Item 1.01 Entry into a Material Definitive Agreement.

BIOLASE Technology, Inc. entered into an agreement to settle and dismiss all claims by Diodem LLC against BIOLASE in a suit in Los Angeles Superior Court over the terms of the parties' agreement in 2005 by which Biolase purchased patents from Diodem and settled patent infringement litigation filed in 2003.

The settlement eliminates BIOLASE's obligation under the 2005 agreement to issue up to $1 million of BIOLASE stock to Diodem under certain conditions and to register stock and warrants which Diodem obtained at the time of that agreement. Under the settlement agreement, BIOLASE will make four payments to Diodem totaling approximately $950,000 through 2010, of which $85,000 will be paid by BIOLASE's liability insurance carriers. In the settlement agreement, BIOLASE denied any wrongdoing. The settlement agreement contains confidentiality provisions that limit disclosure of the terms of the settlement except as required by SEC rule or regulation, under GAAP or pursuant to court order or law.

Related to this matter, BIOLASE will incur approximately $1.2 million in charges for the settlement and associated legal fees in the third quarter ended September 30, 2008, which reflects all the settlement payments to be made over the next two years.

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