company and Executive desire to formalize the terms and conditions of such employment; AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing premises, the terms and conditions set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Employment and Duties. --------------------- (a) The Company hereby employs Executive as its President and Chief Executive Officer, and Executive accepts such employment. In such capacity, Executive shall report and be responsible to the Company Board of Directors ("Board") and shall perform such duties and functions as may be assigned to Executive from time to time by the Board. Executive shall comply with all proper directives and instructions of the Board, as embodied in resolutions adopted by the Board. (b) Executive agrees during the term of his employment hereunder to devote his entire business time and attention to the performance of his duties hereunder and to serve the Company diligently and to the best of his ability. 2. Compensation. For all services to be rendered by Executive ------------ hereunder, the Company shall pay Executive a base salary at the rate of Two Hundred Forty Thousand Dollars ($240,000) per year. Executive's salary shall be paid on such basis as is the normal payment pattern for executive officers of the Company but no less frequently than monthly. Part of the total compensation may be in the form of a fee for consulting services to BIOLASE Europe as long as the total compensation does not exceed $240,000 per year. In addition to the base salary, the Company shall pay to Executive an annual bonus equal to 0.5% (one-half of one percent) of all sales over $10,000,000 (ten million dollars) per year for the years 2002 and 2003. In lieu of a bonus for 2001, the Company will pay Executive for the year 2002 a housing allowance of $3,500 (three thousand five hundred dollars) per month to 1 compensate Executive for expenses related to maintaining a dual residence away from his permanent residence in Wyoming. 3. Options. The Board has authorized the grant to Executive of options ------- to purchase up to 300,000 shares of BioLase Common Stock at an exercise price equal to the fair market value (as determined in accordance with the provisions of the Company's 1998 Stock Option Plan) of a share of Company Common Stock on December 20, 2001. The options will be embodied in a stock option agreement in the standard form employed or to be employed under the Company's 1998 Stock Option Plan, modified to be consistent with the terms of this Agreement, and will vest and become exercisable with respect to increments of the grant as follows: 12,500 (twelve thousand five hundred) shares on the last day of each calendar month during the term hereof commencing January 31, 2002 and continuing through December 31, 2003. It is intended that such options shall be non-qualified stock options (within the meaning of the Internal Revenue Code). In the event Executive's employment with the Company is terminated by the Company other than For Cause (as hereinafter defined), options shall continue to vest for the longer of (a) the balance of the calendar year in which termination occurs or (b) six months following termination. 4. Benefits. Executive shall be entitled to such fringe benefits and -------- perquisites as are generally made available to executive officers of the Company from time to time, including continuance of the auto allowance approved by the Board in May of 2001. In addition, Executive shall be entitled to four weeks of paid vacation per annum, but unused vacation time may not be carried over from one calendar year to the next calendar year. 5. Reimbursement of Expenses. The Company shall reimburse Executive ------------------------- for all reasonable business expenses incurred by Executive in connection with the performance of his duties hereunder, provided that Executive furnishes to Company receipts and other documentation evidencing such expenditures. Such the reimbursement shall include expenses, not to exceed $7,500 per year, related to reasonable periodic travel between Executive's permanent residence in Wyoming and the Company's principal executive offices located in San Clemente, California. 6. Non-Competition. --------------- (a) Executive agrees during the term of his employment by the Company not to compete with the Company or any of its Subsidiaries in any manner whatsoever. Without limiting the generality of the foregoing, Executive shall not, during the term of his employment by the Company, directly or indirectly (whether for compensation or otherwise), alone or as an agent, principal, partner, officer, employee, trustee, director, shareholder or in any other capacity, own, manage, operate, join, control or participate in the ownership, management, operation or control of or furnish any capital to or be connected in any manner with or provide any services as a consultant for any business which competes directly or indirectly with any of the businesses of the Company or any of its Subsidiaries as they may be conducted from time to time; provided, 2 however, that nothing contained in this Agreement shall be deemed to preclude Executive from owning not more than one-half of one percent (0.5%) of the capital stock of a publicly-traded entity which is in competition with any of such businesses. (b) Executive may engage in civic, educational and charitable activities. Executive shall be entitled, with the approval of the Board, to serve as a director of any corporation other than a corporation which, in the good faith opinion of the Board, is in competition with the Company or a Subsidiary. Executive shall be entitled to receive compensation from any corporation with respect to which he serves as a director in accordance with this Section 6(b). Notwithstanding anything to the contrary set forth herein, Executive shall not be entitled to engage in any of the activities set forth in this Section 6(b) if such activities, in the good faith opinion of the Board, interfere or could reasonably be expected to interfere with Executive's performance of his duties and activities under this Agreement. (c) Executive shall promptly disclose to the Company and shall use his best efforts to transfer to or hold for the benefit of the Company but in no event shall divert or exploit for his own personal profit or that of any other person except the Company, any business opportunity or other opportunity to acquire an interest in or a contractual relationship with any person or entity where such person or entity is in the same line of business as the Company or a Subsidiary or where such contractual relationship would be considered a feasible and advantageous opportunity for the Company or a Subsidiary. 7. Term of Agreement. ----------------- (a) The basic term of Executive's employment with the Company hereunder shall commence on January 1, 2002 and, except in the event of earlier termination, shall end on December 31, 2003. Following December 31, 2003, the employment relationship under this Agreement shall continue on a calendar quarter to calendar quarter basis with the same remuneration arrangements as shall apply during the final year of the term hereof, unless and until (i) the employment relationship between Executive and the Company shall become governed by a written instrument executed by Executive and the Company subsequent to the date hereof, including an instrument amending, renewing or extending this Agreement, or (ii) this Agreement shall have been terminated on December 31, 2003 or a calendar quarter-end thereafter by notice of the termination hereof given by one party hereto to the other at least ninety (90) days prior to the date specified in such notice for such termination. (b) The Company upon written notice to Executive may terminate this Agreement For Cause (as defined herein). For the purposes of this Agreement, the term "For Cause" shall mean: (i) Executive's conviction by, or entry of a plea of guilty or nolo contenders in, a court of competent jurisdiction for any crime involving moral turpitude or any felony punishable by imprisonment in the jurisdiction involved; (ii) the repeated failure by Executive to perform his duties and functions hereunder in accordance with the instructions of the Board as embodied in resolutions of the Board (provided that such instructions do not require Executive to take any actions that are unlawful or otherwise improper); (iii) the willful and material breach of this Agreement by Executive if Executive fails to cure such breach within 15 business days following 3 written notice from the Company; or (iv) Executive's commission of any act of fraud or dishonesty in connection with his employment by the Company. (c) In the event the Company terminates the employment of Executive prior to January 1, 2003 other than For Cause, the Company shall pay to Executive as severance pay and in lieu of any other salary or bonus payments hereunder with respect to post-termination periods an amount equal to twelve (12) times the base monthly salary Executive was receiving immediately prior to the date of termination. In the event the Company terminates the employment of Executive subsequent to December 31, 2002 other than For Cause, the Company shall pay to Executive as severance pay and in lieu of any other salary or bonus payments hereunder with respect to post-termination periods an amount equal to at least six (6) times the base monthly salary Executive was receiving immediately prior to the date of termination, and in such case the sum of (i) the number of months between the notice of termination and the date of termination of employment and (ii) the number of months with respect to which such severance pay is paid shall be no less than twelve (12). 8. Confidentiality. --------------- (a) The Company (which for purposes of this Section 8 shall mean the Company and its Subsidiaries) and Executive recognize that during the course of Executive's employment with the Company he will accumulate certain crucial proprietary and confidential information and trade secrets for use in the Company's business and will have divulged to him certain crucial confidential and proprietary information and trade secrets about the businesses, operations and prospects of the Company, including, without limitation, confidential and proprietary information regarding the technology, finances, customers, suppliers and employees of the Company, which constitute valuable business assets providing the Company with a competitive advantage over those who do not know such information or have access to it. Executive hereby acknowledges and agrees that such information (the "Proprietary Information") is confidential and proprietary and constitutes trade secrets; that the Proprietary information belongs to the Company and not to Executive; that such information includes, without limitation: (i) The identity and location of customers and suppliers; (ii) Records of research, including research relating to the Technology; (iii) Plans, proposals and projections, including but not limited to plans for the growth, expansion and development of the company's various businesses and their respective relationships with their employees, suppliers and customers; and (iv) Files, reports, memoranda, computer software or programming and budgets or other financial plans or information regarding the Company and its business, properties or affairs. (b) Executive agrees that he shall not, at any time subsequent to the execution of this Agreement, whether during or after the term hereof, disclose, divulge or make known, directly or indirectly, to any person, or otherwise use or exploit in any manner any Proprietary 4 Information obtained by Executive at any time during his employment by the Company, except in connection with and to the extent required by his performance of his duties hereunder for the Company. Executive agrees to advise the Company promptly of the identity and nature of any contacts with any person or entity soliciting from Executive disclosure of any Proprietary Information or soliciting Executive's involvement in any business venture competitive with the Company. Upon termination of this Agreement, Executive shall deliver to the Company all tangible displays and repositories of Proprietary Information, including without limitation customer and supplier lists, files, records of research, proposals, reports, memoranda, business methods and techniques, computer software and programming, budgets and other financial plans and information, and other materials or records or writings of any other type (including all copies thereof) made, used or obtained by, or provided to, Executive, containing any Proprietary Information, whether obtained prior to or subsequent to the execution of this Agreement. 9. Miscellaneous. ------------- (a) Executive represents and warrants to the Company that he is not now under any obligation of a contractual or other nature to any person, firm or corporation which is inconsistent or in conflict with this Agreement, or which would prevent, limit or impair in any way the performance by him of his obligations hereunder. (b) The waiver by either party of a breach of any provision of this Agreement must be in writing and shall not operate or be construed as a waiver of any subsequent breach thereof. (c) This Agreement constitutes the entire Agreement of Executive and the Company regarding employment and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations between the parties with respect to the subject matter hereof. (d) Any and all notices referred to herein shall be sufficiently furnished if in writing and personally delivered or sent by registered or certified mail, postage prepaid with return receipt requested, by facsimile transmission (if receipt is confirmed) or by courier to the Company at its principal executive office and to the Executive at his address as reflected in the Company's employment records or such other address as a party may from time to time designate in writing in the manner set forth in this Section 9(d): (e) If any portion or provision of this Agreement shall be invalid or unenforceable for any reason, there shall be deemed to be made such changes (and only such changes) in such provision or portion as are necessary to make it valid and enforceable. The invalidity or unenforceability of any provision or portion of this Agreement shall not affect the validity or enforceability of any other provision or portions of this Agreement. If any such unenforceable or invalid provision or provisions shall be rendered enforceable and valid by changes in applicable law, then such provision or provisions shall be deemed to read as they presently do in this Agreement without change. 5 (f) The rights and obligations of the parties hereto shall inure to and be binding upon the parties hereto and their respective heirs, successors and assigns. Without limiting the generality of the foregoing, this Agreement shall be binding upon any successor to the Company whether by merger, acquisition of stock, purchase of all or substantially all of the Company's assets, reorganization or otherwise. Executive may not assign his rights and duties hereunder, except with the prior written consent of the Company. (g) This Agreement is intended to and shall be governed by, and interpreted under and construed in accordance with, the laws of the State of California applicable to contracts executed in and wholly performed with such state and without reference to any choice or conflict of laws principles. The payment of base compensation, bonus or benefits may be allocated to or made by such divisions or subsidiaries of the Company as appropriate. (h) Any controversy, claim or dispute between the parties directly or indirectly concerning this Agreement, or the breach or subject matter hereof, shall be finally settled by arbitration held in Orange County, California. Either party may demand an arbitration proceeding by providing the other party and the American Arbitration Association with written notice thereof. The Company and Executive shall each select one arbitrator from a panel of at least five (5) arbitrators (the "Arbitration Pool") obtained from the American Arbitration Association within thirty (30) days of receiving the Arbitration Pool list. Such two arbitrators so selected shall agree on a third arbitrator from the Arbitration Pool within fifteen (15) days thereafter. In the event an agreement has not been reached on the third arbitrator by the end of such fifteen-day period, the American Arbitration Association shall choose the third arbitrator. The parties hereto agree that an action to compel arbitration pursuant to this Agreement may be brought in any appropriate court, and in connection therewith the laws of the State of California shall control. Application may also be made to any such court for confirmation of any decision or award of the arbitrators but only if necessary to effectuate such decision or award. The parties hereto hereby consent to the jurisdiction of the arbitrators and waive any objection to the jurisdiction of such arbitrators. If any arbitration, litigation or other proceedings is instituted in connection with or related to this Agreement, the non-prevailing party in such proceeding shall pay the expenses, including without limitation the attorneys' fees and expenses of investigation, of the prevailing party. (i) The Company and Executive represent, respectively, that it and he have not obligated the Company to pay any fee to any person in connection with the employment of Executive by the Company. 10. Indemnification. The Company shall, to the maximum extent permitted --------------- under the General Corporation Law of the State of Delaware, indemnify Executive against any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement (with the written consent of the Company which shall not be unreasonably withheld) actually and reasonably incurred by Executive in connection with any action, suit or proceeding, whether civil, criminal, administrative or investigative, threatened or initiated against Executive by reason of the fact that 6 he was serving as an officer, director, employee or agent of the Company or was serving at the request of the Company as an officer, director, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. BioLase Technology, Inc. By: /s/ FEDERICO PIGNATELLI ----------------------------------------- Federico Pignatelli, Chairman of the Board By: /s/ JEFFREY W. JONES ----------------------------------------- Jeffrey W. Jones 7 EX-10.3 5 dex103.txt ASSET PURCHASE AGREEMENT EXHIBIT 10.3 ASSET PURCHASE AGREEMENT of January 29,2002 between Asclepion-Meditec AG Goschwitzer Strasse 51-52 07745 Jena (hereinafter referred to as the "Seller") and BIOLASE Europe GmbH c/o Brobeck Hale and Dorr Maximilianstrasse 31 80539 Munchen (hereinafter referred to as the "Purchaser") Preamble -------- The Seller is the owner of a production center with ten employees in Floss, Germany (hereinafter referred to as the "Business"). The Seller is interested in divesting itself of the Business by way of a transfer of the assets and contractual relationships relating thereto. The Purchaser is interested in purchasing certain assets and contractual relationships relating thereto. The parties therefore agree as follows: ARTICLE 1 Purchase of Assets ------------------ 1. The Seller hereby sells to the Purchaser all fixed assets (Gegenstande des Anlagevermogens) within the meaning of Section 266 (2) A of the German Commercial Code (Handelsgesetzbuch) (hereinafter referred to as "HGB") which belong to the Business on February 1, 2002 (hereinafter referred to as the "Effective Date") and are listed in Attachment 1.1 hereto. -------------- 2. The list of assets attached to this Agreement as Attachment 1.1 was -------------- prepared from the inventory list (Inventar) which formed the basis of the balance sheet being part of the audited annual statement of the Seller as of September 30, 2001, and taking into account subsection 3 below. Assets of the Business, which did not have to be included in the inventory in view of their particular nature (e.g. low value items), are nevertheless included in the assets sold pursuant to this Article 1. Page 1 of 10 3. All inventories (Vorrate) within the meaning of Section 266 (2) B.I. HGB relating to the Business, receivables and other assets (Forderungen und sonstige Vermogensgegenstande) within the meaning of Article 266 (2) B.II. HGB relating to the Business, securities (Wertpapiere) within the meaning of Article 266 (2) B.III. HGB and checks, cash, federal bank and post giro deposits and deposits with credit institutions (Schecks, kassenbestand Bundesbank und Postgiroguthaben und Guthaben bei Kreditinstituten) within the meaning of Article 266 (2) B.IV. HGB relating to the Business are not included in the assets sold pursuant to subsection 1. ARTICLE 2 Premises -------- The real estate on which the operations of the Business are conducted is included in the assets sold pursuant to Article 1 subsection 1 of this Agreement. The real estate is registered in the Land Register Schonbrunn of the Municipal Court of Weiden i.d.Oberpfalz, volume 11, page folio 375 BV no. 1 and is owned by the Seller. Details of the sale of such real estate are governed by the Real Estate Purchase Agreement to which this Agreement is exhibit 4. ARTICLE 3 Assignment of Contracts ----------------------- The Purchaser hereby assumes from the Seller as of the Effective Date all contracts which are specified in Attachment 3 to this Agreement, i.e., the ------------ Purchaser assumes from the Seller all rights and obligations resulting from these contracts by way of the assumption of contract with full discharge of the original contract party (im Wege der Vertragsubernahme mit befreiender Wirkung). ARTICLE 4 Transfer of Employment Relationships ------------------------------------ 1. The parties acknowledge that employment relationships existing with the Seller and attributable to the Business together with all rights and obligations arising therefrom are on the Effective Date transferred to the Purchaser pursuant to Section 613a of the German Civil Code (Burgerliches Gesetzbuch). 2. The employment relationships transferred to the Purchaser are listed in Attachment 4.2 to this Agreement. -------------- 3. Any compensation and or social security or tax payment related to the transferred employment relationships for January 2002 shall still be handled and paid by the Seller. 4. In the event the Purchaser has to terminate any of the employees listed in Attachment 4.2, then the Seller shall indemnify the Purchaser for the -------------- Termination Costs of up to 3 of the transferred employees. "Termination Costs" in this Article 4 shall mean the costs resulting from any settlement payment based on the employee's service prior to the Effective Date plus any reasonable legal fees (attorney and court fees) in case of a legal dispute in connection with the termination of the employee. Page 2 of 10 5. In the event, the Purchaser has to terminate more than 3 of the employees listed in Attachment 4.2, then the parties shall equally share the -------------- Termination Costs (as defined in subsection 3 above) of those additional employees. 6. The indemnification in subsections 4 and 5 above shall be conditioned on the Purchaser, prior to the termination of the respective employee listed in Attachment 4.2 having consulted and discussed in good faith with the -------------- Seller its intention to terminate the employee. 7. The entitlement to the indemnification in subsections 4 and 5 above shall lapse, if (i) the Purchaser files a petition for bankruptcy or has such petition filed involuntarily against it, or files a petition for suspension of payments, becomes insolvent, makes an assignment for the benefit of creditors, goes into liquidation or receivership, or otherwise loses legal control of its business, or (ii) comes under the control of a third party (e.g., by virtue of acquisition or merger) two years or more after the Effective Date. ARTICLE 5 Transfer of Title, Grant of Possession -------------------------------------- 1. The Seller hereby transfers to the Purchaser, who hereby accepts such transfer, title to the assets sold pursuant to Article 1 of this Agreement with effect as of the Effective Date. The transfer from the Seller to the Purchaser of the real estate referred to in Article 2 of this Agreement is governed by the Real Estate Purchase Agreement. 2. The Seller will grant to the Purchaser on the Effective Date possession of the tangible assets sold pursuant to Section 1.1 of this Agreement. 3. With effect from the Effective Date, the Seller transfers all books, records and documentation relating to the transferred assets and employment relationships and assigned contracts to the Purchaser. ARTICLE 6 Third Party Consents -------------------- 1. The parties will jointly endeavor to obtain all necessary third party consents in respect of the transferred assets and assigned contractual relationships, and the entry into certain contracts and contractual offers; in particular, the parties will endeavor to obtain the consent of contractual partners. 2. If it turns out to be impossible or impracticable to obtain the consent of a third party which is necessary in connection with the effective transfer of an asset or the assignment of a contractual relationship, or the effective entry into a contractual relationship or contractual offer, the parties will, for the purposes of their internal relationship (im Innenverhaltnis), behave and conduct themselves as if the transfer or entry had effectively taken place on the Effective Date. In this case, the Seller will, in respect of its external relationships (im Aussenverhaltnis), remain the owner of the relevant asset and remain the party to the relevant contractual relationship but will continue to hold the relevant asset and the relevant contract or contractual offer in the internal relationship Page 3 of 10 between the Seller and the Purchaser for the account of the Purchaser. Thus, the Purchaser shall indemnify the Seller for any losses, damages, liabilities to third parties, costs or expenses (including taxation) it might incur in connection therewith. ARTICLE 7 No assumption of Liabilities ---------------------------- Except as set forth herein, the Purchaser shall not assume any liabilities of the Seller related to the Business, including but not limited to (i) any liabilities in connection with the transferred assets or the assigned contractual relationships incurred until the Effective Date and (ii) any liabilities of the Seller relating to accounts payable, indebtedness, legal services, accounting services, financial advisory services or other professional services performed in connection with the Business. ARTICLE 8 Purchase Price -------------- 1. The aggregate purchase price for the transfer of the assets and employment relationships, and the assignment of the contractual relationships (hereinafter referred to as the "Purchase Price") is US-$ 1,000,000.00 (in words: United States Dollar one million). Therefrom US-$ 849,000.00 (in words: United States Dollar eight-hundred-forty-nine-thousand) shall be paid for the acquisition of the premises. Installments of the Purchase Price to be paid shall be allocated to the acquisition of the premises until this portion of the Purchase Price has been fully settled. 2. A first installment of the Purchase Price which shall amount according to the sole discretion of the Purchaser between US-$ 300,000.00 (in words: United States Dollar three-hundred-thousand) and US-$ 500,000.00 (in words: United States Dollar five-hundred-thousand) shall be paid by the Purchaser not later than May 31, 2002 but not before the 12th day after the Notary Public has sent to the Purchaser a written notice in accordance with Article III of the Real Estate Purchase Agreement. The funds shall be paid to account no. ***** of the Seller with ***** (bank identification number: *****). 3. Provided that the first installment is US-$ 500,000.00 (in words: United States Dollar five-hundred-thousand), the balance of the Purchase Price shall be paid by the Purchaser not later than April 1, 2003 to the account of the Seller no. ***** with ***** (bank identification number: *****). 4. In the event, the first installment of the Purchase Price is less than US-$ 500,000.00 (in words: United States Dollar five-hundred-thousand), then the second installment of the Purchase Price shall be in the amount of at least US-$ 500,000.00 (in words: United States Dollar five-hundred-thousand), and shall be paid by the Purchaser not later than April 1, 2003. The remaining outstanding balance of the Purchase Price shall then be paid by the Purchaser not later than December 1, 2003. - --------------------- * Confidential Treatment Requested. Page 4 of 10 5. The portion of the Purchase Price outstanding from time to time shall, from the Effective Date until payment, bear interest at an annual rate calculated in accordance with the following formula: *****. The interest is due and payable on the last business day of each month. 6. On the date the first installment of the Purchase Price is due, the Purchaser shall provide the Seller with a direct suretyship of BIOLASE Technology, Inc., payable upon first demand (selbstschuldnerische Burgschaft auf erstes Anfordern) in the amount of the remaining balance of the Purchase Price. This suretyship must be returned by the Seller upon receipt of the final installment of the Purchase Price at the latest. If, at the time of the intended return of the suretyship, the parties do not agree as to whether there are any warranty claims in respect of which the Purchaser can exercise a right of set off against the outstanding claim for the Purchase Price or a portion thereof, the Seller may nevertheless demand from the Purchaser payment of the full amount of the final installment of the Purchase Price if the Seller, in order to secure the warranty amount in dispute, provides at the same time a direct suretyship payable upon first demand (selbstschuldnerische Burgschaft auf erstes Anfordern) of a bank or savings bank which is recognized as a customs or tax surety. 7. The Purchase Price agreed upon in subsection 1 above is a net amount. The Purchaser shall be solely responsible for and shall pay, or reimburse the Seller for any German Value Added Tax due under this Agreement. The Seller shall provide the Purchaser with according invoices separately stating the Purchase Price and Value Added Tax. 8. If payment of the first installment of the Purchase Price is not made when due as specified in subsection 2 above, then the Seller has the right to withdraw from this Agreement (zurucktreten), if the Purchaser has not cured this failure within 14 banking days after having received the Seller's written notice that payment of the first installment of the Purchase Price is still outstanding. The right of the Seller to demand damages from the Purchaser on the basis of non-completion is not affected by the exercise of this right of withdrawal. 9. The Purchase Price and any interest resulting therefrom shall be payable in the European currency Euro ("EUR" or "(euro)"). The exchange rate to be applied for the conversion from United States Dollars (US-$) to EUR. (hereinafter referred to as the "Exchange Rate") shall be the average exchange rate as stated in the London Financial Times on the date of the notarial recording of this Agreement. The Exchange Rate shall be applicable to any and all payments under this Agreement. - --------------------- * Confidential Treatment Requested. Page 5 of 10 ARTICLE 9 Warranties of the Seller ------------------------ The Seller warrants to the Purchaser, in the form of an independent promise of guarantee (unabhangiges Garantieversprechen), that the following statements, as at the Effective Date, are true and correct: 1. The Seller has the right to freely dispose of the assets sold pursuant to Article 1 and 2 of this Agreement without any third parties' consent being required and without such a disposal infringing the rights of third parties. The Seller is the legal and beneficial owner of all assets sold pursuant to Article 1 subsection 1 and Article 2 of this Agreement. Such assets are free of all encumbrances or any other rights in favor of third parties and are in good operating and maintenance condition. 2. The validity or enforceability of the contracts transferred pursuant to Article 3 of this Agreement has not been legally contested or challenged. No such contract has been terminated nor, to the best knowledge of the Seller, is any such termination pending. Neither the Seller nor, to the best knowledge of the Seller, its respective contractual partner, has breached, or is in default with respect to, any such contract. 3. Attachment 4.2 to this Agreement is a complete and correct list of all -------------- employees of the Seller transferred pursuant to Article 4 of this Agreement specifying the name of each such employee and the aggregate amount in Deutsche Mark of the compensation (including wages, salary, commissions, director's fees, fringe benefits, bonuses, profit- sharing payments and other payments or benefits of any type) received by such employee from the Seller with respect to the services performed in 2001. No employee indicated in that list as ***** has declared an intention to terminate the employment relationship. Except as set forth in Attachment 4.2 to this Agreement, the Seller is not -------------- a party to or bound by, any employment contract or any union contract, collective bargaining agreement or similar contract in connection with the transferred employees. To the best of Seller's knowledge, no transferred employee is a party to or bound by any confidentiality agreement, non-competition agreement or other contract with any person that may have an adverse effect on the performance by such employee of any of his duties or responsibilities as an employee of the Seller or the Purchaser. - --------------------- * Confidential Treatment Requested. Page 6 of 10 4. The business facilities of the Business have been erected in compliance with all applicable laws and regulatory orders (in particular in the area of construction and trade law). Neither their operation nor any other current business operations of the Business nor any of its products or services infringe any applicable laws or regulatory orders. All relevant permits required in connection with the operation of the Business have been granted (Realkonzessionen). To the best knowledge of the Seller, neither the revocation nor any restrictions in respect of such permits is or are impending. All necessary insurances are valid and in full force up until the Effective Date. 5. Bankruptcy or composition proceedings have not been commenced against the Seller nor are there any circumstances visible which would justify the commencement of such proceedings in the foreseeable future. There is also no pending proceeding against or involving the Seller that is related to the Business or any transferred asset or employment relationship or assigned contract, and to the knowledge of the Seller, no person has threatened to commence any proceeding against or involving the Seller that is related to the Business or the transferred assets or employment relationships or assigned contracts. To the knowledge of the Seller, there is no proposed order that, if issued or otherwise put into effect, (i) would be reasonably likely to have a material adverse effect on the ability of the Seller to comply with or perform any covenant or obligation under any provision of this Agreement or (ii) would reasonably be expected to have the effect of preventing, delaying, making illegal or otherwise interfering with any of the transactions contemplated hereby. 6. To the best knowledge of the Seller, all information supplied by the Seller to the Purchaser and its advisers prior to the notarial recording of this Agreement is complete, correct and accurate in all respects. It is not misleading and does not omit any fact relating to the Business and the assets and contractual and employment relationships transferred pursuant to this Agreement which would be important in respect of specific information given or which the Purchaser at the time of the notarial recording of this Agreement should have known for the purposes of evaluating such information. To the best knowledge of the Seller, there are no material facts or circumstances, which in the future could have a material adverse effect on the Business and its operations as well as on the transferred assets and employment relationships and assigned contracts with the exception of general developments of the economy or the market. 7. The Seller has all requisite legal power and authority to enter into this Agreement and to consummate the transactions contemplated thereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary legal bodies of the Seller. This Agreement has been duly executed and delivered by the Seller and constitutes the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. 8. The execution and delivery of this Agreement by the Seller does not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit under any other agreement of the Seller and Purchaser. Page 7 of 10 ARTICLE 10 Legal Consequences ------------------ 1. If one or several of the statements in respect of which the Seller has, pursuant to Article 9 of this Agreement, assumed a guarantee turns out to be inaccurate, then the Purchaser may demand that the Seller, within an appropriate period of time but in any case not later than 30 days after receipt of such demand brings about the position which would have existed had such statements been correct. If the Seller, within such period of time, fails to produce such position or if it is impossible to do so, the Purchaser may demand damages from the Seller. 2. The Purchaser may claim damages on the basis of non-fulfillment of the guarantees assumed by the Seller pursuant to Article 9 of this Agreement only to the extent that the aggregate amount of such claims exceeds an amount of EUR ***** (in words: Euro *****). This limitation has no application in respect of legal defects (Rechtsmangel) of the assets sold. 3. Expressly excluded are any rights of the Purchaser relating to exchange (Wandlung) or reduction of purchase price (Minderung), damages for incorrect representation (Schadenersatz wegen unrichtiger Zusicherung), avoidance of this Agreement due to lack of substantial quality (Anfechtung wegen des Fehlens einer wesentlichen Eigenschaft) or rescission or adjustment of this Agreement due to lack of substantial elements (Wegfall der Geschaftsgrundlage) or damages for other negligent breach of contract (Schadensersatz wegen Pflichtverletzung). 4. All warranty claims of the Purchaser pursuant to this Article 10 are subject to a limitation period of two (2) years. This has no application in respect of legal defects of the assets sold, which are subject to the statutory limitation period. The limitation period commences on the Effective Date. ARTICLE 11 Confidentiality and Press Releases ---------------------------------- 1. The Seller shall keep confidential for a period of 2 years from the Effective Date its knowledge concerning the Business and its business operations if the relevant facts are not publicly known and to the extent that no legal disclosure requirements exist and shall, furthermore, not use such confidential information for itself or for others. 2. The parties agree to keep strictly confidential any information obtained by them in connection with the negotiation and conclusion of this Agreement which relates to the relevant other party and its affiliated companies. 3. Neither party shall make any press release nor any similar public announcement with respect to the transactions contemplated in this Agreement without the prior written agreement of the relevant other party. - --------------------- * Confidential Treatment Requested. Page 8 of 10 ARTICLE 12 Enticement of Employees ----------------------- The parties agree for a period of 30 (thirty) months after the Effective Date, not to cause and not to cause any of their affiliates to cause any employee of the other party to terminate his/her employment or other contractual relationship with the other party. ARTICLE 13 Miscellaneous ------------- 1. Each party to this Agreement shall bear the costs of its advisers. The cost of the notarial recording of this Agreement as well as other transaction costs brought about by the conclusion or performance of this Agreement including any transfer taxes shall, as between the parties, be borne by the Purchaser. 2. This Agreement, including this provision, may only be amended by written or, if required by applicable law, notarial instrument 3. Notices permitted or required to be given hereunder shall be in writing and shall be deemed given when delivered personally, or upon receipt if mailed by registered mail or certified mail, postage prepaid, return receipt requested, or transmitted by telefax (with an electronic confirmation thereof to the transmitter), to the parties at their respective addresses set forth below (or at such other address for a party as shall be specified by notice given hereunder): If to the Seller: Asclepion-Meditec AG Goschwitzer Strasse 51-52 07745 Jena Attn.: Dr. Bernhard Seitz Telefax: 03641 - 220102 If to the Purchaser: BIOLASE Europe GmbH c/o Brobeck Hale and Dorr Maximilianstrasse 3l 80539 Munchen, Attn Rainer Kreifels Telefax: 089-24213213 4. If any provision of this Agreement is wholly or in part invalid or unenforceable, the validity and enforceability of the other provisions of this Agreement shall not be affected thereby. The invalid or unenforceable provision shall be deemed to be replaced by such valid and enforceable provision which best serves the economic interests of the parties as originally intended by the invalid or enforceable provision. 5. In case of any conflict between the provisions of this Agreement and the Real Estate Purchase Agreement, the Real Estate Purchase Agreement shall prevail. 6. This Agreement shall be governed by the laws of the Federal Republic of Germany. In the event of a dispute between the parties arising out of this Agreement, the parties agree Page 9 of 10 on Jena, Germany as the exclusive venue with respect to the commencement of any legal proceedings. Signed at Munich on this 29th day of January 2002 On behalf of Asclepion-Meditec AG: /s/ A. GOTTLIEB On behalf of BIOLASE Europe GmbH: /s/ RAINER KREIFELS Attachments Page 10 of 10
Attachment 1.1 Anlage Inventar Anlagenbezeichnung Einsatzort 1 Serialnr. Aktivdatum - ------ -------- ------------------------------------------ -------------------------------------- -------- ----------- 200040 AF230032 SW Feros "HZGD-01.07.1993,1312,00/590,00" 01.10.1995 500000 AF570009 Trennwand "HZGD-01.10.1993, 9560,00/1912,00" 01.10.1995 500001 AF530001 Gebaeude Floss "HZGD-01.10.1989,1231484,76/420728,76" 01.10.1995 500002 AF570001 Trennwand mit Verbindungstuere "HZGD-01.12.1991, 2689,99/686,99" 01.10:1995 500004 AF570003 Regalschrank als Raumteiler "HZGD-01.03.1993, 22320,00/5766,00" 01.10.1995 500005 AF570004 Trennwand m. Schraenken u. Tor "HZGD-01.05.1993, 22325,00/5396,00" 01.10.1995 500006 AF570005 Schrankwandanl. m. Tuer u. Garderobe "HZGD-01.07.1993, 11675,00/2628,00" 01.10.1995 500007 AF570006 Trennwand "HZGD-01.12.1993, 7100,44/1301,44" 01.10.1995 500008 AF570008 Trennwand incl. Verglasung "HZGD-01.10.1993, 12886,60/2577,60" 01.10.1995 500009 AF570007 Trennwand incl. Vergl. m. Durchgangstuereu "HZGD-01.10.1993, 15199,20/3039,20" 01.10.1995 500011 AF510001 Grund u. Boden bebaut Floss "HZGD-01.10.1994, 389307,78/0.00" 01.10.1995 500012 AF569001 Aussenanlagen Floss "HZGD-01.10.1989, 93365,31/61694,31" 01.10.1995 500015 AF999120 Grunderwerbssteuer Floss "HZGD-01.10.1994, 33506,00/0,00" 01.10.1995 700000 AF700004 Kompressor ECO 5-90 D Bauj. 1995 "HZGD-10.03.1995, 1750,41/525,41" 01.10.1995 700006 AF720023 Hydraulik-Stapler "HZGD-10.10.1990, 1887,00/1569,00" 01.10.1995 700008 AF720027 Messgeraet m. Zubehoer "HZGD-10.04.1992, 6468,00/4852,00" 01.10.1995 700023 AF720005 Thyzel Bohrmaschine 1980 "HZGD-10.10.1985, 1337,00/1336,00" 01.10.1995 700024 AF720004 "Bandsaegemaschine" "Haaf" "HZGD-10.10.1985, 3792,34/3791,34" 01.10.1995 800000 AF870118 Regal-System "HZGD-10.04.1992, 1162,22/872,22" 01.10.1995 800001 AF870117 Regal-System "HZGD-10.04.1992, 1162,22/872,22" 01.10.1995 800002 AF870116 Regal-System "HZGD-10.04.1992, 1162,23/872,23" 01.10.1995 800008 AF870119 Regal-System "HZGD-10.04.1992, 1162,22/872,22" 01.10.1995 800009 AF870136 Regal "HZGD-10.04.1992, 976,79/732,79" 01.10.1995 800014 AF870120 Regal-System "HZGD-10.04.1992, 1162,22/872,22" 01.10.1995 800015 AF870121 Regal-System "HZGD-10.04.1992, 1412,91/1057,73" 01.10.1995 800018 AF870128 Wandregal "HZGD-10.04.1992, 835,56/626,56" 01.10.1995 800021 AF870137 Regal "HZGD-10.04.1992, 1422,02/1067,02" 01.10.1995 800024 AF870074 Schrank "HZGD-10.10.1990, 1094,16/911,16" 01.10.1995 800026 AF870154 Regal "HZGD-10.10.1992, 991,30/667,30" 01.10.1995 800027 AF870155 Regal "HZGD-10.10.1992, 993,31/668,31" 01.10.1995 800031 AF870156 Regal "HZGD-10.10.1992, 993,29/668,29" 01.10.1995 800032 AF800031 Anbauten+Zubehoer Loetofen "HZGD-10.04.1987, 14610,56/13996,56" 01.10.1995 800041 AF800042 Testaufbau elektr. ARGUS "HZGD-10.04.1992, 3076,44/2307,44" 01.10.1995
Page 1 of 6
Attachment 1.1 Anlage Inventar Anlagenbezeichnung Einsatzort 1 Serialnr. Aktivdatum - ------ -------- ------------------------------------------ ------------------------------------ -------- ----------- 800044 AF870028 Schrank "HZGD-10.04.1990, 885,00/758,00" 01.10.1995 800047 AF870064 EPROM-Programmiergeraet "HZGD-10.04.1991, 1339,47/1227,47" 01.10.1995 800048 AF870059 Geschirrspuelmaschine "HZGD-10.04.1991, 950,00/870,00" 01.10.1995 800049 AF800043 Testaufbau Arztfilter "HZGD-10.04.1992, 1590,58/1193,58" 01.10.1995 800050 AF870045 Trennwandanlage "HZGD-10.10.1990, 5570,00/4633,00" 01.10.1995 800052 AF870008 Werksicherung (BP) "HZGD-10.10.1984, 22411,00/21997,00" 01.10.1995 800053 AF870004 Schrank (Floss) "HZGD-10.10.1985, 1818,00/1817,00" 01.10.1995 800054 AF870002 Schrank (Floss) "HZGD-10.10.1985, 1040,20/1039,20" 01.10.1995 800058 AF800046 Testaufbau ER YAG-Staehe "HZGD-10.10.1992, 4271,78/2876,78" 01.10.1995 800059 AF870046 Regale f. Lagereinrichtung "HZGD-10.10.1990, 6260,36/6259,36" 01.10.1995 800062 AF860090 Notebook Commodore m. Epson-Matrixdrucker "HZGD-10.10.1992, 2025,61/1363,61" 01.10.1995 800064 AF860103 Notebook Schneider "HZGD-10.10.1992, 1226,32/826,32" 01.10.1995 800066 AF860125 PC Arbeitsplatz DT 386/40 MHz "HZGD-10.10.1993, 2420,89/1234,89" 01.10.1995 800067 AF860130 Notebook Highscreen 386 SX20 "HZGD-10.04.1994, 1738,26/703,26" 01.10.1995 800071 AF800052 Testaufbau fuer Laserdiode "HZGD-10.04,1995, 3065,36/460,36" 01.10.1995 800072 AFS60084 Schallschutzhaube f. Drucker "HZGD-10.10.1991, 1135,25/949,25" 01.10.1995 800073 AF920013 Messgeraet Fieldmaster "HZGD-10.06.1995, 3105,00/466,00" 01.10.1995 800076 AF850115 Testsystem f. Steuerrechner AMLS-ZUK "HZGD-10.11.1994, 8600,00/2580,00" 01.10.1995 800077 AF850107 b+s Split-Klimageraet AW 212 CL "HZGD-10.10.1994, 5947,00/1785,00" 01.10.1995 800078 AF850101 Energieme geraet f. YAK-Laser "HZGD-10.10.1994, 7023,34/2107,34" 01.10.1995 800079 AF850137 Autokllimator "HZGD-10.03.1995, 2300,00/690,00" 01.10.1995 800083 AF999121 Lasermate 10 Analog System Leistungsmessgeraet "HZGD-10.05.1995, 1955,00/294,00" 01.10.1995 800084 AF999129 Lasermate 10 Analog System Leistungsmessgeraet "HZGD-10.05.1995, 1955,00/294,00" 01.10.1995 800085 AF999130 Lasermate 10 Analog System Leistungsmessgeraet "HZGD-10.05.1995, 1955,00/294,00" 01.10.1995 800086 AF850152 Trennwandanlage 3teilig, variabel einsetzbar "HZGD-10.05.1995, 1935,00/291,00" 01.10.1995 800087 AF800030 Test-System BREWSTER-TEST "HZGD-10.10.1987, 6812,56/6811,56" 01.10.1995 800089 AF870158 Regal "HZGD-10.10.1992, 1547,85/1042,85" 01.10.1995 800091 AF870167 Arthrodesenstuhl "HZGD-10.10.1992, 1340,53/880,53" 01.10.1995 800092 AF870168 Schubladen-Rollwagen "HZGD-10.10.1992, 1119,20/753,20" 01.10.1995
Page 2 of 6
Attachment 1.1 Anlage Inventar Anlagenbezeichnung Einsatzort 1 Serialnr. Aktivdatum - ------ -------- ------------------------------------------ ------------------------------------ -------- ----------- 800096 AF870176 Splitklimaanlage Fujitsu "HZGD-10.04.1993, 7161,71/4178,71" 01.10.1995 800097 AFS70177 Splitklimaanlage Fujitsu "HZGD-10.04.1993, 7161,71/4178,71" 01.10.1995 800099 AF860004 Oszillograph (Floss) "HZGD-10.10.1985, 16910,00/16900,00" 01.10.1995 800110 AF870157 Regal "HZGD-10.10.1992, 1756,26/1183,26" 01.10.1995 800120 AF850008 Hartgestellplatte "HZGD-10.10.1984, 1031,00/1030,00" 01.10.1995 800121 AF820003 Digitalspeicheroszilloskop "HZGD-10.04.1990, 1503,13/1502,13" 01.10.1995 800122 AF820004 Batterie-Konduktometer "HZGD-10.10.1991, 824,50/690,50" 01.10.1995 800123 AF820005 Impulsschrauber Bosch "HZGD-10.04.1992, 1382,25/1037,25" 01.10.1995 800126 AF840001 Gabelstapler, Braucke "HZGD-01.10.1983, 9975,20/9974,20" 01.10.1995 800128 AF850001 Vakuum-Trockenschrank "HZGD-10.10.1983, 3426,30/3425,30" 01.10.1995 800130 AFS50003 Div. Werktische "HZGD-10.10.1984, 6677,19/6676,19" 01.10.1995 800132 AF850005 Rasenmaeher "HZGD-10.10.1984, 1598,89/1597,89" 01.10.1995 800133 AF850006 Maschinenschraubsatz "HZGD-10.10.1984, 4839,40/4838,40" 01.10.1995 800135 AF850009 2 Werkbaenke "HZGD-10.10.1984, 2120,88/2119,88" 01.10.1995 800138 AF850007 Regalanlage "HZGD-10.10.1984, 2450,23/2449,23" 01.10.1995 800146 AF800009 Testaufbau f. GF,EK Filterblock "HZGD-10.04.1986, 1779,00/1778,00" 01.10.1995 800147 AF800010 Testaufbau Arztfilter "HZGD-10.10.1987, 1164,00/1163,00" 01.10.1995 800149 AF800029 Vorrichtung "HZGD-10.10.1987, 1716,61/1715,61" 01.10.1995 800151 AF800022 Druckminderer AGA "HZGD-10.04.1987, 3859,00/3858,00" 01.10.1995 800153 AF800027 PINCH-OFF-Vorrichtung "HZGD-10.10.1986, 2279,00/2278,00" 01.10.1995 800159 AF800021 Erdungs-Tester "HZGD-10.04.1987, 1159,00/1158,00" 01.10.1995 800167 AF850054 Drehschieberpumpe "HZGD-10.10.1990, 2265,90/2264,90" 01.10.1995 800169 AF850011 Trenn-Trafo "HZGD-10.10.1984, 4513,00/4512,00" 01.10.1995 800170 AF850012 Spectroscop "HZGD-10.10.1986, 1956,00/1955,00" 01.10.1995 800176 AF850018 "Steigleiter" "Lindner" "HZGD-10.04.1987, 1426,00/1425,00" 01.10.1995 800177 AF850024 Klimaanlage "HZGD-10.10.1989, 114572,22/110735,22" 01.10.199S 800178 AF850047 Steuerschrank "HZGD-10.04.1991, 1184,50/1085,50" 01.10.1995 800179 AF850048 Steuerschrank "HZGD-10.04.1991, 1184,50/1085,50" 01.10.1995 800181 AF850053 Digitales Speicheroszilloskop "HZGD-10.10.1990, 996,00/995,00" 01.10.1995 800182 AF850075 Schrankgehaeuse "HZGD-10.10.1991, 2206,72/1676,72" 01.10.1995 800185 AF850083 Autokollimator MRA-50 "HZGD-10.10.1992, 2130,00/1434,00" 01.10.1995 800186 AF850082 Oszilloscope HM 205-3 "HZGD-10.10.1992, 1502,13/1101,13" 01.10.1995 800187 AF850049 Steuerschrank "HZGD-10.04.1991, 1184,50/1085,50" 01.10.1995 800188 AF850076 Fertigungsstrasse f. Dentallaser "HZGD-10.04.1992, 6748,70/4781,70" 01.10.1995
Page 3 of 6
Attachment 1.1 Anlage Inventar Anlagenbezeichnung Einsatzort 1 Serialnr. Aktivdatum - ------ -------- ------------------------------------------ ------------------------------------ -------- ----------- 800194 AF860143 Netz Datennetzinstallation in Floss "HZGD-10.12.1994, 10303,24/3091,24" 01.10.1995 800195 AF850062 Reiner Arbeitsplatz "HZGD-10.04.1991, 8878,00/8139,00" 01.10.1995 800197 AF850079 Me geraet "HZGD-10.10.1992, 1502,13/1101,13" 01.10.1995 800200 AF860155 Notebook Acrobat Furore M. 486DX-50 "HZGD-10.04.1995, 1579,29/237,29" 01.10.1995 800202 AF860156 Notebook Acrobat Furore M. 486DX-50 "HZGD-10.04.1995, 1579,29/237,29" 01.10.1995 800204 AF999005 Testaufbau Blitzlampen MQL11 "HZGD-10.09.1995, 14574,95/2186,95" 01.10.1995 800206 AF999007 Palettenregal "HZGD-10.07.1995, 4399,17/660,17" 01.10.1995 800209 AF850148 Digitalanzeige fuer LaserMate 10 Inv.Nr. 370950 "HZGD-10.05.1995, 400,00/60,00" 01.10.1995 800210 AF850150 Digitalanzeige fuer LaserMate 10 Inv.Nr. 370950 "HZGD-10.05.1995, 400,00/60,00" 01.10.1995 800211 AF850149 Digitalanzeige fuer LaserMate 10 Inv.Nr. 370950 "HZGD-10.05.1995, 400,00/60,00" 01.10.1995 800212 AF860157 Notebook Acrobat Furore M. 486DX-50 "HZ.GD-10.04.1995, 1579,26/237,26" 01.10.1995 800213 AF860152 Notebook Acrobat Furore M. 486DX-50 "HZGD-10.04.1995, 1579,29/237,29" 01.10.1995 800214 AF860153 Notebook Acrobat Furore M. 486DX-50 "HZGD-10.04.1995, 1579,29/237,29" 01.10.1995 800215 AF850143 Stereo-Mikroskop "HZGD-10.04.1995, 7507,00/1127,00" 01.10.1995 800216 AF850142 Notebook Acrobat Furore M 486DX2-50 "HZGD-10.04.1995, 1499,00/225,00" 01.10.1995 800217 AF850140 Notebook Acrobat Furore M 486DX2-50 "HZGD-10.04.1995, 1499,00/225,00" 01.10.1995 800219 AF850141 Notebook Acrobat Furore M 486DX2-50 "HZGD-10.04.1995, 1499,00/225,00" 01.10.1995 800290 AH870001 Werkzeugschrank "HZGD-10.10.1984, 1129,00/1128,00" 01.10.1995 800299 AF850043 Joulemeter/Me kopf "HZGD-10.10.1990, 3130,00/3129,00" 01:10.1995 800372 AH860114 Netz Datennetz "HZGD-10.04.1993, 9753,41/5691,41" 01.10.1995 800386 AH860140 Fax PC-Fax "HZGD-10.10.1994, 5027,50/1508,50" 01.10.1995 800417 AH850138 Mcssplatte aus Hartgestein m. Untergestell "HZGD-10.03.1995, 1260,30/378,30" 01.10.1995 800772 Werkzeugkoffer 01.09:1996 800779 Zentrierring 01.06.1996 800780 Messschraube 01.06.1996 800865 Lotstation 01.04.1996 800873 Heissluftpistole 01.03.1996 800883 Digitalmultimeter 01.01.1996 800894 AM000089 Messkopf 01.11.1995 800896 AM000091 Messkopf 01.11.1995 800902 Spriihsauger 01.11.1995
Page 4 of 6
Attachment 1.1 Anlage Inventar Anlagenbezeichnung Einsatzort 1 Serialnr. Aktivdatum - ------ -------- ------------------------------------------ ------------------------------------ --------- ----------- 800905 AM000099 Erweiterung Testaufbau 01.11.1995 800908 Digital-Messschieber 01.04.1996 801106 Speicher 4MB 01.07.1996 801508 Telefon CT-Corn 316, schnurlos, 675182025 01.12.1996 801569 AM000376 Telefonanlage 01.03.1997 801592 Stichsage Bosch GST 85 PBAE m. Koffer 01.03.1997 801593 Bohrmaschine Bosch mit Winkelbohrkopf 01.03.1997 801703 AM000434 ALCON EyeLite-Laser 22.09.1997 801708 AM000438 PC Compaq Deskpro+Monit.17" 8723HVY4 01.09.1997 801713 Beschriftungsgerat 0839 01.09.1997 801739 "Farbmonilor 14""/Abl.Leas.SN:BZ032313" 01.03.1997 801817 Stromzange 25.11.1997 801818 Stromzange 25.11.1997 801819 Stromzange 25.11.1997 801832 Feuerloscher, Europa GE6 28.01.1998 801834 AM000523 Tisch m.Anbautisch u. 2 Schubladen 04.02.1998 801835 AM000524 Tisch m.Anbautisch u. 2 Schubladen 04.02.1998 801918 HP Deskjet 1120C 24.04.1998 801922 AM000578 Messkopf PE50-DIF-ER SN:52375 08.09.1998 801923 AM000556 Lasermate 1 Head SN:NL98 13.07.1998 802070 Werkzeugkoffer 11.02.1999 802071 Werkzeugkoffer 11.02.1999 802072 Werkzeugkoffer, fahrbar 15.02.1999 802152 AM000663 Werkzeug - Tool offset alignment 12.07.1999 802154 AM000665 Werkzeug - Tool offset alignment 26.07.1999 802155 Notebook Case (Rucksack) 02.07.1999 802156 Notebook Case (Rucksack) 02.07.1999 802157 Pilot-Case Koskin (Rucksack) 02.07.1999 802181 Werkzeugkoffer 29.07.1999 802201 AM000670 Prufaufbau EIL 27.10.1998 802220 Scanner 20.12.1999
Page 5 of 6
Attachment 1.1 Anlage Inventar Anlagenbezeichnung Einsatzort 1 Serialnr. Aktivdatum - ------ -------- ------------------------------------------ ------------------------------------ --------- ----------- 802423 Handy D 2 18.02.2000 802743 AM000882 Abgleichwerkzeug fur Multipulse 10.10.2000 802791 Schnurlostelefon Siemens Gigaset 100 06.12.2000 802812 AM000905 Drucker/Kopierer/Scanner, HP OfficeJet K80C6750a 22.01.2001 802830 Autotelefonanlage 25.01.2001 802831 AM000910 Kopierer Toshiba, Modell e-studio 16 CVL01372 25.01.2001 9 802887 AM000993 Notebook Toshiba Satellite Pro4300 SX002428 15.12.2000 3G*13 802931 AM000944 PC DPEX MT PIII cmpq-aex0011 8037FR4Z 15.12.2000 E540*08 802932 AM000945 PC DPEX MT PIII cmpq-aex0011 8037FR4Z 15.12.2000 E541*08 802933 AM000952 PC DPEX MT PIII cmpq-aex0011 8037FR4Z 15.12.2000 E671*08 802934 AM000982 Notebook Toshiba Satellite Pro 4300 SX002426 15.12.2000 4G*13 803028 Drucker HP Deskjet 930 C 29.03.2001 803067 Handy Nokia 6210 14.05.2001 803072 Einbau Freisprechanlage J-AM 705 29.05.2001 803104 Ultraschall-Reiniger 12.07.2001 803154 Mikrowelle Moulinex 21.11.2001 803155 Schnurlos-Telefon Siemens Gigaset 21.11.2001
Page 6 of 6 ATTACHMENT 3 Asclepion-Meditec AG Produktionsstatte Floss Vertrage
- ------------------------------------------------------------------------------------------------------------------------------------ Laufzeit ----------------------- Bezelchnung Inhalt Vertragspartner Vertrags-Nummer von bls - ------------------------------------------------------------------------------------------------------------------------------------ Versicherung Gebaude Bayerische Landes- B 9 44 77111 / L 01.10.01 01.10.02 (Feuer) brandversicherung AG - ------------------------------------------------------------------------------------------------------------------------------------ Versicherung Telefonanlage WUBA 90 000 494/155 24.10.91 01.01.03 - ------------------------------------------------------------------------------------------------------------------------------------ Versicherung Brandmeldeanlage WUBA 90 000 494/56 14.10.94 01.01.03 - ------------------------------------------------------------------------------------------------------------------------------------ Versicherung Einbruchmeldeentage WUBA 90 000 494/57 14.10.94 01.01.03 (Notrufanlage) - ------------------------------------------------------------------------------------------------------------------------------------ Versicherung Faxgerat Wurttembergische TV 27-6362164-46 01.09.94 01.09.02 - ------------------------------------------------------------------------------------------------------------------------------------ Miete Telefonnlage Tenovis GmbH 12311/02/1/1/13/19 24.10.91 31.12.02 - ------------------------------------------------------------------------------------------------------------------------------------ Miete Brandmeldeanlage Bosch Telecom GmbH 12311/02/5/1/13/00 14.10.94 31.12.02 - ------------------------------------------------------------------------------------------------------------------------------------ Miete Einbruchmeldeanlage Bosch Telecom GmbH 12311/04/4/1/13/00 14.10.94 31.12.02 (Notrufanlage) - ------------------------------------------------------------------------------------------------------------------------------------ Miete Stahlflaschen Tyczka Industrie-Gase GmbH ohne 01.07.01 31.07.02 - ------------------------------------------------------------------------------------------------------------------------------------ Miete Stahlflaschen Messer Griesheim GmbH ohne 01.04.01 31.03.02 - ------------------------------------------------------------------------------------------------------------------------------------ Leasing Fahrzeug J - AM 705 Volkswagen Leasing GmbH 560 6382 03.03.98 02.03.02 Fahrzeug J - AM 770 Mercedes-Benz Leasing GmbH 48 23 85 15.02.99 14.02.03 - ------------------------------------------------------------------------------------------------------------------------------------ Nutzungsvertrag Handy D2 vodafone 0172- 813 6673 28.01.02 27.01.03 Handy D2 vodafohe 0172 -794 3092 10.05.01 09.05.03 - ------------------------------------------------------------------------------------------------------------------------------------ Dienstleistung Standleitung Deutsche Telekom AG 000001/000001 01.12.97 01.12.02 zur Datenubertragung - ------------------------------------------------------------------------------------------------------------------------------------ Lieferung Strom OBAG AG 01.01.01 31.12.03 - ------------------------------------------------------------------------------------------------------------------------------------ Lieferung Wasser, Kanallsation Markt Flo(beta) ohne - ------------------------------------------------------------------------------------------------------------------------------------ Gebuhr Entewasserungsbeitrag Markt Flo(beta) ohne - ------------------------------------------------------------------------------------------------------------------------------------
Page 1 of 2
- ------------------------------------------------------------------------------------------------------------------------------------ Laufzeit ----------------------- Bezelchnung Inhalt Vertragspartner Vertrags-Nummer von bls - ------------------------------------------------------------------------------------------------------------------------------------ Untermiete Gewerberaume SYSMOTRONIC GmbH ohne 01.08.98 31.07.03 - ------------------------------------------------------------------------------------------------------------------------------------ Uberwachungsvertrag Qualitatssicherungssystem Landesgewerbeanstalt Bayern ohne 16.12.97 15.12.02 - ------------------------------------------------------------------------------------------------------------------------------------ Dienstlelstung Unterhaltsreinigung Morotz Furst GmbH & Co. KG ohne Maschinenreinigung - ------------------------------------------------------------------------------------------------------------------------------------ Dienstlelstung Wach-und Streifendlenst Kostell GmbH ohne - ------------------------------------------------------------------------------------------------------------------------------------
Page 2 of 2
ATTACHMENT 4.2 Annual Gross Compensation Name of Employee for Services performed in 2001 Remarks - ------------------------------------ --------------------------------------- --------------------------- 1. Gross, Thomas ***** DM 2. Kett, Franz ***** DM ***** 3. Kiener, Robert ***** DM ***** 4. Kiesl, Stefan ***** DM ***** 5. Landgraf, Hans ***** DM 6. Landgraf, Werner ***** DM ***** 7. Malzer, Margarete ***** DM 8. Piehler, Wolfgang ***** DM 9. Proelss, Hans ***** DM 10. Rass, Brigitte ***** DM
- --------------------- * Confidential Treatment Requested. 1 EX-10.4 6 dex104.txt AGREEMENT FOR PURCHASE OF BUILT-UP PROPERTY EXHIBIT 10.4 Document No. 0260/2002 - ---------------------- Purchase of a built-up property ------------------------------- Today, this day of January twenty-nine two thousand two, appeared before me, Dr. Martin Schuck, public notary in Munich, in my office at Residenzstrasse 19/20: 1. Mr. Rainer Kreifels, lawyer, business address Maximilianstrasse 31, 80539 Munich, personally known 2. Mr. Andreas Gottlieb, lawyer, business address Goschwitzer Strasse 51-52, 07745 Jena, identity provided by submission of official photograph identity card The inspection of the Land Register was performed by the notary. The 1st named person appearing stated thereafter that he did not act in his own name, but via the power of attorney attached to this document as Exhibit 1 on behalf of BIOLASE Europe GmbH, c/o Brobeck Hale and Dorr, Maximilianstrasse 31, 80539 Munich. The 2nd named person appearing stated that he did not act in his own name, but via the power of attorney attached to this document as Exhibit 2, on behalf of ASCLEPION-MEDITEC AG, Goschwitzer Strasse 51-52, 07745 Jena. The persons appearing were present at the same time and stated thereafter: I. Preliminary notice, contract object ----------------------------------- In the Land Register of the local court of Weiden, Oberpfalz, sub-district Schonnbrunn, volume 11, sheet 375 the following real property is registered: Cadastral district No. 785/4, Floss, Paintweg 10, building and free area, size 9544 qm. As owner in division 1 of the Land Register AESCULAP-Meditec GmbH, having its registered office in Jena is entered. AESCULAP-Meditec GmbH according to the certificate of registration of the local court of Gera for HR B 5623, a copy of which is attached to this document as Exhibit 3, by the decision of the 1 shareholders' meeting, dated November 10, 1999, was transformed into a stock corporation. The transformed stock corporation trades under the firm of ASCLEPION-MEDITEC AG. The transformation decision and the new establishment of the statutes on the date of December 27, 1999, were entered into the Commercial Register of the local court of Gera for HRB 5623. The following encumbrances have been entered: Division II: High-voltage cable line right for Energieversorgung Ostbayern AG Regensburg; according to approval of April 28, 1983 entered on June 22, 1983. Division III: Account No. 1 of land charge without certificate at six hundred thousand DM for Raiffeisenbank Floss eG in 8485 Floss; 16% interest annually, enforceable according to ss. 800 ZPO (Code of Civil Procedure); according to the approval of July 16, 1982/August 24, 1982/September 22, 1982 entered on June 21, 1983. Account No. 2 and 2a of land charge without certificate at hundred ten thousand DM (account No. 2) and four hundred thousand DM (account No. 2a) for Bayerische Vereinsbank AG, Munchen; 16% interest annually since June 21, 1983; enforceable according to ss. 800 ZPO; according to approval of July 16/ August 24/September 22, 1982 entered on June 21, 1983/March 3, 1994. Account No. 3 deleted The account numbers 4 and 4a of land charge without certificate at two hundred thousand DM (account No. 4) and one hundred seventy thousand DM (account No. 4a) for Bayerische Vereinsbank AG, Munich; 16% interest annually since December 15, 1983; enforceable according to ss. 800 ZPO; according to approval of November 11, 1983 entered on December 15, 1983/March 3, 1994. Account No. 5 of land charge without certificate at two hundred fifty thousand DM for Bayerische Vereinbank AG, Munich; 16% interest annually since March 12, 1984; enforceable according to ss. 800 ZPO; according to approval of February 22, 1984 entered on March 12, 1984/March 3, 1994. Object of the contract: - ---------------------- The object of the contract is the above real property. II. Purchase Contract ----------------- ASCLEPION-MEDITEC AG (hereinafter referred to as "seller") sells the object of the contract specified in section I with all rights and components and the accessories, free of encumbrances except for the encumbrance mentioned in section I in division II, to BIOLASE Europe GmbH (hereinafter referred to as "buyer"). 2 III. Purchase Price -------------- The purchase price is EURO 985,689.00 (in words: EURO nine hundred eighty-five thousand six hundred eighty-nine). The purchase price comes due according to Article 8 of the Asset Purchase Agreement concluded between the seller and the buyer and attached as Exhibit 4 to this document, but no earlier than 12 days following the despatch of a written notification by the notary to the buyer as to the fulfilment of the following requirements: 1. The priority notice for the buyer must be entered into the Land Register according to the correct rank; 2. The existence of a negative pledge certificate from the community in charge regarding the right of first refusal; 3. The cancellation entries of all encumbrances not taken over must be available to the notary ready for enforcement. In this connection, the creditor may only depend their use on payments that collectively may not exceed the purchase price. In this case, the buyer is entitled and committed to make these payments to the creditor. The payment immediately to the buyer is reduced accordingly. The contracting parties instruct the notary to inform them in writing about the occurrence of the maturity prerequisites. IV. Conveyance of Land ------------------ 1.) The contracting parties agree on the transfer of ownership with respect to the process of acquisition referred to in section II of the document and grant to themselves and their legal successors, the authenticating notary public, his representative or successor, an irrevocable and unconditional power of attorney to give the consent to the making of an entry in the Land Register for the transfer of ownership, which was expressly refrained from today. In the internal relationship the notary may do so no earlier than after the seller has confirmed to him in writing the payment of the first purchase price instalment or if the buyer proved this payment - without interest - in a credible manner by bank confirmation or receipts. 2.) To safeguard the entitlement of the buyer to the transfer of ownership, the buyer consents to and both contracting parties apply for, the entry of a priority notice for the buyer. 3 In addition to the entries mentioned in section I, only encumbrances in the recording of which the buyer participated, may rank before this priority notice. Already today, the buyer consents to and applies for deleting the priority notice and replacing it incrementally with the transfer of ownership in the rank of the priority notice. V. Ownership, Use, Encumbrances ---------------------------- The ownership is transferred with effect as of February 1, 2002. Along with the ownership, the uses, the encumbrances and the danger of accidental deterioration and the duty to make land safe for persons or vehicles are transferred to the buyer. Any real property tax paid in advance has to be reimbursed on a pro rata basis. Residential and development costs of all kinds, particularly development charges and advance payments according to the Town and Country Planning Code (BauGB), - where they have already been paid by the seller or which the seller has received payment orders as well as for the actual state of development - are included in the purchase price. All other residential and development costs are borne by the buyer. It does not matter when the development costs come due or to whom they are charged. The seller assigns to the buyer any claims to the repayment of such charges. VI. Liability for Legal and Material Defects ---------------------------------------- The seller assumes liability for the unobstructed transfer of possession and ownership and for the exemption of the contract object from Land Register encumbrances and other third parties rights, unless they are based on the consent of the buyer or expressly adopted in this document. The deletion of all liens on real property entered in division III is consented to in the application for enforcement. The seller assures that he does not know of the existence of old legal easements, contaminated sites or pollution of land in the widest sense or of essential hidden material defects. The seller further assures that he does not know of any circumstances that arouse the suspicion of existing pollution of land (earlier commercial use, refilling). The seller assures that he adopted no spacing surfaces from neighbours. Furthermore the warranty is based on Articles 9 and 10 of the Asset Purchase Agreement attached to this document as Exhibit 4. 4 VII. Costs, Transcripts ------------------ All costs arising in connection to this authentication and any property acquisition tax shall be borne by the buyer. The costs of any release from encumbrances are borne by the seller. Of this document, the following copies are delivered to: Certified copies - ---------------- Land Registry Weiden, Oberpfalz Seller Buyer Simple copies - ------------- Revenue office of Weiden, Oberpfalz - central property acquisition tax office - -Committee of experts of the county office of Weiden, Oberpalz VIII. Approvals and Execution Order ----------------------------- The notary is instructed and authorized to issue, obtain and accept and draft, all statements for the implementation and execution of this document, such as any required approvals, negative certifications and releases from encumbrances, to file, add to, amend and cancel all applications and consents with the Land Registry - in some cases also in part or in a limited manner. With the receipt of all outstanding approvals by the public notary they shall be deemed communicated to all contracting parties and are thus legally valid. The notary pointed out the legal right of preemption of the communities and is instructed to announce the sale and to apply for negative clearance. Where the right of preemption is exercised or legal or authority-related approvals are not issued, each contracting party is entitled to withdraw from the contract and damage claims are excluded. The conveyance of land declared is not affected by the right to withdraw from the contract. IX. Notes ----- The notary pointed out the following: 1. The timing and the requirements of the transfer of ownership (clearance certificate, certificate of non-objection, all required approvals). 2. All agreements must be authenticated, non-authenticated agreements are invalid and may challenge the validity of the whole contract. 5 3. The division of costs and the property acquisition tax due does only affect the internal relationship between the buyer and the seller, in the external relationship both are liable as joint and several debtors. 4. The object of the contract is liable for arrears in public burdens and levies, particularly for development charges. The seller assures that arrears do not exist. 5. Sec. 566 BGB (German Civil Code) was pointed out (purchase does not override rent). Further attachments: Asset Purchase Agreement Attachment 1.1, 4.2 and 3 was not read allowed. These attachments are known to the contracting parties and presented for signature. Record read by the notary, approved by the parties concerned and signed in their own hand: /s/ A. GOTTLIEB /s/ RAINER KREIFELS [NOTARY SEAL] /s/ MARTIN SCHUCK 6 EX-10.5 7 dex105.txt AGREEMENT DTD. JANUARY 29, 2002 EXHIBIT 10.5 AGREEMENT of January 29, 2002 between Asclepion-Meditec AG Goschwitzer Strasse 51-52 07745 Jena (hereinafter referred to as the "Seller") and BIOLASE Europe GmbH c/o Brobeck Hale and Dorr Maximilianstrasse 31 80539 Munchen (hereinafter referred to as the "Purchaser") Preamble -------- The Seller and the Purchaser are parties to an Asset Purchase Agreement dated January 29, 2002 (hereinafter referred to as the "Asset Purchase Agreement") as a result of which the Purchaser acquired from the Seller certain assets, the Seller assigned to the Purchaser certain contracts and transferred to the Purchaser certain employment relationships. The Seller and the Purchaser are also parties to a Real Estate Purchase Agreement dated January 29, 2002, which is related to the Asset Purchase Agreement. The Seller and the Purchaser now agree as follows: The parties acknowledge that it is their joint understanding that the Purchaser shall effectively not be burdened with an actual payment of more than US-$ 700,000.00 (in words: United States Dollar seven-hundred-thousand) resulting from the transactions contemplated under the Asset Purchase Agreement and the Real Estate Agreement. Accordingly, the parties agree that the remaining balance of the aggregate Purchase Price (Article 8 of the Asset Purchase Agreement) shall be covered by a credit (Gutschrift) of a minimum of US $-300,000.00 (in words: United States Dollar three-hundred thousand), resulting from a ***** Agreement to be concluded between the Seller, the Purchaser and ***** (hereinafter referred to as the "***** Agreement"). However, in the event that (i) the ***** Agreement is not concluded by April 15, 2002, or any later date the Seller and the Purchaser mutually agree upon in writing or (ii) the Purchaser does not receive the expected minimum payment of US-$ 300,000.00 (in words: United States Dollar - --------------------- * Confidential Treatment Requested. 1 three-hundred-thousand) resulting from the ***** Agreement, and (iii) the parties are not able to mutually agree on any other arrangement resulting in a credit (Gutschrift) to the Purchaser in the amount of US-$300,000.00 (in words: United States Dollar three-hundred-thousand) within 6 weeks after the ***** of the ***** Agreement have *****, but not later than May 31, 2002, then the parties agree that the total Purchase Price shall be reduced by US-$ 150,000.00 (in words: United States Dollar one-hundred-fifty) in which case the first installment to be paid by the Purchaser according to Article 8 subsection 2 of the Asset Purchase Agreement may be reduced at the sole discretion of the Purchaser to an amount between US-$ 150,000.00 (in words: United States Dollar one-hundred-fifty-thousand) and US-$ 350,000.00 (in words: United States Dollar three-hundred-fifty-thousand). Signed at Munich on this 29th day of January 2002 On behalf of Asclepion-Meditec AG: ANDREAS GOTTLIEB /s/ A. GOTTLIEB - --------------------------- CORPORATE COUNSEL On behalf of BIOLASE Europe GmbH: RAINER KREIFELS /s/ RAINER KREIFELS - ------------------------------------ ATTORNEY-IN-FACT - --------------------- * Confidential Treatment Requested. 2 -----END PRIVACY-ENHANCED MESSAGE-----