<PAGE>
 
   As filed with the Securities and Exchange Commission on November 14, 2000
                                                     Registration No. 333-
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
 
                                ---------------
                                   FORM S-1
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
                                ---------------
                            ALIGN TECHNOLOGY, INC.
            (Exact name of registrant as specified in its charter)
 

<TABLE>
<CAPTION>
            Delaware                           3843                        94-3267295
 <S>                              <C>                            <C>
  (State or other jurisdiction
               of                  (Primary Standard Industrial         (I.R.S. Employer
 incorporation or organization)    Classification Code Number)       Identification Number)
</TABLE>

 
       851 Martin Avenue, Santa Clara, California 95050, (408) 470-1000
  (Address, including zip code, and telephone number, including area code, of
                 the registrant's principal executive offices)
 
                                ---------------
                                  Zia Chishti
                            Chief Executive Officer
                            Align Technology, Inc.
       851 Martin Avenue, Santa Clara, California 95050, (408) 470-1000
  (Name and address, including zip code, and telephone number, including area
                          code, of agent for service)
 
                                ---------------
                                  Copies to:

<TABLE>
<S>                                            <C>
            John W. Larson, Esq.                           John T. Sheridan, Esq.
            Patrick J. Shea, Esq.                           Richard S. Au, Esq.
           Jeanine M. Larrea, Esq.                        Carolynn W. Jones, Esq.
            Mark C. Hornor, Esq.                   WILSON SONSINI GOODRICH & ROSATI, P.C.
       BROBECK, PHLEGER & HARRISON LLP                       650 Page Mill Road
                 One Market                               Palo Alto, CA 94304-1050
             Spear Street Tower                                (650) 493-9300
           San Francisco, CA 94105
               (415) 442-0900
</TABLE>

                                ---------------
     As soon as practicable after the effective date of this Registration
                                  Statement.
       (Approximate date of commencement of proposed sale to the public)
 
                                ---------------
   If the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [_]
   If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
   If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
   If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
   If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
                                ---------------

                        CALCULATION OF REGISTRATION FEE
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
    Title of Each Class of            Proposed Maximum           Amount of
 Securities to be Registered   Aggregate Offering Price(1)(2) Registration Fee
------------------------------------------------------------------------------
<S>                            <C>                            <C>
Common Stock, $0.0001 par
 value.......................           $200,000,000              $52,800
</TABLE>

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the amount of the
    registration fee pursuant to Rule 457(o).
(2) Includes amount subject to the over-allotment option granted to the
    underwriters.
 
                                ---------------
   The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

<PAGE>
 
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be     +
+changed. These securities may not be sold until the registration statement    +
+filed with the Securities and Exchange Commission becomes effective. This     +
+preliminary prospectus is not an offer to sell these securities nor does it   +
+seek offers to buy these securities in any jurisdiction where the offer or    +
+sale is not permitted.                                                        +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
 Subject to Completion, Dated November 14, 2000
                                                Filed Pursuant to Rule 424(b)(4)
                                                      Registration No. 333-37020
 
 Align Technology, Inc.
 
--------------------------------------------------------------------------------
           Shares
 Common Stock
--------------------------------------------------------------------------------
 
 This is the initial public offering of Align Technology, Inc. and we are
 offering        shares of our common stock. We anticipate that the initial
 public offering price will be between $    and $    per share. We have
 applied to list our common stock on the Nasdaq National Market under the
 symbol "ALGN."
 
 Investing in our common stock involves risks. See "Risk Factors" beginning on
 page 6.
 
 Neither the Securities and Exchange Commission nor any state securities
 commission has approved or disapproved of these securities or passed upon the
 adequacy or accuracy of this prospectus. Any representation to the contrary
 is a criminal offense.
 

<TABLE>
<CAPTION>

                       Underwriting
           Price to    Discounts and Proceeds to
           Public      Commissions   Align
<S>        <C>         <C>           <C>
 Per share $           $             $
 Total     $           $             $
</TABLE>

 
 We have granted the underwriters the right to purchase up to       additional
 shares to cover over-allotments.
 
 Deutsche Banc Alex. Brown
 
            Bear, Stearns & Co. Inc.
 
                                      J.P. Morgan & Co.
 
                                                              Robertson Stephens
 
 The date of this prospectus is      , 2000

<PAGE>
 
                            Description of artwork
 
Inside front cover page:
 
Middle top: "Align Technology, Inc. Presents Invisalign, A New Way To
Straighten Teeth Without Braces"
 
Middle center: Invisalign mark
 
Middle center: Align logo
 
Middle bottom: Graphic of hand holding Aligner between thumb and forefinger.
 
Inside foldout:
 
Center of Page: Close-up of smiling woman wearing an Aligner--surrounded by
various smaller graphics and captions as listed below.
 
Moving from top center left clockwise: Graphic: two smiling faces, facing each
other displaying teeth. One of the smiles is wearing braces, the other is
wearing an Aligner. Caption: "Both of these people are straightening their
teeth."
 
Top right corner: Graphic: three pictures of smiling people. Caption: "Which
of these people is wearing Invisalign? They all are."
 
Right of page: Graphic: three pairs of before and after pictures with numbers
1, 2, 3. Caption: "Invisalign Aligners effectively straighten teeth more
gently and comfortably than braces."
 
Bottom right corner: Align logo and Invisalign mark
 
Bottom center: Graphic: three pictures of a woman placing an Aligner on her
teeth. Caption: "Invisalign Aligners are removable and nearly invisible."
 
Bottom left: Graphic: hand holding an Aligner between thumb and forefinger.
Caption: "A series of clear, removable Invisalign Aligners is custom
manufactured to match each stage of treatment."
 
Left center of page: Graphic: computer graphic of human dentition. Caption:
"Our proprietary software, ClinCheck, lets orthodontists visualize their
treatment plans by projecting how the teeth will move over time."
 
Left center of page: Graphic: impression of human dentition. Caption: "The
impression is scanned into our 3-D graphics computers."
 
Left top of page: Graphic: impression of human dentition. Caption: "Treatment
begins when the orthodontist makes an impression."

<PAGE>
 
 

                                    SUMMARY
 
   This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should carefully read the
entire prospectus, including "Risk Factors" and the financial statements,
before making an investment decision.
 
                                  Our Company
 
   We design, manufacture and market the Invisalign System, a proprietary new
method for treating malocclusion, or the misalignment of teeth. The System
corrects malocclusion using a series of clear, removable appliances that gently
move teeth to a desired final position. Because it does not rely on the use of
metal or ceramic brackets and wires, the System significantly reduces the
aesthetic and other limitations associated with braces. The Invisalign System
also offers orthodontists a new means of carrying out their diagnosis and
treatment planning processes. We believe the Invisalign System has the
potential to transform the traditional practice of orthodontics by appealing to
people who would not otherwise seek treatment.
 
   In the U.S. alone, over 200 million individuals have some form of
malocclusion. Each year, less than one percent of these individuals, or
approximately two million Americans, enter orthodontic treatment, spending
approximately $7 billion in aggregate. We believe the Invisalign System is a
compelling treatment alternative for most of the patients who would seek
traditional orthodontic treatment. In addition, given the significant benefits
of our System, we have the opportunity to expand the U.S. orthodontic market by
addressing the needs of millions of individuals who would not otherwise seek
treatment. Further, we believe the international opportunity is larger than the
U.S. opportunity.
 
   We received FDA clearance to market the Invisalign System in 1998 and
started commercial sales of the System in July 1999. Our 510(k) clearance from
the FDA allows us to market the Invisalign System to treat patients with any
type of malocclusion. We voluntarily restrict the use of the Invisalign System
to adults and adolescents with mature dentition and who are otherwise suitable
for treatment, a group that represents approximately 130 million people in the
U.S. Currently, we do not treat children whose teeth and jaws are still
developing, as the effectiveness of the Invisalign System relies on our ability
to accurately predict the movement of teeth over the course of treatment. Based
on our clinical studies to date, we recommend that orthodontists use the
Invisalign System as a complete treatment for mild and moderate malocclusions
and as a component of treatment for unusually severe malocclusions.
 
   As of October 2000, we had trained more than 5,300 orthodontists to use the
Invisalign System, representing over 60% of all U.S. and Canadian
orthodontists. To date, over 7,600 patients have commenced treatment with the
Invisalign System, including more than 1,000 patients in September 2000.
 
   Our objective is to establish the Invisalign System as the standard method
for treating orthodontic malocclusion. Our sales and marketing efforts focus on
educating both consumers and orthodontists on the significant benefits of the
System. We continue to train orthodontists and work with them to increase the
use of the Invisalign System within their practices. We recently initiated a
national advertising campaign to create awareness of the Invisalign System as a
treatment alternative and to stimulate demand for treatment with the System.
 
 
                                       1

<PAGE>
 
                             The Invisalign System
 
   The Invisalign System has two components: ClinCheck and Aligners. ClinCheck
is an Internet-based application that allows orthodontists to simulate
treatment in three dimensions by modeling two-week stages of tooth movement.
Aligners are thin, clear plastic, removable dental appliances that correspond
to each stage of the ClinCheck simulation. Each custom-fabricated Aligner is
worn over the teeth for two weeks before being disposed of and replaced by the
next Aligner, until the last Aligner in the series is worn and treatment is
complete.
 
   The Invisalign System addresses many of the significant limitations of
conventional braces. Braces call attention to the patient's condition and
treatment and are often identified with adolescence. Braces are uncomfortable
and at times painful. Braces trap food and make it more difficult to brush and
floss.
 
   By contrast, Aligners are nearly invisible when worn. Aligners move teeth
more gently than braces and are made of smooth polymer rather than sharp metal,
making them substantially more comfortable and less abrasive. Patients can
remove Aligners to eat, brush and floss, improving oral hygiene.
 
   The Invisalign System is straightforward for orthodontists to learn and to
use, since the System relies on the same biomechanical principles that underlie
traditional orthodontic treatment. Our initial certification training is
generally completed in a one day workshop, and orthodontists can be equipped to
submit cases immediately thereafter with minimal financial outlay.
 
   We believe our Invisalign System provides orthodontists with an opportunity
to substantially increase the profitability of their practices. The Invisalign
System allows orthodontists to broaden their patient base by offering a new,
attractive treatment alternative to people who would not otherwise elect
treatment. We believe that orthodontists using the System have generally been
able to command a premium over the fees charged for conventional treatment. In
addition, since our System eliminates many time-intensive activities associated
with conventional treatment, orthodontists are able to reduce the time spent on
each case and, accordingly, increase practice capacity.
 
                                       2

<PAGE>
 
 
                                  The Offering
 

<TABLE>
 <C>                                          <S>
 Common stock offered by Align Technology....       shares
 Common stock to be outstanding after this
  offering...................................       shares
 Use of proceeds............................. Expansion of manufacturing
                                              capacity, advertising and other
                                              sales and marketing activities,
                                              research and development,
                                              working capital and general
                                              corporate purposes. See "Use of
                                              Proceeds."
 Proposed Nasdaq National Market symbol...... ALGN
</TABLE>

 
   The number of shares of common stock to be outstanding upon completion of
this offering is based on the number of shares outstanding as of September 30,
2000. This number assumes the conversion into common stock of all of our
preferred stock outstanding on that date, including the sale of 718,355 shares
of Series D preferred stock issued in October 2000, which converts into 733,194
shares of common stock, and excludes:
 
  .  2,155,998 shares of common stock issuable upon exercise of outstanding
     options at a weighted average exercise price of $1.59 per share;
 
  .  322,917 shares of common stock issuable upon exercise of outstanding
     warrants to purchase preferred stock, or common stock upon the
     completion of this offering, at a weighted average exercise price of
     $3.87 per share;
 
  .  1,177,621 shares of common stock available for grant under our 1997
     Equity Incentive Plan;
 
  .  2,700,000 shares of common stock reserved for issuance under our 2001
     Stock Incentive Plan; and
 
  .  500,000 shares of common stock to be reserved for issuance under our
     Employee Stock Purchase Plan upon completion of the offering.
 
                                ----------------
 
   Unless otherwise indicated, the information in this prospectus assumes:
 
  .  the conversion of all outstanding shares of preferred stock into common
     stock upon the closing of this offering, taking into account the Series
     D preferred stock antidilution conversion price adjustment described in
     "Certain Transactions--Preferred Stock Sales;" and
 
  .  no exercise of the underwriters' over-allotment option.
 
                                       3

<PAGE>
 
                      Summary Consolidated Financial Data
                     (in thousands, except per share data)
 

<TABLE>
<CAPTION>
                              Period from
                             April 3, 1997                      Nine Months
                               (date of       Year Ended           Ended
                             inception) to   December 31,      September 30,
                             December 31,  -----------------  -----------------
                                 1997       1998      1999     1999      2000
                             ------------- -------  --------  -------  --------
                                                                (unaudited)
<S>                          <C>           <C>      <C>       <C>      <C>
Statement of Operations
 Data:
Revenue....................     $  --      $   --   $    411  $    77  $  3,236
Cost of revenue............        --          --      1,754      357    11,313
                                ------     -------  --------  -------  --------
Gross loss.................        --          --     (1,343)    (280)   (8,077)
                                ------     -------  --------  -------  --------
Operating expenses:
 Sales and marketing.......        283         133     5,688    2,726    19,664
 General and
  administrative...........        --        2,344     3,474    2,000    12,349
 Research and development..        405       1,474     4,200    3,068     5,904
                                ------     -------  --------  -------  --------
  Total operating
   expenses................        688       3,951    13,362    7,794    37,917
                                ------     -------  --------  -------  --------
Loss from operations.......       (688)     (3,951)  (14,705)  (8,074)  (45,994)
Interest and other income
 (expense), net............         24         176      (710)    (499)   (7,317)
                                ------     -------  --------  -------  --------
Net loss...................       (664)     (3,775)  (15,415)  (8,573)  (53,311)
Dividend related to
 beneficial conversion
 feature of preferred
 stock.....................        --          --        --       --    (44,150)
                                ------     -------  --------  -------  --------
Net loss available to
 common stockholders.......     $ (664)    $(3,775) $(15,415) $(8,573) $(97,461)
                                ======     =======  ========  =======  ========
Net loss per share
 available to common
 stockholders, basic and
 diluted...................     $(0.86)    $ (2.66) $  (7.31) $ (4.22) $ (35.87)
                                ======     =======  ========  =======  ========
Shares used in computing
 net loss per share
 available to common
 stockholders, basic and
 diluted...................        771       1,421     2,109    2,030     2,717
                                ======     =======  ========  =======  ========
Pro forma net loss per
 share available to common
 stockholders, basic and
 diluted (unaudited).......                         $  (1.85)          $  (4.22)
                                                    ========           ========
Shares used in computing
 pro forma net loss per
 share available to common
 stockholders, basic and
 diluted (unaudited).......                            8,339             12,635
                                                    ========           ========
</TABLE>

 

<TABLE>
<CAPTION>
                                                  September 30, 2000
                                         -------------------------------------
                                                                  Pro Forma
                                          Actual   Pro Forma(1) As Adjusted(2)
                                         --------  ------------ --------------
<S>                                      <C>       <C>          <C>
Balance Sheet Data:
Cash, cash equivalents and marketable
 securities............................. $ 37,867    $53,079
Working capital.........................   47,758     62,970
Total assets............................   75,567     90,779
Long term obligations, net of current
 portion................................    1,569      1,569
Convertible preferred stock and
 warrants...............................  115,708        --
Total stockholders' equity (deficit)....  (56,086)    74,834
</TABLE>

--------
(1) The pro forma column reflects the sale of 718,355 shares of Series D
    preferred stock in October 2000 at an offering price of $21.25 less
    estimated offering expenses of $53,000, and the conversion of all
    outstanding shares of preferred stock, including the 718,355 shares of
    Series D preferred stock issued in October 2000, into 12,990,503 shares of
    common stock effective upon the closing of this offering.
(2) The pro forma, as adjusted column reflects the sale of      shares of our
    common stock in the public offering at an assumed initial public offering
    price of $   per share, after deducting underwriting discounts, commissions
    and estimated offering expenses.
 
                                       4

<PAGE>
 
 
   We incorporated in Delaware on April 3, 1997. We are located at 851 Martin
Avenue, Santa Clara, California, 95050 and our telephone number is (408) 470-
1000. Our website is located at www.invisalign.com. The information on our
website is not incorporated into and is not intended to be a part of this
prospectus.
 
   ClinCheck(R) is our registered trademark. We have filed applications for
several trademarks with the U.S. Patent and Trademark Office, including
Invisalign and Invisalign System, as well as the Invisalign System logo and the
Align logo. Trademarks, trade names and service marks of other companies
appearing in this prospectus are the property of the respective holders. Use or
display by Align of other parties' trade names, trademarks or service marks is
not intended to and does not imply a relationship with, or endorsement or
sponsorship of Align by, the trade name, trademark or service mark owners.
 
                                       5

<PAGE>
 

                                  RISK FACTORS
 
   Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide
whether to buy our common stock. If any of the following risks actually occur,
our business, results of operations and financial condition could suffer
significantly. In any such case, the market price of our common stock could
decline, and you may lose all or part of the money you paid to buy our common
stock.
 
                         Risks Related to Our Business
 
Since we have a history of losses and negative cash flows, and we expect our
operating expenses to continue to increase, we may not achieve or maintain
profitability in the future.
 
   We have incurred significant operating losses and have not achieved
profitability. We have incurred net losses of $73.2 million for the period from
our inception in April 1997 through September 30, 2000, including a net loss of
$15.4 million in 1999 and $53.3 million for the nine months ended September 30,
2000. We incurred negative cash flows of $11.6 million from operating
activities in 1999 and $31.2 million for the nine months ended September 30,
2000. From inception through July 2000, we have spent significant funds in
organizational and start-up activities, to recruit key managers and employees,
to develop the Invisalign System and to develop our manufacturing and customer
support resources. We have also spent significant funds on clinical trials and
training programs to train orthodontists in the use of the Invisalign System.
We expect to have increasing net losses and negative operating cash flows for
at least the next two years.
 
   We intend to increase our operating expenses as we continue to:
 
  .  scale our manufacturing operations;
 
  .  develop new software and increase the automation of our manufacturing
     processes;
 
  .  execute our national direct to consumer marketing campaign;
 
  .  increase the size of our sales force and orthodontist training staff;
 
  .  undertake quality assurance and improvement initiatives; and
 
  .  increase our general and administrative functions to support our growing
     operations.
 
   As a result, we will need to increase our revenue significantly, while
controlling our expenses, to achieve profitability. It is possible that we will
not achieve profitability, and even if we do achieve profitability, we may not
sustain or increase profitability in the future.
 
We have a limited operating history and expect our future financial results to
fluctuate significantly, which may cause our stock price to decline.
 
   We were incorporated in April 1997 and have only recently begun selling our
Invisalign System in commercial quantities. Thus, we have a limited operating
history which makes an evaluation of our future prospects and your investment
in our stock difficult. In addition, we expect our future quarterly and annual
operating results to fluctuate as we increase our commercial sales. These
fluctuations could cause our stock price to decline. Some of the factors that
could cause our operating results to fluctuate include:
 
  .  changes in the timing of product orders;
 
  .  unanticipated delays in production caused by insufficient capacity or in
     the introduction of new production processes;
 
                                       6

<PAGE>
 
  .  inaccurate forecasting of revenue, production and other operating costs;
     and
 
  .  the development and marketing of directly competitive products by
     potential competitors.
 
   To respond to these and other factors, we may need to make business
decisions that could adversely affect our operating results. Most of our
expenses, such as employee compensation and lease payment obligations, are
relatively fixed in the short term. Moreover, our expense levels are based, in
part, on our expectations regarding future revenue levels. As a result, if our
revenue for a particular period fall below our expectations, we may be unable
to adjust spending quickly enough to offset any unexpected shortfall in revenue
growth or any decrease in revenue levels.
 
   Due to these and other factors, we believe that quarter-to-quarter
comparisons of our operating results may not be meaningful. You should not rely
on our results for any one quarter as an indication of our future performance.
 
If orthodontists do not adopt our Invisalign System in sufficient numbers or as
rapidly as we anticipate, our operating results will be harmed.
 
   To date, a substantial portion of our cases and revenue have been derived
from a limited number of orthodontists. Our success depends upon increasing
acceptance by orthodontists and dentists of the Invisalign System. The
Invisalign System requires orthodontists and their staff to undergo special
training and learn to interact with patients in new ways and to interact with
us as a supplier. In addition, because our Invisalign System has only been in
clinical testing since July 1997 and commercially available since July 1999,
orthodontists may be reluctant to adopt it until more historical clinical
results are available. Also, increasing adoption by orthodontists will depend
on factors such as the capability, safety, efficacy, ease of use, price,
quality and reliability of our products and our provision of effective sales
support, training and service. In the future, unanticipated poor clinical
performance of the Invisalign System could result in significant adverse
publicity and consequently in reduced acceptance by orthodontists. If our
Invisalign System does not achieve growing acceptance in the orthodontic and
dental communities, our operating results will be harmed.
 
If consumers do not adopt our Invisalign System in sufficient numbers or as
rapidly as we anticipate, our operating results will be harmed.
 
   Our Invisalign System represents a significant change from traditional
orthodontic treatment, and patients may be reluctant to accept it or may not
find it preferable to conventional treatment. In addition, patients may not
comply with recommended treatment guidelines which could compromise the
effectiveness of their treatment. Patient acceptance will depend in part upon
the recommendations of dentists and orthodontists, as well as other factors
including effectiveness, safety, reliability, improved treatment aesthetics and
greater comfort and hygiene compared to conventional orthodontic products.
Furthermore, consumers may not respond to our direct marketing campaigns or we
may be unsuccessful in reaching our target audience. If consumers prove
unwilling to adopt our Invisalign System as rapidly or in the numbers that we
anticipate, our operating results will be harmed.
 
Our success depends in part on our proprietary technology and if we are unable
to successfully enforce our intellectual property rights, our competitive
position may be harmed.
 
   Our success will depend in part on our ability to maintain existing
intellectual property and to obtain and maintain further intellectual property
protection for our products, both in the
 
                                       7

<PAGE>
 
U.S. and in other countries. Our inability to do so could harm our competitive
position. We have one issued U.S. patent, 46 pending U.S. applications, of
which two are allowed and nine are provisional applications. We have two
foreign-issued patents and 111 pending foreign applications. We intend to rely
on our portfolio of issued and pending patent applications in the U.S. and in
other countries to protect a large part of our intellectual property and our
competitive position. However, our currently pending or future patent
applications may not issue as patents. Additionally, any patents issued to us
may be challenged, invalidated, held unenforceable or circumvented. In
addition, our intellectual property rights may not be sufficiently broad to
prevent third parties from producing competing products similar in design to
our products. We also believe that foreign patents and the protection afforded
by such foreign patents and foreign intellectual property laws, may be more
limited than that provided under U.S. patents and intellectual property laws.
 
   We also rely on protection of trade secrets, know-how and confidential and
proprietary information. We generally enter into confidentiality agreements
with our employees, consultants and our collaborative partners upon
commencement of a relationship with us. However, these agreements may not
provide meaningful protection against the unauthorized use or disclosure of our
trade secrets or other confidential information and adequate remedies may not
exist if unauthorized use or disclosure were to occur. The exposure of our
trade secrets and other proprietary information would impair our competitive
advantages and could have a material adverse effect on our operating results,
financial condition and future growth prospects. Further, other parties may
independently develop substantially equivalent know-how and technology.
 
If we infringe the patents or proprietary rights of other parties, our ability
to grow our business will be severely limited.
 
   Extensive litigation over patents and other intellectual property rights is
common in the medical devices industry. We have been sued for infringement of
another party's patent in the past and, while that action has been dismissed,
we may be the subject of patent or other litigation in the future.
 
   In January 2000, Ormco Corporation filed suit against us asserting an
infringement of U.S. Patent Nos. 5,447,432 and 5,683,243. The complaint sought
unspecified monetary damages and equitable relief. In March 2000, we answered
the complaint and asserted counterclaims seeking a declaration, among other
things, by the court of non-infringement and invalidity of the asserted
patents. In June 2000, we entered into a Stipulation of Dismissal with Ormco in
which Ormco agreed not to recommence suit against us on either of the two
asserted patents for a period of two years. However, in the event that Ormco is
issued a patent which it believes is infringed by the Invisalign System, it may
commence suit after the one year anniversary of the stipulation of dismissal.
If Ormco were to bring such an action concerning as yet unissued patents after
one year, the Stipulation of Dismissal would allow Ormco to include in such an
action claims involving U.S. Patent Nos. 5,447,432 and 5,683,243. No assurance
can be given that Ormco will not bring another action against us or, that if
brought, it will not be successful. If successful, it could result in
significant monetary damages or other penalties against us. It is possible
that, depending on the scope of any new patents that are issued to Ormco, Ormco
will bring another patent action after a period of one year has passed.
 
   From time to time, we have received and may again receive letters from third
parties drawing our attention to their patent rights. While we do not believe
that we infringe any valid and enforceable rights which have been brought to
our attention, there may be other more pertinent rights of which we are
presently unaware. The defense and prosecution of
 
                                       8

<PAGE>
 
intellectual property suits, interference proceedings and related legal and
administrative proceedings could result in substantial expense to us and
significant diversion of effort by our technical and management personnel. An
adverse determination in a patent suit by Ormco or any other litigation or
interference proceedings to which we may become a party could subject us to
significant liabilities to Ormco or any other person who brings such an action,
could put our patents at risk of being invalidated or interpreted narrowly or
require us to seek licenses from third parties which may not be available on
commercially reasonable terms or at all.
 
We have limited experience in manufacturing our products and if we encounter
manufacturing problems or delays, our ability to generate revenue will be
limited.
 
   We have manufactured a limited number of our products to date. Our
manufacturing processes rely on complex three-dimensional scanning, geometrical
manipulation and modeling technologies that have historically not been used on
the scale we require. Each item that we manufacture is geometrically unique and
we have not manufactured our products in the commercial volumes which will be
required to make us profitable. Accordingly, we may be unable to establish or
maintain reliable, high-volume manufacturing capacity. Even if this capacity
can be established and maintained, the cost of doing so may increase the cost
of our products. We may encounter difficulties in scaling up production to meet
demand, including:
 
  .  problems involving production yields;
 
  .  shortages of key manufacturing equipment;
 
  .  shortages of qualified personnel, in particular dental and orthodontic
     personnel;
 
  .  failure to develop new software processes; and
 
  .  compliance with applicable Quality System regulations enforced by the
     Food and Drug Administration, or FDA.
 
   Our manufacturing process is complex. Since all our products are designed
for individual patients, we manufacture our products to fill purchase orders
rather than maintaining inventories of assembled products. If demand for our
products exceeds our manufacturing capacity, we could develop a substantial
backlog of customer orders. If we are unable to establish and maintain larger-
scale manufacturing capabilities, our ability to generate revenue will be
limited and our reputation in the marketplace would be damaged.
 
We currently rely on third parties to provide key inputs to our manufacturing
process, and if our access to these inputs is diminished, our business may be
harmed.
 
   We currently outsource key portions of our manufacturing process. We rely on
a third party manufacturer in Mexico to fabricate Aligners and to ship the
completed product to customers. In addition, third party rapid prototyping
bureaus fabricate some molds from which the Aligners are formed. As a result,
if any of our third party manufacturers fail to deliver their components or if
we lose their services, we may be unable to deliver our products in a timely
manner and our business may be harmed. Finding substitute manufacturers may be
expensive, time-consuming or impossible. Although we are in the process of
developing the capability to fabricate all molds and Aligners internally, we
may not be successful and may continue to rely on outsourcing in the future.
 
   In addition, we are highly dependent on manufacturers of specialized
scanning equipment, rapid prototyping machines, resin and other advanced
materials. We maintain single supply relationships for many of these machines
and materials technologies. Our rapid growth may exceed the capacity of these
manufacturers to produce the needed equipment and materials in
 
                                       9

<PAGE>
 
sufficient quantities to support our growth. In the event of delivery delays or
shortages of these items, our business and growth prospects may be harmed.
 
We are dependent on our international manufacturing operations, which exposes
us to foreign operational and political risks that may harm our business.
 
   Two of our key production steps are performed in manufacturing operations
located outside the U.S. We currently rely on our manufacturing facilities in
Pakistan to create virtual treatment plans with the assistance of sophisticated
software. We employ approximately 550 people in Lahore, Pakistan in this
effort. We anticipate that we will need to expand our personnel and facilities
in Pakistan in order to scale our manufacturing operations. In addition, we
rely on third party manufacturers in Mexico to fabricate Aligners and to ship
the completed product to customers. Our reliance on international operations
exposes us to risks and uncertainties, including:
 
  .  difficulties in staffing and managing international operations;
 
  .  controlling quality of manufacture;
 
  .  political, social and economic instability;
 
  .  interruptions and limitations in telecommunication services;
 
  .  product or material transportation delays or disruption;
 
  .  trade restrictions and changes in tariffs;
 
  .  import and export license requirements and restrictions;
 
  .  fluctuations in currency exchange rates; and
 
  .  potential adverse tax consequences.
 
   If any of these risks materialize, our operating results may be harmed.
 
We are growing rapidly, and our failure to manage this growth could harm our
business.
 
   We have experienced significant growth in recent periods. Our headcount
increased from 50 employees as of June 30, 1999 to approximately 910 employees
as of September 30, 2000. In mid-2000, we approved major expansions to our
existing facilities and the building of new facilities. We expect that our
growth will place significant demands on our management and other resources and
will require us to continue to develop and improve our operational, financial
and other internal controls both in the U.S. and internationally. In
particular, continued growth increases the challenges involved in a number of
areas, including: recruiting and retaining sufficient skilled personnel,
providing adequate training and supervision to maintain our high quality
standards, and preserving our culture and values. Our inability to manage this
growth effectively would harm our business.
 
If we lose our key personnel or are unable to attract and retain key personnel,
we may be unable to pursue business opportunities or develop our products.
 
   We are highly dependent on the key employees in our clinical engineering and
management teams. The loss of the services of those individuals may
significantly delay or prevent the achievement of our product development and
other business objectives and could harm our business. Our future success will
also depend on our ability to identify, recruit, train and retain additional
qualified personnel. There is currently a shortage of skilled clinical,
engineering and management personnel and intense competition for these
personnel, especially in Silicon Valley where our headquarters is located. In
addition, few orthodontists
 
                                       10

<PAGE>
 
are accustomed to working in a manufacturing environment since they are
generally trained to work in private practices, universities and other research
institutions. Thus, we may be unable to attract and retain personnel with the
advanced qualifications necessary for the further development of our business.
Furthermore, we may not be successful in retaining our key personnel or their
services.
 
We experience competition from manufacturers of traditional braces and expect
aggressive competition in the future.
 
   We are not aware of any company that is marketing or developing a system
directly comparable to our Invisalign System. However, manufacturers of
traditional braces, such as 3M Company, Sybron International Corporation and
Dentsply International, Inc have substantially greater financial resources and
manufacturing and marketing experience than we do and may, in the future,
attempt to develop an orthodontic system similar to ours. Large consumer
products companies may also enter the orthodontic supply market. Furthermore,
we may face competition in the future from new companies that may introduce new
technologies. We may be unable to compete with these competitors and one or
more of these competitors may render our technology obsolete or economically
unattractive. If we are unable to compete effectively with existing products or
respond effectively to any products developed by our competitors, our business
will be harmed.
 
Complying with the Food and Drug Administration and other regulations is an
expensive and time-consuming process, and any failure to comply could result in
substantial penalties.
 
   Our products are medical devices and subject to extensive regulation in the
U.S. and internationally. FDA regulations are wide ranging and govern, among
other things:
 
  .  product design, development, manufacture and testing;
 
  .  product labeling;
 
  .  product storage;
 
  .  premarket clearance or approval;
 
  .  advertising and promotion; and
 
  .  product sales and distribution.
 
   Noncompliance with applicable regulatory requirements can result in
enforcement action which may include recalling products, ceasing product
marketing, and paying significant fines and penalties, which could limit
product sales, delay product shipment and adversely affect our profitability.
 
   In the U.S. we must comply with facility registration and product listing
requirements of the FDA and adhere to applicable Quality System regulations.
The FDA enforces its Quality System regulations through periodic unannounced
inspections, which we have yet to undergo. If we or any third party
manufacturer of our products do not conform to applicable Quality System
regulations, we may be required to find alternative manufacturers, which could
be a long and costly process.
 
   Before we can sell a new medical device in the U.S., we must obtain FDA
clearance or approval, which can be a lengthy and time-consuming process. Even
though the devices we market have obtained the necessary clearances from the
FDA through the premarket notification provisions of Section 510(k) of the
federal Food, Drug, and Cosmetic Act, we may be unable to maintain the
necessary clearances in the future. Furthermore, we may be unable
 
                                       11

<PAGE>
 
to obtain the necessary clearances for new devices that we market in the
future. Please see "Business--Government Regulation" for a more detailed
discussion of the regulations that govern our industry.
 
Extensive and changing government regulation of the healthcare industry may be
expensive to comply with and exposes us to the risk of substantial government
penalties.
 
   In addition to medical device laws and regulations, numerous state and
federal healthcare-related laws regulate our business, covering areas such as:
 
  .  storage, transmission and disclosure of medical information and
     healthcare records;
 
  .  prohibitions against the offer, payment or receipt of remuneration to
     induce referrals to entities providing healthcare services or goods; and
 
  .  the marketing and advertising of our products.
 
   Complying with these laws and regulations could be expensive and time-
consuming, and could increase our costs or reduce or eliminate certain of our
activities or our revenues. See "Business--Government Regulation."
 
We face risks related to our international operations, including the need to
obtain necessary foreign regulatory clearance or approvals.
 
   Sales of our products outside the U.S. are subject to foreign regulatory
requirements that vary widely from country to country. The time required to
obtain clearances or approvals required by other countries may be longer than
that required for FDA clearance or approval, and requirements for such
approvals may differ from FDA requirements. We may be unable to obtain
regulatory approvals in other countries. We may also incur significant costs in
attempting to obtain and in maintaining foreign regulatory approvals. If we
experience delays in receipt of approvals to market our products outside of the
U.S., or if we fail to receive these approvals, we may be unable to market our
products or enhancements in international markets in a timely manner, if at
all.
 
Our business exposes us to risks of product liability claims, and we may incur
substantial expenses if we are sued for product liability.
 
   Medical devices involve an inherent risk of product liability claims and
associated adverse publicity. We may be held liable if any product we develop
or any product that uses or incorporates any of our technologies causes injury
or is otherwise found unsuitable. Although we intend to continue to maintain
product liability insurance, adequate insurance may not be available on
acceptable terms and may not provide adequate coverage against potential
liabilities. A product liability claim, regardless of its merit or eventual
outcome, could result in significant legal defense costs. These costs would
have the effect of increasing our expenses and could harm our business.
 
We may be unable to raise additional capital if it should be necessary which
could harm our ability to compete.
 
   We expect to expend significant capital to establish a national brand, build
manufacturing infrastructure and develop both product and process technology.
These initiatives may require us to raise additional capital over the next few
years. We believe that the proceeds from this offering and the capital that we
have already raised should be sufficient to fund our operations for at least
the next 12 months. However, we may consume available resources more rapidly
than anticipated and we may not be able to raise additional funds when needed,
or on acceptable terms.
 
                                       12

<PAGE>
 
                         Risks Related to This Offering
 
The market price for our common stock may be highly volatile, and you may not
be able to resell your shares at or above the initial public offering price.
 
   Before this offering, there has not been a public market for our common
stock. An active trading market for our common stock may not develop following
this offering. You may not be able to sell your shares quickly or at the market
price if trading in our stock is not active. Further, the market price of our
common stock may decline below the price you paid for your shares. The initial
public offering price for the shares will be determined by negotiations between
us and the representatives of the underwriters and may not be indicative of
prices that will prevail in the trading market. Please see "Underwriting" for
more information regarding our arrangement with the underwriters and the
factors considered in setting the initial public offering price.
 
   The trading price of our common stock is likely to be highly volatile and
could be subject to wide fluctuations in price in response to various factors,
many of which are beyond our control, including:
 
  .  quarterly variations in our results of operations;
 
  .  changes in recommendations by the investment community or in their
     estimates of our revenues or operating results;
 
  .  speculation in the press or investment community;
 
  .  strategic actions by our competitors, such as product announcements or
     acquisitions; and
 
  .  general market conditions.
 
   In addition, the stock market in general, and the market for technology and
medical device companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated to or disproportionate to
the operating performance of those companies. These broad market and industry
factors may seriously harm the market price of our common stock, regardless of
our operating performance.
 
   In the past, following periods of volatility in the market price of a
company's securities, class action litigation has often been brought against
the company. If a securities class action suit is filed against us, we would
incur substantial legal fees and our management's attention and resources would
be diverted from operating our business in order to respond to the litigation.
 
The large number of shares eligible for public sale after this offering could
cause our stock price to decline.
 
   The market price of our stock could decline as a result of sales by our
existing stockholders of a large number of shares of our stock in the market
after this offering or the perception that these sales could occur. These sales
also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. Please see "Shares
Eligible for Future Sale" for a description of sales that may occur in the
future.
 
Anti-takeover provisions in our charter documents and under Delaware law may
make an acquisition of us more difficult.
 
   Provisions of our certificate of incorporation and bylaws could make it more
difficult for a third party to acquire us, even if doing so would be beneficial
to our stockholders. These provisions:
 
  .  prevent stockholders from taking action by written consent;
 
                                       13

<PAGE>
 
  .  limit the persons who may call special meetings of stockholders;
 
  .  authorize the issuance of preferred stock in one or more series; and
 
  .  require advance notice for stockholder proposals and director
     nominations.
 
   In addition, Section 203 of the Delaware General Corporation Law also
imposes restrictions on mergers and other business combinations between us and
any holder of 15% or more of our common stock. Please see "Description of
Capital Stock--Preferred Stock" and "Description of Capital Stock--Antitakeover
Effects of Provisions of the Certificate of Incorporation, Bylaws and Delaware
Law" for a more detailed discussion of these anti-takeover provisions.
 
Concentrations of ownership and agreements among our existing executive
officers, directors and principal stockholders may prevent new investors from
influencing significant corporate transactions.
 
   The interest of management could conflict with the interest of our other
stockholders. Upon completion of this offering, our executive officers,
directors and principal stockholders will beneficially own, in total,   % of
our outstanding common stock. As a result, these stockholders will be able to
exercise control over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions. This
could have the effect of delaying or preventing a change of control of Align,
which in turn could reduce the market price of our stock.
 
New investors in our common stock will experience immediate and substantial
dilution.
 
   The offering price of our common stock will be substantially higher than the
net tangible book value per share of our existing capital stock. As a result,
if you purchase common stock in this offering, you will incur immediate and
substantial dilution of $      in net tangible book value per share of common
stock, based on as assumed public offering price of $      per share. You will
also experience additional dilution upon the exercise of outstanding stock
options and warrants. Please see "Dilution" for a more detailed discussion of
the dilution new investors will incur in this offering.
 
                                       14

<PAGE>
 
      SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
 
   We make many statements in the prospectus under the captions Summary, Risk
Factors, Management's Discussion and Analysis of Financial Condition and
Results of Operations, Business and elsewhere that are forward-looking and are
not based on historical facts. These statements relate to our future plans,
objectives, expectations and intentions. We may identify these statements by
the use of words such as believe, expect, will, anticipate, intend and plan and
similar expressions. These forward-looking statements involve a number of risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those we discuss in Risk Factors and elsewhere in this prospectus.
These forward-looking statements speak only as of the date of this prospectus,
and we caution you not to rely on these statements without considering the
risks and uncertainties associated with these statements and our business that
are addressed in this prospectus.
 
   Given these uncertainties, you should not place undue reliance on such
forward-looking statements. We are not under any duty to update any of the
forward-looking statements after the date of this prospectus to conform these
statements to actual results except as required by law.
 
   Information regarding market and industry statistics contained in the
Summary and Business sections is included based on information available to us
that we believe is accurate. It is generally based on academic and other
publications that are not produced for purposes of securities offerings or
economic analysis. We have not reviewed or included data from all sources and
cannot assure you of the accuracy of the data we have included.
 
                                       15

<PAGE>
 

                                USE OF PROCEEDS
 
   Our net proceeds from the sale of              shares of common stock we are
offering are estimated to be $   million ($   million if the underwriters'
over-allotment option is exercised in full) assuming an initial public offering
price of $       per share and after deducting the underwriting discounts and
commissions and our estimated offering expenses.
 
   We currently intend to use the net proceeds of this offering, along with our
existing cash balances, primarily to expand our manufacturing capacity, to fund
our national advertising campaign and other sales and marketing activities, to
continue to develop our product and manufacturing process technology, to fund
working capital and for general corporate purposes. As of the date of this
prospectus, we have not allocated any specific amount of the proceeds for the
purposes listed in this paragraph. A portion of the net proceeds may also be
used to acquire or invest in complementary businesses, technologies, product
lines or products. Pending our use of the proceeds, the net proceeds of this
offering will be invested in short term, interest-bearing, investment-grade
securities.
 

                                DIVIDEND POLICY
 
   Payments of future dividends, if any, will be at the discretion of our board
of directors after taking into account various factors our board of directors
deems relevant, including our financial condition, operating results, current
and anticipated cash needs, plans for expansion and debt covenants. We have
never declared or paid any cash dividends on shares of our capital stock and do
not intend to do so at any time in the foreseeable future.
 
                                       16

<PAGE>
 

                                 CAPITALIZATION
 
   The following table sets forth the following information:
 
  .  our actual capitalization as of September 30, 2000;
 
  .  our pro forma capitalization, which gives effect to the sale of 718,355
     shares of Series D preferred stock in October 2000 at an offering price
     of $21.25 per share, after deducting estimated offering expenses of
     $53,000, and the conversion of all outstanding shares of preferred
     stock, including the 718,355 shares of Series D preferred stock issued
     in October 2000, into 12,990,503 shares of common stock upon completion
     of this offering; and
 
  .  our pro forma as adjusted capitalization to reflect the sale of
     shares of common stock at an assumed initial public offering price of
     $     per share in this offering, less the underwriting discounts and
     commissions and estimated offering expenses.
 

<TABLE>
<CAPTION>
                                                   As of September 30, 2000
                                                 -------------------------------
                                                             Pro      Pro Forma
                                                  Actual    Forma    As Adjusted
                                                 --------  --------  -----------
                                                        (in thousands)
<S>                                              <C>       <C>       <C>
Long term obligations, net of current portion..  $  1,569  $  1,569    $
                                                 --------  --------    -------
Convertible preferred stock, $0.0001 par value;
 13,605,427 shares authorized, actual and pro
 forma; 5,000,000 shares  authorized, pro forma
 as adjusted; 12,175,512 shares issued and
 outstanding, actual; and no shares outstanding
 pro forma and pro forma as adjusted...........   113,890       --
                                                 --------  --------    -------
Preferred stock warrants.......................     1,818       --
                                                 --------  --------    -------
Stockholders' equity (deficit):
Common stock, $0.0001 par value; 60,000,000
 shares authorized; 3,594,196 shares issued and
 outstanding, actual; 16,584,699 shares issued
 and outstanding, pro forma;     shares issued
 and outstanding, pro forma as adjusted........       --          2
Additional paid-in capital.....................    91,926   222,844
Deferred stock-based compensation..............   (74,847)  (74,847)
Accumulated deficit............................   (73,165)  (73,165)
                                                 --------  --------    -------
Total stockholders' equity (deficit)...........   (56,086)   74,834
                                                 --------  --------    -------
Total capitalization...........................  $ 61,191  $ 76,403    $
                                                 ========  ========    =======
</TABLE>

 
   The number of shares of common stock referenced above excludes as of
September 30, 2000:
 
  .  2,155,998 shares of common stock issuable upon the exercise of
     outstanding options at a weighted average exercise price of $1.59 per
     share;
 
  .  322,917 shares of common stock issuable upon the exercise of outstanding
     warrants to purchase preferred stock, or common stock upon the
     completion of this offering at a weighted average exercise price of
     $3.87 per share;
 
  .  1,177,621 shares of common stock available for grant under our 1997
     Equity Incentive Plan;
 
  .  2,700,000 shares of common stock reserved for issuance under our 2001
     Stock Incentive Plan; and
 
  .  500,000 shares of common stock to be reserved for issuance under our
     Employee Stock Purchase Plan upon completion of the offering.
 
                                       17

<PAGE>
 
                                    DILUTION
 
   Our net tangible book value of the common stock as of September 30, 2000 was
approximately $59.6 million, or approximately $     per share of common stock
assuming conversion of all outstanding preferred stock into an aggregate of
12,257,309 shares of common stock upon completion of the offering. Our net
tangible book value per share has been determined by dividing net tangible book
value (total tangible assets less total liabilities) by the pro forma number of
shares of common stock outstanding at September 30, 2000.
 
   After giving effect to the sale of      shares of common stock in this
offering at an assumed price of $     per share and after deduction of the
underwriting discount and estimated offering expenses, our net tangible book
value after the offering would have been approximately $       million, or
$       per share. The offering will result in an increase in net tangible book
value of $       per share to existing investors and an immediate dilution of
$       per share to new investors, or approximately    % of the assumed
offering price of $       per share.
 
   Pro forma net tangible book value dilution per share represents the
incremental dilutive effect of the sale of 718,355 shares of Series D preferred
stock which convert into 733,194 shares of common stock at an offering price of
$21.25 per share, after deducting estimated offering expenses of $53,000. These
shares convert into 733,194 shares of common stock as a result of an
antidilution conversion feature of our Series D preferred stock offering. See
"Certain Transactions." The following table illustrates this calculation of per
share dilution:
 

<TABLE>
   <S>                                                               <C>   <C>
   Assumed initial public offering price per share..................       $
    Net tangible book value per share as of September 30, 2000...... $3.78
    Increase per share attributable to new investors................
                                                                     -----
   Net tangible book value per share after this offering............
                                                                           ----
   Dilution per share to new investors..............................
   Incremental dilution occurring upon sale of Series D preferred
    stock...........................................................
                                                                           ----
   Pro forma dilution per share to new investors....................       $
                                                                           ====
</TABLE>

 
   The following table summarizes, on the pro forma basis described above, the
differences between the number of shares of common stock issued by us, the
total consideration paid and the average price per share paid by the existing
stockholders and by new investors, before deducting underwriting discounts and
commissions and estimated offering expenses, at an assumed initial public
offering price of $     per share:
 
 

<TABLE>
<CAPTION>
                             Shares Purchased  Total Consideration
                            ------------------ -------------------- Average Price
                              Number   Percent    Amount    Percent   Per Share
                            ---------- ------- ------------ ------- -------------
   <S>                      <C>        <C>     <C>          <C>     <C>
   Existing stockholders... 16,584,699      %  $129,093,000      %      $7.78
   New investors...........
                            ----------   ---   ------------   ---
    Total..................              100%  $              100%
                            ==========   ===   ============   ===
</TABLE>

 
   These tables do not assume exercise of stock options and warrants
outstanding as of September 30, 2000. As of September 30, 2000, there were
2,155,998 shares of common stock issuable upon exercise of outstanding stock
options at a weighted average exercise price of $1.59 per share and 322,917
shares of common stock issuable upon exercise of outstanding warrants at a
weighted average exercise price of $3.87 per share. There are 2,700,000 shares
of common stock reserved for issuance under our 2001 Stock Incentive Plan.
There will be 500,000 shares of common stock reserved for issuance under our
Employee Stock Purchase Plan upon completion of the offering. Giving effect to
the exercise of the options and warrants outstanding and exercisable as of
September 30, 2000, the pro forma net tangible book value per share would be
$       and the dilution per share to the new investors would be $        .
 
                                       18

<PAGE>
 

                      SELECTED CONSOLIDATED FINANCIAL DATA
                     (in thousands, except per share data)
 
   You should read the following selected consolidated financial data in
conjunction with the Consolidated Financial Statements and related Notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The consolidated statement
of operations data for the period from April 3, 1997 (date of inception) to
December 31, 1997 and for each of the two years in the period ended December
31, 1999, and the balance sheet at December 31, 1998 and 1999, are derived from
the audited consolidated financial statements included elsewhere in this
prospectus. The consolidated balance sheet data at December 31, 1997 is derived
from audited consolidated financial statements not included in this prospectus.
The selected consolidated results of operations for the nine months ended
September 30, 1999 and 2000 and the selected consolidated balance sheet data as
of September 30, 2000 are derived from unaudited financial statements included
in this prospectus. In the opinion of management, the unaudited consolidated
financial statements include all adjustments, consisting principally of normal
recurring adjustments, necessary for a fiscal presentation of the results of
operations for the periods. Our historical results are not necessarily
indicative of results to be expected for future periods. See the Notes to our
Consolidated Financial Statements for a detailed explanation of the
determination of the shares used to compute basic and diluted net loss per
share.
 

<TABLE>
<CAPTION>
                                Period
                                 from
                               Inception
                               (April 3,    Year Ended      Nine Months Ended
                               1997) to      Dec. 31,           Sept. 30,
                               Dec. 31,  -----------------  ------------------
                                 1997     1998      1999     1999      2000
                               --------- -------  --------  -------  ---------
<S>                            <C>       <C>      <C>       <C>      <C>
Statement of Operations Data:
Revenue......................   $  --    $   --   $    411  $    77  $  3,236
Cost of revenue..............      --        --      1,754      357    11,313
                                ------   -------  --------  -------  --------
Gross loss...................      --        --     (1,343)    (280)   (8,077)
                                ------   -------  --------  -------  --------
Operating expenses:
 Sales and marketing.........      283       133     5,688    2,726    19,664
 General and administrative..      --      2,344     3,474    2,000    12,349
 Research and development....      405     1,474     4,200    3,068     5,904
                                ------   -------  --------  -------  --------
 Total operating expenses....      688     3,951    13,362    7,794    37,917
                                ------   -------  --------  -------  --------
Loss from operations.........     (688)   (3,951)  (14,705)  (8,074)  (45,994)
Interest and other income
 (expense), net..............       24       176      (710)    (499)   (7,317)
                                ------   -------  --------  -------  --------
Net loss.....................     (664)   (3,775)  (15,415)  (8,573)  (53,311)
Dividend related to
 beneficial conversion
 feature of preferred stock..      --        --        --       --    (44,150)
                                ------   -------  --------  -------  --------
Net loss available to common
 stockholders................   $ (664)  $(3,775) $(15,415) $(8,573) $(97,461)
                                ======   =======  ========  =======  ========
Net loss per share available
 to common stockholders,
 basic and diluted...........   $(0.86)  $ (2.66) $  (7.31) $ (4.22) $ (35.87)
                                ======   =======  ========  =======  ========
Shares used in computing net
 loss per share available to
 common stockholders, basic
 and diluted.................      771     1,421     2,109    2,030     2,717
                                ======   =======  ========  =======  ========
 
 
<CAPTION>
                                        Dec. 31,
                               ---------------------------           Sept. 30,
                                 1997     1998      1999               2000
                               --------- -------  --------           ---------
<S>                            <C>       <C>      <C>       <C>      <C>
Balance Sheet Data:
Cash, cash equivalents and
 marketable securities.......   $1,506   $ 6,923  $ 12,085           $ 37,867
Working capital..............    1,370     6,815    10,027             47,758
Total assets.................    1,642     8,117    17,091             75,567
Total long term obligations..        4        10         3              1,569
Convertible preferred stock
 and warrants................    2,164    12,147    32,755            115,708
Total stockholders' deficit..     (661)   (4,433)  (19,414)           (56,086)
</TABLE>

 
                                       19

<PAGE>
 

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS
 
   The following discussion and analysis of our financial condition and results
of operations should be read together with "Selected Consolidated Financial
Data" and our financial statements and related notes appearing elsewhere in
this prospectus. This discussion and analysis contains forward-looking
statements that involve risks, uncertainties and assumptions. The actual
results may differ materially from those anticipated in these forward-looking
statements as a result of many factors, including but not limited to those set
forth under "Risk Factors" and elsewhere in this prospectus.
 
Overview
 
   From inception in April 1997 to July 2000, we were engaged in the design,
manufacture and marketing of the Invisalign System, a proprietary new System
for treating malocclusion, or the misalignment of teeth. In July 1999, we
commenced commercial sales of our Invisalign System. Prior to July 1999, we
devoted nearly all our resources to developing our software and manufacturing
processes, clinical trials of the Invisalign System and to building our sales
force, customer support and management teams. We exited the development stage
in July 2000.
 
   The Invisalign System has two components: ClinCheck and Aligners. ClinCheck
is an Internet-based application that allows orthodontists to simulate
treatment, in three dimensions, by modeling two-week stages of tooth movement.
Aligners are thin, clear plastic, removable dental appliances that are
manufactured in a series to correspond to each two-week stage of the ClinCheck
simulation. Aligners are customized to perform the treatment prescribed for an
individual patient by an orthodontist using ClinCheck.
 
   In the third quarter of 1999, we recognized revenue for the first time from
the sale of the Invisalign System and related dental impression machines
manufactured by ESPE America, Inc. We expect to sell dental impression machines
only once. Accordingly, sales of such machines are expected to represent a
lower proportion of our revenue in the future. Substantially all our revenue is
generated in the U.S. and Canada, which, taken together, we regard as our
domestic market.
 
   We incurred net losses of $664,000 in 1997, $3.8 million in 1998 and $15.4
million in 1999. For the nine months ended September 30, 2000, we incurred a
net loss of $53.3 million compared to a net loss of $8.6 million for the nine
months ended September 30, 1999. As of September 30, 2000, we had an
accumulated net deficit of $73.2 million. We expect to continue to incur losses
for the foreseeable future, in part, due to our national advertising campaign,
the expansion of manufacturing capacity and continued research and development
efforts.
 
   We earn revenue primarily from the sale of our Invisalign System. Our
revenue consists of the ClinCheck fee and the charge for each Aligner. We
charge orthodontists a fixed fee for the treatment simulation viewed via
ClinCheck on our website, Invisalign.com. This fee is invoiced when the
orthodontist orders ClinCheck prior to the production of Aligners. In addition,
we charge orthodontists a fee for Aligners as we ship them. Fees from the sale
of ClinCheck and Aligners, taken together, are treated as revenue from a single
System and are recognized ratably as batches of Aligners are shipped to the
orthodontist.
 
   To date, we have shipped Aligners in batches. The first batch, which
typically represents the first several months of treatment, is produced once
the prescribing orthodontist approves ClinCheck. Thereafter, Aligners are sent
at approximately six month intervals until treatment is complete.
 
                                       20

<PAGE>
 
   The costs of producing the ClinCheck treatment plan, which are incurred
prior to the production of Aligners, are capitalized and recognized as related
revenue is earned. In the cases where we expect a loss on the contract, the
entire loss is recognized immediately and the remaining costs are deferred and
recognized ratably as batches of Aligners are shipped to the orthodontist.
 
   We are in the process of changing the pattern of Aligner shipments. We
intend to ship all the Aligners associated with a given case in a single batch
beginning in early 2001. When this happens, all the revenue associated with a
given case, including ClinCheck fees, will be recognized at the time the
Aligners are shipped.
 
Deferred Compensation
 
   In connection with the grant of stock options to employees and non-
employees, we recorded deferred stock-based compensation as a component of
stockholders' deficit. Deferred stock compensation for options granted to
employees is the difference between the fair value of our common stock on the
date such options were granted and their exercise price. For stock options
granted to non-employees, the fair value of the options, estimated using the
Black-Scholes valuation model, is initially recorded on the date of grant. As
the non-employee options become exercisable, we revalue the remaining unvested
options, with the change in fair value from period to period represented as a
change in the deferred compensation charge. This stock-based compensation is
amortized as charges to operations over the vesting periods of the options. We
recorded amortization of deferred compensation of $394,000 for the year ended
December 31, 1999 and $7.9 million for the nine months ended September 30,
2000.
 
Results of Operations
 
   Nine Months Ended September 30, 1999 and 2000
 
   Revenue. We recorded revenue for the first time in the third quarter of
1999. For the nine months ended September 30, 1999, we recorded revenue of
$77,000. Almost all our revenue in this period related to the sale to
orthodontists of dental impression machines. In the nine months ended September
30, 2000, we recorded revenue of $3.2 million, of which approximately
$2.3 million was derived from the sale of Invisalign System products. The
balance of our revenue for the nine month period ended September 30, 2000
represented sales of dental impression machines. We expect to sell a dental
impression machine to an orthodontist only once. Accordingly, sales of these
machines are expected to represent a substantially lower proportion of our
revenue in the future.
 
   Cost of revenue. Cost of revenue includes the salaries of staff involved in
production, the cost of materials and packaging used in production and shipping
together with an allocation of the cost of facilities and depreciation on the
capital equipment used in the production process. We reported cost of revenue
of $357,000 for the nine months ended September 30, 1999. For the nine months
ended September 30, 2000, we reported cost of revenue of $11.3 million, which
includes start-up manufacturing costs and reflects a substantial increase in
the scale of our manufacturing operations.
 
   Sales and marketing. Sales and marketing expenses include sales force
compensation together with the expense of professional marketing, principally,
conducting training workshops and market surveys, advertising and attending
orthodontic trade shows. Sales and marketing expenses increased from $2.7
million for the nine months ended September 30, 1999 to $19.7 million for the
nine months ended September 30, 2000. This increase resulted from a substantial
increase in doctor training, our participation in the annual convention of the
 
                                       21

<PAGE>
 
American Association of Orthodontists in April and May, 2000 and the launch of
our national advertising campaign in September 2000.
 
   General and administrative. General and administrative expenses include
costs for the compensation of administrative personnel, outside consulting
services, facilities, legal expenses and general corporate expenses. General
and administrative expenses increased from $2.0 million for the nine months
ended September 30, 1999 to $12.3 million for the nine months ended September
30, 2000, primarily due to increased personnel cost. We expect administrative
expenses to continue to increase in the future to support expanding business
activities and the additional administrative costs related to being a public
company.
 
   Research and development. Research and development expenses include the
costs associated with software engineering, the costs of designing, developing
and testing our products and the conduct of both clinical and post-marketing
trials. Research and development is expensed as incurred. Research and
development expenses increased from $3.1 million for the nine months ended
September 30, 1999 to $5.9 million for the nine months ended September 30,
2000. The expenses incurred in the 1999 period included the costs of
researching processes to manufacture our product. Starting in the third quarter
of 1999, we transitioned from recording manufacturing process research as
research and development expense to recognizing it as cost of sales.
 
   Interest and other income (expense), net. Net interest and other expense
increased from $499,000 for the nine months ended September 30, 1999 to $7.3
million for the nine months ended September 30, 2000. This increase resulted
primarily from non-cash interest expense related to the beneficial conversion
feature of a bridge loan financing.
 
   Dividend related to beneficial conversion feature of preferred stock. In the
three months ended June 30, 2000, we issued 4,048,836 shares of Series D
preferred stock. The difference between the conversion price and the fair
market value per share of the common stock on the transaction date resulted in
a beneficial conversion feature of $44.2 million which has been reflected as a
preferred stock dividend in the September 30, 2000 consolidated interim
financial statements.
 
Period from April 3, 1997 (date of inception) to December 31, 1997, and the
Years Ended December 31, 1998 and 1999
 
   Revenue. Revenue was recorded for the first time in 1999. For the year ended
December 31, 1999, we recorded $411,000 in revenue from sales of the Invisalign
System and related ancillary products. Approximately $98,000 was derived from
the sale of the Invisalign System products. The balance of our revenue, or
$313,000, represented sales to orthodontists of dental impression machines.
 
   Cost of revenue. No cost of revenue was incurred in 1997 and 1998. We
incurred cost of revenue of $1.8 million relating to the manufacture of
products sold for the year ended December 31, 1999.
 
   Sales and marketing. Sales and marketing expenses in 1997 and 1998 were
insignificant because we had not launched our product commercially. Sales and
marketing expenses decreased from $283,000 in 1997 to $133,000 in 1998 and
increased to $5.7 million in 1999, reflecting the hiring of our sales force,
the training of doctors to support our commercial launch and the testing of
direct advertising in two markets.
 
   General and administrative. General and administrative expenses increased
from none in 1997 and $2.3 million in 1998 to $3.5 million in 1999, reflecting
the growth in our
 
                                       22

<PAGE>
 
administrative staff, rent on our facilities and other general expenses as we
prepared for commercial launch of the Invisalign System.
 
   Research and development. Research and development expenses increased from
$405,000 in 1997 to $1.5 million in 1998, reflecting the commencement of
clinical trials of the Invisalign System and the development of software and
processes for the manufacture of the Invisalign System. In 1999, research and
development expenses increased to $4.2 million, reflecting the development of
manufacturing processes and continuation of our clinical trials.
 
   Interest and other income (expense), net. Net interest and other income
increased from a negligible amount in 1997 to $176,000 in 1998 due to interest
income earned on higher average cash balances, resulting from the sale of
preferred stock in July 1998. In 1999, net interest expense was $710,000 due to
non-cash interest expense created by the amortization of warrants issued in
connection with a line of credit.
 
Income Taxes
 
   We have not incurred any income tax expense to date since we have not been
profitable. As of December 31, 1999, we had federal net operating loss
carryforwards of $10.5 million. As of December 31, 1999, we had recorded a full
valuation allowance for our existing net deferred tax assets due to
uncertainties regarding their realization. We also have federal research tax
credit carryforwards of $606,000 as of December 31, 1999. The federal net
operating loss and credit carryforwards expire beginning in the year 2017 if
not utilized. Utilization of the federal net operating losses and credit
carryforwards may be limited by the change of ownership provisions contained in
Section 382 of the Internal Revenue Code.
 
Liquidity and Capital Resources
 
   Historically, we have funded our operations with the proceeds from the sale
of our common and preferred stock, equipment leases and bridge loans. As of
September 30, 2000, we had $37.9 million in cash, cash equivalents and
marketable securities and an accumulated deficit of $73.2 million. Our
equipment lease line was repaid in July 2000.
 
   Net cash used in operating activities totaled $522,000 in 1997, $3.8 million
in 1998 and $11.6 million in 1999. For the nine months ended September 30,
2000, net cash used in operations totaled $31.2 million compared to $6.8
million for the nine months ended September 30, 1999. In each of these periods
net cash used by operating activities consisted primarily of net operating
losses, partially offset by increases in accounts payable, depreciation and
amortization of deferred stock compensation.
 
   Net cash used in investing activities totaled $1.6 million in 1997, $3.8
million in 1998 and $3.6 million in 1999. For the nine months ended September
30, 2000, net cash used in investing activities totaled $24.3 million compared
to net cash provided by investing activities of $1.8 million for the nine
months ended September 30, 1999. In each of these periods, net cash used in
investing activities consisted primarily of purchases of property and equipment
and marketable securities offset by sales and maturities of marketable
securities. For the nine months ended September 30, 2000, there was a
substantial increase in restricted cash related to the transfer of funds to our
media buying agent to fund our national advertising campaign.
 
   Net cash from financing activities was $2.2 million in 1997, $10.0 million
in 1998 and $19.6 million in 1999. For the nine months ended September 30,
2000, net cash from financing activities totaled $82.6 million compared to
$17.9 million for the nine months ended September 30, 1999. In May 2000, we
sold $14.0 million of convertible promissory notes to
 
                                       23

<PAGE>
 
preferred stockholders. In May and June 2000, we sold $72.0 million of
preferred stock to investors. Also in May 2000, the convertible promissory
notes were converted to preferred stock. In October 2000, we sold an additional
$15.3 million of preferred stock.
 
   We expect that our operating expenses will increase with an overall increase
in the level of our business activity, including increased sales and the
related costs of products sold, the launch of our national advertising
campaign, continuing efforts to expand our manufacturing capacity, research and
development and other costs. We are in the process of changing the pattern of
Aligner shipments, which will have a negligible effect on our cash flows. In
addition, we may use cash to fund acquisitions of complementary businesses or
technologies. We believe the net proceeds from this offering will be sufficient
to meet our operating, working capital and capital expenditure requirements for
at least the next 12 months.
 
Quantitative and Qualitative Disclosures about Market Risk
 
   Our exposure to market risk is currently confined to our cash and cash
equivalents that have maturities of less than three months. We currently do not
hedge interest rate exposure. Because of the short-term maturities of our cash
and cash equivalents and marketable securities, we do not believe that an
increase in market rates would have any significant negative impact on the
realized value of our investments.
 
Recent Accounting Pronouncements
 
   In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes new standards of accounting and reporting for derivative
instruments and hedging activities. SFAS No. 133 requires that all derivative
instruments be recognized at fair value in the statement of financial position,
and that the corresponding gains and losses be reported either in the statement
of operations or as a component of comprehensive income, depending on the type
of relationship that exists. We have not engaged in significant hedging
activities or invested in derivative instruments. In July 1999, the Financial
Accounting Standards Board issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 137 deferred the effective date of SFAS No. 133
until fiscal years beginning after June 15, 2000.
 
   In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation--an Interpretation of APB
25." This interpretation clarifies (1) the definition of employee for purposes
of applying Opinion 25, (2) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (3) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (4)
the accounting for an exchange of stock compensation awards in a business
combination. This interpretation is effective July 1, 2000, but certain
conclusions in this interpretation cover specific events that occur after
either December 15, 1998 or January 12, 2000. To the extent that this
interpretation covers events occurring during the period after December 15,
1998 or January 12, 2000, but before the effective date of July 1, 2000, the
effects of applying this interpretation are recognized on a prospective basis
from July 1, 2000. The adoption of FIN 44 did not have a material impact on our
financial statements.
 
                                       24

<PAGE>
 

 
                                   BUSINESS
 
Overview
 
   We design, manufacture and market the Invisalign System, a proprietary new
method for treating malocclusion, or the misalignment of teeth. The System
corrects malocclusion using a series of clear, removable appliances that gently
move teeth to a desired final position. Because it does not rely on the use of
metal or ceramic brackets and wires, the System significantly reduces the
aesthetic and other limitations associated with braces. The Invisalign System
also offers orthodontists a new means of carrying out their diagnosis and
treatment planning processes. We believe the Invisalign System has the
potential to transform the traditional practice of orthodontics by appealing to
people who would not otherwise seek treatment.
 
   In the U.S. alone, over 200 million individuals have some form of
malocclusion. Each year, less than one percent of these individuals, or
approximately two million Americans, enter orthodontic treatment, spending
approximately $7 billion in aggregate. We believe the Invisalign System is a
compelling treatment alternative for most of the patients who would seek
traditional orthodontic treatment. In addition, given the significant benefits
of our System, we have the opportunity to expand the U.S. orthodontic market by
addressing the needs of millions of individuals who would not otherwise seek
treatment. Further, we believe the international opportunity is larger than the
U.S. opportunity.
 
   We received FDA clearance to market the Invisalign System in 1998 and
started commercial sales of the System in July 1999. Our 510(k) clearance from
the FDA allows us to market the Invisalign System to treat patients with any
type of malocclusion. We voluntarily restrict the use of the Invisalign System
to adults and adolescents with mature dentition and who are otherwise suitable
for treatment, a group that represents approximately 130 million people in the
U.S. Currently, we do not treat children whose teeth and jaws are still
developing, as the effectiveness of the Invisalign System relies on our ability
to accurately predict the movement of teeth over the course of treatment. Based
on our clinical studies to date, we recommend that orthodontists use the
Invisalign System as a complete treatment for mild and moderate malocclusions
and as a component of treatment for unusually severe malocclusions.
 
   As of October 2000, we had trained more than 5,300 orthodontists to use the
Invisalign System, representing over 60% of all U.S. and Canadian
orthodontists. To date, over 7,600 patients have commenced treatment with the
Invisalign System, including more than 1,000 patients in September 2000.
 
   Our objective is to establish the Invisalign System as the standard method
for treating orthodontic malocclusion. Our sales and marketing efforts focus on
educating both consumers and orthodontists on the significant benefits of the
System. We continue to train orthodontists and work with them to increase the
use of the Invisalign System within their practices. We recently initiated a
national advertising campaign to create awareness of the Invisalign System as a
treatment alternative and to stimulate demand for treatment with the System.
 
Industry Background
 
  Malocclusion
 
   Malocclusion is one of the most prevalent clinical conditions, affecting
over 200 million individuals, or approximately 75% of the U.S. population.
Approximately two million people annually elect orthodontic treatment in the
U.S., generating industry revenues of approximately
 
                                       25

<PAGE>
 
$7 billion. While most individuals seek orthodontic treatment to improve their
appearance, malocclusion may also be responsible for dental problems such as
tooth decay, tooth loss, gum disease, jaw joint pain and headaches. Only a
relatively small proportion of people with malocclusion seek treatment because
of the compromised aesthetics, discomfort and other drawbacks associated with
conventional orthodontic treatments.
 
  Traditional Orthodontic Treatment
 
   Orthodontists apply traditional techniques and principles of treatment
developed in the early 20th century. In the U.S., orthodontists treat
malocclusion primarily with metal archwires and brackets, commonly referred to
as braces. Occasionally, in an attempt to improve treatment aesthetics,
orthodontists use ceramic, tooth-colored brackets or bond brackets on the
inside, or lingual surfaces, of the patient's teeth. Orthodontists also augment
braces with elastics, metal bands, headgear and other ancillary devices.
 
   The average treatment takes approximately two years to complete and requires
several hours of direct orthodontist involvement, or chair time. To initiate
treatment, an orthodontist will diagnose a patient's condition and create an
appropriate treatment plan. In a subsequent visit, the orthodontist will bond
brackets to the patient's teeth with cement and attach an archwire to the
brackets. Thereafter, by tightening or otherwise adjusting the braces
approximately every six weeks, the orthodontist is able to exert sufficient
force on the patient's teeth to achieve desired tooth movement. Because of the
length of time between visits, the orthodontist must tighten the braces to a
degree sufficient to achieve sustained tooth movement during the interval. In a
final visit, the orthodontist removes each bracket and residual cement from the
patient's teeth.
 
   Fees for orthodontic treatment typically range between $3,000 to $5,000 and
are generally not reimbursed by insurance. In addition, orthodontists commonly
charge a premium for lingual or ceramic alternatives. Fees are based on the
difficulty of the particular case and on the orthodontist's estimate of chair
time and are generally negotiated in advance. A treatment that exceeds the
orthodontist's estimate of chair time generally results in decreased fees per
hour of chair time, or reduced profitability for the orthodontist.
 
  Limitations of Traditional Orthodontic Treatment
 
   Although braces are generally effective in correcting a wide range of
malocclusions, they are subject to many limitations and disadvantages.
Conventional orthodontic treatment is associated with:
 
  .  Unattractive appearance. Braces call attention to the patient's
     condition and treatment. In addition, braces trap food, which can
     further compromise appearance. Braces can also result in permanent
     discoloration of teeth. Many adults associate braces with adolescence.
     As a result of these and other limitations, less than one half of one
     percent of American adults with malocclusion elect orthodontic treatment
     annually.
 
  .  Oral discomfort. Braces are sharp and bulky and can abrade and irritate
     the interior surfaces of the mouth. The tightening or adjustment of
     braces results in root and gum soreness and discomfort, especially in
     the days after an orthodontic visit.
 
  .  Poor oral hygiene. Braces compromise oral hygiene by making it more
     difficult to brush and floss. These problems can result in tooth decay
     and periodontal damage. Additionally, the bonding of brackets to teeth
     can cause permanent markings on the teeth.
 
                                       26

<PAGE>
 
  .  Inability to project treatment. Historically, orthodontists have not had
     a means to model the movement of teeth over a course of treatment.
     Accordingly, orthodontists must rely on intuition and judgment to plan
     and project treatment. As a result, they cannot be precise about the
     direction or distance of expected tooth movement between patient visits.
     This lack of predictability may result in unwanted tooth movements and
     can limit the orthodontist's ability to estimate the duration of
     treatment. Because most orthodontic treatment is performed on a fixed
     price basis, extended treatment duration reduces profitability for the
     orthodontist.
 
  .  Physical demands on orthodontists. The manipulation of wires and
     brackets requires sustained manual dexterity and visual acuity, and may
     place other physical burdens on the orthodontist.
 
  .  Root resorption. The sustained high levels of force associated with
     conventional treatment can result in root resorption, a shortening of
     tooth roots. This shortening can have substantial adverse periodontal
     consequences for the patient.
 
  .  Emergencies. At times, braces need to be repaired or replaced on an
     emergency basis. Such emergencies cause significant inconvenience to
     both the patient and the orthodontist.
 
   Due to the poor aesthetics, discomfort and other limitations of braces,
relatively few people with malocclusion elect orthodontic treatment.
Accordingly, we believe there is a large unmet need for an orthodontic system
that addresses these patient concerns. We also believe there is an unmet need
among orthodontists for a treatment system that increases the predictability
and efficiency of treatment and enhances practice profitability.
 
The Align Solution
 
   Our Invisalign System is a proprietary new system for treating malocclusion.
The Invisalign System consists of two components: ClinCheck and Aligners.
 
   ClinCheck. ClinCheck is an interactive Internet application that allows
orthodontists to diagnose and plan treatment for their patients. We use a
dental impression and a treatment prescription submitted by an orthodontist to
develop a customized, three-dimensional treatment plan that simulates
appropriate tooth movement in a series of two-week increments. ClinCheck allows
the orthodontist to view this three-dimensional simulation with a high degree
of magnification and from any angle. Accordingly, ClinCheck enables the
orthodontist to project tooth movement with a level of accuracy not previously
possible.
 
   Upon review of the ClinCheck simulation, the orthodontist may immediately
approve our projected treatment, or may provide us with feedback for
modification. We reflect any requested adjustments in a modified simulation.
Upon the orthodontist's approval of the ClinCheck simulation, we use the data
underlying the simulation to manufacture the patient's Aligners.
 
   Aligners. Aligners are custom-manufactured, clear, removable dental
appliances that, when worn in prescribed series, provide orthodontic treatment.
Each Aligner covers a patient's teeth and is nearly invisible when worn.
Aligners are commonly worn in pairs, over the upper and lower dental arches.
Aligners are generally worn for consecutive two-week periods which correspond
to the approved ClinCheck treatment simulation. After two weeks of use, the
patient discards the Aligners and replaces them with the next pair in the
series. This process is repeated until the final Aligners are used and
treatment is complete. In our experience to date, the typical Invisalign System
patient uses 22 sets of Aligners over 44 weeks of treatment.
 
                                       27

<PAGE>
 
  Benefits of the Invisalign System
 
   We believe that the Invisalign System provides benefits to patients and
orthodontists that have the potential to establish the System as the preferred
alternative to conventional braces.
 
    Benefits to the Patient
 
  .  Excellent aesthetics. Aligners are nearly invisible when worn,
     eliminating the aesthetic concerns associated with conventional braces.
 
  .  Comfort. By replacing the six-week adjustment cycle of traditional
     braces with two-week stages, Aligners move teeth more gently. Also,
     Aligners are thin, smooth and low in profile. As a result, Aligners are
     substantially more comfortable and less abrasive than conventional
     braces.
 
  .  Improved oral hygiene. Patients can remove Aligners for tasks that are
     difficult with conventional braces, such as eating, brushing and
     flossing. We believe this feature has the potential to reduce tooth
     decay and periodontal damage during treatment.
 
  .  Potentially reduced overall treatment time. Aligners control force by
     distributing it broadly over the exposed surfaces of the teeth. In
     addition, the ClinCheck simulation from which Aligners are produced is
     designed to reduce unintended and unnecessary tooth movements. Together,
     these factors may significantly reduce overall treatment time relative
     to conventional braces.
 
  .  Potentially reduced root resorption. We believe that controlling force
     and shortening treatment time has the potential to reduce the incidence
     of root resorption.
 
  .  Reduced incidence of emergencies. Typically, a lost or broken Aligner is
     simply replaced with the next Aligner in series, minimizing
     inconvenience to both patient and orthodontist.
 
   We believe that these benefits will prove attractive to people who currently
do not seek treatment because of the limitations of conventional braces.
 
    Benefits to the Orthodontist
 
  .  Ability to visualize treatment and likely outcomes. We believe that
     ClinCheck is the only product that enables orthodontists to preview a
     course of treatment and the likely final outcome of treatment in an
     interactive three-dimensional computer model. ClinCheck allows
     orthodontists to analyze multiple treatment alternatives before
     selecting the alternative they feel is most appropriate for the patient.
 
  .  Minimal additional training. The biomechanical principles that underlie
     the Invisalign System are consistent with those of traditional
     orthodontics. Orthodontists can complete our initial training and
     certification program within a day. As of October 2000, we have trained
     more than 5,300 U.S. and Canadian orthodontists.
 
  .  Ease of use. When treating patients with the Invisalign System,
     orthodontists do not spend their time manipulating wires and brackets.
     This allows them to spend proportionately more time diagnosing and
     interacting with their patients.
 
  .  Significantly expanded patient base. We believe the Invisalign System
     has the potential to transform the practice of orthodontics. Currently,
     less than one percent of the over 200 million people with malocclusion
     in the U.S. enter treatment each year. We believe that our System will
     allow orthodontists to attract patients who would not otherwise seek
     orthodontic treatment.
 
                                       28

<PAGE>
 
  .  Higher fees. Orthodontists typically charge between $3,000 and $5,000
     for a course of conventional treatment. Due to the substantial patient
     benefits of the Invisalign System, we believe orthodontists offering our
     System have generally been able to command a significant premium. In our
     experience, the premiums charged by orthodontists for the Invisalign
     System have been comparable to other treatment alternatives that attempt
     to improve the aesthetics of conventional braces, such as ceramic and
     lingual braces.
 
  .  Decreased orthodontist and staff time. The Invisalign System reduces
     both the frequency and length of patient visits. The Invisalign System
     eliminates the need for time-intensive processes such as bonding
     appliances to the patient's teeth, adjusting archwires during the course
     of treatment and removing the appliances at the conclusion of treatment.
     As such, use of the Invisalign System significantly reduces orthodontist
     and staff chair time and can increase practice throughput.
 
   We believe the combination of increased patient volume, higher fees per case
and reduced chair time has the potential to substantially improve orthodontic
practice profitability.
 
Our Target Market
 
   Commercial sales of our Invisalign System commenced in the U.S. in July
1999. Since then, over 7,600 patients have entered treatment using the
Invisalign System.
 
   Our 510(k) clearance from the FDA allows us to market the Invisalign System
to treat patients with any type of malocclusion. We voluntarily restrict the
use of the Invisalign System to adults and adolescents with mature dentition
and who are otherwise suitable for treatment, a group that represents
approximately 130 million people in the U.S. Currently, we do not treat
children whose teeth and jaws are still developing, as the effectiveness of the
Invisalign System relies on our ability to accurately predict the movement of
teeth over the course of treatment. Based on our clinical studies to date, we
recommend that orthodontists use the Invisalign System as a complete treatment
for mild and moderate malocclusions and as a component of treatment for
unusually severe malocclusions.
 
   Approximately two million patients enter into traditional orthodontic
treatment in the U.S. annually. These patients represent less than one percent
of the population of people with malocclusion. Of these, over 50%, or more than
one million patients, have mature dentition and are therefore natural
candidates for the Invisalign System.
 
   In addition, we believe that we have an immediate and substantial market
expansion opportunity. Our market research indicates that the great majority of
people with malocclusion who desire treatment do not elect traditional
treatment because of its many limitations. We believe that by addressing the
primary limitations of braces, our Invisalign System will encourage this group
to seek treatment. Adults, who are particularly sensitive to the aesthetic
limitations of traditional treatment, represent our most significant market
expansion opportunity.
 
   We are currently focused on the domestic market opportunity but we also
believe that a large international market opportunity exists.
 
 
                                       29

<PAGE>
 
Business Strategy
 
   Our objective is to establish the Invisalign System as the standard method
for treating orthodontic malocclusion. Key elements of our strategy include the
following:
 
   Educate orthodontists and stimulate demand for Invisalign System
treatment. Our market research indicates that the great majority of people with
malocclusion who desire treatment do not elect traditional treatment because of
its many limitations. By communicating the benefits of the Invisalign System to
both orthodontists and consumers, we intend to significantly increase the
number of patients who seek orthodontic treatment annually. As of October 2000,
we have trained over 5,300 orthodontists in the U.S. and Canada on the use and
benefits of the Invisalign System, and intend to continue training
orthodontists at a rapid pace. We have successfully tested consumer advertising
in two lead markets and recently initiated a national advertising campaign in
order to create awareness of the Invisalign System as a treatment alternative
and to establish the Invisalign brand name.
 
   Communicate practice benefits of the Invisalign System to orthodontists. The
Invisalign System provides substantial financial incentives to orthodontists by
enabling them to increase patient volume, charge a premium price and reduce
chair time per treatment. We intend to continue to emphasize these practice
benefits to orthodontists through our sales and training efforts.
 
   Expand and enhance manufacturing capability. Our manufacturing operations
are designed to produce large numbers of custom Aligners at a high level of
quality. To improve cost efficiency, we conduct labor intensive processes in
relatively low wage countries, including Pakistan and Mexico. We intend to
maintain manufacturing capacity in excess of projected demand to reduce the
risk that manufacturing capacity constrains our ability to grow. Our
proprietary software underlies our manufacturing process. By continually
developing this software and other manufacturing processes, we plan to increase
the level of production automation. Increased automation will enhance
production capacity and reduce both unit costs and production times.
 
   Extend and defend technology leadership. The Invisalign System represents a
significant technological advancement in orthodontics. We believe that our
issued patents, multiple pending patents and other intellectual property
provide a substantial lead over potential competitors. Our issued U.S. patent
is written to broadly cover any algorithmic method of segmenting orthodontic
treatment into a sequence of three or more steps, based on calculated initial
and final representations of a patient's dentition. We continue to pursue
further intellectual property protection through U.S. and foreign patent
applications and non-disclosure agreements. We also seek to protect our
software, documentation and other written materials under trade secret and
copyright laws.
 
   Expand our target patient base. The Invisalign System can provide complete
treatment for those patients with mature dentition and mild or moderate
malocclusion. In addition, we believe that the System can provide partial
treatment of unusually severe malocclusions. In an effort to demonstrate the
System's ability to comprehensively treat such cases, we are undertaking post-
marketing studies and making additional improvements to the product.
 
   Build an international presence. In the near term, we intend to focus our
sales and marketing efforts on the U.S. and Canadian market opportunities.
However, we are developing our strategy for introducing the Invisalign System
in selected international markets. We believe that potential international
demand for the Invisalign System exceeds that of our domestic markets.
 
                                       30

<PAGE>
 
Manufacturing
 
   We produce highly customized, close tolerance, medical quality products in
volume. To do so, we have developed a number of proprietary processes and
technologies. These technologies include complex software solutions, laser,
destructive and white light scanning techniques and stereolithography, wax
modeling and other rapid prototyping methods.
 
   We believe the complexity inherent in producing such highly customized
devices in volume is a barrier to potential competitors. Furthermore, we
believe the sophisticated software we use to guide a custom manufacturing
process on a large scale was not available until we developed it.
 
   Manufacturing is coordinated in Santa Clara, California where, as of
September 2000, we employed a manufacturing staff of approximately 190 people.
In addition, as of September 2000, we employed a software development team
comprising approximately 30 software engineers with backgrounds in
computational geometry, animation, computer-aided design and manufacturing
industries. We also employ approximately 550 software operators and other staff
in our facilities in Lahore, Pakistan, who are responsible for the creation of
treatment simulations. In addition, we outsource the fabrication and packaging
of Aligners to a contract manufacturer based in Juarez, Mexico.
 
  The Invisalign Treatment Process
 
   The Invisalign System treatment process comprises the following five stages:
 
   Orthodontic diagnosis and transmission of treatment data to us. In an
initial patient visit, the orthodontist determines whether the Invisalign
System is an appropriate treatment. The orthodontist then prepares treatment
data which consists of an impression of the relevant dental arches, x-rays of
the patient's dentition, photographs of the patient, a wax bite depicting the
relationship between the patient's upper and lower dental arches and an
Invisalign System treatment planning form, or prescription. The prescription is
a critical component, describing the desired positions and movement of the
patient's teeth. The orthodontist sends the treatment data to our Santa Clara
facility.
 
   Preparation of three-dimensional computer models of the patient's initial
malocclusion. Upon receipt, we use the treatment data to construct plaster
models of the patient's dentition. We scan the plaster models to develop a
digital, three-dimensional computer model of the patient's current dentition.
We then transmit this initial computer model together with the orthodontist's
prescription via the Internet to our facilities in Lahore, Pakistan.
 
   Preparation of computer-simulated treatment and viewing of treatment using
ClinCheck. In Pakistan, we transform this initial model into a customized,
three-dimensional treatment plan that simulates appropriate tooth movement in a
series of two-week increments. This simulation is then transmitted back to our
Santa Clara facility for review. Upon passing review, the simulation is then
delivered to the prescribing orthodontist via ClinCheck on our website at
www.invisalign.com. The orthodontist then reviews the ClinCheck simulation and,
on occasion, asks us to make adjustments. At this point, the orthodontist may
also invite the patient to review ClinCheck, allowing the patient to see the
projected course of treatment. The orthodontist then approves the proposed
treatment and, in doing so, engages us for the manufacture of corresponding
Aligners.
 
   Construction of molds corresponding to each step of treatment. We use the
approved ClinCheck simulation to construct a series of molds of the patient's
teeth. Each mold is a
 
                                       31

<PAGE>
 
replica of the patient's teeth at each two-week stage of the simulated course
of treatment. These molds are fabricated at our Santa Clara facility using
custom manufacturing techniques that we have adapted for use in orthodontic
applications.
 
   Manufacture of Aligners and shipment to orthodontist. We ship these molds to
Juarez, Mexico, where our contract manufacturer fabricates Aligners by pressure
forming polymeric sheets over each mold. The Aligners are then trimmed,
polished, cleaned, packaged and, following final inspection, shipped directly
to the prescribing orthodontist. In certain cases, orthodontists may use the
Invisalign System in conjunction with clear attachments bonded to the patient's
teeth. These attachments are used to increase the force applied to a tooth or
teeth in circumstances where the Aligners alone may have difficulty in
effecting the desired movement.
 
   To date, we have shipped Aligners in batches. The first batch, which
typically represents the first several months of treatment, is produced once
the prescribing orthodontist approves ClinCheck. Thereafter, Aligners are sent
at approximately six month intervals until treatment is complete. We are in the
process of changing the pattern of Aligner shipments. We intend to ship all the
Aligners associated with a given case in a single batch beginning in early
2001.
 
  Throughput Management
 
   Because we manufacture each case on a build-to-order basis, we cannot build
inventories. As a result, we must conservatively build manufacturing throughput
for anticipated demand. To increase throughput, we must improve the efficiency
and increase the scale of our manufacturing processes.
 
   In order to increase the efficiency of our manufacturing processes, we focus
our efforts on software development and the improvement of rate-limiting
processes. Our next generation of software is being developed to enhance
computer analysis of treatment data, reducing time spent for each case on
manual and judgmental tasks, thereby increasing the efficiency of our
technicians in Pakistan. We are also developing an automated system for the
fabrication of Aligners currently conducted in Mexico.
 
   In order to scale our manufacturing capacity, we continue to add labor and
invest in facilities and capital equipment. In particular, we recently expanded
our operations to two facilities in Santa Clara, California, together totaling
approximately 70,000 square feet, which serve as our manufacturing
headquarters. We are also expanding our technician base in Pakistan and
continue to hire in Santa Clara.
 
  Quality Assurance
 
   Our quality assurance team maintains compliance with FDA regulations,
monitors customer satisfaction with our products and services, and helps ensure
a high level of quality of final product. The prescribing orthodontist's review
of the ClinCheck treatment simulation represents an important step in our
overall quality control procedures.
 
Sales and Marketing
 
   We market the Invisalign System by communicating the System's benefits
directly to consumers with a nationwide advertising campaign. Based on our
experience with advertising and commercial sales in our test markets, we
believe that making consumers aware of the Invisalign System as a new treatment
alternative generates significant demand for the System. In order to serve
anticipated demand in North America, we are training a broad base of
 
                                       32

<PAGE>
 
orthodontists. As of October 2000, we have trained over 5,300 orthodontists,
representing over 60% of the orthodontists in the U.S. and Canada.
 
  Consumer Marketing
 
   We tested our consumer marketing strategy in two markets, Austin, Texas and
San Diego, California. Based on the positive results of these initial marketing
efforts, we recently have launched a nationwide consumer marketing campaign to
create awareness and stimulate demand for the Invisalign System. Our national
consumer marketing efforts primarily focused on television advertising and will
be supported by print, public relations and direct mail campaigns.
 
   Our experience indicates that prospective patients exposed to our
advertising seek information from four primary sources:
 
  .  a general practice dentist;
 
  .  an orthodontist;
 
  .  our toll-free support line (1-800-INVISIBLE); and
 
  .  our website (www.invisalign.com).
 
   Our marketing efforts have generated substantial consumer interest directed
toward our telephone support line and our website. In the first five weeks of
our national advertising campaign, our support line received approximately
150,000 calls and we received a comparable number of visitors to our website.
Our telephone support line and our website not only provide consumers with
information on the Invisalign System, but, importantly, also allow us to
channel consumer interest to orthodontists of our choice. We outsource the
telephone support function to a large national call center operator.
 
  Professional Marketing
 
   As of September 2000, our sales team comprised approximately 30 salespeople
experienced in orthodontic product sales. Approximately 25 technical support
staff, together with the marketing department and our in-house orthodontic
staff, support the sales team. Our sales and support staff has been engaged in
marketing the Invisalign System to orthodontists since July 1999. Professional
marketing consists of training orthodontists and assisting them in building
their practices. In addition, we are creating awareness of the System among
general practice dentists to help them refer patients to orthodontists.
 
   As of October 2000, we had trained over 5,300 orthodontists, representing
over 60% of the orthodontists in the U.S. and Canada. Our sales and orthodontic
teams conduct training primarily in a workshop format. The key topics covered
in training include case selection criteria, instructions on filling out the
Invisalign prescription form, guidance on pricing and instructions on
interacting with our ClinCheck software and the many other features of our
website.
 
   The Invisalign System relies on the same orthodontic principles that apply
to traditional treatment, and we present our training material in a manner
consistent with orthodontists' training and experience. As a result, we are
able to complete these training workshops within one day. Our success in
training a large number of orthodontists confirms our belief that training
represents a minimal barrier to adoption for most orthodontists.
 
   After training, sales representatives follow up with orthodontists to ensure
that their staff is prepared to handle Invisalign System cases. Such follow up
may include assisting
 
                                       33

<PAGE>
 
orthodontists in taking dental impressions, establishing an Internet connection
and familiarizing them with our website. Sales representatives may also provide
practice-building assistance, including helping orthodontists market to local
general practice dentists and to prospective patients through direct mail or
other media. Indeed, many practices have commenced promotional activity in
their local region with our assistance.
 
   We have developed a system of tiering orthodontists that encourages our
sales force to devote more time to those orthodontists most proficient in the
use of the Invisalign System.
 
   We use objective criteria, primarily the number of cases initiated with the
Invisalign System, to tier orthodontists. Inquiries from prospective patients
through our customer call center and our website are directed to higher tier
orthodontists. We believe the tiering process will rapidly increase the
penetration of our product within selected orthodontists' offices.
 
   General dentists play an important role in informing their patients about
orthodontics and are a key source of referrals to orthodontists. There are over
120,000 active general practice dentists in the U.S. and Canada. We have
commenced educating these general dentists and staff to encourage them to
recommend the Invisalign System to their patients. We communicate with the
dental community using a combination of direct mail, telemarketing, journal
advertising and trade shows.
 
Research and Development
 
   As of September 2000, our research and development team consisted of 18
individuals with medical device development, orthodontic and other relevant
backgrounds. From inception to September 30, 2000, we spent approximately
$12.0 million in research and development expenses to develop the Invisalign
System.
 
   Prior to commercial launch in July 1999, our research and development
strategy had three primary objectives: developing the Invisalign System,
establishing the ability of the System to treat malocclusion and developing
software and processes to enable the manufacture of Aligners in volume. Since
our commercial launch, our research and development effort has focused on
extending the range of clinical applicability of the Invisalign System,
enhancing the software used in the manufacturing process and enhancing our
product suite.
 
   We are conducting a number of post-marketing studies to establish the
effectiveness of the System in comprehensively treating unusually severe cases
of malocclusion. We are developing a next-generation of software primarily to
increase our manufacturing capacity and efficiency. Our product development
team is testing enhanced materials and a number of complementary products that
we expect will provide additional revenue opportunities.
 
Intellectual Property
 
   We believe our intellectual property position represents a substantial
business advantage. We have one issued U.S. patent, 46 pending U.S.
applications, of which two are allowed and nine are provisional applications.
We have two foreign-issued patents and 111 pending foreign applications. The
issued U.S. patent is written to cover any algorithmic method of segmenting
orthodontic treatment into a sequence of three or more steps, based on
calculated initial and final representations of a patient's dentition.
 
   We continue to pursue further intellectual property protection through U.S.
and foreign patent applications and non-disclosure agreements. We also seek to
protect our software, documentation and other written materials under trade
secret and copyright laws. We cannot
 
                                       34

<PAGE>
 
assure you that patents will be issued as a result of any patent application or
that patents that have been issued to us or may issue in the future will be
found to be valid and enforceable and sufficient to protect our technology or
products.
 
Competition
 
   We are not aware of any company that has developed or is marketing a system
comparable to our Invisalign System. However, we compete for the attention of
orthodontists with manufacturers of other orthodontic products. These suppliers
include manufacturers of traditional orthodontic appliances such as 3M Company,
Sybron International Corporation and Dentsply International, Inc.
 
   We believe that, in addition to price, the principal competitive factors in
the market for orthodontic appliances include the following factors:
 
  .  aesthetic appeal of the treatment method;
 
  .  comfort associated with the treatment method;
 
  .  effectiveness of treatment;
 
  .  ease of use; and
 
  .  orthodontist chair time.
 
   We believe that the Invisalign System compares favorably with respect to
each of these factors.
 
Government Regulation
 
   FDA Regulation of Medical Devices. The Invisalign System is regulated as a
medical device. Accordingly, our product development, labeling, manufacturing
processes and promotional activities are subject to extensive review and
rigorous regulation by government agencies in countries in which we sell our
products.
 
   In the U.S., the FDA regulates the design, manufacture, distribution,
preclinical and clinical study, clearance and approval of medical devices.
Medical devices are classified in one of three classes on the basis of the
controls necessary to reasonably assure their safety and effectiveness. Class I
or II devices require the manufacturer to submit a premarket notification
requesting permission for commercial distribution, which is known as 510(k)
clearance. Class III devices, which are deemed by the FDA to pose greater risk
than Class I and II devices, require FDA approval of a premarket approval
application which includes, among other things, extensive preclinical and
clinical trial data and information about the device's and its components'
design, manufacturing and labeling.
 
   The Invisalign System is a Class I device, the least stringent class, which
only requires general controls, including labeling, premarket notification and
adherence to the FDA's Quality System regulations.
 
   In November 1998, our Invisalign System received 510(k) Pre-Market
Notification by the FDA, allowing us to market the Invisalign System in the
U.S. In addition, we have recently applied for FDA registration for our Santa
Clara facility. The manufacture and distribution of the Invisalign System are
subject to continuing regulation by the FDA. We are subject to routine
inspections by the FDA to determine compliance with facility registration,
product listing requirements, medical device reporting regulations and Quality
System requirements.
 
                                       35

<PAGE>
 
The Quality System regulation is similar to good manufacturing practices and
relates to product testing and quality assurance, as well as the maintenance of
records and documentation.
 
   If the FDA finds that we have failed to comply, it can institute a wide
variety of enforcement actions against us, ranging from a public Warning Letter
to more severe sanctions, including but not limited to financial penalties,
withdrawal of 510(k) premarket notification clearances already granted, and
criminal prosecution.
 
   When introduced in Europe, the Invisalign System will be regulated as a
custom device. As such, we will not be subject to regulations promulgated by
the European Community, although we have the option to CE mark our product. We
are working toward the certification of our manufacturing process under ISO
9001, an internationally recognized quality standard, which will facilitate the
commercialization of the Invisalign System outside the U.S.
 
   Other Federal and State Laws. As a participant in the health care industry
we are subject to extensive and frequently changing regulation under many other
laws administered by governmental entities at the federal, state and local
levels, some of which are, and others of which may be, applicable to our
business. Furthermore, our health care service provider customers are also
subject to a wide variety of laws and regulations that could affect the nature
and scope of their relationships with us.
 
   Laws regulating medical device manufacturers and health care providers cover
a broad array of subjects. For example, the confidentiality of patient medical
information and the circumstances under which such information may be released
for inclusion in our databases, or released by us to third parties, are subject
to substantial regulation by state governments. These state laws and
regulations govern both the disclosure and the use of confidential patient
medical information and are evolving rapidly. In addition, provisions of the
Social Security Act prohibit, among other things, paying or offering to pay any
remuneration in exchange for the referral of patients to a person participating
in, or for the order, purchase or recommendation of items or services that are
subject to reimbursement by Medicare, Medicaid and similar other federal or
state healthcare programs. Most states have also enacted illegal remuneration
laws that are similar to the federal laws. These laws are applicable to our
financial relationships with, and any marketing or other promotional activities
involving, our orthodontist customers. Finally, various states regulate the
operations of an advertising and referral service for dentists, and may require
registration of such services with a state agency as well as compliance with
various requirements and restrictions on how they conduct business and
structure their relationships with participating dentists. Violations of any of
these laws or regulations could subject us to a variety of civil and criminal
sanctions.
 
Employees
 
   As of September 2000, we had approximately 910 employees, of whom
approximately 360 were employed in the U.S., with the balance employed in
Pakistan. In the U.S., manufacturing accounts for 190 of our staff. As of
September 2000, we also employed approximately 30 software engineers, 30 sales
representatives and 24 customer support staff.
 
   We employ a staff of approximately 550 employees in our two facilities in
Pakistan, most of whom are computer operators and about 50 of whom are dental
and orthodontic supervisors. We believe that our relations with our employees
are good.
 
Facilities
 
   Our headquarters are located in Santa Clara, California. We lease
approximately 70,000 square feet of space where we house our manufacturing,
customer support, software
 
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<PAGE>
 
engineering and administrative personnel. The lease for the larger of the two
Santa Clara facilities will expire in August 2005, while the lease for the
smaller facility, roughly 15,000 square feet, will expire in August 2002. The
combined monthly rent for the Santa Clara facilities is approximately $240,000.
 
   We operate two facilities in Pakistan, both in the city of Lahore. Each
facility accommodates approximately 300 employees. The main facility comprises
over 5,000 square feet of office space. The lease for this facility expires at
the end of 2002. The second facility comprises over 10,000 square feet of
office space. The lease for this facility expires in August 2010.
 
Legal Proceedings
 
   In January 2000, Ormco Corporation filed suit against us asserting
infringement of U.S. Patent Nos. 5,447,432 and 5,683,243. The complaint sought
unspecified and monetary damages and injunctive relief. In March 2000, we
answered the complaint and asserted counterclaims seeking a declaration by the
Court of invalidity and non-infringement of the asserted patents.
 
   In June 2000, we entered into a Stipulation of Dismissal with Ormco. Ormco
agreed for a period of at least two years to not pursue litigation with respect
to these patents, except as set forth below. Further, Ormco agreed that it
would not bring any patent action against us for at least a period of one year
with respect to any as yet unissued patents. If Ormco were to bring such an
action concerning as yet unissued patents after one year, the Stipulation of
Dismissal would allow Ormco to include in such an action claims involving U.S.
Patent Nos. 5,447,432 and 5,683,243. No assurance can be given that Ormco will
not bring another action against us or, that if brought, it will not be
successful. If successful, it could result in significant monetary damages or
other penalties against us. It is entirely possible that, depending on the
scope of any new patents that are issued to Ormco, Ormco will bring another
patent action after a period of one year has passed.
 
   From time to time, we have received, and may again receive, letters from
third parties drawing our attention to their patent rights. While we do not
believe that we infringe any such rights which have been brought to our
attention, there may be other more pertinent rights of which we are presently
unaware.
 
                                       37

<PAGE>
 

                                   MANAGEMENT
 
Executive Officers and Directors
 
   The following table sets forth information regarding our executive officers
and directors as of November 10, 2000:
 

<TABLE>
<CAPTION>
Name                     Age Position
----                     --- --------
<S>                      <C> <C>
Zia Chishti............. 29  Chief Executive Officer and Chairman of the Board
Kelsey Wirth............ 30  President, Secretary and Director
Stephen Bonelli......... 38  Chief Financial Officer and Vice President, Finance
Ike Udechuku............ 34  Vice President, Corporate Strategy
Joe Breeland............ 48  Vice President, Sales
Len Hedge............... 43  Vice President, Manufacturing
Amir Abolfathi.......... 35  Vice President, Research and Development
Ken Vargha.............. 36  Vice President, Marketing
Christian Skieller...... 52  Vice President, Operations
James Heslin............ 49  Vice President, General Counsel
Ross Miller, DDS, MS.... 38  Chief Clinical Officer
Charlie Wen............. 34  Chief Technology Officer
Peter Riepenhausen...... 64  Chairman, Align Technology, Europe
Brian Dovey............. 59  Director
Joe Lacob............... 43  Director
Mark Logan.............. 61  Director
H. Kent Bowen........... 58  Director
</TABLE>

 
   Zia Chishti is one of our founders and has served as our Chief Executive
Officer and the Chairman of our Board of Directors since inception. From July
1992 to September 1995, Mr. Chishti worked for Morgan Stanley's investment
banking division. Mr. Chishti received his M.B.A. from Stanford University's
Graduate School of Business and his B.S. and B.A. from Columbia College.
 
   Kelsey Wirth is one of our founders and has served as our President and
Secretary and as a Director since inception. From 1993 to 1995, Ms. Wirth
worked for the Environmental Working Group and World Resources Institute as an
environmental consultant, and in 1992 she worked for the Lamm Senate campaign
as director of constituency outreach. Ms. Wirth received her M.B.A. from
Stanford University's Graduate School of Business and her B.A. from Harvard
College.
 
   Stephen Bonelli has served as our Chief Financial Officer and Vice President
of Finance since November 2000. From April 2000 to November 2000, Mr. Bonelli
was a financial consultant for various medical device and telecommunications
companies. From February 2000 to April 2000, Mr. Bonelli was the Chief
Financial Officer and Treasurer at Oplink Communications, Inc., an optical
networking components company. Prior to joining Oplink, Mr. Bonelli was the
Chief Financial Officer, Vice President of Finance and Administration and
Treasurer of General Surgical Innovations, Inc., a medical device company, from
September 1994 until shortly after General Surgical Innovations was acquired by
Tyco International Ltd. in November 1999. From November 1993 to August 1994,
Mr. Bonelli held a financial management position at Coactive Computing
Corporation, a computer networking company. Mr. Bonelli received his B.S. in
business administration from California Polytechnic State University, San Luis
Obispo. Mr. Bonelli is a Certified Public Accountant.
 
   Ike Udechuku has served as our Vice President of Corporate Strategy since
November 2000. From January 2000 until July 2000, Mr. Udechuku served as one of
our consultants in
 
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<PAGE>
 
various financial positions. In July 2000, he became an employee, serving as
Chief Financial Officer from July 2000 to November 2000. From 1989 to January
2000, Mr. Udechuku worked for Morgan Stanley's investment banking division in
London, most recently as an Executive Director. While at Morgan Stanley,
Mr. Udechuku concentrated on mergers and acquisitions and capital raising for
European clients. From 1985 to 1989, Mr. Udechuku worked for the Australian
government in the Treasury. Mr. Udechuku graduated with B.A. degrees in both
economics and law from the Australian National University in 1988.
 
   Joe Breeland has served as our Vice President of Sales since August 1998.
Mr. Breeland was Regional Manager for the "A" Company Orthodontics, a leading
manufacturer of orthodontic devices. Prior to that, Mr. Breeland served as
Southwest Regional Manager for Allergan, Inc., a manufacturer and distributor
of ophthalmic implantables and associated capital equipment, and National Sales
Director for Ioptex Research, a manufacturer of intraocular lenses. Mr.
Breeland received his M.B.A. from Golden Gate University and his B.S. in
pharmacy from the University of Texas.
 
   Len Hedge has served as our Vice President of Manufacturing since January
1999. Mr. Hedge served as Vice President of Operations for Plynetics Express
Corporation, a rapid-prototyping and stereolithography services supplier, from
December 1996 to December 1998. From October 1991 to December 1996, Mr. Hedge
worked at Beckman Instruments Corporation as Manager for Prototype
Manufacturing and Process Development. Prior to joining Beckman, Mr. Hedge
spent 13 years with General Dynamics Corporation, holding positions of
increasing responsibility from Machinist to Manager of Mechanical Fabrication.
Mr. Hedge received his B.S. from La Verne University.
 
   Amir Abolfathi has served as our Vice President of Research and Development
since March 2000. From November 1999 to March 2000, Mr. Abolfathi served as our
Senior Director of Planning and Execution. Mr. Abolfathi served as a consultant
for a number of medical device companies from February 1999 through November
1999. From April 1995 through January 1999, Mr. Abolfathi served as Senior
Director of Research and Development for EndoTex Interventional Systems, Inc.,
a company focused on the treatment of neurovascular diseases which he co-
founded. From 1991 to 1995, he served as Program Manager at Pfizer, Inc. From
1989 to 1991, Mr. Abolfathi served as Group Leader of Reliability Engineering
at Guidant Corporation. Mr. Abolfathi received his M.S. in engineering
management from the University of Southern California and his B.S. in
biomedical engineering from the University of California at San Diego.
 
   Ken Vargha has served as our Vice President of Marketing since September
1998. From November 1994 through August 1998, Mr. Vargha served in a number of
positions for Pharmacia & Upjohn, Inc. including Brand Manager, Senior Brand
Manager and Director of Marketing. At Pharmacia & Upjohn, Mr. Vargha was
responsible for the strategic direction, marketing research, and advertising
development for Pharmacia & Upjohn's hair care brands, of which Rogaine is the
largest. Prior to that, Mr. Vargha worked in beauty care at both Maybelline,
Inc., where he was responsible for a targeted line of cosmetics, and at the
Procter & Gamble Company, where Mr. Vargha was responsible for the advertising
and launch of Pantene Pro-V styling products. Mr. Vargha received his M.B.A.
from the University of California at Los Angeles' Anderson School of Business
and his B.A. from Brigham Young University.
 
   Christian Skieller has served as our Vice President of Operations since July
2000. From November 1998 to June 2000, Mr. Skieller served as Vice President of
Operations at CardioVention, a medical device company. From August 1996 through
May 1998, he was Vice President of Operations at CardioThoracic Systems, a
manufacturer of devices for cardiac surgery. From January 1992 through July
1996, Mr. Skieller served as Vice President of
 
                                       39

<PAGE>
 
Manufacturing for Medtronic CardioRhythm, a manufacturer of catheters for
electrophysiology. Mr. Skieller, received his M.B.A from Stanford University's
Graduate School of Business and his B.S. from the Technical University in
Copenhagen, Denmark.
 
   James Heslin has served as our Vice President and General Counsel since
August 2000. Since 1986, Mr. Heslin was a Partner at Townsend, Townsend and
Crew LLP. Mr. Heslin was head of the firm's Medical Device Practice Group and a
member of its Executive Committee. Mr. Heslin's practice concentrated on
advising clients on how to best obtain, protect, and enforce their intellectual
property rights. Prior to Townsend, Townsend and Crew LLP, Mr. Heslin was a
patent attorney with FMC Corporation and a process engineer with Fluor
Corporation. Mr. Heslin received his J.D. from the University of California's
Boalt Hall School of Law and his B.S. in chemical engineering from University
of California at Santa Barbara.
 
   Ross Miller, DDS, MS, has served as our Chief Clinical Officer since July
1998. Dr. Miller served in private clinical practice for seven years, most
recently as Dental Director for the Tuolumne Indian Health Center. Dr. Miller
received his M.S. and B.S. in Oral Biology from the University of California at
San Francisco, his D.D.S and Certificate of Orthodontics from the University of
California at San Francisco and his B.S. in Biological Sciences from the
University of California at Irvine.
 
   Charlie Wen has served as our Chief Technology Officer since July 2000,
having joined us as Director of Software Engineering in June 1998. Mr. Wen has
over 10 years of working experience specializing in high end 3D computer
graphics/animation, computational geometry and pattern recognition. From
January 1997 to June 1998, Mr. Wen served as Software Engineering Project
Manager for Sony Pictures Corporation, Special Effects Division. From December
1993 to January 1997, Mr. Wen was a Senior Software Engineer for the McNeal
Schwendler Corporation, a leading CAD/CAM/CAE software provider. Mr. Wen
received his M.S. degree in Computer Science from the California Institute of
Technology and his B.S. degree from University of Science and Technology,
China. Mr. Wen is a two-time winner of the Chinese National Mathematics Award.
 
   Peter Riepenhausen has served as our Chairman, Align Technology, Europe
since September 2000. From March 1998 to September 2000, Mr. Riepenhausen was a
business consultant. From 1994 to 1998, Mr. Riepenhausen was President and
Chief Executive Officer of ReSound Corporation, a hearing aid producer. Since
September 2000, Mr. Riepenhausen has served as a director of GAP A.G. and as a
director of Advanced Polymer Systems, Inc. since 1991. From January 1987 until
September 1989, Mr. Riepenhausen served as Vice Chairman of the board of
directors of the Cooper Companies, Inc., a medical device company serving the
vision and surgical markets. Mr. Riepenhausen has also held executive positions
with Brendax-Werke R. Schneider Gmbh & Co. and PepsiCo Inc. Mr. Riepenhausen
received his Industrie Kaufman degree in Commerce from IHK, Wurtzburg.
 
   Brian Dovey has served as a director since July 1998. Mr. Dovey has been a
Managing Member of Domain Associates, a venture capital firm, since 1988. Since
joining Domain, he has served as Chairman of Athena Neurosciences, Creative
BioMolecules, Inc. (now Curis, Inc.) and Univax Biologics. Mr. Dovey is
currently a director of Connetics Corporation, a biopharmaceutical company and
Cardiac Sciences, a developer of cardiac defibrillator devices, as well as
several private companies. From 1986 to 1988, Mr. Dovey served Rorer Group (now
Aventis) as President. Mr. Dovey has served as both President and Chairman of
the National Venture Capital Association and is on the Board of Trustees for
the Cornell Institute and the University of Pennsylvania School of Nursing. Mr.
Dovey is a former Board Member of the Health Industry Manufacturers Association
and the Non-Prescription Drug Manufacturers Association. Mr. Dovey received his
M.B.A. from Harvard University's Graduate School of Business and his B.A. from
Colgate University.
 
                                       40

<PAGE>
 
   Joseph Lacob has served as a director since August 1997 and has been a
Partner of Kleiner Perkins Caufield and Byers, a venture capital firm, since
May 1987. Prior to that, Mr. Lacob was an executive with Cetus Corporation, a
biotechnology company, and FHP International, a health maintenance organization
and the management consulting firm of Booz, Allen & Hamilton. Since joining
Kleiner Perkins Caufield and Byers in 1987, Mr. Lacob has led Kleiner Perkins
Caufield and Byers' investments in over 30 life science companies, including
the start-up or incubation of a dozen ventures. He leads Kleiner Perkins
Caufield and Byers' growing medical technology practice, which includes over 30
therapeutic and diagnostic medical device companies. Mr. Lacob is also active
in Kleiner Perkins Caufield and Byers' new media and e-commerce company
initiatives. Mr. Lacob currently serves on the board of directors of three
public companies including Sportsline, Corixa and HeartPort, as well as several
other privately held companies. Mr. Lacob received his M.B.A. from the Stanford
Graduate School of Business, his M.P.H. in Public Health from University of
California at Los Angeles and his B.S. in Biological Sciences from the
University of California at Irvine.
 
   Mark Logan has served as a director since May 2000. Mr Logan is Chairman of
the Board and Chief Executive Officer of VISX, Inc., a medical equipment
manufacturing company which he joined in November 1994. From 1992 to 1994, Mr.
Logan was Chairman of the Board, President and Chief Executive Officer of
Insmed Pharmaceuticals, Inc., a development stage biopharmaceutical company.
From 1981 to 1985, Mr. Logan was President of Bausch and Lomb's Health Care and
Consumer Group and also served on the board of directors. From 1975 to 1981,
Mr. Logan served as Consumer Group President of Becton, Dickinson & Co.'s
worldwide diabetes syringe business. From 1967 to 1974, Mr. Logan served as
President and General Manager of American Home Products Corporation's Mexican
subsidiary. He serves as a director on the boards of Abgenix, Inc., a
biopharmaceutical company, VIVUS, Inc., a drug development company, and Somnus
Medical Technologies, Inc., a medical device company. Mr. Logan is a graduate
of Hiram College, the Program for Management Development at Harvard University
and was a Woodrow Wilson Fellow at New York University.
 
   H. Kent Bowen has served as a director since May 2000. Mr. Bowen has been
the Bruce Rauner Professor in Business Administration at Harvard University's
Graduate School of Business Administration since 1992. Professor Bowen's
current research and teaching is in the field of operations and technology
management. From 1975 to 1992, Professor Bowen was the Ford Professor of
Engineering at the Massachusetts Institute of Technology, where he was the
founder of Leaders for Manufacturing, a joint research and education program
developed by M.I.T.'s School of Engineering and the Sloan School of Management.
At M.I.T., Professor Bowen's research focused on advanced materials, materials
processing, technology management and manufacturing. Professor Bowen is a
member of the National Academy of Engineering and the American Academy of Arts
and Sciences, a fellow of the American Association for the Advancement of
Science, and a member of several professional societies. He serves as a
director of Ceramics Process Systems, a developer of thermal management
solutions, and for a number of private companies. He received his Ph.D. from
M.I.T in Engineering, and his B.S. from the University of Utah.
 
Scientific Advisory Board
 
   We employ a scientific advisory board, comprised of leading clinicians and
scientists, to serve as advisors and liaisons to the orthodontic community. The
current members of the scientific advisory board are:
 
   Dr. Robert Boyd is Professor and Chairperson of the Department of
Orthodontics at the University of Pacific School of Dentistry. His practice and
clinical research focuses on the orthodontic-periodontic relationship. In this
area, he has published more than 100 scientific
 
                                       41

<PAGE>
 
articles and given more than 200 continuing education courses and lectures to
dental groups around the world. Dr. Boyd is a Diplomate of the American Board
of Orthodontics, a Fellow of the American College of Dentistry, a member of the
E.H. Angle Society and has received many teaching awards. Dr. Boyd received his
D.D.S. from Temple University, his M.A. in Education from the University of
Florida, his B.S. from Indiana University and his Certificates of Orthodontics
and Periodontics from the University of Pennsylvania.
 
   Dr. Donald Kennedy is President Emeritus of Stanford University and Bing
Professor of Environmental Science. From 1977 to 1979, Dr. Kennedy was
Commissioner of the U.S. Food and Drug Administration. Following his return to
Stanford in 1979, Dr. Kennedy served for 12 years as President of the
University. Dr. Kennedy serves as a member of the Board of Directors of the
Health Effects Institute and Children Now. He is also a member of the National
Academy of Sciences, the American Academy of Arts and Sciences and the American
Philosophical Society. Dr. Kennedy received his Ph.D., M.S. and A.B. degrees in
Biology from Harvard University. In June 2000, Dr. Kennedy began a term as
Editor-in-Chief of Science, the Journal of the American Association for the
Advancement of Science.
 
   Dr. Gregory King is Professor and Chairman of the Department of Orthodontics
at the University of Washington's School of Dentistry. Dr. King received the
Milo Hellman Research Award of the American Association of Orthodontics for his
outstanding contributions to orthodontic research. Prior to joining the
University of Washington, Dr. King was Professor and Chairman of the Department
of Orthodontics at the University of Florida. Dr. King is a Diplomate of the
American Association of Orthodontists. He received his D.M.D. from Tufts
University, his Ph.D. and B.A. from Brown University and his Certificate in
Orthodontics from Harvard University.
 
   Dr. Elizabeth Rekow is Professor and Chairperson of the Department of
Orthodontics at the University of Medicine and Dentistry of New Jersey, a
visiting Professor of the Department of Mechanical Engineering at the
University of Maryland and the Director of the Associated Institutions for
Material Science. She has focused her teaching and research on the interaction
between engineering, advanced materials and dentistry and in these fields has
published numerous articles. Dr. Rekow is a member of the E.H. Angle Society, a
member of the International and American Associations for Dental Research and a
fellow of the Academy of Dental Materials. Dr. Rekow received her D.D.S., her
Ph.D. in Biomedical Engineering and her Orthodontic Certificate from the
University of Minnesota.
 
   Dr. Van P. Thompson is Associate Dean for Research and Professor of
Prosthodontics and Biomaterials at the University of Medicine and Dentistry of
New Jersey. Dr. Thompson has published many articles and made numerous
presentations on dental materials in the U.S. and internationally. Co-developer
of the etched casting resin bonded retainer, Dr. Thompson has published and
presented extensively in this area. He has served on the ADA Council on Dental
Materials Instruments and Equipment and is Chair of the ADA Council on
Scientific Affairs. Dr. Thompson received his D.D.S. from the University of
Maryland, his Ph.D. in Biology and his B.S. in Biology and Biophysics from the
Rensselaer Polytechnic Institute.
 
Board of Directors
 
   We currently have six directors. Other than expenses in connection with
attendance at meetings and other customary expenses, we have not provided cash
compensation to any non-employee member of the board. Directors who are also
employees do not receive additional compensation for serving as directors. As
of September 30, 2000, the directors have been granted options to purchase an
aggregate of 124,000 shares of our common stock.
 
 
                                       42

<PAGE>
 
   Under the automatic option grant program which will be in effect for the
non-employee board members under the 2001 Stock Incentive Plan, each non-
employee board member will receive an automatic option grant for     shares at
each annual stockholders meeting during his or her period of continued service
on the board, with such shares to vest upon completion of one year of board
service measured from the grant date. Each new non-employee board member will
receive, at the time of his or her initial election or appointment to the
board, an automatic option grant for     shares which will vest in four
successive equal annual installments over his or her first four years of board
service. For further information concerning the automatic option grant program,
see the "Stock Plans" section below.
 
   Our bylaws provide that the number of members of our board of directors
shall be determined by the board of directors. All members of our board of
directors hold office until the next annual meeting of stockholders or until
their successors are duly elected and qualified.
 
Committees of the Board of Directors
 
   The audit committee is composed of Joseph Lacob, Mark Logan and Brian Dovey.
It is responsible for reviewing and evaluating our financial control, audit and
reporting functions. In addition, the audit committee makes recommendations to
the board of directors regarding the selection of our independent accountants,
reviews the fees to be paid to our independent accountants and reviews any
independence issues with our independent accountants.
 
   The compensation committee is composed of Mark Logan and Kent Bowen. It
recommends to our board of directors the compensation and benefits of all our
officers and establishes and reviews general policies relating to compensation
and benefits to our employees.
 
Executive Officers
 
   Each officer is elected by, and serves at the discretion of, the board of
directors. Each of our officers and directors, other than non-employee
directors, devotes full-time to our affairs. Our non-employee directors devote
such time to our affairs as is necessary to discharge their duties. There are
no family relationships among any of our directors, officers or key employees.
 
                                       43

<PAGE>
 

Executive Compensation
 
   The following table sets forth information concerning compensation that we
paid during the fiscal year ended December 31, 1999, to our Chief Executive
Officer and to each of our four other most highly compensated executive
officers for that fiscal year, referred to collectively in this prospectus as
the named executive officers. There were no long-term compensation awards or
other compensation awarded to our named executive officers during 1999.
 
                           Summary Compensation Table
 

<TABLE>
<CAPTION>
                                                                    Annual
                                                                 Compensation
                                                               ----------------
Name and Principal Position                                     Salary   Bonus
---------------------------                                    -------- -------
<S>                                                            <C>      <C>
Zia Chishti................................................... $130,327 $   --
 Chief Executive Officer and Chairman of the Board
 
Kelsey Wirth..................................................  130,327     --
 President, Secretary and Director
 
Kenneth Vargha................................................  133,223  16,560
 Vice President, Marketing
 
Joe Breeland..................................................   87,012  40,916
 Vice President, Sales
 
Ross Miller, DDS, MS..........................................  173,767     --
 Chief Clinical Officer
</TABLE>

 
Option Grants in 1999
 
   The following table sets forth information with respect to stock options
granted to each of our named executive officers in 1999, including the
potential realizable value over the term of the options, based on assumed rates
of stock appreciation of 5% and 10%, compounded annually. No stock appreciation
rights were granted during 1999.
 

<TABLE>
<CAPTION>
                                                                   Potential
                                                                  Realizable
                                                                   Value at
                                                                Assumed Annual
                                                                Rates of Stock
                                                                     Price
                                Percent of                       Appreciation
                     Number of    Options                       for Option Term
                     Securities Granted to                         at Public
                     Underlying Employees  Exercise             Offering Price
                      Options   in Fiscal    Price   Expiration ---------------
Name                  Granted      Year    Per Share    Date      5%      10%
----                 ---------- ---------- --------- ---------- ------- -------
<S>                  <C>        <C>        <C>       <C>        <C>     <C>
Zia Chishti.........      --        --%      $ --         --     $ --    $ --
Kelsey Wirth........      --        --         --         --       --      --
Kenneth Vargha......      --        --         --         --       --      --
Joe Breeland........      --        --         --         --       --      --
Ross Miller.........   10,000      2.7        0.30    1/28/09      --      --
</TABLE>

 
   In 1999, we granted options to purchase up to an aggregate of 368,300 shares
to employees, directors and consultants under our 1997 Plan at exercise prices
equal to the fair market value of our common stock on the date of grant, as
determined in good faith by our board of directors.
 
   Options granted are immediately exercisable in full, but any shares
purchased under these options that are not vested are subject to our right to
repurchase the shares at the original option exercise price paid per share. In
general, this repurchase right lapses as to 25% of the shares after one year of
service, and as to the remaining shares, in equal monthly installments over the
subsequent, additional three-year period. As of November 10, 2000, 697,386
shares of common stock were subject to repurchase.
 
 
                                       44

<PAGE>
 
   The potential realizable value is calculated assuming the potential public
offering price appreciates at the indicated rate for the entire term of the
option and that the option is exercised and sold on the last day of its term at
the appreciated price. Stock price appreciation of 5% and 10% is assumed
pursuant to the rules of the Commission. We can give no assurance that the
actual stock price will appreciate over the term of the options at the assumed
5% and 10% levels or at any other defined level. Actual gains, if any, on stock
option exercises will be dependent on the future performance of our common
stock. Unless the market price of the common stock appreciates over the option
term, no value will be realized from the option grants made to the named
executive officers.
 
Aggregate Option Exercises in 1999 and Year-end Values at December 31, 1999
 
   The following table sets forth information concerning the number and value
of shares of common stock underlying the unexercised options held by the named
executive officers. The options listed in the following table were granted
under our 1997 Plan. See "Management--Stock Plans." No stock appreciation
rights were exercised during 1999 and no stock appreciation rights were
outstanding as of December 31, 1999. The value of unexercised in-the-money
options at December 31, 1999 is calculated on the basis of the fair market
value of our common stock at December 31, 1999, as determined by our board of
directors, less the aggregate exercise price of the options.
 

<TABLE>
<CAPTION>
                                                      Number of
                                                Securities Underlying     Value of Unexercised
                                               Unexercised Options at    In-the-Money Options at
                           Shares                 December 31, 1999         December 31, 1999
                         Acquired on  Value   ------------------------- -------------------------
Name                      Exercise   Realized Exercisable Unexercisable Exercisable Unexercisable
----                     ----------- -------- ----------- ------------- ----------- -------------
<S>                      <C>         <C>      <C>         <C>           <C>         <C>
Zia Chishti.............       --    $   --        --           --        $   --        $ --
Kelsey Wirth............       --        --        --           --            --          --
Kenneth Vargha..........    20,000    10,000    30,000          --         15,000         --
Joe Breeland............    50,000    25,000       --           --            --          --
Ross Miller.............     5,312     2,656    19,688          --          9,844         --
</TABLE>

 
Compensation Plans
 
  Amended and Restated 1997 Equity Incentive Plan
 
   At September 30, 2000, a total of 4,854,546 shares of common stock had been
reserved for issuance under our 1997 Plan. On that date, options to purchase an
aggregate of 2,155,998 shares of common stock, with a weighted average exercise
price of $1.59 per share, were outstanding and options to purchase an aggregate
of 1,177,621 shares of common stock were available for future grant.
 
   The 1997 Plan provides for the grant of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, non-
statutory stock options, stock bonuses and restricted stock purchase rights to
our employees, consultants and nonemployee directors. The 1997 Plan is
administered by the board of directors or a committee appointed by the board of
directors, which determines the terms of options granted, including the
exercise price and the number of shares subject to each option. The board of
directors also determines the schedule upon which options become exercisable.
The exercise price of incentive stock options granted under the 1997 Plan must
be at least equal to the fair market value of our common stock on the date of
grant. The exercise price of nonqualified stock options is set by the
administrator of the 1997 Plan and will be no less than 85% of the fair market
value on the date of grant. However, for any person holding more than 10% of
the voting power of all classes of our capital stock, the exercise price,
whether the
 
                                       45

<PAGE>
 
option is an incentive stock option or a nonqualified option, will be no less
than 110% of the fair market value on the date of grant. Any stock option will
be exercisable at such time as determined by the administrator of the 1997
Plan. However, the right to exercise an option must vest at the rate of at
least 20% per year over five years. The maximum term of options granted under
the 1997 Plan is ten years. The 1997 Plan will terminate in 2007, unless
terminated earlier in accordance with its provisions.
 
   The vesting provisions of individual options granted under the 1997 Plan
vary. However, in each case it provides for vesting of at least twenty percent
per year of the total number of shares subject to the option. The 1997 Plan
also provides that options granted may include a right of repurchase by us
whereby, prior to being listed on a securities exchange, we may elect to
repurchase all or any part of the vested shares exercised pursuant to the
option. We may elect the repurchase right only for a period of time following
the termination of the optionee's employment relationship as a director or
consultant. The repurchase price is equal to the fair market value of our
common stock at the time of the optionee's termination.
 
 2001 Stock Incentive Plan
 
   The 2001 Stock Incentive Plan is intended to serve as the successor program
to the 1997 Plan. The 2001 Plan was adopted by the board on August 24, 2000.
The 2001 Plan will become effective upon the closing of this offering. At that
time, all outstanding options under the 1997 Plan will be transferred to the
2001 Plan, and no further option grants will be made under the 1997 Plan. The
transferred options will continue to be governed by their existing terms,
unless our compensation committee decides to extend one or more features of the
2001 Plan to those options. Except as otherwise noted below, the transferred
options have substantially the same terms as will be in effect for grants made
under the discretionary option grant program of the 2001 Plan.
 
   2,700,000 shares of our common stock have been authorized for issuance under
the 2001 Plan. This share reserve is in addition to the number of shares we
expect will be carried over from the 1997 Plan. The share reserve under the
2001 Plan will automatically increase on the first trading day in January each
calendar year, beginning in calendar year 2002, by an amount equal to five
percent of the total number of shares of our common stock outstanding on the
last trading day in December of the immediately preceding calendar year, but in
no event will this annual increase exceed 3,000,000 shares. In addition, no
participant in the 2001 Plan may be granted stock options, separately
exercisable stock appreciation right and direct stock issuances for more than
1,000,000 shares of common stock in any calendar year.
 
   The 2001 Plan has five separate programs:
 
  .  The discretionary option grant program, under which eligible individuals
     in our employ may be granted options to purchase shares of our common
     stock at an exercise price not less than the fair market value of those
     shares on the grant date.
 
  .  The stock issuance program, under which eligible individuals may be
     issued shares of common stock directly, through the purchase of such
     shares at a price not less than their fair market value at the time of
     issuance or as a bonus tied to the attainment of performance milestones
     or the completion of a specified period of service.
 
  .  The salary investment option grant program, under which our executive
     officers and other highly compensated employees may be given the
     opportunity to apply a portion of their base salary each year to the
     acquisition of special below market stock option grants.
 
                                       46

<PAGE>
 
  .  The automatic option grant program, under which option grants will
     automatically be made at periodic intervals to eligible non-employee
     board members to purchase shares of common stock at an exercise price
     equal to the fair market value of those shares on the grant date.
 
  .  The director fee option grant program, under which our non-employee
     board members may be given the opportunity to apply a portion of any
     retainer fee otherwise payable to them in cash each year to the
     acquisition of special below-market option grants.
 
   The individuals eligible to participate in the 2001 Plan include our
officers and other employees, our board members and any consultants we hire.
 
   The discretionary option grant and stock issuance programs will be
administered by the compensation committee. This committee will determine which
eligible individuals are to receive option grants or stock issuances under
those programs, the time or times when the grants or issuances are to be made,
the number of shares subject to each grant or issuance, the status of any
granted option as either an incentive stock option or a non-statutory stock
option under the federal tax laws, the vesting schedule to be in effect for the
option grant or stock issuance and the maximum term for which any granted
option is to remain outstanding. The compensation committee will also have the
exclusive authority to select the executive officers and other highly
compensated employees who may participate in the salary investment option grant
program in the event that program is put into effect for one or more calendar
years.
 
   The 2001 Plan will include the following features:
 
  .  The exercise price for any options granted under the plan may be paid in
     cash or in shares of our common stock valued at fair market value on the
     exercise date. The option may also be exercised through a same-day sale
     program without any cash outlay by the optionee. In addition, the plan
     administrator may provide financial assistance to one or more
     participants in the exercise of their outstanding options or the
     purchase of their shares by allowing such individuals to deliver a full-
     recourse, interest-bearing promissory note in payment of the exercise or
     purchase price of the shares and any associated withholding taxes
     incurred in connection with such exercise or purchase.
 
  .  The compensation committee will have the authority to cancel outstanding
     options under the discretionary option grant program, including any
     transferred options from the 1997 Plan, in return for the grant of new
     options for the same or different number of option shares with an
     exercise price per share based upon the fair market value of our common
     stock on the new grant date.
 
  .  Stock appreciation rights may be issued under the discretionary option
     grant program. These rights will provide the holders with the election
     to surrender their outstanding options for a payment from us equal to
     the fair market value of the shares subject to the surrendered options
     less the exercise price payable for those shares. We may make the
     payment in cash or in shares of our common stock. None of the options
     under the 1997 Plan have any stock appreciation rights.
 
   The 2001 Plan will include the following change in control provisions which
may result in the accelerated vesting of outstanding option grants and stock
issuances:
 
  .  In the event that we are acquired by merger or asset sale, each
     outstanding option under the discretionary option grant program which is
     not to be assumed by the
 
                                       47

<PAGE>
 
     successor corporation will immediately become exercisable for all the
     option shares, and all outstanding unvested shares will immediately
     vest, except to the extent our repurchase rights with respect to those
     shares are to be assigned to the successor corporation.
 
  .  The compensation committee will have complete discretion to grant one or
     more options which will become exercisable for all the option shares in
     the event those options are assumed in the acquisition but the
     optionee's service with us or the acquiring entity is subsequently
     terminated. The vesting of any outstanding shares under the 2001 Plan
     may be accelerated upon similar terms and conditions.
 
  .  The compensation committee may grant options and structure repurchase
     rights so that the shares subject to those options or repurchase rights
     will immediately vest in connection with a successful tender offer for
     more than 50% of our outstanding voting stock or a change in the
     majority of our board through one or more contested elections. Such
     accelerated vesting may occur either at the time of such transaction or
     upon the subsequent termination of the individual's service.
 
  .  The options outstanding under our 1997 Plan will immediately vest in the
     event we are acquired by merger or asset sale, unless those options are
     assumed by the acquiring entity or our repurchase rights with respect to
     any unvested shares subject to those options are assigned to such
     option. In addition, those options will vest in full if the optionee's
     employment with us is involuntarily terminated within 12 months
     following an acquisition in which the options are assumed.
 
   In the event the compensation committee decides to put the salary
investment option grant program into effect for one or more calendar years,
each of our executive officers and other highly compensated employees selected
for participation may, prior to the start of the calendar year, elect to
reduce his or her base salary for the calendar year by an amount not less than
$10,000 nor more than $50,000. Each selected individual who makes such an
election will automatically be granted, on the first trading day in January of
the calendar year for which his or her salary reduction is to be in effect, an
option to purchase that number of shares of common stock determined by
dividing the salary reduction amount by two-thirds of the fair market value
per share of our common stock on the grant date. The option will have exercise
price per share equal to one-third of the fair market value of the option
shares on the grant date. As a result, the option will be structured so that
the fair market value of the option shares on the grant date less the exercise
price payable for those shares will be equal to the amount by which the
optionee's salary is to be reduced under the program. The option will become
exercisable in a series of 12 equal monthly installments over the calendar
year for which the salary reduction is to be in effect.
 
   Each automatic grant will have an exercise price per share equal to the
fair market value per share of our common stock on the grant date and will
have a term of ten years, subject to earlier termination following the
optionee's cessation of board service. The option will be immediately
exercisable for all of the option shares; however, we may repurchase, at the
exercise price paid per share, any shares purchased under the option which are
not vested at the time of the optionee's cessation of board service. The
shares subject to each initial         share automatic option grant will vest
in a series of four successive annual installments upon the optionee's
completion of each year of board service over the four year period measured
from the grant date. The shares subject to each       -share annual option
grant will vest upon optionee's completion of one year of board service
measured from the grant date. The shares subject to each option will
immediately vest in full upon certain changes in control or ownership or upon
the optionee's death or disability while a board member.
 
                                      48

<PAGE>
 
   If the director fee option grant program is put into effect in the future,
then each non-employee board member may elect to apply all or a portion of any
cash retainer fee for the year to the acquisition of a below-market option
grant. The option grant will automatically be made on the first trading day in
January in the year for which the retainer fee would otherwise be payable in
cash. The option will have an exercise price per share equal to one-third of
the fair market value of the option shares on the grant date, and the number of
shares subject to the option will be determined by dividing the amount of the
retainer fee applied to the program by two-thirds of the fair market value per
share of our common stock on the grant date. As a result, the option will be
structured so that the fair market value of the option shares on the grant date
less the exercise price payable for those shares will be equal to the portion
of the retainer fee applied to that option. The option will become exercisable
in a series of 12 equal monthly installments over the calendar year for which
the election is in effect. However, the option will become immediately
exercisable for all the option shares upon the death or disability of the
optionee while serving as a board member.
 
   The 2001 Plan will also have the following features:
 
  .  Outstanding options under the salary investment option grant program and
     the automatic and director fee option grant programs will immediately
     vest if we are acquired by a merger or asset sale or if there is a
     successful tender offer for more than 50% of our outstanding voting
     stock or a change in the majority of our board through one or more
     contested elections.
 
  .  Limited stock appreciation rights will automatically be included as part
     of each grant made under the salary investment option grant program and
     the automatic and director fee option grant programs, and these rights
     may also be granted to one or more officers as part of their option
     grants under the discretionary option grant program. Options with this
     feature may be surrendered to us upon the successful completion of a
     hostile tender offer for more than 50% of our outstanding voting stock.
     In return for the surrendered option, the optionee will be entitled to a
     cash distribution from us in an amount per surrendered option share
     based upon the highest price per share of our common stock paid in that
     tender offer.
 
  .  The board may amend or modify the 2001 Plan at any time, subject to any
     required stockholder approval. The 2001 Plan will terminate no later
     than August 23, 2011.
 
 Employee Stock Purchase Plan
 
   Our Employee Stock Purchase Plan was adopted by the board on August 24,
2000. The Purchase Plan will become effective upon the closing of this
offering. The Purchase Plan is designed to allow our eligible employees and the
eligible employees of our participating subsidiaries to purchase shares of
common stock, at semi-annual intervals, with their accumulated payroll
deductions.
 
   500,000 shares of our common stock will initially be reserved for issuance
under the Purchase Plan. The reserve will automatically increase on the first
trading day in January each calendar year, beginning in calendar year 2002, by
an amount equal to one percent of the total number of outstanding shares of our
common stock on the last trading day in December of the immediately preceding
calendar year. In no event will any such annual increase exceed 1,000,000
shares.
 
   The Purchase Plan will have a series of successive overlapping offering
periods, with a new offering period beginning on the first business day of
February and August each year. Each offering period will continue for a period
of 24 months, unless otherwise determined by
 
                                       49

<PAGE>
 
our compensation committee. However, the initial offering period will start on
the date the underwriting agreement for this offering is signed and will end on
the last business day of January 2003. The next offering period will start on
the first business day of August 2001 and end on the last business day in July
2003.
 
   Individuals scheduled to work more than 20 hours per week for more than five
calendar months per year may join an offering period on the start date of that
period. Employees may participate in only one offering period at any time.
 
   A participant may contribute up to 15% of his or her cash earnings through
payroll deductions, and the accumulated deductions will be applied to the
purchase of shares on each semi-annual purchase date. For the first purchase
interval under the plan, the participant may effect his or her contribution
through a lump sum payment up to 15% of his or her cash earnings for that
period. Semi-annual purchase dates will occur on the last business day of
January and July each year, with the first purchase to occur on the last
business day of July 2001. The purchase price per share on each semi-annual
purchase date will be equal to 85% of the fair market value per share on the
start date of the offering period or, if lower, 85% of the fair market value
per share on the semi-annual purchase date. However, a participant may not
purchase more than 2,500 shares on any purchase date, and not more than
125,000 shares may be purchased in total by all participants on any purchase
date. Our compensation committee will have the authority to change these
limitations for any subsequent offering period.
 
   If the fair market value per share of our common stock on any purchase date
is less than the fair market value per share on the start date of the 24-month
offering period, then the participants in that offering period will, following
the purchase of shares on their behalf on that date, be automatically enrolled
in the next offering period beginning immediately after such purchase date.
 
   Should we be acquired by merger or sale of substantially all of our assets
or more than 50% of our voting securities, then all outstanding purchase rights
will automatically be exercised immediately prior to the effective date of the
acquisition. The purchase price will be equal to 85% of the market value per
share on the start date of the offering period in which the acquisition occurs
or, if lower, 85% of the fair market value per share immediately prior to the
acquisition.
 
   The following provisions will also be in effect under the Purchase Plan:
 
  .  The Purchase Plan will terminate no later than the last business day of
     January 2011.
 
  .  The board may at any time amend, suspend or discontinue the Purchase
     Plan. However, certain amendments may require stockholder approval.
 
Limitations of Liability and Indemnification Matters
 
   Our certificate of incorporation eliminates, to the maximum extent allowed
by the Delaware General Corporation Law, directors' personal liability to our
stockholders for monetary damages or breaches of fiduciary duties. Our
certificate of incorporation does not, however, eliminate or limit the personal
liability of a director for the following:
 
  .  any breach of the director's duty of loyalty to us or our stockholders;
 
  .  acts or omissions not in good faith or that involve intentional
     misconduct or a knowing violation of law;
 
  .  unlawful payments of dividends or unlawful stock repurchases or
     redemptions; or
 
                                       50

<PAGE>
 
  .  any transaction from which the director derived an improper personal
     benefit.
 
   Our bylaws provide that we shall indemnify our directors and executive
officers to the fullest extent permitted under the Delaware General Corporation
Law and may indemnify our other officers, employees and other agents as set
forth in the Delaware General Corporation Law. In addition, we have entered
into an indemnification agreement with each of our directors and executive
officers. The indemnification agreements contain provisions that require us,
among other things, to indemnify our directors and executive officers against
liabilities (other than liabilities arising from intentional or knowing and
culpable violations of law) that may arise by reason of their status or service
as directors or executive officers for us or other entities to which they
provide service at our request and to advance expenses they may incur as a
result of any proceeding against them as to which they could be indemnified. We
believe that these bylaw provisions and indemnification agreements are
necessary to attract and retain qualified directors and officers.
 
   Prior to the consummation of the offering, we will obtain an insurance
policy covering directors and officers for claims they may otherwise be
required to pay or for which we are required to indemnify them.
 
   At present, there is no pending litigation or proceeding involving any of
our directors, officers, employees or agents where indemnification will be
required or permitted, and we are not aware of any threatened litigation or
proceeding that may result in a claim for indemnification.
 
                                       51

<PAGE>
 

                              CERTAIN TRANSACTIONS
 
  Preferred Stock Sales
 
   On August 29, 1997, we issued a total of 2,175,000 shares of Series A
Preferred Stock at a purchase price of $1.00 per share. Of the 2,175,000 shares
of Series A Preferred Stock sold by us, a total of 1,838,000 shares were sold
to our executive officers, directors and greater than 5% stockholders, and
persons associated with them, listed in the table below for a total purchase
price of $1,838,000.
 
   On July 13, 1998, we issued a total of 3,358,562 shares of Series B
Preferred Stock at a purchase price of $3.00 per share. Of the 3,358,562 shares
of Series B Preferred Stock sold by us, a total of 2,540,207 shares were sold
to our executive officers, directors and greater than 5% stockholders, and
persons associated with them, listed in the table below for a total purchase
price of $7,620,621.
 
   On August 19, 1999, we issued a promissory note in the principal amount of
$750,000 bearing interest at 6% per annum to Kleiner Perkins Caufield and
Byers. Immediately upon the first closing of the Series C Preferred Stock
financing, the principal amount under the notes automatically converted into
shares of Series C Preferred Stock at $8.00 per share.
 
   On September 24, 1999 and October 14, 1999, we issued a total of 2,593,114
shares of Series C Preferred Stock at a purchase price of $8.00 per share. Of
the 2,593,114 shares of Series C Preferred Stock sold by us, a total of
1,963,875 shares were sold to our executive officers, directors and greater
than 5% stockholders, and persons associated with them, listed in the table
below for a total purchase price of $15,711,000.
 
   In May 2000, we issued promissory notes to purchasers in the total principal
amount of $14,000,000 bearing interest at 10% per annum. Of the $14,000,000
principal amount of the notes issued by us, $3,000,000 principal amount of the
notes was issued to entities affiliated with Kleiner Perkins Caufield and
Byers, $2,000,000 principal amount of the notes was issued to Domain Partners
III, L.P., $4,000,000 principal amount of the notes was issued to QuestMark
Partners, L.P. and $5,000,000 principal amount of the notes was issued to
Gordon Gund and trusts held for his immediate family members. Immediately upon
the first closing of the Series D Preferred Stock financing, the principal
amount under the notes and accrued interest thereon automatically converted
into shares of Series D Preferred Stock at $21.25 per share.
 
   On May 25, June 20 and October 5, 2000, we issued a total of 4,767,191
shares of Series D Preferred Stock at a purchase price of $21.25 per share. Of
the 4,767,191 shares of Series D Preferred Stock sold by us, a total of
3,431,091 shares were sold to our executive officers, directors and greater
than 5% stockholders, and persons associated with them, listed in the table
below for a total purchase price of $72,910,684.
 
   Our Series D preferred stock is subject to an antidilution conversion price
adjustment feature which we triggered when we granted options to purchase our
common stock beyond the number of options that were authorized under our 1997
Plan at the time we commenced our Series D preferred stock offering in May
2000. The conversion feature provides that if, during the period between May
12, 2000 and the earlier of the closing of an initial public offering or
January 31, 2001, we have granted more than an aggregate of 1,665,989 options
to purchase our common stock, then the conversion price of our Series D
preferred stock shall be adjusted downward from its original conversion price
of $21.25 per share. As of November 13, 2000, we had granted an excess of
295,015 options over the 1,665,989 allowed under the conversion price
adjustment feature. As a result, the Series D preferred stock conversion price
 
                                       52

<PAGE>
 
was adjusted downward to $20.82. This adjustment causes the 4,767,191 issued
and outstanding shares of Series D preferred stock to be converted into
4,863,827 shares of our common stock, an increase of 96,636 shares of common
stock.
 
   The following table summarizes the description in this section of the shares
of common stock and preferred stock purchased by our executive officers,
directors and 5% stockholders and persons associated with them, since April
1997. As of November 10, each share of preferred stock listed in the table
below was convertible into one share of our common stock, except for shares of
our Series D preferred stock, which were subject to the antidilution conversion
price adjustment feature described above.
 

<TABLE>
<CAPTION>
                                                                              Total
  Executive Officers,                          Preferred Stock             Shares on an
     Directors and         Common   -------------------------------------- as-Converted   Aggregate
    5% Stockholders         Stock   Series A  Series B Series C  Series D     Basis     Consideration
  -------------------     --------- --------- -------- --------- --------- ------------ -------------
<S>                       <C>       <C>       <C>      <C>       <C>       <C>          <C>
Entities affiliated with
 Kleiner Perkins
 Caufield and Byers
 VIII, L.P. ............        --  1,725,000 810,328    500,000   141,562  3,179,721         --
Entities affiliated with
 Domain Partners III,
 L.P. ..................     30,000       --  993,212    187,500    94,401  1,307,001         --
Entities affiliated with
 QuestMark Partners,
 L.P. ..................        --        --      --   1,000,000   188,699  1,192,473         --
Entities affiliated with
 Carlyle Partners III,
 L.P. ..................        --        --      --         --  1,317,647  1,344,000         --
Entities affiliated with
 Oak Hill Capital
 Partners, L.P. ........        --        --      --         --  1,411,765  1,440,000         --
Kelsey Wirth............  1,240,227    23,000  11,250      8,334       --   1,282,811         --
Zia Chishti.............  1,240,227    15,000     --         --        --   1,255,227         --
Mark Logan..............     32,000       --      --         --        --      32,000         --
Joe Breeland............     50,000       --      --       2,000     1,750     53,785         --
Gordon Gund(1)..........        --        --  666,667    212,500   235,939  1,119,825         --
Leonard Hedge...........    137,836       --      --         625       --     138,461         --
James Heslin............    117,214       --    3,333      1,875       --     122,422         --
Ross Miller.............     60,000       --    1,667      1,250     1,000     63,937         --
Ike Udechuku............        --        --   20,000      7,500     4,705     32,299         --
Kenneth Vargha..........     61,979       --      --         625       --      62,604         --
Charlie Wen.............     45,000       --      --         --        600     45,612         --
Christian Skieller......    100,000       --      --         --        --     100,000         --
Amir Abolfathi..........     81,866       --      --         --        --      81,866         --
Wren Wirth..............        --     25,000  11,250     25,000       --      61,250         --
Timothy Wirth...........        --     25,000  11,250      8,333       --      44,583         --
Timothy and Wren Wirth..        --        --      --         --     25,411     25,919         --
Christopher Wirth.......        --     25,000  11,250      8,333     4,705     49,382         --
Saadia Chishti..........        --        --      --         --      2,352      2,399         --
George Andrew Lear III..        --        --      --         --        555        566         --
Artel Services, N.V.....        --        --      --         --    235,294    239,999         --
</TABLE>

--------
(1) Includes 753,493 shares held in trust for immediate family members and
    shares held by immediate family members.
 
   Holders of shares of our preferred stock are entitled to registration rights
in respect of the common stock issued or issuable upon conversion thereof. See
"Description of Securities--Registration Rights."
 
   Joseph Lacob, one of our directors, is a principal of the general partner of
one or more of the Kleiner Entities, shares voting and dispositive power with
respect to the shares held by one or more of such entities, and disclaims
beneficial ownership of such shares in which he has no pecuniary interest.
 
   Brian Dovey, one of our directors, is a principal of the general partner of
one or more of the Domain Entities, shares voting and dispositive power with
respect to the shares held by
 
                                       53

<PAGE>
 
one or more of such entities, and disclaims beneficial ownership of such shares
in which he has no pecuniary interest.
 
Agreements with Officers and Directors
 
   As of November 10, 2000 each of Messrs. Hedge, Heslin and Abolfathi
delivered a full-recourse promissory note to us in payment of the exercise
price of outstanding stock options they held under our 1997 Plan. The principal
amount secured under each note is as follows: Hedge--$211,539.97; Heslin--
$249,665.82; and Abolfathi--$174,374.58. Each note has a term of two years and
bears interest at a rate of 9.5% per annum, compounded annually. The notes are
each secured by pledges of the purchased shares to us and pledges of collateral
which, together with the shares, have a value of twice the principal amount of
each note. The shares and collateral underlying the pledges will be released
from the pledges only upon the entire payment or prepayment of the principal
balance of each note, together with payment of all accrued interest on the
principal amount so paid or prepaid. Accrued interest becomes due on each
anniversary of the signing of each note and the principal balance will become
due and payable in one lump sum on the second anniversary of the signing of
each note. However, the entire unpaid balances of the notes will become due and
payable upon termination of employment, failure to pay any installment of
principal or interest when due, the insolvency of the maker of the notes, or in
the event we are acquired and receive cash or freely tradable securities for
our shares in the acquisition. None of the shares serving as security for the
notes may be sold unless the principal portion of the note attributable to
those shares, together with the accrued interest on that principal portion, is
paid to us.
 
   In November 2000, we entered into an agreement with Stephen Bonelli, who
serves as our Chief Financial Officer and Vice President of Finance. The
agreement provides that Mr. Bonelli's employment is at-will and sets his annual
base salary. Mr. Bonelli's agreement also provides that he will be eligible for
an annual bonus and stock options exercisable for shares of our common stock,
plus certain other standard employee benefits. In addition, the agreement
provides that if we terminate Mr. Bonelli without "cause" or if Mr. Bonelli
resigns with "good reason," Mr. Bonelli will be credited with one year of
vesting of his stock options in addition to any other vesting he had earned,
provided he signs a full release of all claims against us at the time his
employment terminates.
 
   We have granted options and issued common stock to our executive officers
and directors. See "Management--Executive Compensation" and "Principal
Stockholders."
 
 Indemnification Agreements
 
   We have entered into indemnification agreements with our officers and
directors containing provisions which may require us, among other things, to
indemnify them against certain liabilities that may arise by reason of their
status or service as officers or directors. See "Management--Limitations of
Liability and Indemnification Matters" for more information regarding
indemnification of our officers and directors.
 
                                       54

<PAGE>
 
                             PRINCIPAL STOCKHOLDERS
 
   The table below sets forth information regarding the beneficial ownership of
our common stock on an as-converted basis as of November 10, 2000, by the
following individuals or groups:
 
  .  each person or entity who is known by us to own beneficially more than
     5% of our outstanding stock;
 
  .  each of the named executive officers;
 
  .  each of our directors; and
 
  .  all directors and executive officers as a group.
 
   Each stockholder's percentage ownership in the following table is based on
     shares of common stock outstanding as of November 10, 2000 which reflects
the automatic conversion into common stock upon completion of this offering of
all series of preferred stock outstanding as of November 10, 2000. For purposes
of calculating each stockholder's percentage ownership, all options and
warrants exercisable within 60 days of November 10, 2000 held by the particular
stockholder and that are included in the first column are treated as
outstanding shares. The numbers shown in the table below assume no exercise by
the underwriters of their over-allotment option.
 
   Unless otherwise indicated, the principal address of each of the
stockholders below is c/o Align Technology, Inc., 851 Martin Ave., Santa Clara,
California 95050. Except as otherwise indicated, and subject to applicable
community property laws, except to the extent authority is shared by both
spouses under applicable law, we believe the persons named in the table have
sole voting and investment power with respect to all shares of common stock
held by them.
 

<TABLE>
<CAPTION>
                                                     Shares Beneficially Owned
                                                    ---------------------------
                                                              Percent  Percent
                                                               Before   After
Beneficial Owner                                     Number   Offering Offering
----------------                                    --------- -------- --------
<S>                                                 <C>       <C>      <C>
Entities affiliated with Kleiner Perkins Caufield
 & Byers(1).......................................  3,179,721   16.8%        %
Kelsey Wirth(2)...................................  1,463,945    7.7
Entities affiliated with TC Group III, L.P., d/b/a
 The Carlyle Group(3).............................  1,344,000    7.1
Entities affiliated with Oak Hill Capital(4)......  1,440,000    7.6
Entities affiliated with Domain Associates,
 L.L.C.(5)........................................  1,307,001    6.9
Zia Chishti(6)....................................  1,258,192    6.7
Entities affiliated with QuestMark Partners,
 L.P.(7)..........................................  1,432,472    7.6
Gordon Gund(8)....................................  1,119,825    5.9
Kenneth Vargha(9).................................    137,375     *
Ross Miller(10)...................................     77,196     *
Joe Breeland(11)..................................    150,302     *
Charlie Wen(12)...................................     88,522     *
Ike Udechuku(13)..................................    159,513     *
Leonard Hedge(14).................................    161,794     *
Amir Abolfathi(15)................................    131,866     *
James Heslin(16)..................................    122,422     *
Christian Skieller(17)............................    117,214     *
Kent Bowen(18)....................................     32,000     *
Joseph Lacob(19)..................................  3,206,890   17.0
Mark Logan(20)....................................     32,000     *
Brian Dovey(21)...................................  1,305,113    6.9
Stephen Bonelli(22)...............................    130,000     *
Peter Riepenhausen(23)............................    210,000     *
All directors, executive officers and key
 employees as a group (17 persons) ...............  8,519,183   45.1
</TABLE>

--------
  * Represents beneficial ownership of less than one percent of our common
    stock.
 
                                       55

<PAGE>
 
 (1) Principal address is 2750 Sand Hill Road, Menlo Park, CA 94025. Consists
     of 2,883,232 shares held by Kleiner Perkins Caufield & Byers VIII, L.P.,
     166,892 shares held by KPCB VIII Founders Fund, L.P. and 126,766 shares
     held by KPCB Life Sciences Zaibatsu Fund II, L.P. Joseph Lacob, one of our
     directors, is a principal of the general partner of one or more of the
     Kleiner Entities, shares voting and dispositive power with respect to the
     shares held by one or more of such entities and disclaims beneficial
     ownership of such shares in which he has no pecuniary interest.
 
 (2) Includes 61,250 owned by Wren Wirth, 44,583 shares owned by Timothy Wirth,
     49,288 shares owned by Christopher Wirth and 25,411 shares owned by
     Timothy and Wren Wirth, all of whom are immediate family members of Kelsey
     Wirth.
 
 (3) Principal address is 1001 Pennsylvania Avenue, N.W., Suite 220 South,
     Washington, D.C. 20004. Consists of 1,284,540 shares held of record by
     Carlyle Partners III, L.P. and 33,107 shares held of record by CP III
     Coinvestment, L.P. Voting and dispositive power with respect to such
     shares may be deemed to be shared by (i) TC Group III, L.P., as the sole
     general partner of Carlyle Partners III, L.P. and CP III Co-investment,
     (ii) TC Group III, L.L.C., as the sole general partner of TC Group III,
     L.P., (iii) TC Group, L.L.C., as the managing member of TC Group II,
     L.L.C., (iv) TCG Holdings, L.L.C., as the managing member of TC Group,
     L.L.C. and (v) William E. Conway, Jr., David M. Rubenstein and Daniel A.
     D'Aniello, as managing member of TCG Holding, L.L.C. Messrs. Conway,
     Rubenstein and D'Aniello disclaim such beneficial ownership.
 
 (4) Principal address is 201 Main Street, Suite 2300, Fort Worth, TX 76102.
     Consists of 1,284,706 shares held by Oak Hill Capital Partners, L.P. and
     127,059 shares held by OHCMP Align, L.P.
 
 (5) Principal address is 1 Palmer Square, Suite 515, Princeton, NJ 08542.
     Consists of 1,241,901 shares held by Domain Partners III, L.P., 33,212
     shares held by DP III Associates, L.P. and 30,000 shares held by Domain
     Associates L.L.C., of which 13,125 shares are subject to repurchase by us.
     Brian Dovey, one of our directors, is a general partner of One Palmer
     Square Associates II, LLC, the general partner of Domain Partners II, L.P.
     and DP III Associates, L.P. and is a managing member of Domain Associates,
     L.L.C. Mr. Dovey shares voting and investment power with respect to these
     shares and disclaims beneficial ownership of such shares except to the
     extent of his proportionate interest therein.
 
 (6) Includes 2,352 shares owned by Saadia Chishti and 555 shares owned by
     George Andrew Lear III, both of whom are immediate family members of Zia
     Chishti.
 
 (7) Principal address is One South Street, Suite 800, Baltimore, MD 21202.
     Includes 1,038,213 shares held by QuestMark Partners, L.P., 150,486 shares
     held by QuestMark Partners Side Fund, L.P., and 235,294 shares held by
     Artal Services, N.V.
 
 (8) Principal address is Post Office Box 449 Princeton, NJ 08542. Includes
     175,833 shares owned by each of Grant Gund and Zachary Gund and 200,914
     shares held in trust for each of Grant Gund and Zachary Gund, both of whom
     are immediate family members of Gordon Gund.
 
 (9) Includes 15,625 shares held jointly with Shawna Vargha and 625 shares held
     by Pearl Vargha, both of whom are immediate family members of Kenneth
     Vargha. Includes 35,938 shares subject to repurchase by us at the original
     exercise price in the event of termination of Mr. Vargha's employment with
     us, which repurchase right lapses over time. Also includes 74,771 shares
     of common stock issuable upon exercise of immediately exercisable options
     within 60 days of November 10, 2000, which shares are also subject to our
     right of repurchase.
 
(10) Includes 2,658 shares held individually by wife Cheryl A. Miller. Also
     includes 625 shares held by Rita and Troy Miller and 625 shares held by
     Janice and Jonathan Sykes, all of
 
                                       56

<PAGE>
 
    whom are immediate family members of Ross Miller. Includes 47,188 shares
    subject to repurchase by us at the original exercise price in the event of
    termination of Mr. Miller's employment with us, which right lapses over
    time. Also includes 13,259 shares of common stock issuable upon exercise
    of immediately exercisable options within 60 days of November 10, 2000,
    which shares are also subject to our right of repurchase.
 
(11) Includes 21,875 shares subject to repurchase by us at the original
     exercise price in the event of termination of Mr. Breeland's employment
     with us, which repurchase right lapses over time. Also includes 96,517
     shares of common stock issuable upon exercise of immediately exercisable
     options within 60 days of November 10, 2000, which shares are subject to
     our right of repurchase.
 
(12) Includes 20,209 shares subject to repurchase by us at the original
     exercise price in the event of termination of Mr. Wen's employment with
     us, which repurchase right lapses over time. Also includes 42,910 shares
     of common stock issuable upon exercise of immediately exercisable options
     within 60 days of November 10, 2000, which shares are also subject to our
     right of repurchase.
 
(13) Includes 127,214 shares of common stock issuable upon exercise of
     immediately exercisable options within 60 days of November 10, 2000,
     which shares, if and when exercised, are subject to repurchase by us upon
     termination of Mr. Udechuku's employment with us, which right lapses over
     time.
 
(14) Includes 121,169 shares subject to repurchase by us at the original
     exercise price in the event of termination of Mr. Hedge's employment with
     us, which right lapses over time. Also includes 23,333 shares of common
     stock issuable upon exercise of immediately exercisable options within 60
     days of November 10, 2000, some of which shares are also subject to our
     right of repurchase.
 
(15) Includes 81,866 shares subject to repurchase by us at the original
     exercise price in the event of termination of Mr. Abolfathi's employment
     with us, which right lapses over time. Also includes 50,000 shares of
     common stock issuable upon exercise of immediately exercisable options
     within 60 days of November 10, 2000, some of which shares are also
     subject to our right of repurchase.
 
(16) Includes 117,214 shares subject to repurchase by us at the original
     exercise price in the event of termination of Mr. Heslin's employment
     with us, which repurchase right lapses over time.
 
(17) Includes 100,000 shares subject to repurchase by us at the original
     exercise price in the event of termination of Mr. Skieller's employment
     with us, which repurchase right lapses over time. Also includes 17,214
     shares of common stock issuable upon exercise of immediately exercisable
     options within 60 days of November 10, 2000, which shares are subject to
     our right of repurchase.
 
(18) Includes 32,000 shares of common stock issuable upon exercise of
     immediately exercisable options within 60 days of November 10, 2000,
     which shares are subject to repurchase by us.
 
(19) Includes 3,176,890 shares held by entities affiliated with Kleiner
     Perkins Caufield & Byers. Mr. Lacob disclaims beneficial ownership of
     these shares except to the extent of his pecuniary interest in these
     shares. Also includes 30,000 shares of common stock issuable upon
     exercise of immediately exercisable options within 60 days of November
     10, 2000, of which 10,000 shares are subject to repurchase by us.
 
(20) Includes 32,000 shares subject to repurchase by us at the original
     exercise price, which repurchase right lapses over time.
 
(21) Consists of 1,241,901 shares held by Domain Partners III, L.P., 33,212
     shares held by DP III Associates, L.P. and 30,000 shares held by Domain
     Associates L.L.C., of which
 
                                      57

<PAGE>
 
     13,125 shares are subject to repurchase by us. Brian Dovey, one of our
     directors, is a general partner of One Palmer Square Associates II, LLC,
     the general partner of Domain Partners II, L.P. and DP III Associates, L.P.
     and is a managing member of Domain Associates, L.L.C. Mr. Dovey shares
     voting and investment power with respect to these shares and disclaims
     beneficial ownership of such shares except to the extent of his
     proportionate interest therein.
 
(22) Includes 130,000 shares of common stock issuable upon exercise of
     immediately exercisable options within 60 days of November 10, 2000, which
     shares are also subject to our right of repurchase.
 
(23) Includes 210,000 shares of common stock issuable upon exercise of
     immediately exercisable options within 60 days of November 10, 2000, which
     shares are also subject to our right of repurchase.
 
 
                                       58

<PAGE>
 

                          DESCRIPTION OF CAPITAL STOCK
 
General
 
   At the closing of this offering, we will be authorized to issue 60,000,000
shares of common stock, $0.0001 par value, and 5,000,000 shares of undesignated
preferred stock, $0.0001 par value, after giving effect to the amendment of our
certificate of incorporation to delete references to the existing preferred
stock following conversion of that stock. Immediately following the completion
of this offering, and assuming no exercise of the underwriters' over-allotment
option, based on the number of shares outstanding as of September 30, 2000, and
718,355 shares of Series D preferred stock issued in October 2000, a total of
      shares of common stock will be issued and outstanding, and no shares of
preferred stock will be issued and outstanding.
 
   The following description of our capital stock and certain provisions of our
certificate of incorporation is a summary and is qualified in its entirety by
the provisions of our certificate of incorporation, where such rights are set
forth in full, and the provisions of applicable laws.
 
Common Stock
 
   At September 30, 2000, 3,594,196 shares of common stock were outstanding,
options to purchase 2,155,998 shares of common stock were outstanding and
options to purchase an aggregate of 1,177,621 shares of common stock were
available for future grant pursuant to our 1997 Plan. The holders of common
stock are entitled to one vote for each share held of record on all matters
submitted to a vote of the stockholders.
 
   Subject to preferences that may be applicable to any then outstanding shares
of preferred stock, holders of common stock are entitled to receive ratably
such dividends as may be declared by the Board of Directors out of funds
legally available therefore. In the event of our liquidation, dissolution or
winding up, holders of the common stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of
any then outstanding shares of preferred stock. Holders of common stock have no
preemptive rights and no right to convert their common stock into any other
securities. There are no redemption or sinking fund provisions applicable to
the common stock. All outstanding shares of common stock are fully paid and
nonassessable.
 
Preferred Stock
 
   Our board of directors is authorized to issue from time to time, without
stockholder authorization, in one or more designated series, authorized but
unissued shares of preferred stock, with any dividend, redemption, conversion
and exchange provisions as may be provided in the particular series. Any series
of preferred stock may possess voting, dividend, liquidation and redemption
rights superior to those of the common stock.
 
   The rights of the holders of our common stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that
may be issued in the future. Issuance of a new series of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of entrenching our board of
directors and making it more difficult for a third party to acquire, or
discourage a third-party from acquiring, a majority of our outstanding voting
stock. We have no present plans to issue any shares of or designate any series
of preferred stock.
 
 
                                       59

<PAGE>
 
Warrants
 
   At September 30, 2000, there were warrants outstanding to purchase a total
of 322,917 shares of our preferred stock. Following the closing of the
offering, the warrants automatically will become exercisable for the same
number of shares of common stock and will expire five years thereafter if not
exercised. Some of these warrants have net exercise provisions under which the
holder may, in lieu of payment of the exercise price in cash, surrender the
warrants and receive a net amount of shares based on the fair market value of
our common stock at the time of exercise of the warrants after deduction of the
total exercise price.
 
Registration Rights
 
   Upon completion of the offering, the holders of an aggregate of
approximately       shares of common stock as well as warrants to purchase up
to approximately 322,917 shares of our common stock will be entitled to certain
rights with respect to the registration of the shares under the Securities Act.
These rights are provided under the terms of agreements between us and the
holders of these securities. If we propose to register any of our securities
under the Securities Act, either for our own account or for the account of
other security holders exercising registration rights, these holders are
entitled to notice of the registration and are entitled to include shares of
common stock in the registration. The rights are subject to conditions and
limitations, among them the right of the underwriters of an offering subject to
the registration to limit the number of shares included in the registration. At
any time following 180 days after this offering, holders of these rights may
also require us to file up to two registration statements under the Securities
Act at our expense with respect to their shares of common stock, and we are
required to use our best efforts to effect the registration, subject to
conditions and limitations. Furthermore, stockholders with registration rights
may require us to file additional registration statements on Form S-3, subject
to conditions and limitations. Upon registration, these shares will be freely
tradable in the public market without restriction.
 
Antitakeover Effects of Provisions of the Certificate of Incorporation, Bylaws
and Delaware Law
 
   We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a Delaware corporation
from engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder, unless:
 
  .  prior to that date, the board of directors of the corporation approved
     either the business combination or the transaction that resulted in the
     stockholder becoming an interested stockholder;
 
  .  upon consummation of the transaction that resulted in the stockholder
     becoming an interested stockholder, the interested stockholder owned at
     least 85% of our voting stock outstanding at the time the transaction
     commenced, excluding for purposes of determining the number of shares
     outstanding those shares owned by:
 
    (i) persons who are directors and also officers; and
 
    (ii) employee stock plans in which employee participants do not have
         the right to determine confidentially whether shares held subject
         to the plan will be tendered in a tender or exchange offer; or
 
  .  on or subsequent to that date, the business combination is approved by
     the board of directors of the corporation and authorized at an annual or
     special meeting of stockholders, and not by written consent, by the
     affirmative vote of at least 66 2/3% of the outstanding voting stock
     that is not owned by the interested stockholder.
 
                                       60

<PAGE>
 
   Section 203 defines "business combination" to include the following:
 
  .  any merger or consolidation involving the corporation and the interested
     stockholder;
 
  .  any sale, transfer, pledge or other disposition of 10% or more of the
     assets of the corporation involving the interested stockholder;
 
  .  subject to certain exceptions, any transaction that results in the
     issuance or transfer by the corporation of any stock of the corporation
     to the interested stockholder;
 
  .  any transaction involving the corporation that has the effect of
     increasing the proportionate share of the stock of any class or series
     of the corporation beneficially owned by the interested stockholder; or
 
  .  the receipt by the interested stockholder of the benefit of any loans,
     advances, guarantees, pledges or other financial benefits provided by or
     through the corporation.
 
   In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by any of these entities or persons.
 
   Our certificate of incorporation:
 
  .  provides that any action required or permitted to be taken by our
     stockholders must be effected at a duly called annual or special meeting
     of stockholders and not by written consent;
 
  .  provides that the authorized number of directors may be changed only by
     our board of directors; and
 
  .  authorizes our board of directors to issue blank check preferred stock
     to increase the amount of outstanding shares.
 
   Our bylaws provide that candidates for director may be nominated, and
proposals for business to be considered by the stockholders at an annual
meeting may be made, only by our board of directors or by a stockholder who
gives us written notice no later than 90 days or no earlier than 120 days prior
to the first anniversary of the date of the preceding year's annual meeting,
subject to certain adjustments.
 
   Delaware law and the foregoing provisions of our certificate of
incorporation and bylaws and the issuance of preferred stock in certain
circumstances may have the effect of deterring hostile takeovers or delaying
changes in control of our management, which could depress the market price of
our common stock.
 
Transfer Agent and Registrar
 
   Our transfer agent and registrar for our common stock is Equiserve L.P.
 
Listing
 
   We have applied to list our common stock on the Nasdaq National Market under
the trading symbol ALGN.
 
                                       61

<PAGE>
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
   Upon completion of this offering, we will have     shares of common stock
outstanding. Of these shares, the     shares sold in this offering will be
freely tradable without restriction under the Securities Act, unless purchased
by our "affiliates," as that term is defined in Rule 144 under the Securities
Act. A significant number of shares of our stock outstanding prior to this
offering is subject to 180-day lock-up agreements, and may not be sold in the
public market prior to the expiration of the lock-up agreements. Deutsche Bank
Securities Inc. may release the shares subject to the lock-up agreements in
whole or in part at any time without prior public notice. However, Deutsche
Bank Securities Inc. has no current plans to effect such a release. Upon the
expiration of the lock-up agreements, approximately     additional shares will
be available for sale in the public market, subject in some cases to compliance
with the volume and other limitations of Rule 144.
 

<TABLE>
<CAPTION>
 Days after Date                 Shares
 of this Prospectus         Eligible for Sale              Comment
 ------------------         -----------------              -------
 <C>                        <C>               <S>
 Upon effectiveness........                   Freely tradable shares eligible
                                               for sale under Rule 144(k) and
                                               not locked-up
 
 90 days...................                   Shares not locked-up and saleable
                                               under Rules 144 and 701
 
 180 days..................                   Lock-up released, shares saleable
                                               under Rules 144 and 701
 
 Various dates thereafter..                   Restricted securities held for
                                               one year or less as of 180 days
                                               following effectiveness
</TABLE>

 
Rule 144
 
   In general, under Rule 144 a person (or persons whose shares are aggregated)
who has beneficially owned shares for at least one year is entitled to sell
within any three-month period commencing 90 days after the date of this
prospectus a number of shares that does not exceed the greater of
 
  .  1% of the then outstanding shares of our common stock (approximately
     shares immediately after this offering) or
 
  .  the average weekly trading volume during the four calendar weeks
     preceding such sale, subject to the filing of a Form 144 with respect to
     the sale.
 
   A person (or persons whose shares are aggregated) who is not deemed to have
been our affiliate at any time during the 90 days immediately preceding the
sale who has beneficially owned his or her shares for at least two years is
entitled to sell these shares pursuant to Rule 144(k) without regard to the
limitations described above. Affiliates must always sell pursuant to Rule 144,
even after the applicable holding periods have been satisfied.
 
   We cannot estimate the number of shares that will be sold under Rule 144, as
this will depend on the market price for our common stock, the personal
circumstances of the sellers and other factors. Prior to this offering, there
has been no public market for our common stock, and there can be no assurance
that a significant public market for our common stock will develop or be
sustained after this offering. Any future sale of substantial amounts of our
common stock in the open market may adversely affect the market price of our
common stock.
 
                                       62

<PAGE>
 
Lock-Up Agreements
 
   We and our directors, executive officers and certain of our stockholders
have agreed, pursuant to the underwriting agreement and other agreements, not
to sell any of our common stock without the prior consent of Deutsche Bank
Securities Inc. until 180 days from the date of this prospectus. Transfers or
dispositions can be made sooner only with the prior written consent of Deutsche
Bank Securities Inc.
 
Stock Options
 
   We intend to file a registration statement on Form S-8 under the Securities
Act to register shares of our common stock that are subject to outstanding
options or reserved for issuance under our 1997 Plan, our 2001 Plan and our
Purchase Plan 90 days following the effectiveness of this registration
statement, which permits the resale of these shares by nonaffiliates in the
public market without restriction under the Securities Act.
 
Rule 701
 
   Any of our employees or consultants who purchased his or her shares pursuant
to a written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permits nonaffiliates to sell their Rule 701
shares without having to comply with the public information, holding period,
volume limitations or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
prospectus.
 
Registration Rights
 
   After this offering the holders of warrants to purchase 322,917 shares of
our common stock will be entitled to certain rights with respect to
registration of such shares under the Securities Act. Registration of these
shares under the Securities Act would result in these shares becoming freely
tradable without restriction under the Securities Act except for shares
purchased by affiliates. See "Description of Capital Stock--Registration
Rights."
 
                                       63

<PAGE>
 

                                  UNDERWRITING
 
   Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank
Securities Inc., Bear, Stearns & Co. Inc., J.P. Morgan Securities Inc. and
Robertson Stephens Inc., have severally agreed to purchase from Align the
following respective number of shares of common stock at a public offering
price less the underwriting discounts and commissions set forth on the cover
page of this prospectus:
 

<TABLE>
<CAPTION>
                                                                       Number of
   Underwriter                                                          Shares
   -----------                                                         ---------
   <S>                                                                 <C>
   Deutsche Bank Securities Inc.......................................
   Bear, Stearns & Co. Inc............................................
   J.P. Morgan Securities Inc.........................................
   Robertson Stephens Inc.............................................
                                                                         ----
     Total............................................................
                                                                         ====
</TABLE>

 
   The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all
shares of the common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.
 
   The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover of this prospectus and to
dealers at a price that represents a concession not in excess of $       per
share under the public offering price. The underwriters may allow, and these
dealers may re-allow, a concession of not more than $       per share to other
dealers. After the initial public offering, representatives of the underwriters
may change the offering price and other selling terms.
 
   We have granted to the underwriters an option, exercisable not later than 30
days after the date of this prospectus, to purchase up to
additional shares of common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. The underwriters may exercise this option only to cover over-
allotments made in connection with the sale of the common stock offered hereby.
To the extent that the underwriters exercise this option, each of the
underwriters will become obligated, subject to conditions, to purchase
approximately the same percentage of additional shares of common stock as the
number of shares of common stock to be purchased by it in the above tables
bears to the total number of shares of common stock offered hereby. We will be
obligated, pursuant to the option, to sell these additional shares of common
stock to the underwriters to the extent the option is exercised. If any
additional shares of common stock are purchased, the underwriters will offer
the additional shares on the same terms as those on which the       shares are
being offered.
 
                                       64

<PAGE>
 
   The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is currently expected to be approximately 7% of the
initial public offering price. We have agreed to pay the underwriters the
following fees, assuming either no exercise or full exercise by the
underwriters of the underwriters' over-allotment option:
 

<TABLE>
<CAPTION>
                                                         Total Fees
                                              ---------------------------------
                                                                  With Full
                                              Without Exercise   Exercise of
                                                  of Over-          Over-
                                Fee Per Share Allotment Option Allotment Option
                                ------------- ---------------- ----------------
<S>                             <C>           <C>              <C>
Fees paid by Align Technology,
 Inc..........................      $              $                $
</TABLE>

 
   In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $         .
 
   We have agreed to indemnify the underwriters against some specified types of
liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect of any of these
liabilities.
 
   Each of our officers and directors, and certain holders of our stock, have
agreed not to offer, sell, contract to sell or otherwise dispose of, or enter
into any transaction that is designed to, or could be expected to, result in
the disposition of any shares of our common stock or other securities
convertible into or exchangeable or exercisable for shares of our common stock
or derivatives of our common stock owned by these persons prior to this
offering or common stock issuable upon exercise of options or warrants held by
these persons for a period of 180 days after the effective date of the
registration statement of which this prospectus is a part without the prior
written consent of Deutsche Bank Securities Inc. This consent may be given at
any time without public notice. We have entered into a similar agreement with
the representatives of the underwriters, except that we may grant options and
issue shares under our 1997 Plan and 2001 Plan and sell shares under our
Purchase Plan. In addition, we can sell up to an aggregate of 1,000,000 shares
to strategic and corporate partners and equipment lessors without such consent.
There are no agreements between the representatives and any of our stockholders
or affiliates releasing them from these lock-up agreements prior to the
expiration of the 180-day period.
 
   The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
 
   In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. Additionally, to cover these over-
allotments or to stabilize the market price of our common stock, the
underwriters may bid for and purchase shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters, may also
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
 
                                       65

<PAGE>
 
   At our request, the underwriters have reserved for sale up to     shares, at
the initial public offering price, for our vendors, employees, family members
of employees, customers and other third parties. The number of shares of our
common stock available for sale to the general public will be reduced to the
extent these reserved shares are purchased. Any reserved shares that are not
purchased by these persons will be offered by the underwriters to the general
public on the same basis as the other shares in this offering.
 
Pricing of This Offering
 
   Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiation among us and the representatives of the
underwriters. Among the primary factors considered in determining the public
offering price were:
 
  .  prevailing market conditions;
 
  .  our results of operations in recent periods;
 
  .  the present stage of our development;
 
  .  the market capitalization and stage of development of other companies
     that we and the representatives of the underwriters believe to be
     comparable to our business; and
 
  .  estimates of our business potential.
 
   The estimated initial public offering price range set forth on the cover of
this preliminary prospectus is subject to change as a result of market
conditions and other factors.
 

                                 LEGAL MATTERS
 
   The validity of the common stock offered will be passed upon for us by
Brobeck, Phleger & Harrison LLP, San Francisco, California. Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California, is acting
as counsel for the underwriters in connection with selected legal matters
relating to the shares of common stock offered by this prospectus.
 

                                    EXPERTS
 
   The consolidated financial statements as of December 31, 1998 and 1999 and
for the period from April 3, 1997 (Date of inception) to December 31, 1997 and
for each of the two years in the period ended December 31, 1999, included in
this prospectus, have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
 
                                       66

<PAGE>
 
                   WHERE YOU CAN FIND ADDITIONAL INFORMATION
 
   We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, under the Securities Act a registration statement on Form S-1 relating
to the common stock offered. This prospectus does not contain all of the
information set forth in the registration statement and its exhibits and
schedules. For further information with respect to us and the shares we are
offering pursuant to this prospectus, you should refer to the registration
statement and its exhibits and schedules. Statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete, and you should refer to the copy of
that contract or other document filed as an exhibit to the registration
statement. You may read or obtain a copy of the registration statement,
including exhibits, at the commission's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Each statement in this prospectus
relating to a contract or document filed as an exhibit is qualified in all
respects by the filed exhibit. You may obtain information on the operation of
the public reference room by calling the commission at 1-800-SEC-0330. The
commission maintains a website that contains reports, proxy information
statements and other information regarding registrants that file electronically
with the commission. The address of this website is http://www.sec.gov.
 
   As a result of the offering, the information and reporting requirements of
the Securities Exchange Act of 1934 will apply to us. We intend to furnish
holders of our common stock with annual reports containing, among other
information, audited financial statements certified by an independent public
accounting firm and quarterly reports containing unaudited condensed financial
information for the first three quarters of each fiscal year. We intend to
furnish other reports as we may determine or as may be required by law.
 
                                       67

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 

                         Index to Financial Statements
 

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Report of Independent Accountants.......................................... F-2
 
Consolidated Balance Sheets................................................ F-3
 
Consolidated Statements of Operations...................................... F-4
 
Consolidated Statements of Stockholders' Deficit........................... F-5
 
Consolidated Statements of Cash Flows...................................... F-6
 
Notes to Consolidated Financial Statements................................. F-7
</TABLE>

 
                                      F-1

<PAGE>
 

                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders
 of Align Technology, Inc.
 
   In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' deficit and of cash
flows present fairly, in all material respects, the financial position of Align
Technology, Inc. at December 31, 1998 and 1999, and the results of their
operations and their cash flows for the period from April 3, 1997 (date of
inception) to December 31, 1997 and for the years ended December 31, 1998 and
1999, in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
 
/s/ PricewaterhouseCoopers LLP
 
San Jose, California
August 18, 2000, except for Note 11 for

 which the date is November 13, 2000
 
                                      F-2

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
 

<TABLE>
<CAPTION>
                                                                    Pro Forma
                                                                  Stockholders'
                                                                    Equity at
                                   December 31,                   September 30,
                                 -----------------  September 30,     2000
                                  1998      1999        2000        (Note 2)
                                 -------  --------  ------------- -------------
                                                            (unaudited)
<S>                              <C>      <C>       <C>           <C>
ASSETS
Current assets:
Cash and cash equivalents......  $ 2,471  $  6,832    $ 33,940
Restricted cash................      --        340      18,127
Marketable securities..........    4,452     5,253       3,927
Accounts receivable, net of
 allowance for doubtful
 accounts of none, $33 and $300
 at December 31, 1998 and 1999
 and September 30, 2000,
 respectively..................      --        314       2,179
Inventories....................      --        366         667
Deferred costs.................      --        --        1,380
Other current assets...........      285       669       1,914
                                 -------  --------    --------
  Total current assets.........    7,208    13,774      62,134
Property and equipment, net....      770     3,317      11,938
Other assets...................      139       --        1,495
                                 -------  --------    --------
  Total assets.................  $ 8,117  $ 17,091    $ 75,567
                                 =======  ========    ========
LIABILITIES, CONVERTIBLE
 PREFERRED STOCK AND
 STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable...............  $   257  $  1,572    $ 10,762
Accrued liabilities............      129     2,050       2,033
Deferred revenue...............      --        119       1,145
Current portion of capital
 lease obligations.............        7         6         436
                                 -------  --------    --------
  Total current liabilities....      393     3,747      14,376
Capital lease obligations, net
 of current portion............       10         3       1,569
                                 -------  --------    --------
  Total liabilities............      403     3,750      15,945
                                 -------  --------    --------
Commitments and contingencies
 (Note 4)
 
Convertible preferred stock:
 $0.0001 par value;
 Authorized: 13,605 shares;
 Issued and outstanding: 5,534,
  8,127 and 12,176 shares at
  December 31, 1998, 1999 and
  September 30, 2000
  (unaudited), respectively,
  and none pro forma (aggregate
  liquidation preference:
  $32,996 at December 31, 1999
  and $119,034 at September 30,
  2000 (unaudited))............   12,223    31,713     113,890      $    --
Notes receivable from

 stockholders..................      (76)      --          --            --
Preferred stock warrants (Note
 6)............................      --      1,042       1,818           --
                                 -------  --------    --------      --------
                                  12,147    32,755     115,708           --
                                 -------  --------    --------      --------
Stockholders' equity (deficit):
 Common stock: $0.0001 par
  value
 Authorized: 60,000 shares;
 Issued and outstanding: 2,678,
  2,821 and 3,594 shares at
  December 31, 1998, 1999 and
  September 30, 2000
  (unaudited), respectively,
  and 15,807 shares pro forma
  (unaudited)..................      --        --          --              2
 Additional paid-in capital....        6     2,220      91,926       207,632
 Deferred stock-based
  compensation.................      --     (1,780)    (74,847)      (74,847)
 Accumulated deficit ..........   (4,439)  (19,854)    (73,165)      (73,165)
                                 -------  --------    --------      --------
  Total stockholders' equity
   (deficit)...................   (4,433)  (19,414)    (56,086)     $ 59,622
                                 -------  --------    --------      ========
  Total liabilities,
   convertible preferred stock
   and warrants, and
   stockholders' equity
   (deficit)...................  $ 8,117  $ 17,091    $ 75,567
                                 =======  ========    ========
</TABLE>

 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-3

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)
 

<TABLE>
<CAPTION>
                             Period from
                            April 3, 1997    Year Ended        Nine Months
                              (date of        Dec. 31,       Ended Sept. 30,
                            inception) to -----------------  -----------------
                            Dec. 31, 1997  1998      1999     1999      2000
                            ------------- -------  --------  -------  --------
                                                               (unaudited)
<S>                         <C>           <C>      <C>       <C>      <C>
Revenue--Ancillary
 products.................     $  --      $   --   $    313  $    70  $    950
Revenue--Invisalign.......        --          --         98        7     2,286
                               ------     -------  --------  -------  --------
  Total revenue...........        --          --        411       77     3,236
                               ------     -------  --------  -------  --------
Cost of revenue--Ancillary
 products.................        --          --        246       62       912
Cost of revenue and
 manufacturing start-up
 costs--Invisalign........        --          --      1,508      295    10,401
                               ------     -------  --------  -------  --------
  Total cost of revenue...        --          --      1,754      357    11,313
                               ------     -------  --------  -------  --------
Gross loss................        --          --     (1,343)    (280)   (8,077)
                               ------     -------  --------  -------  --------
Operating expenses:
 Sales and marketing......        283         133     5,688    2,726    19,664
 General and
  administrative..........        --        2,344     3,474    2,000    12,349
 Research and
  development.............        405       1,474     4,200    3,068     5,904
                               ------     -------  --------  -------  --------
  Total operating
   expenses...............        688       3,951    13,362    7,794    37,917
                               ------     -------  --------  -------  --------
Loss from operations......       (688)     (3,951)  (14,705)  (8,074)  (45,994)
Interest income...........         25         185       362      148     1,514
Interest expense..........        --          --       (986)    (639)   (8,807)
Other expense.............         (1)         (9)      (86)      (8)      (24)
                               ------     -------  --------  -------  --------
Net loss..................       (664)     (3,775)  (15,415)  (8,573)  (53,311)
Dividend related to
 beneficial conversion
 feature of preferred
 stock....................        --          --        --       --    (44,150)
                               ------     -------  --------  -------  --------
Net loss available to
 common stockholders......     $ (664)    $(3,775) $(15,415) $(8,573) $(97,461)
                               ======     =======  ========  =======  ========
Net loss per share
 available to common
 stockholders, basic and
 diluted..................     $(0.86)    $ (2.66) $  (7.31) $ (4.22) $ (35.87)
                               ======     =======  ========  =======  ========
Shares used in computing
 net loss per share
 available to common
 stockholders, basic and
 diluted..................        771       1,421     2,109    2,030     2,717
                               ======     =======  ========  =======  ========
Pro forma net loss per
 share available to common
 stockholders, basic and
 diluted (unaudited) (Note
 2).......................                         $  (1.85)          $  (4.22)
                                                   ========           ========
Shares used in computing
 pro forma net loss per
 share available to common
 stockholders, basic and
 diluted (unaudited)
 (Note 2).................                            8,339             12,635
                                                   ========           ========
</TABLE>

 
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-4

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
 
 For the period from April 3, 1997 (date of inception) to December 31, 1997 and
  for the years ended December 31, 1998 and 1999 and for the nine months ended
                         September 30, 2000 (unaudited)
                                 (in thousands)
 

<TABLE>
<CAPTION>
                          Common Stock   Additional   Deferred
                          --------------  Paid-In      Stock     Accumulated
                          Shares  Amount  Capital   Compensation   Deficit    Total
                          ------  ------ ---------- ------------ ----------- --------
<S>                       <C>     <C>    <C>        <C>          <C>         <C>
Issuance of common stock
 for services rendered..  2,430   $ --    $      1    $    --     $    --    $      1
Stock options
 exercised..............    490     --           2         --          --           2
Issuance of common
 stock..................     80     --         --          --          --         --
Net loss................    --      --         --          --         (664)      (664)
                          -----   -----   --------    --------    --------   --------
Balance at December 31,
 1997...................  3,000     --           3         --         (664)      (661)
Repurchase of common
 stock..................  (370)     --          (2)        --          --          (2)
Stock options
 exercised..............     46     --           5         --          --           5
Issuance of common
 stock..................      2     --         --          --          --         --
Net loss................    --      --         --          --       (3,775)    (3,775)
                          -----   -----   --------    --------    --------   --------
Balance at December 31,
 1998...................  2,678     --           6         --       (4,439)    (4,433)
Repurchase of common
 stock .................   (21)     --          (2)        --          --          (2)
Stock options
 exercised..............    164     --          42         --          --          42
Deferred stock
 compensation, net of
 cancellations..........    --      --       2,174      (2,174)        --         --
Amortization of deferred
 stock compensation.....    --      --         --          394         --         394
Net loss................    --      --         --          --      (15,415)   (15,415)
                          -----   -----   --------    --------    --------   --------
Balance at December 31,
 1999...................  2,821     --       2,220      (1,780)    (19,854)   (19,414)
Stock options
 exercised..............    821     --         680         --          --         680
Repurchase of common
 stock .................    (48)    --         (38)        --          --         (38)
Deferred stock
 compensation, net of
 cancellations..........    --      --      80,970     (80,970)        --         --
Amortization of deferred
 stock compensation.....    --      --         --        7,903         --       7,903
Charge for accelerated
 vesting of employee
 stock options..........    --      --         405         --          --         405
Issuance of bridge loan
 with beneficial
 conversion feature.....    --      --       7,689         --          --       7,689
Issuance of preferred
 stock with beneficial
 conversion feature.....    --      --      44,150         --          --      44,150
Deemed dividend on
 preferred stock........    --      --     (44,150)        --          --     (44,150)
Net loss................    --      --         --          --      (53,311)   (53,311)
                          -----   -----   --------    --------    --------   --------
Balance at September 30,
 2000 (unaudited).......  3,594   $ --    $ 91,926    $(74,847)   $(73,165)  $(56,086)
                          =====   =====   ========    ========    ========   ========
</TABLE>

 
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-5

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
 

<TABLE>
<CAPTION>
                             Period from
                            April 3, 1997    Year Ended        Nine Months
                              (date of        Dec. 31,       Ended Sept. 30,
                            inception) to -----------------  -----------------
                            Dec. 31, 1997  1998      1999     1999      2000
                            ------------- -------  --------  -------  --------
                                                               (unaudited)
<S>                         <C>           <C>      <C>       <C>      <C>
Cash flows from operating
 activities:
 Net loss..................    $  (664)   $(3,775) $(15,415) $(8,573) $(53,311)
 Adjustments to reconcile
  net loss to net cash used
  in operating activities:
 Depreciation and
  amortization.............         16        115       559      331     1,465
 Amortization of deferred
  compensation.............        --         --        394      184     7,903
 Amortization of
  accelerated vesting of
  stock options............        --         --        --       --        405
 Gain on sale of
  property.................        --          32       --       --        --
 Allowance for doubtful
  accounts.................        --         --         33      --        267
 Amortization of
  capitalized financing
  costs and debt
  discount.................        --         --        984      637       776
 Non-cash interest expense
  on bridge loans..........        --         --        --       --      7,689
 Changes in operating
  assets and liabilities:
  Accounts receivable......        --         --       (347)     (94)   (2,132)
  Deferred costs...........        --         --        --       --     (1,380)
  Inventories..............        --         --       (366)    (144)     (301)
  Other assets.............         (9)      (415)     (187)     (90)   (2,740)
  Accounts payable.........         90        167       672      134     9,190
  Deferred revenue.........        --         --        119       14     1,026
  Accrued liabilities......         45         84     1,921      826       (17)
                               -------    -------  --------  -------  --------
   Net cash used in
    operating activities...       (522)    (3,792)  (11,633)  (6,775)  (31,160)
                               -------    -------  --------  -------  --------
Cash flows from investing
 activities:
 Purchase of property and
  equipment................       (136)      (973)   (2,463)  (1,652)   (7,877)
 Increase in restricted
  cash.....................        --         --       (340)      (6)  (17,787)
 Purchase of marketable
  securities ..............     (1,470)    (6,451)   (5,906)  (1,582)   (4,013)
 Maturities of marketable
  securities ..............        --       2,665     3,365    3,389     1,250
 Proceeds from sale of
  marketable securities ...        --         804     1,740    1,625     4,089
 Proceeds from sale of
  property.................        --         198       --       --        --
                               -------    -------  --------  -------  --------
   Net cash provided by
    (used in) investing
    activities.............     (1,606)    (3,757)   (3,604)   1,774   (24,338)
                               -------    -------  --------  -------  --------
Cash flows from financing
 activities:
 Proceeds from issuance of
  common stock.............          3          5        42      --        680
 Proceeds from issuance of
  convertible preferred
  stock, net of issuance
  costs....................      2,164      9,983    18,740   17,851    68,177
 Proceeds from note
  receivable for preferred
  stock....................        --         --         76       76       --
 Repurchase common stock...        --          (2)       (2)      (2)      (38)
 Proceeds from convertible
  subordinated notes.......        --         --        750      --     14,000
 Proceeds from draw down of
  line of credit...........        --         --        --       --      5,000
 Repayment of line of
  credit...................        --         --        --       --     (5,000)
 Payments on capital lease
  obligations..............         (2)        (3)       (8)      (5)     (213)
                               -------    -------  --------  -------  --------
   Net cash provided by
    financing activities...      2,165      9,983    19,598   17,920    82,606
                               -------    -------  --------  -------  --------
Net increase in cash and
 cash equivalents..........         37      2,434     4,361   12,919    27,108
Cash and cash equivalents,
 beginning of period.......        --          37     2,471    2,471     6,832
                               -------    -------  --------  -------  --------
Cash and cash equivalents,
 end of period.............    $    37    $ 2,471  $  6,832  $15,390  $ 33,940
                               =======    =======  ========  =======  ========
Supplemental cash flow
 information:
 Taxes paid................    $     1    $     4  $      1  $   --   $      1
                               =======    =======  ========  =======  ========
 Interest paid.............    $   --     $   --   $    614  $   --   $    342
                               =======    =======  ========  =======  ========
Noncash investing and
 financing activities:
 Note receivable for
  preferred stock..........    $   --     $    76  $    --   $   --   $    --
                               =======    =======  ========  =======  ========
 Fixed assets acquired
  under capital lease......    $     8    $    14  $    --   $   --   $  2,209
                               =======    =======  ========  =======  ========
 Fixed assets acquired with
  accounts payable.........    $   --     $   --   $    643  $   --   $    --
                               =======    =======  ========  =======  ========
 Transfer of accounts
  payable to capital lease
  obligation...............    $   --     $   --   $    --   $   --   $    643
                               =======    =======  ========  =======  ========
 Issuance of warrants in
  conjunction with line of
  credit financing.........    $   --     $   --   $  1,042  $ 1,042  $    776
                               =======    =======  ========  =======  ========
 Deferred stock based
  compensation.............    $   --     $   --   $  2,174  $   674  $ 80,970
                               =======    =======  ========  =======  ========
 Conversion of convertible
  subordinated notes into
  convertible preferred
  stock....................    $   --     $   --   $    750  $   --   $ 14,000
                               =======    =======  ========  =======  ========
</TABLE>

 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-6

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Note 1 Organization:
 
  Formation and business of the Company
 
   Align Technology, Inc., (the "Company") was incorporated in April 1997 and
is engaged in the development, manufacturing and marketing of the Invisalign
System (the "System"), used for treating malocclusion, or the misalignment of
teeth. The System uses a series of clear plastic "Aligners" to move the
patients' teeth in small increments from their original state to a final
treated state. The Company has exited the development stage as of July 2000.
 
Note 2 Summary of Significant Accounting Policies:
 
  Basis of consolidation
 
   The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All intercompany transactions have been
eliminated in consolidation.
 
  Use of estimates
 
   The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
  Unaudited interim results
 
   The accompanying interim consolidated financial statements for the nine
months ended September 30, 1999 and 2000, together with the related notes, are
unaudited. The unaudited interim financial statements have been prepared on the
same basis as the annual financial statements and, in the opinion of
management, reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the Company's results of their
operations and their cash flows for the nine months ended September 30, 1999
and 2000. The results of operations for any interim period are not necessarily
indicative of the results of operations for the full year.
 
  Unaudited pro forma stockholders' equity
 
   If the offering contemplated by this prospectus is consummated, all of the
convertible preferred stock outstanding at September 30, 2000 will
automatically convert into 12,212,175 shares of common stock. Unaudited pro
forma stockholders' equity, as adjusted for the assumed conversion of the
preferred stock, is set forth on the balance sheet.
 
  Fair value of financial instruments
 
   The carrying amounts of certain of the Company's financial instruments
including cash and cash equivalents, short-term investments and accounts
payable approximate fair value due to their short maturities. Based on
borrowing rates currently available to the Company for leases with similar
terms, the carrying value of its lease obligations approximates fair value.
 
                                      F-7

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  Cash and cash equivalents and restricted cash
 
   Cash equivalents are stated at cost, which approximates market value. The
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents. The Company invests
primarily in money market funds and commercial paper, accordingly, these
investments are subject to minimal credit and market risks.
 
  Restricted cash
 
   Restricted cash as of December 31, 1999 primarily comprises amounts held on
deposit which is required as a collateral for an outstanding Line of Credit
(see Note 5) and for security on customer credit card transactions.
 
   Restricted cash as of September 30, 2000 is primarily comprised of $17.6
million held in escrow for deposits on future advertising (Note 4).
 
  Marketable securities
 
   Marketable securities are classified as available-for-sale in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Securities" and are carried at fair value.
Marketable securities classified as current assets have scheduled maturities of
less than one year. Unrealized holding gains or losses on such securities are
included in accumulated comprehensive income/(loss) in stockholders' deficit.
Realized gains and losses on sales of all such securities are reported in
earnings and computed using the specific identification cost method. There were
no unrealized gains or losses as of December 31, 1998 and 1999.
 
   The cost and fair value of available-for-sale securities at December 31,
1998 are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                               Cost   Fair Value
                                                              ------- ----------
     <S>                                                      <C>     <C>
     Commercial paper........................................ $ 4,452   $4,452
                                                              -------   ------
                                                              $ 4,452   $4,452
                                                              =======   ======
</TABLE>

 
   The cost and fair value of available-for-sale securities at December 31,
1999 are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                               Cost   Fair Value
                                                              ------- ----------
     <S>                                                      <C>     <C>
     Commercial paper........................................ $ 1,239   $1,239
     Corporate notes.........................................     997      997
     Medium term notes.......................................   3,017    3,017
                                                              -------   ------
                                                              $ 5,253   $5,253
                                                              =======   ======
</TABLE>

 
  Certain risks and uncertainties
 
   The Company's operating results depend to a significant extent on the
Company's ability to market and develop its products. The life cycles of the
Company's products are difficult to estimate due in part to the effect of
future product enhancements and competition. The inability of the Company to
successfully develop and market its products as a result of
 
                                      F-8

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
competition or other factors would have a material adverse effect on the
Company's business, financial condition and results of operations.
 
   Financial instruments which potentially expose the Company to concentrations
of credit risk consist primarily of cash equivalents and accounts receivable.
The Company invests excess cash primarily in money market funds of major
financial institutions, commercial paper and notes. The Company provides credit
to customers in the normal course of business. Collateral is not required for
accounts receivable, but ongoing credit evaluations of customers' financial
condition are performed. The Company maintains reserves for potential credit
losses and such losses have been within management's expectations.
 
   In the U.S., the FDA regulates the design, manufacture, distribution,
preclinical and clinical study, clearance and approval of medical devices.
Products developed by the Company may require approvals or clearances from the
Food and Drug Administration ("FDA") or other international regulatory agencies
prior to commercialized sales. There can be no assurance that the Company's
products will receive any of the required approvals or clearances. If the
Company was denied approval or clearance or such approval was delayed, it may
have a material adverse impact on the Company.
 
   The Company has manufacturing operations located outside the United States.
The Company currently relies on its manufacturing facilities in Pakistan to
create virtual treatment plans with the assistance of sophisticated software.
In addition, the Company relies on third party manufacturers in Mexico to
fabricate Aligners and to ship the completed product to the Company's
customers. The Company's reliance on international operations exposes it to
related risks and uncertainties, including; difficulties in staffing and
managing international operations; controlling quality of manufacture;
political, social and economic instability; interruptions and limitations in
telecommunication services; product and/or material transportation delays or
disruption; trade restrictions and changes in tariffs; import and export
license requirements and restrictions; fluctuations in currency exchange rates;
and potential adverse tax consequences. If any of these risks materialize, the
Company's international manufacturing operations, as well as its operating
results, may be harmed.
 
  Inventories
 
   Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market.
 
  Property and equipment
 
   Property and equipment are stated at historical cost less accumulated
depreciation and amortization. Depreciation and amortization are computed using
the straight-line method over the estimated useful lives of the assets, which
range from three to seven years. Amortization of leasehold improvements is
computed using the straight-line method over the estimated useful lives of the
assets, or the remaining lease term, whichever is shorter. Upon sale or
retirement, the asset's cost and related accumulated depreciation are removed
from the accounts and any related gain or loss is reflected in operations.
 
  Website development costs
 
   The Company accounts for website development and related costs in accordance
with the AICPA Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed
 
                                      F-9

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
or Obtained for Internal Use." Website development and related costs consist of
external and internal costs incurred to purchase and implement the website
software and significant enhancements used in the Company's business. Website
development costs of $35,000 had been capitalized as of December 31, 1999 and
are being amortized using the straight-line method over the estimated useful
life of the asset of two years. Amortization of website development costs
commenced in April 2000 upon launch of the website.
 
   Internal and external costs of developing website content are expensed as
incurred and included in the accompanying Statement of Operations.
 
   There was no other software developed or obtained for internal use or
capitalized in the period. No amortization of other software developed or
obtained was made in the period ended December 31, 1999.
 
  Impairment of long-lived assets
 
   The Company identifies and records impairment losses on long-lived assets
used in operations when events and circumstances indicate that the assets are
less than the carrying amounts of those assets. Recoverability is measured by
comparison of the assets carrying amount to future net undiscounted cash flows
the assets are expected to generate. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the projected discounted future net
cash flows arising from the asset. None of these events have occurred with
respect to the Company's long-lived assets, which consist primarily of
computers and equipment, furniture and fixtures and leasehold improvements.
 
  Revenue recognition
 
   Revenue from the Invisalign product and Ancillary product sales are
recognized upon receipt of a purchase order and product shipment provided no
significant obligations remain and collection of the receivables is deemed
probable. Up-front fees received in connection with the Invisalign product are
deferred and recognized over the associated product shipments. The costs of
producing the ClinCheck treatment plan, which are incurred prior to the
production of Aligners, are capitalized and recognized as related revenues are
earned.
 
   The sales recorded by the Company through September 30, 2000 have had
significant losses. The Company estimates its loss on the sale, and records a
provision for the entire amount of estimated loss in the period such losses are
determined.
 
  Research and development
 
   Research and development costs are expensed as incurred.
 
  Advertising costs
 
   The cost of advertising is expensed as incurred. For the period from April
3, 1997 (date of inception) to December 31, 1997 and the years ended December
31, 1998 and December 31, 1999, advertising costs totaled none, $31,000 and
$1,722,000, respectively.
 
                                      F-10

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  Income taxes
 
   Income taxes are recorded under the liability method, under which deferred
tax assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
 
  Accounting for stock-based compensation
 
   The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123").
 
   Under APB 25, compensation expense for grants to employees is based on the
difference, if any, on the date of the grant, between the fair value of the
Company's stock and the option's exercise price. SFAS 123 defines a "fair
value" based method of accounting for an employee stock option or similar
equity investment. The pro forma disclosure of the difference between
compensation expense included in net loss and the related cost measured by the
fair value method is presented in Note 8.
 
   The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS 123 and Emerging Issues Task Force Issue
No. 96-18, "Accounting for Equity Instruments that are Issued to Other Than
Employees, or in Conjunction with Selling Goods and Services," and Financial
Accounting Standards Board Interpretation No. 28, "Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plan" ("FIN 28").
 
  Segments
 
   The Company operates in one segment, using one measurement of profitability
to manage its business. There were no export sales.
 
   The Company maintains two facilities in Pakistan which generate no revenue
and are comprised of none and $256,000 of identifiable assets as of December
31, 1998 and 1999, respectively.
 
  Pro forma net loss per share (unaudited)
 
   Pro forma net loss per share for the year ended December 31, 1999 and the
nine month period ended September 30, 2000 was computed using the weighted
average number of shares of common stock outstanding, including the pro forma
effect of the automatic conversion of all of the Company's preferred stock into
shares of the Company's common stock effective upon the closing of the
Company's initial public offering as if such conversion occurred on January 1,
1999 or at the date of original issuance, if later. The resulting pro forma
adjustment includes an increase in the weighted average shares used to compute
pro forma basic net loss per share of 6,230,000 shares and 9,918,000 shares for
the year ended December 31, 1999 and the nine month period ended September 30,
2000, respectively. The calculation of pro forma
 
                                      F-11

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
diluted net loss per share excludes warrants and stock options as their effect
would be anti-dilutive.
 
  Net loss per share
 
   Basic and diluted net loss per share are computed by dividing the net loss
for the period by the weighted average number of shares of common stock
outstanding during the period. The calculation of diluted net loss per share
excludes potential common stock if their effect is anti-dilutive. Potential
common stock consists of common stock subject to repurchase, incremental common
shares issuable upon the exercise of stock options and warrants and shares
issuable upon conversion of the preferred stock.
 
   The following is a reconciliation of the numerator (net loss) and the
denominator (number of shares) used in the basic and diluted EPS calculations
(in thousands, except per share data):
 

<TABLE>
<CAPTION>
                          Period from
                         April 3, 1997                             Nine Months
                           (date of                              Ended September
                         inception) to  Year Ended   Year Ended        30,
                         December 31,  December 31, December 31, -----------------
                             1997          1998         1999      1999      2000
                         ------------- ------------ ------------ -------  --------
                                                                   (unaudited)
<S>                      <C>           <C>          <C>          <C>      <C>
Basic and diluted:
 Net loss available to
  common stockholders...    $ (664)      $(3,775)     $(15,415)  $(8,573) $(97,461)
                            ------       -------      --------   -------  --------
 Weighted-average common
  shares outstanding....     2,779         2,810         2,667     2,659     3,127
 Less: Weighted average
  shares subject to
  repurchase............     2,008         1,389           558       629       410
                            ------       -------      --------   -------  --------
 Weighted-average shares
  used in basic and
  diluted net loss per
  share.................       771         1,421         2,109     2,030     2,717
                            ======       =======      ========   =======  ========
Net loss per share
 available to common
 stockholders...........    $(0.86)      $ (2.66)     $  (7.31)  $ (4.22) $ (35.87)
                            ======       =======      ========   =======  ========
Proforma basic and diluted:
 Net loss..........................................   $(15,415)           $(53,311)
                                                      ========            ========
 Adjustments to reflect weighted-average effect of
  assumed conversion of preferred stock
  (unaudited)......................................      6,230               9,918
                                                      ========            ========
 Weighted-average shares used in pro forma basic
  and diluted net loss per share (unaudited).......      8,339              12,635
                                                      ========            ========
 Pro forma basic and diluted net loss per share
  (unaudited)......................................   $  (1.85)           $  (4.22)
                                                      ========            ========
</TABLE>

 
 
                                      F-12

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
   The following table sets forth potential shares of common stock that are not
included in the diluted net loss per share because to do so would be anti-
dilutive for the periods indicated (in thousands):
 

<TABLE>
<CAPTION>
                                      Period from
                                        April 3,
                                       1997 (date
                                           of                     Nine Months
                                       inception)   Year Ended       Ended
                                           to       December 31,  September 30,
                                      December 31, ------------- --------------
                                          1997      1998   1999   1999   2000
                                      ------------ ------ ------ --------------
                                                                  (unaudited)
<S>                                   <C>          <C>    <C>    <C>    <C>
Preferred stock......................    2,175      5,534  8,127  8,127  12,176
Options to purchase common stock.....       97        476    643    770   2,156
Common stock subject to repurchase...    1,930        889    327    392     697
Warrants.............................      --         --     267    267     323
                                         -----     ------ ------ ------ -------
                                         4,202      6,899  9,364  9,556  15,352
                                         =====     ====== ====== ====== =======
</TABLE>

 
  Recent accounting pronouncements
 
   In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative investments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In July
1999, the FASB issued SFAS No. 137, "Accounting for Derivative and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133." SFAS No.
137 deferred the effective date of SFAS No. 133 until fiscal years beginning
after June 15, 2000. The Company will adopt SFAS No. 133 during fiscal 2001. To
date, the Company has not engaged in derivative or hedging activities.
 
   In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements," which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to revenue
recognition policies. In June 2000, the SEC issued SAB 101B, "Second Amendment:
Revenue Recognition in Financial Statements" ("SAB 101B"). SAB 101B deferred
the implementation date of SAB 101 until no later than the fourth fiscal
quarter of fiscal years beginning after December 15, 1999. The Company has
evaluated SAB 101 and believes that its current revenue recognition is in
compliance with the SAB.
 
   In March 2000, the FASB issued Interpretation No. 44, ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation--an
Interpretation of APB 25." This interpretation clarifies (a) the definition of
employee for purposes of applying Opinion 25, (b) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (c) the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award, and (d) the accounting for an exchange of stock compensation
awards in a business combination. This interpretation is effective July 1,
2000, but certain conclusions in this interpretation cover specific events that
occur after either December 15, 1998, or January 12, 2000. To the extent that
this interpretation covers events occurring during the period after December
15, 1998, or January 12, 2000, but before the effective date of July 1, 2000,
the effects of applying this interpretation are recognized on a prospective
basis from July 1, 2000. The adoption of FIN 44 did not have a material impact
on the Company's financial statements.
 
                                      F-13

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
Note 3 Balance Sheet Components:
 
   Inventories consist of the following (in thousands):
 

<TABLE>
<CAPTION>
                                                      December 31, September 30,
                                                          1999         2000
                                                      ------------ -------------
                                                                    (unaudited)
     <S>                                              <C>          <C>
     Raw materials..................................      $ 73         $432
     Finished goods.................................       293          235
                                                          ----         ----
                                                          $366         $667
                                                          ====         ====
</TABLE>

 
   As of December 31, 1998, the Company had no inventory.
 
   Property and Equipment consist of the following (in thousands):
 

<TABLE>
<CAPTION>
                                                                  December 31,
                                                                  -------------
                                                                  1998    1999
                                                                  -----  ------
     <S>                                                          <C>    <C>
     Computer hardware........................................... $ 524  $1,580
     Clinical equipment..........................................   156   1,537
     Computer software...........................................     9     302
     Furniture and fixtures......................................   129     313
     Leasehold improvements......................................    83     275
                                                                  -----  ------
                                                                    901   4,007
     Less: Accumulated depreciation and amortization.............  (131)   (690)
                                                                  -----  ------
                                                                  $ 770  $3,317
                                                                  =====  ======
</TABLE>

 
   Property and equipment includes $21,400 and $18,957 of assets under capital
leases at December 31, 1998 and 1999, respectively. Accumulated amortization of
assets under capital leases totaled $4,103 and $9,607 at December 31, 1998 and
1999, respectively.
 
   Depreciation expense was $16,000, $115,000 and $559,000 for the period from
April 3, 1997 (date of inception) to December 31, 1997 and the years ended
December 31, 1998 and 1999, respectively.
 
   Accrued and other current liabilities consist of the following (in
thousands):
 

<TABLE>
<CAPTION>
                                                                     December
                                                                        31,
                                                                    -----------
                                                                    1998  1999
                                                                    ---- ------
     <S>                                                            <C>  <C>
     Accrued payroll and benefits.................................. $ 33 $  744
     Accrued marketing expenses....................................  --     385
     Accrued loss reserve on product sales.........................  --     351
     Other.........................................................   96    570
                                                                    ---- ------
                                                                    $129 $2,050
                                                                    ==== ======
</TABLE>

 
Note 4 Commitments and Contingencies:
 
  Operating lease
 
   The Company leases two facilities in Sunnyvale, California expiring in
September and December 2000. One lease was paid in its entirety in advance in
1998, and accordingly is being amortized over the life of the lease. Total rent
expense was $16,000, $147,000 and $295,000 for
 
                                      F-14

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
the period from April 3, 1997 (date of inception) to December 31, 1997, and for
the years ended December 31, 1998 and 1999, respectively. The future minimum
lease payments under these noncancelable operating leases for the year ending
December 31, 2000 is $622,000.
 
   In June 2000, the Company entered into a noncancelable operating lease to
lease a manufacturing facility in Santa Clara, California. The lease term is
for five years, commencing July 1, 2000. The Company paid $1,175,000 security
deposit upon execution of the lease.
 
   In July 2000, the Company entered into an agreement to sublease additional
manufacturing space in Santa Clara, California. The lease term begins on July
14, 2000 and expires on August 14, 2002. A security deposit of $184,448 was
paid by the Company upon execution of the lease.
 
   The minimum lease payments under these leases as of September 30, 2000 are
$1,450,000, $2,969,000, $2,701,000, $2,264,000, $2,355,000 and $1,177,000 for
the years ended December 31, 2000, 2001, 2002, 2003, 2004 and thereafter,
respectively.
 
  Advertising Commitments
 
   In May 2000, the Company entered into an escrow agreement between TBWA
Chiat/Day, Inc. ("TBWA") and Greater Bay Trust Company ("Escrow Agent"). TBWA
has been employed by the Company to procure non-cancellable television and
radio media time on behalf of the Company. In consideration of the services
provided by TBWA, the Company has agreed to deposit a certain amount with the
Escrow Agent for purposes of repaying TBWA. At September 30, 2000, the Company
had $17,787,000 held in money market funds with the Escrow Agent. This amount
has been classified as restricted cash.
 
  Contingencies
 
   The Company was involved in a patent infringement proceeding with a
plaintiff asserting infringement of two of its patents. On June 30, 2000, the
Company entered into a stipulation of dismissal with the plaintiff whereby the
plaintiff agreed not to recommence a suit against the Company for two years
with respect to the disputed patents. Pursuant to the agreement, if a patent is
subsequently issued to the plaintiff and the plaintiff believes the Company is
infringing it, then the plaintiff may commence suit after one year from the
effective date of the agreement and include in such action claims involving the
two previously disputed patents. If any such action is successful, it could
result in a significant monetary damages judgment against the Company.
 
   The Company is subject to claims and assessments from time to time in the
ordinary course of business. Management does not believe that any such matters,
individually or in the aggregate, will have a material adverse effect on the
Company's financial condition.
 
  Capitalized lease obligations
 
   The Company is leasing equipment from several leasing companies. Under the
terms of the capital lease obligations, which bear interest at 10.155% at
December 31, 1998 and December 31, 1999 and expire from May 2000 through
October 2001, the Company is responsible for insurance, transportation and
support service costs.
 
                                      F-15

<PAGE>
 
                            ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
   Future minimum payments under capital lease obligations are as follows (in
thousands):
 

<TABLE>
<CAPTION>
     Year Ended December 31,
     -----------------------
     <S>                                                                    <C>
       2000................................................................ $ 6
       2001................................................................   4
                                                                            ---
       Minimum lease payments..............................................  10
       Less: Amount representing interest..................................  (1)
                                                                            ---
       Present value of minimum lease payments.............................   9
       Amount due within one year..........................................  (6)
                                                                            ---
       Amount due after one year........................................... $ 3
                                                                            ===
</TABLE>

 
   In February 2000, the Company leased a stereolithography apparatus from
Leasing Technologies International, Inc. ("LTI") under a master lease
agreement entered into between the Company and LTI in July 1999. Under the
terms of the lease, the value of the leased equipment is $729,000 at a
borrowing rate of 11.154% per annum. The term of the lease is for 48 months
with a bargain purchase option at the end of the lease to purchase the
equipment at 15% of the purchase price. Accordingly, the Company has
capitalized the leased equipment in accordance with SFAS 13, "Accounting for
Leases."
 
   In May and June 2000, the Company leased two stereolithography machines
from 3D Capital Corporation ("3D") under a Master Lease Agreement entered into
in September 1999 for a total value of $1,479,000 at a borrowing rate of
6.533% per annum for a period of 60 months. The Company has capitalized these
machines in accordance with SFAS 13.
 
Note 5 Credit Facilities:
 
   The Company had a $450,000 line of credit which expired on March 18, 1999.
This line of credit was not drawn against in either the year ended December
31, 1998 or December 31, 1999.
 
   The Company entered into a line of credit agreement (the "Line") with a
financing institution (the "Lender") on April 12, 1999 to make available up to
an aggregate principal amount of $5,000,000. The Line is available in minimum
advances of $1,000,000 with each advance to be evidenced by a note bearing
interest at 12% per annum. The agreement requires that each note shall be
payable in 36 monthly installments of principal and interest. The assets of
the Company are pledged as collateral for the loan agreement. Under the Line,
the Company is required to maintain certain negative and financial covenants,
which require, among other things, written consent from the Lender prior to
the declaration and payment of dividends and sale of material assets of the
Company. The Company did not borrow money under this agreement in 1999. A
secured promissory note for the entire $5,000,000 was executed on April 12,
2000. In connection with this Line the Company issued 266,667 warrants to
purchase convertible preferred stock (Note 6).
 
   In July 1999, the Company entered into an agreement with a leasing company
for a leasing line of credit of $1,000,000. Amounts borrowed under this
agreement bear interest at a rate of 11.154% and are collateralized by leased
assets. At December 31, 1999, the Company had not borrowed against this line
of credit.
 
   In September 1999, the Company entered into an agreement with a leasing
company for a leasing line of credit of $3,000,000. Amounts borrowed under
this agreement bear interest at a
 
                                     F-16

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
rate of 12.00% and are collateralized by leased assets. At December 31, 1999,
the Company had not borrowed against this line of credit.
 
   In January 2000, the Company exercised its right to extend its draw period
relating to the Line entered into with the Lender. in April 1999 from an
original draw expiration date of January 2000 to October 2000. In conjunction
with the draw period extension, the Company issued the Lender a warrant to
purchase 56,250 shares of the Company's Series C preferred stock at a price of
$8.00 per share (Note 6). In April 2000, the Company drew down a total of
$5,000,000 against the line. The note was subsequently repaid in full in July
2000.
 
Note 6 Convertible Preferred Stock:
 
  Convertible preferred stock
 
   Convertible preferred stock consists of the following (in thousands):
 

<TABLE>
<CAPTION>
                                                   December 31,
                                                  --------------- September 30,
                                                   1998    1999       2000
                                                  ------- ------- -------------
                                                                   (unaudited)
<S>                                               <C>     <C>     <C>
Series A: 2,175 shares authorized, issued and
 outstanding at December 31, 1998, 1999 and
 September 30, 2000 (unaudited) (liquidation
 preference at September 30, 2000 (unaudited)
 $2,175)........................................  $ 2,164 $ 2,164   $  2,164
Series B: 3,825 shares authorized; 3,359 shares
 issued and outstanding at December 31, 1998,
 1999 and September 30, 2000 (unaudited)
 (liquidation preference at September 30, 2000
 (unaudited) $10,076)...........................   10,059  10,059     10,059
Series C: no shares authorized at December 31,
 1998 and 2,656 shares authorized at December
 31, 1999 and September 30, 2000 (unaudited); no
 shares issued and outstanding at December 31,
 1998 and 2,593 shares issued and outstanding at
 December 31, 1999 and September 30, 2000
 (unaudited) (liquidation preference at
 September 30, 2000 (unaudited) $20,745)........      --   19,490     19,490
Series D: none, none and 4,949 shares authorized
 at December 31, 1998, 1999 and September 30,
 2000 (unaudited), respectively; none, none and
 4,049 shares issued and outstanding at
 December 31, 1998, 1999 and September 30, 2000
 (unaudited), respectively (liquidation
 preference at September 30, 2000 (unaudited)
 $86,038).......................................      --      --      82,177
                                                  ------- -------   --------
                                                  $12,223 $31,713   $113,890
                                                  ======= =======   ========
</TABLE>

 
  Sale of preferred securities
 
   In May and June 2000, the Company sold 4,048,836 shares of Series D
preferred shares for gross proceeds of $86,000,000. Included in the 4,048,836
total shares issued, the Company issued 660,601 Series D shares upon the
conversion of the Convertible Subordinated Promissory Notes financing (the
"Notes") and associated interest as discussed below. The
 
                                      F-17

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
issuance of Series D convertible preferred stock resulted in a beneficial
conversion feature, calculated in accordance with Emerging Issues Task Force
Issue No. 98-5, "Accounting for Convertible Securities with Beneficial
Conversion Features or Contingently Adjustable Conversion Ratios." Accordingly,
the Company has recognized $44,150,000 as a charge to additional paid in
capital to account for the deemed dividend on the preferred stock as of the
issuance date in the September 30, 2000 unaudited interim financial statements.
In addition, the Series D preferred shares have certain contingent rights and
preferences which, if perfected, could cause the Company to record an
incremental beneficial conversion feature charge.
 
   The Company has accounted for a beneficial conversion feature embedded in
convertible subordinated notes (the "Notes") entered into on May 15, 2000. The
beneficial conversion feature, amounting to $7,689,000, represents an
additional interest yield on the debt which may be converted at any time at the
option of the holders into immediately convertible preferred stock.
Accordingly, the beneficial conversion feature has been recorded as an
immediate charge to interest expense in May 2000. Under the terms of the loan
agreement, the Notes, and associated accrued interest, were converted into the
Company's convertible Series D preferred stock ("Series D shares") in May 2000.
The Company sold the Notes, in the aggregate face amount of $14,000,000,
bearing a stated interest rate of 10% per annum and a maturity date one month
from the date of issuance.
 
  Convertible subordinated note
 
   During 1999, the Company issued $750,000 in convertible subordinated notes
payable to certain preferred stockholders. The amount subsequently converted
into 93,750 shares of Series C convertible preferred stock at $8 per share.
 
   The rights, preferences and privileges of Series A, Series B, Series C and
Series D preferred stock are as follows:
 
  Voting rights
 
   Holders of Series A, Series B, Series C and Series D preferred stock are
entitled to one vote for each share of common stock into which such shares can
be converted. Certain votes, as defined in the Company's Articles of
Incorporation, require the approval of at least a majority of Series A, Series
B, Series C and Series D preferred stock stockholders. The holders of Series A
and Series B preferred stock, voting as separate classes, are each entitled to
elect one member to the Company's Board of Directors. Beginning January 1,
2001, the holders of the Series D preferred stock are entitled to elect one
member of Align's Board of Directors in the event that the Company has not yet
closed an initial public offering of its common stock at that time. The holders
of common stock and Preferred Stock, voting together as a single class, are
entitled to elect all remaining members of the Board of Directors.
 
  Dividends
 
   The holders of Series A, Series B, Series C and Series D preferred stock are
entitled to noncumulative dividends, when and if declared by the Board of
Directors, in the amount of $0.08, $0.24, $0.64 and $1.70, respectively, per
share per annum, on each outstanding share of Series A, Series B, Series C and
Series D preferred stock, subject to certain adjustments. No dividends have
been declared or paid as of June 30, 2000.
 
                                      F-18

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  Conversion rights
 
   Shares of Series A, Series B, Series C and Series D preferred stock are
convertible into common stock at the option of the holder or automatically upon
a public offering of at least $75,000,000 of common stock or upon the written
consent of the holders of more than two-thirds of the then outstanding shares
of Series A, Series B, Series C and Series D preferred stock. The conversion
rate is one share of common stock for one share of preferred stock (subject to
certain adjustments). In the event of a sale of common stock below any
preferred stock conversion price, such preferred stock conversion price shall
be adjusted. In addition, in the event that the Company issues more than
1,665,989 additional shares of common stock, as defined, before the earlier of
January 31, 2001, or the effectiveness of a registration statement, the Series
D conversion price will be adjusted as of such date. As of September 30, 2000,
the Company has issued 137,015 stock options above the 1,665,989 shares as
defined above. As a result the Series D stockholders would receive an
additional 36,663 shares of common stock upon conversion of the preferred
stock.
 
  Liquidation
 
   In the event of liquidation or sale of the Company, each class of preferred
stock shall be entitled to be paid out of the assets of the Company an amount
of $1.00, $3.00, $8.00 and $21.25, respectively, for the Series A, Series B,
Series C and Series D, plus all declared but unpaid dividends relating to
preferred stock.
 
   Holders of Series D preferred stock have preference over holders of Series
A, Series B, Series C and common stockholders. Holders of Series C preferred
stock have preference over holders of Series A and Series B preferred stock and
common stockholders. Holders of Series B preferred stock have preference over
holders of Series A preferred stock. Holders of Series A preferred stock have
preference over common stockholders.
 
   The remaining assets of the Company shall be distributed among all
stockholders on an as-if-converted basis until such time as the Series D
preferred stockholders have received $63.75 per share, Series C preferred
stockholders have received $16.00 per share, the Series B preferred
stockholders have received $9.00 per share and the Series A preferred
stockholders have received $4.00 per share. The remaining assets of the Company
shall then be distributed ratably to the common stockholders.
 
   The following events are considered a liquidation: (i) any consolidation,
merger or corporate reorganization in which the stockholders immediately prior
to such transaction own less than 50% of the Company's voting power immediately
after the transaction; or any transaction or series of related transactions in
which in excess of 50% of the Company's voting power is transferred and (ii) a
sale, lease or other disposition of all or substantially all of the Company's
assets.
 
  Warrants
 
   In April 1999, in connection with a financing arrangement, the Company
issued 266,667 warrants to purchase Series B convertible preferred stock at
$3.00 per share. The warrants are exercisable for a period of ten years from
the date of issuance or 5 years from the Company's initial public offering of
common stock, whichever is shorter. The aggregate fair value of these warrants
of $1,042,000 was calculated using the Black-Scholes pricing
 
                                      F-19

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
method and has been charged to preferred stock warrants. The related amount is
being amortized as interest expense over the life of the notes. A total of
$984,000 was amortized in 1999.
 
   In conjunction with the draw period extension, the Company issued the Lender
a warrant to purchase 56,250 shares of the Company's Series C preferred stock
at a price of $8.00 per share. The warrants are exercisable for a period of ten
years from the date of issuance. The fair value of the warrants was calculated
using the Black-Scholes pricing method and has been charged to preferred stock
warrants and amortized as interest expense over the life of the note. A total
of $776,000 was amortized during the nine months ended September 30, 2000 over
the total amount discounted from the value of the note of $776,000.
 
Note 7 Common Stock:
 
  Common stock
 
   The holders of common stock, voting as a separate class, may elect two
members of the Board of Directors. Any additional members of the Board of
Directors shall be elected by the holders of common stock and preferred stock
voting together as a class.
 
   The holders of common stock are also entitled to receive dividends whenever
funds are legally available and when declared by the Board of Directors subject
to the prior rights of holders of all classes of stock having priority rights
as to dividends. No dividends have been declared or paid as of September 30,
2000.
 
  Restricted stock purchase agreement
 
   The Company has sold shares of its common stock to founders and employees of
the Company under agreements which provide for repurchase of the stock by the
Company at the stock's original purchase price upon termination of employment.
The Company's right to repurchase lapses at any time prior to the earlier of:
(i) three years from date of agreement; (ii) the closing of an "Asset Transfer"
or an "Acquisition"; or (iii) the voluntary liquidation, dissolution, or
winding up of the Company. At December 31, 1998 and 1999, 889,466 and 326,771
shares of common stock, respectively, were subject to repurchase, including
52,258 shares of common stock which were subject to a right of repurchase at
the Company's discretion until October 2002.
 
Note 8 Stock Options:
 
   In April 1997, the Company adopted the 1997 Equity Incentive Plan (the
"Plan") under which the Board of Directors may issue incentive and non-
qualified stock options to employees, directors and consultants. The Company
has reserved 4,854,546 shares of common stock for issuance under the Plan. The
Board of Directors has the authority to determine to whom options will be
granted, the number of shares, the term and exercise price. Options are to be
granted at an exercise price not less than fair market value for incentive
stock options or 85% of fair market value for non-qualified stock options. For
individuals holding more than 10% of the voting rights of all classes of stock,
the exercise price of incentive stock options will not be less than 110% of
fair market value. Options become exercisable and vest on a cumulative basis at
the discretion of the Board of Directors but at a rate not less than 20% per
year over five years from the date of grant and generally
 
                                      F-20

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
vest at a rate of 25% on the first anniversary and 1/48th each month
thereafter. The term of the options is no longer than five years for incentive
stock options for which the grantee owns greater than 10% of the voting power
of all classes of stock and no longer than ten years for all other options.
 
   Activity under the Plan is set forth below (in thousands, except per share
data):
 

<TABLE>
<CAPTION>
                                                       Options Outstanding
                                                    --------------------------
                                                            Weighted
                                           Shares           Average
                                          Available         Exercise Aggregate
                                          for Grant Shares   Price     Price
                                          --------- ------  -------- ---------
<S>                                       <C>       <C>     <C>      <C>
 Initial shares reserved.................   1,255     --     $  --    $  --
 Options granted.........................    (587)    587    $0.019       11
 Options exercised.......................     --     (490)   $0.003       (2)
                                           ------   -----             ------
Balances at December 31, 1997............     668      97    $0.100        9
 Options granted.........................    (505)    505    $0.208      105
 Options exercised.......................     --      (46)   $0.109       (5)
 Options cancelled.......................      80     (80)   $0.100       (8)
                                           ------   -----             ------
Balances at December 31, 1998............     243     476    $0.214      101
 Increase in pool........................     800     --        --       --
 Options granted.........................    (368)    368    $0.391      144
 Options exercised.......................     --     (164)   $0.262      (42)
 Options cancelled.......................      37     (37)   $0.270      (10)
                                           ------   -----             ------
Balances at December 31, 1999............     712     643    $0.300      193
 Increase in pool........................   2,800     --        --       --
 Options granted.........................  (2,406)  2,406    $ 1.64    3,945
 Options exercised.......................     --     (821)   $ 0.83     (680)
 Options cancelled.......................      72     (72)   $ 0.56      (40)
                                           ------   -----             ------
Balances at September 30, 2000
 (unaudited).............................   1,178   2,156    $ 1.59   $3,418
                                           ======   =====             ======
</TABLE>

 
   The options outstanding and currently exercisable by exercise price at
December 31, 1999 are as follows:
 

<TABLE>
<CAPTION>
                          Options Outstanding and Exercisable
             -------------------------------------------------------------------------------
                                                                                  Weighted
                                                                                   Average
                                         Number                                   Remaining
                                       Outstanding                               Contractual
             Exercise                      and                                      Life
              Price                    Exercisable                                 (Years)
             --------                  -----------                               -----------
             <S>                       <C>                                       <C>
              $0.10                        162                                      8.38
               0.30                        404                                      9.20
               0.60                         44                                      9.65
               0.80                         33                                      9.81
                                           ---
                                           643
                                           ===
</TABLE>

 
                                      F-21

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
   The options outstanding and currently exercisable by exercise price at
September 30, 2000 are as follows (unaudited) (in thousands, except per share
data):
 

<TABLE>
<CAPTION>
                          Options Outstanding and Exercisable
             -------------------------------------------------------------------------------
                                                                                  Weighted
                                                                                   Average
                                         Number                                   Remaining
                                       Outstanding                               Contractual
             Exercise                      and                                      Life
              Price                    Exercisable                                 (Years)
             --------                  -----------                               -----------
             <S>                       <C>                                       <C>
              $0.10                          58                                     7.72
               0.30                         180                                     8.59
               0.60                          31                                     8.91
               0.80                         542                                     9.54
               2.13                       1,345                                     9.96
                                          -----
                                          2,156
                                          =====
</TABLE>

 
   The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-
Based Compensation." Had compensation cost for the Incentive Stock Plan been
determined based on the fair value at the grant date for awards during 1997,
1998 and 1999, consistent with the provisions of SFAS No. 123, the Company's
pro forma net loss and pro forma net loss per share would have been as follows
(in thousands, except per share amounts):
 

<TABLE>
<CAPTION>
                                                Period from
                                               April 3, 1997
                                                 (date of      Years Ended
                                               inception) to   December 31,
                                               December 31,  -----------------
                                                   1997       1998      1999
                                               ------------- -------  --------
   <S>                                         <C>           <C>      <C>
   Net loss, as reported.....................     $ (664)    $(3,775) $(15,415)
   Net loss, pro forma.......................     $ (664)    $(3,777) $(15,519)
   Net loss per share, as reported, basic and
    diluted..................................     $(0.86)    $ (2.66) $  (7.31)
   Net loss per share, pro forma, basic and
    diluted..................................     $(0.86)    $ (2.66) $  (7.36)
</TABLE>

 
   Such pro forma disclosure may not be representative of future compensation
cost because options vest over several years and additional grants are
anticipated to be made each year.
 
   The value of each option grant is estimated on the date of grant using the
minimum value method with the following weighted assumptions:
 

<TABLE>
<CAPTION>
                                          Period from
                                         April 3, 1997
                                           (date of          Years Ended
                                         inception) to      December 31,
                                         December 31,  ------------------------
                                             1997         1998         1999
                                         ------------- -----------  -----------
   <S>                                   <C>           <C>          <C>
   Risk-free interest rate..............     6.11%     4.22 - 5.63% 4.91 - 6.03%
   Expected life........................    5 years      5 years      5 years
   Expected dividends...................       0%           0%           0%
</TABLE>

 
   Volatility was not included in the calculation of the fair value of options
grants as the Company's equity securities are not publicly traded.
 
 
                                      F-22

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
   The weighted average per share fair values of options granted during the
period from April 3, 1997 (date of inception) to December 31, 1997, and the
years ended December 31, 1998 and 1999 were $0.06, $0.12 and $6.57,
respectively.
 
  Stock-based compensation
 
   During the years ended December 31, 1998 and 1999, the Company recorded
unearned stock-based compensation for the excess of the deemed fair market
value over the exercise price at the date of grant of none and $1,772,000,
respectively, related to options granted to employees. The Company has recorded
additional unearned stock-based compensation of $73,602,000 related to options
issued to employees to purchase common stock issued through September 30, 2000.
The compensation expense is being recognized over the option vesting period of
four years using the straight-line method. For the period from April 3, 1997
(date of inception) to December 31, 1997 and the years ended December 31, 1998
and 1999, the Company recorded amortization of stock-based compensation of
none, none and $267,000, respectively, in connection with options granted to
employees.
 
   During the years ended December 31, 1998 and 1999, the Company recorded
unearned stock-based compensation of none and $402,000, respectively, related
to options granted to consultants. For options granted to consultants, the
Company determined the fair value of the options using the Black-Scholes
pricing model. The Company has recorded additional unearned stock-based
compensation of $7,368,000 related to options issued to consultants to purchase
common stock issued through September 30, 2000. The compensation expense is
being recognized over the option vesting period of four years, using the method
presented by FIN 28. For the period from April 3, 1997 (date of inception) to
December 31, 1997 and the years ended December 31, 1998 and 1999, the Company
recorded amortization of stock-based compensation of none, none and $127,000,
respectively, in connection with options granted to consultants.
 
   Amortization of deferred stock compensation has been allocated to cost of
revenue, sales and marketing, general and administrative and research and
development expenses as follows (in thousands):
 

<TABLE>
<CAPTION>
                                            Period from
                                              April 3,
                                             1997 (date    Years    Nine Months
                                                 of        Ended       Ended
                                             inception)   December   September
                                                 to         31,         30,
                                            December 31, ---------- -----------
                                                1997     1998  1999 1999  2000
                                            ------------ ----- ---- ---- ------
                                                                    (unaudited)
   <S>                                      <C>          <C>   <C>  <C>  <C>
   Cost of revenue.........................    $ --      $ --  $ 80 $ 21 $1,339
   Sales and marketing.....................      --        --   111   50  1,461
   General and administrative..............      --        --   106   46  3,374
   Research and development................      --        --    97   70  1,729
                                               -----     ----- ---- ---- ------
                                               $ --      $ --  $394 $187 $7,903
                                               =====     ===== ==== ==== ======
</TABLE>

 
                                      F-23

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
Note 9 Income Taxes:
 
   Deferred tax assets and liabilities consist of the following (in thousands):
 

<TABLE>
<CAPTION>
                                                                 Year Ended
                                                                December 31,
                                                               ----------------
                                                                1998     1999
                                                               -------  -------
   <S>                                                         <C>      <C>
   Deferred tax assets:
     Start-up costs........................................... $ 1,014  $ 2,514
     Net operating loss carryforwards.........................     695    3,968
     Research and development credit..........................     219      606
     Other....................................................      (4)     181
                                                               -------  -------
       Deferred tax assets....................................   1,924    7,269
       Less: Valuation allowance..............................  (1,924)  (7,269)
                                                               -------  -------
         Net deferred tax asset............................... $   --   $   --
                                                               =======  =======
</TABLE>

 
   Due to the uncertainty surrounding the realization of favorable tax
attributes in future tax returns, the Company has placed a valuation allowance
against all of its net deferred tax assets. At such time as it is determined
that it is more likely than not that the deferred tax assets are realizable,
the valuation allowance will be reduced.
 
   At December 31, 1998 and 1999, the Company had federal and state net
operating loss carryforwards of approximately $10,500,000 and $1,700,000,
respectively, available to offset future regular and alternative minimum
taxable income. The Company's federal and state net operating loss
carryforwards will begin to expire in 2017 for federal purposes and 2005 for
state purposes if not utilized.
 
   At December 31, 1998 and 1999, the Company had federal and state research
and experimentation tax credit carryforwards of approximately $219,000 and
$606,000, respectively, available to offset future income tax liabilities. The
Company's federal research and experimentation credit will begin to expire in
2017.
 
   The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carryforwards in certain situations where changes occur in the stock
ownership of a Company. If the Company should have an ownership change, as
defined by the tax law, utilization of the carryforwards could be restricted.
 
Note 10 Employee Benefit Plan:
 
   In January 1999, the Company adopted a defined contribution retirement plan
under Section 401(k) of the Internal Revenue Code. This plan covers
substantially all employees who meet minimum age and service requirements and
allows participants to defer a portion of their annual compensation on a pre-
tax basis. Company contributions to the plan may be made at the discretion of
the Board of Directors. There have been no contributions by the Company since
the inception of the plan.
 
                                      F-24

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
Note 11 Subsequent Events:
 
  Initial Public Offering
 
   In September 2000, the Board of Directors authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock to the
public. If the initial public offering is closed under the terms presently
anticipated, all of the convertible preferred stock outstanding will
automatically convert into shares of common stock on a one-for-one basis.
Unaudited pro forma stockholders' equity, as adjusted for the assumed
conversion of the preferred stock, is set forth on the balance sheet.
 
  Loan to Officer
 
   In September 2000, the Company issued a loan in the amount of $95,000 at a
rate of 6% per annum to the Company's Vice President of Corporate Strategy. The
loan is due on demand, but in no event later than September 19, 2001.
 
  Employee Notes Receivable
 
   In November 2000, the Company loaned $1,162,082 to certain employees and
officers for the exercise of incentive stock options. All of the full recourse
notes accrue interest at 9.5% and are due on the second anniversary of the
issuance date. The notes are secured by the shares of common stock held by the
employees and their personal guarantee.
 
  Sale of Preferred Securities
 
   In October 2000, the Company sold 718,355 additional shares of Series D
preferred stock for gross proceeds of $15.3 million. The issuance of Series D
convertible preferred stock resulted in a beneficial conversion feature of
$13.5 million, calculated in accordance with Emerging Issues Task Force Issue
No. 98-5, "Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios." Accordingly, the
Company will recognize a charge to additional paid in capital to account for
the deemed dividend on the preferred stock as of the issuance date in its third
fiscal quarter of 2000. In addition, the Series D preferred shares have certain
contingent rights and preferences which, if perfected, could cause the Company
to record an incremental beneficial conversion feature charge.
 
  Conversion Rights
 
   In accordance with the Company's certificate of incorporation, as amended in
connection with the Series D preferred stock sale, as of November 13, 2000,
because the Company has issued 295,015 shares of common stock in excess of the
1,665,979 shares of common stock permitted, as defined in the certificate of
incorporation, the Company will be required to issue an additional total number
of 96,636 shares of common stock upon the conversion of the preferred stock.
 
   In addition, the additional shares issued as per above will result in a
beneficial conversion feature, calculated in accordance with EITF No. 98-5.
Accordingly, the Company will recognize a deemed dividend on this additional
common stock based on the fair value of the common stock at the conversion
date.
 
                                      F-25

<PAGE>
 
                             ALIGN TECHNOLOGY, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  2001 Stock Incentive Plan
 
   In August 2000, the Board of Directors adopted the 2001 Stock Incentive Plan
(the "2001 Plan"). The 2001 Plan, which will terminate no later than 2011,
provides for the granting of incentive stock options, nonstatutory stock
options and restricted stock purchase rights and stock bonuses to employees,
and consultants.
 
   A total of 2,700,000 shares of common stock have been authorized for
issuance under the 2001 Plan. At the date of the stockholders' meeting in 2001,
and annually thereafter, the authorized shares will automatically be increased
by a number of shares equal to the least of:
 
  .  3% of the then outstanding shares of common stock on a fully-diluted
     basis;
 
  .  3,000,000 shares; or
 
  .  a lesser number of shares determined by the Board of Directors.
 
  Employee Stock Purchase Plan
 
   In August 2000, the Board of Directors adopted the Employee Stock Purchase
Plan (the "Purchase Plan"), authorizing the issuance of 500,000 shares of
common stock pursuant to purchase rights granted to in the United States
employees.
 
   At the date of the stockholders' meeting in 2001, and annually thereafter,
for a period of 20 years, the share reserve will automatically be increased by
a number of shares equal to the least of:
 
  .  1.0% of the then outstanding shares of common stock on a fully diluted
     basis;
 
  .  5000,000 shares; or
 
  .  a lesser number of shares determined by the Board of Directors.
 
   The Purchase Plan is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended. As of the date hereof, no shares of common stock have been purchased
under the Purchase Plan.
 
   The Purchase Plan permits eligible employees to purchase common stock at a
discount through payroll deductions during defined offering periods. The price
at which stock is purchased under the purchase plan is equal to 85% of the fair
market value of the common stock on the first day of the offering period of 85%
of the fair market value on the subsequent designated purchase dates, whichever
is lower. The initial offering period will commence on the effective date of
the offering.
 
                                      F-26

<PAGE>
 
Inside back page:
 
Middle top of page: Caption: "Which of these people is wearing Invisalign?"
Graphic: Top of page is a series of four pictures of people smiling.
 
Center of page: Caption: "They all are."
 
Center third of page: Graphic: three pictures of woman placing an Aligner on
her teeth.
 
Bottom right corner: Align mark; Invisalign mark

<PAGE>
 
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide information different from that contained in
this prospectus. We are offering to sell, and seeking offers to buy, shares of
common stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of
any sale of our common stock.
 
 
                              TABLE OF CONTENTS
 

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
Summary..................................................................   1
Risk Factors.............................................................   6
Special Note Regarding Forward-Looking Statements and Industry Data......  15
Use of Proceeds..........................................................  16
Dividend Policy..........................................................  16
Capitalization...........................................................  17
Dilution.................................................................  18
Selected Consolidated Financial Data.....................................  19
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  20
Business.................................................................  25
Management...............................................................  38
Certain Transactions.....................................................  52
Principal Stockholders...................................................  55
Description of Capital Stock.............................................  59
Shares Eligible for Future Sale..........................................  62
Underwriting.............................................................  64
Legal Matters............................................................  66
Experts..................................................................  66
Where You Can Find Additional Information................................  67
Index to Financial Statements............................................ F-1
</TABLE>

 
Until          , 2000 (25 days after the date of this Prospectus), all dealers
that buy, sell or trade in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. Dealers are also
obligated to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
 
--------------------------------------------------------------------------------
 
  Align Technology, Inc.
 
       Shares
 
  Common Stock
 
  Deutsche Banc Alex. Brown
  Bear, Stearns & Co. Inc.
  J.P. Morgan & Co.
  Robertson Stephens
 
   Prospectus
 
         , 2000
 

<PAGE>
 

 
                                   PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 

Item 13. Other Expenses of Issuance and Distribution
 
   The following table sets forth the costs and expenses, other than the
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fees and the Nasdaq National Market listing
fee.
 

<TABLE>
   <S>                                                                 <C>
   SEC Registration Fee............................................... $ 52,800
   NASD Filing Fee.................................................... $ 20,500
   Nasdaq National Market Listing Fee.................................       *
   Printing and Engraving Expenses.................................... $350,000
   Legal Fees and Expenses............................................       *
   Accounting Fees and Expenses.......................................       *
   Blue Sky Fees and Expenses......................................... $  3,000
   Transfer Agent Fees................................................ $ 10,000
   Miscellaneous......................................................       *
                                                                       --------
    Total.............................................................       *
                                                                       ========
</TABLE>

--------
* To be provided by amendment
 

Item 14. Indemnification of Directors and Officers
 
   Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit the
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article XI, Section 43 of our bylaws
provides for mandatory indemnification of our directors and officers and
permissible indemnification of employees and other agents to the maximum extent
permitted by the Delaware General Corporation Law. Our certificate of
incorporation provides that, subject to Delaware law, our directors will not be
personally liable for monetary damages for breach of the directors' fiduciary
duty as directors to Align Technology, Inc. and its stockholders. This
provision in the certificate of incorporation does not eliminate the directors'
fiduciary duty, and in appropriate circumstances, equitable remedies such as
injunctive or other forms of non-monetary relief will remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the company or our
stockholders for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental
laws. We have entered into indemnification agreements with our officers and
directors, which provide our officers and directors with further
indemnification to the maximum extent permitted by the Delaware General
Corporation Law. Reference is also made to the underwriting agreement contained
in Exhibit 1.1 hereto, indemnifying our officers and directors against certain
liabilities, and our Amended and Restated Investors' Rights Agreement contained
in Exhibit 10.1 hereto, indemnifying the parties thereto, including controlling
stockholders, against liabilities.
 
                                      II-1

<PAGE>
 

Item 15. Recent Sales of Unregistered Securities
 
   Set forth below is information regarding shares of common stock and
Preferred Stock issued, and options and warrants granted, by the registrant
within the past three years.
 
   (1)  On August 29, 1997, the registrant sold 2,175,000 shares of Series A
Preferred Stock, convertible into 2,175,000 shares of common stock, to a group
of investors for an aggregate cash consideration of $2,175,000.00;
 
   (2)  On July 13, 1998, the registrant sold 3,373,968 shares of Series B
Preferred Stock, convertible into 3,373,968 shares of common stock, to a group
of investors for an aggregate cash consideration of $10,121,904.00;
 
   (3)  On September 24, 1999, the registrant sold 2,574,364 shares of Series C
Preferred Stock, convertible into 2,574,364 shares of common stock, to a group
of investors for an aggregate cash consideration of $20,594,912.00;
 
   (4)  On May 25, June 20 and October 5, 2000, the registrant sold 4,767,191
shares of Series D Preferred Stock, convertible into 4,767,191 shares of common
stock, to a group of investors for an aggregate cash consideration of
101,266,995.52.
 
   (5)  As of September 30, 2000, options to purchase 1,206,957 shares of
common stock had been exercised for an aggregate consideration of $324,337 and
options to purchase 987,810 shares of common stock, at a weighted average
exercise price of $0.656 per share, were outstanding under the 1997 Plan;
 
   (6)  As of September 30, 2000, no options under the 2001 Plan have been
granted.
 
   None of the foregoing transactions involved any underwriters, underwriting
discounts or commissions, or any public offering, and we believe that each
transaction was exempt from the registration requirements of the Securities Act
by virtue of Section 4(2) thereof, Regulation D promulgated thereunder or Rule
701 pursuant to compensatory benefit plans and contracts relating to
compensation as provided under Rule 701. The recipients in each transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof, and
appropriate legends were affixed to the share certificates and instruments
issued in these transactions. All recipients had adequate access, through their
relationships with us, to information about us.
 

Item 16. Exhibits
 

<TABLE>
<CAPTION>
 Exhibit
 Number                          Description of Document
 ------- ----------------------------------------------------------------------
 <C>     <S>
  1.1    Form of Underwriting Agreement.
 
  3.1*   Amended and Restated Certificate of Incorporation of registrant, to be
         effective upon consummation of this offering.
 
  3.2*   Amended and Restated Bylaws of registrant, to be effective upon
         consummation of this offering.
 
  4.1*   Form of Specimen Common Stock Certificate.
 
  5.1*   Opinion of Brobeck, Phleger & Harrison LLP regarding the legality of
         the common stock being registered.
 
 10.1*   Amended and Restated Investors' Rights Agreement, among registrant and
         certain of its stockholders, dated September 16, 2000.
 
 10.2*   Employment Agreement between registrant and Stephen Bonelli, dated
         November 6, 2000.
</TABLE>

 
                                      II-2

<PAGE>
 

<TABLE>
<CAPTION>
 Exhibit
 Number                          Description of Document
 ------- ----------------------------------------------------------------------
 <C>     <S>
 10.3    Lease and License Agreement by and between Pakistan Services Ltd. and
         registrant for its manufacturing space in Pakistan located at Pearl
         Continental, Pavilion 44, Lahore, Pakistan, dated March 4, 1999.
 
 10.4    Lease Agreement by and between James Lindsay and registrant, dated
         June 20, 2000, for office space located at 881 Martin Avenue, Santa
         Clara, CA.
 
 10.5*   Sublease Agreement by and between GW Com, Inc. and registrant, dated
         July 2000, for office space located at 851 Martin Avenue, Santa Clara,
         CA.
 
 10.6    Lease Agreement by and between registrant and Saadia Kahwar Khan
         Chishti for manufacturing space in Pakistan located at the Bhallah
         House, Bhalla Stop, Multan Road, Lahore, Pakistan dated September 1,
         2000.
 
 10.7    Shelter Services Agreement between registrant and Elamex, S.A. de C.V.
         dated February 16, 2000.
 
 10.8    Joint Development Agreement by and between registrant and 3D Systems
         dated September 9, 1999.
 
 10.9*   Loan and Security Agreement by and between Comdisco Inc. and
         registrant, dated April 12, 1999.
 
 10.10*  Secured Promissory Note Agreement by and between Comdisco Inc. and
         registrant, dated April 14, 2000.
 
 10.11   Warrant Agreement, dated April 12, 1999, by and between Comdisco and
          registrant.
 
 10.12*  Warrant Agreement, dated January 7, 2000, by and between Comdisco and
          registrant.
 
 23.1    Consent of PricewaterhouseCoopers LLP, Independent Accountants.
 
 23.2    Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion
         filed as Exhibit 5.1).
 
 24.1    Power of Attorney (see Page II-5).
 
 27.1    Financial Data Schedule.
</TABLE>

--------
* To be filed by amendment.
 

Item 17. Undertakings
 
   We hereby undertake to provide to the underwriters at the closing specified
in the underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
 
   Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the Delaware General Corporation Law, our certificate of incorporation or our
bylaws, indemnification agreements entered into between the registrant and our
officers and directors, the underwriting agreement, or otherwise, we have been
advised that in the opinion of the commission such indemnification is against
public policy as expressed in the Securities Act, and is, therefore,
unenforceable. If a claim for indemnification against such liabilities (other
than the payment by us of expenses incurred or paid by any of our directors,
officers or controlling persons in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question of whether such
indemnification by us is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
 
                                      II-3

<PAGE>
 
   The undersigned registrant hereby undertakes:
 
   (1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective;
 
   (2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
 
                                      II-4

<PAGE>
 

                                   SIGNATURES
 
   Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Santa
Clara, State of California, on November 14, 2000.
 
                                          ALIGN TECHNOLOGY, INC.
 
                                                     /s/ Zia Chishti
                                          By: _________________________________
                                                        Zia Chishti,
                                                Chief Executive Officer and
                                                   Chairman of the Board
 
                               POWER OF ATTORNEY
 
   KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Zia Chishti and Stephen
Bonelli, and each one of them, his true and lawful attorneys-in-fact and
agents, each with full power of substitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
Registration Statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, as amended, and all post-
effective amendments thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming that each of said attorneys-in-fact and agents or any of them, or
his or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
 
   Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
 

<TABLE>
<CAPTION>
 Signature                          Title                                 Date
 ---------                          -----                                 ----
 
 <C>                                <S>                                   <C>
         /s/ Zia Chishti            Chief Executive Officer and Chairman  November 14, 2000
 _________________________________   of the Board (Principal Executive
            Zia Chishti              Officer)
 
       /s/ Stephen Bonelli          Chief Financial Officer and Vice      November 14, 2000
 _________________________________   President, Finance (Principal
          Stephen Bonelli            Accounting Officer)
 
        /s/ Kelsey Wirth            President                             November 14, 2000
 _________________________________
            Kelsey Wirth
 
         /s/ Brian Dovey            Director                              November 14, 2000
 _________________________________
            Brian Dovey
 
        /s/ Joseph Lacob            Director                              November 14, 2000
 _________________________________
            Joseph Lacob
</TABLE>

 
                                      II-5

<PAGE>
 

<TABLE>
<CAPTION>
 Signature                          Title                                 Date
 ---------                          -----                                 ----
 
 <C>                                <S>                                   <C>
         /s/ Mark Logan             Director                              November 14, 2000
 _________________________________
             Mark Logan
 
        /s/ H. Kent Bowen           Director                              November 14, 2000
 _________________________________
           H. Kent Bowen
</TABLE>

 
                                      II-6

<PAGE>
 

                                 EXHIBIT INDEX
 
 

<TABLE>
<CAPTION>
 Exhibit
 Number                          Description of Document
 ------- ----------------------------------------------------------------------
 <C>     <S>
  1.1    Form of Underwriting Agreement.
 
  3.1*   Amended and Restated Certificate of Incorporation of registrant, to be
         effective upon consummation of this offering.
 
  3.2*   Amended and Restated Bylaws of registrant, to be effective upon
         consummation of this offering.
 
  4.1*   Form of Specimen Common Stock Certificate.
 
  5.1*   Opinion of Brobeck, Phleger & Harrison LLP regarding the legality of
         the common stock being registered.
 
 10.1*   Amended and Restated Investors' Rights Agreement, among registrant and
         certain of its stockholders, dated September 16, 2000.
 
 10.2*   Employment Agreement between registrant and Stephen Bonelli, dated
         November 6, 2000.
 
 10.3    Lease and License Agreement by and between Pakistan Services Ltd. and
         registrant for its manufacturing space in Pakistan located at Pearl
         Continental, Pavilion 44, Lahore, Pakistan, dated March 4, 1999.
 
 10.4    Lease Agreement by and between James Lindsay and registrant, dated
         June 20, 2000, for office space located at 881 Martin Avenue, Santa
         Clara, CA.
 
 10.5*   Sublease Agreement by and between GW Com, Inc. and registrant, dated
         July 2000, for office space located at 851 Martin Avenue, Santa Clara,
         CA.
 
 10.6    Lease Agreement by and between registrant and Saadia Kahwar Khan
         Chishti for manufacturing space in Pakistan located at the Bhallah
         House, Bhalla Stop, Multan Road, Lahore, Pakistan dated September 1,
         2000.
 
 10.7    Shelter Services Agreement between registrant and Elamex, S.A. de C.V.
         dated February 16, 2000.
 
 10.8    Joint Development Agreement by and between registrant and 3D Systems
         dated September 9, 1999.
 
 10.9*   Loan and Security Agreement by and between Comdisco Inc. and
         registrant, dated April 12, 1999.
 
 10.10*  Secured Promissory Note Agreement by and between Comdisco Inc. and
         registrant, dated April 14, 2000.
 
 10.11   Warrant Agreement, dated April 12, 1999, by and between Comdisco and
          registrant.
 
 10.12*  Warrant Agreement, dated January 7, 2000, by and between Comdisco and
          registrant.
 
 23.1    Consent of PricewaterhouseCoopers LLP, Independent Accountants.
 
 23.2    Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion
         filed as Exhibit 5.1).
 
 24.1    Power of Attorney (see Page II-5).
 
 27.1    Financial Data Schedule.
</TABLE>

--------
* To be filed by amendment.





<PAGE>
 
                                                                     EXHIBIT 1.1

                             ______________ Shares


                             ALIGN TECHNOLOGY, INC.

                                  Common Stock

                              ($0.0001 Par Value)


                         EQUITY UNDERWRITING AGREEMENT
                         -----------------------------


                                                           _______________, 2000


Deutsche Bank Securities Inc.
Bear Stearns & Co. Inc.
J.P. Morgan & Co., Inc.
FleetBoston Robertson Stephens Inc.
As Representatives of the
   Several Underwriters
c/o  Deutsche Bank Securities Inc.
One South Street
Baltimore, Maryland 21202

Ladies and Gentlemen:

     Align Technology, Inc. a Delaware corporation (the "Company"), proposes to
sell to the several underwriters (the "Underwriters") named in Schedule I hereto
for whom you are acting as representatives (the "Representatives") an aggregate
of __________ shares of the Company's Common Stock, $0.0001 par value (the "Firm
Shares").  The respective amounts of the Firm Shares to be so purchased by the
several Underwriters are set forth opposite their names in Schedule I hereto.
The Company also proposes to sell at the Underwriters' option an aggregate of up
to __________ additional shares of the Company's Common Stock (the "Option
Shares") as set forth below.

     As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and  (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase
 the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the several Underwriters.  

<PAGE>
 
The Firm Shares and the Option Shares (to the extent the aforementioned option
is exercised) are herein collectively called the "Shares."

     Deutsche Bank Securities Inc. ("DBSI") has agreed to reserve up to
___________ of the Shares to be purchased by it under this Agreement for sale to
the Company's directors, officers, employees and business associates and other
parties related to the Company (collectively, "Participants"), as set forth in
the Prospectus under the heading "Underwriters" (the "Directed Share Program").
The Shares to be sold by DBSI and its affiliates pursuant to the Directed Share
Program are referred to hereinafter as the "Directed Shares."  Any Directed
Shares not orally confirmed for purchase by any Participants by the end of the
business day on which this Agreement is executed will be offered to the public
by the Underwriters as set forth in the Prospectus.

     In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:

     1.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
         --------------------------------------------- 

     The Company represents and warrants to each of the Underwriters as follows:

         (a)  A registration statement on Form S-1 (File No. 333-______) with
respect to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. The Company has complied with the conditions for the use of Form 
S-1. Copies of such registration statement, including any amendments thereto,
the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462 (b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no 
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means the form of prospectus first filed
with the Commission pursuant to Rule 424(b). Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus."

         (b)  The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Each of the subsidiaries of
the Company as listed in Exhibit 21 to Item 16(a) of the Registration Statement
(collectively, the "Subsidiaries") has been duly organized and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement.
The Subsidiaries are the only subsidiaries, direct or indirect, of the Company.
The Company and each of the Subsidiaries are duly qualified to transact business
in all jurisdictions in which the conduct of their business requires such
qualification. The outstanding shares of capital

                                      -2-

<PAGE>
 
stock of each of the Subsidiaries have been duly authorized and validly issued,
are fully paid and non-assessable and are owned by the Company or another
Subsidiary free and clear of all liens, encumbrances and equities and claims;
and no options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into shares of
capital stock or ownership interests in the Subsidiaries are outstanding.

         (c)  The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable; the
Shares to be issued and sold by the Company have been duly authorized and when
issued and paid for as contemplated herein will be validly issued, fully paid
and non-assessable; and no preemptive rights of stockholders exist with respect
to any of the Shares or the issue and sale thereof. Neither the filing of the
Registration Statement nor the offering or sale of the Shares as contemplated by
this Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any shares of Common Stock.

         (d)  The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the description
thereof contained in the Registration Statement. The form of certificates for
the Shares conforms to the corporate law of the jurisdiction of the Company's
incorporation.

         (e)  The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform, to the
requirements of the Act and the Rules and Regulations. The Registration
Statement and any amendment thereto do not contain, and will not contain, any
untrue statement of a material fact and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue statement
of material fact; and do not omit, and will not omit, to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Underwriter through the Representatives, specifically for use in the
preparation thereof.

         (f)  The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the results of
operations and cash flows of the Company and the consolidated Subsidiaries, at
the indicated dates and for the indicated periods. Such financial statements and
related schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
except as disclosed therein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data included in the Registration Statement presents fairly the
information shown therein and such data has been compiled on a basis consistent
with the financial

                                      -3-

<PAGE>
 
statements presented therein and the books and records of the company. The pro
forma financial statements and other pro forma financial information included in
the Registration Statement and the Prospectus present fairly the information
shown therein, have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, have been properly
compiled on the pro forma bases described therein, and, in the opinion of the
Company, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions or
circumstances referred to therein.

         (g)  PricewaterhouseCoopers LLP, who have certified certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.

         (h)  There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of its Subsidiaries might result in
any material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and of the Subsidiaries taken as a whole or to prevent the
consummation of the transactions contemplated hereby, except as set forth in the
Registration Statement.

         (i)  The Company and the Subsidiaries have good and marketable title to
all of the properties and assets reflected in the financial statements (or as
described in the Registration Statement) hereinabove described, subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except those reflected
in such financial statements (or as described in the Registration Statement) or
which are not material in amount. The Company and the Subsidiaries occupy their
leased properties under valid and binding leases conforming in all material
respects to the description thereof set forth in the Registration Statement.

         (j)  The Company and the Subsidiaries have filed all Federal, State,
local and foreign tax returns which have been required to be filed and have paid
all taxes indicated by said returns and all assessments received by them or any
of them to the extent that such taxes have become due and are not being
contested in good faith and for which an adequate reserve for accrual has been
established in accordance with generally accepted accounting principles. All tax
liabilities have been adequately provided for in the financial statements of the
Company, and the Company does not know of any actual or proposed additional
material tax assessments.

         (k)  Since the respective dates as of which information is given in the
Registration Statement, as it may be amended or supplemented, there has not been
any material adverse change or any development involving a prospective material
adverse change in or affecting the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise), or prospects of
the Company and its Subsidiaries taken as a whole, whether or not occurring in
the ordinary course of business, and there has not been any material transaction
entered into or any material transaction that is probable of being entered into
by the Company or the Subsidiaries, other than transactions in the ordinary
course of business and changes and transactions described in the Registration
Statement, as it may be amended or supplemented. The Company and the
Subsidiaries

                                      -4-

<PAGE>
 
have no material contingent obligations which are not disclosed in the Company's
financial statements which are included in the Registration Statement.

         (l)  Neither the Company nor any of the Subsidiaries is or with the
giving of notice or lapse of time or both, will be, in violation of or in
default under its Charter or By-Laws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it, or any of its properties, is bound and which default is of material
significance in respect of the condition, financial or otherwise of the Company
and its Subsidiaries taken as a whole or the business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and the Subsidiaries taken as a whole. The execution and delivery of
this Agreement and the consummation of the transactions herein contemplated and
the fulfillment of the terms hereof will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company or any Subsidiary is a party, or of the Charter or By-Laws of the
Company or any order, rule or regulation applicable to the Company or any
Subsidiary of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction.

         (m)  Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.

         (n)  The Company and each of the Subsidiaries holds all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their businesses; and neither the Company nor any of
the Subsidiaries has infringed any patents, patent rights, trade names,
trademarks or copyrights, which infringement is material to the business of the
Company and the Subsidiaries taken as a whole. The Company knows of no material
infringement by others of patents, patent rights, trade names, trademarks or
copyrights owned by or licensed to the Company.

         (o)  Neither the Company, nor to the Company's knowledge, any of its
affiliates, has taken or may take, directly or indirectly, any action designed
to cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
shares of Common Stock to facilitate the sale or resale of the Shares. The
Company acknowledges that the Underwriters may engage in passive market making
transactions in the Shares on The Nasdaq Stock Market in accordance with
Regulation M under the Exchange Act.

         (p)  Neither the Company nor any Subsidiary is an "investment company"
within the meaning of such term under the Investment Company Act of 1940, (as
amended, the "1940 Act") and the rules and regulations of the Commission
thereunder.

         (q)  The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's 

                                      -5-

<PAGE>
 
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.

         (r)  The Company and each of its Subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of their respective businesses and the value of their respective properties and
as is customary for companies engaged in similar industries.

         (s)  The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.

         (t)  To the Company's knowledge, there are no affiliations or
associations between any member of the NASD and any of the Company's officers,
directors or 5% or greater securityholders, except as set forth in the
Registration Statement.

         (u)  No consent, approval, authorization or order of, or qualification
with, any governmental body or agency, other than those obtained, is required in
connection with the offering of the Directed Shares in any jurisdiction where
the Directed Shares are being offered.

         (v)  The Company has not offered, or caused DBSI or its affiliates to
offer, Shares to any person pursuant to the Directed Share Program with the
specific intent to unlawfully influence (i) a customer or supplier of the
Company to alter the customer's or supplier's level or type of business with the
Company, or (ii) a trade journalist or publication to write or publish favorable
information about the Company or its products.

     2.  PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
         ---------------------------------------------- 

         (a)  On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $_____ per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.

                                      -6-

<PAGE>
 
         (b)  Payment for the Firm Shares to be sold hereunder is to be made in
New York Clearing House funds by Federal (same day) against delivery of
certificates therefor to the Representatives for the several accounts of the
Underwriters. Such payment and delivery are to be made through the facilities of
the Depository Trust Company, New York, New York at 10:00 a.m., New York time,
on the third business day after the date of this Agreement or at such other time
and date not later than five business days thereafter as you and the Company
shall agree upon, such time and date being herein referred to as the "Closing
Date." (As used herein, "business day" means a day on which the New York Stock
Exchange is open for trading and on which banks in New York are open for
business and are not permitted by law or executive order to be closed.)

         (c)  In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company setting forth the
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be delivered.
The time and date at which certificates for Option Shares are to be delivered
shall be determined by the Representatives but shall not be earlier than three
nor later than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein referred to
as the "Option Closing Date"). If the date of exercise of the option is three or
more days before the Closing Date, the notice of exercise shall set the Closing
Date as the Option Closing Date. The number of Option Shares to be purchased by
each Underwriter shall be in the same proportion to the total number of Option
Shares being purchased as the number of Firm Shares being purchased by such
Underwriter bears to __________, adjusted by you in such manner as to avoid
fractional shares. The option with respect to the Option Shares granted
hereunder may be exercised only to cover over-allotments in the sale of the Firm
Shares by the Underwriters. You, as Representatives of the several Underwriters,
may cancel such option at any time prior to its expiration by giving written
notice of such cancellation to the Company. To the extent, if any, that the
option is exercised, payment for the Option Shares shall be made on the Option
Closing Date in Federal (same day funds) through the facilities of the
Depository Trust Company in New York, New York drawn to the order of the
Company.

     3.  OFFERING BY THE UNDERWRITERS.
         ---------------------------- 

     It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so.  The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus.  The Representatives may from
time to time thereafter change the public offering price and other selling
terms.  To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.

                                      -7-

<PAGE>
 
     It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.

     4.  COVENANTS OF THE COMPANY.
         ------------------------ 

     The Company covenants and agrees with the several Underwriters that:

         (a)  The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.

         (b)  The Company will advise the Representatives promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (D) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.

         (c)  The Company will cooperate with the Representatives in endeavoring
to qualify the Shares for sale under the securities laws of such jurisdictions
as the Representatives may reasonably have designated in writing and will make
such applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to file
such a consent. The Company will, from time to time, prepare and file such
statements, reports, and other documents, as are or may be required to continue
such qualifications in effect for so long a period as the Representatives may
reasonably request for distribution of the Shares.

         (d)  The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or before
the Closing Date, four signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will deliver to
the Representatives such number of copies of the Registration Statement
(including such

                                      -8-

<PAGE>
 
number of copies of the exhibits filed therewith that may reasonably be
requested), and of all amendments thereto, as the Representatives may reasonably
request.

         (e)  The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder, so as to
permit the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.

         (f)  The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 15 months
after the effective date of the Registration Statement, an earning statement
(which need not be audited) in reasonable detail, covering a period of at least
12 consecutive months beginning after the effective date of the Registration
Statement, which earning statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.

         (g)  Prior to the Closing Date, the Company will furnish to the
Underwriters, as soon as they have been prepared by or are available to the
Company, a copy of any unaudited interim financial statements of the Company for
any period subsequent to the period covered by the most recent financial
statements appearing in the Registration Statement and the Prospectus.

         (h)  No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of Common
Stock (or agreement for such) will be made for a period of 180 days after the
date of this Agreement, directly or indirectly, by the Company otherwise than
hereunder or with the prior written consent of DBSI.

         (i)  The Company will use its best efforts to list, subject to notice
of issuance, the Shares on The Nasdaq Stock Market.

         (j)  The Company has caused each officer and director and stockholder
of the Company to furnish to you, on or prior to the date of this agreement, a
letter or letters, in form and substance satisfactory to the Underwriters,
pursuant to which each such person shall agree not to offer, sell, sell short or
otherwise dispose of any shares of Common Stock of the Company or other capital
stock of the Company, or any other securities convertible, exchangeable or
exercisable for Common Shares or derivative of Common Shares owned by such
person or request the registration for the offer or sale of any of the foregoing
(or as to which such person has the right to direct the

                                      -9-

<PAGE>
 
disposition of) for a period of 180 days after the date of this Agreement,
directly or indirectly, except with the prior written consent of DBSI ("Lockup
Agreements").

         (k)  The Company shall apply the net proceeds of its sale of the Shares
as set forth in the Prospectus and shall file such reports with the Commission
with respect to the sale of the Shares and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Act.

         (l)  The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the 1940 Act.

         (m)  The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar for the Common
Stock.

         (n)  The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.

         (o)  To comply with all applicable securities and other applicable
laws, rules and regulations in each jurisdiction in which the Directed Shares
are offered in connection with the Directed Share Program.

     5.  COSTS AND EXPENSES.
         ------------------ 

     The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following:  accounting
fees of the Company; the fees and disbursements of counsel for the Company; the
cost of printing and delivering to, or as requested by, the Underwriters copies
of the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Underwriters' Selling Memorandum,  the Underwriters' Invitation
Letter,  the Listing Application, the Blue Sky Survey and any supplements or
amendments thereto; the filing fees of the Commission; the filing fees and
expenses (including legal fees and disbursements) incident to securing any
required review by the NASD of the terms of the sale of the Shares; the Listing
Fee of The Nasdaq Stock Market; and the expenses, including the fees and
disbursements of counsel for the Underwriters, incurred in connection with the
qualification of the Shares under State securities or Blue Sky laws.  The
Company agrees to pay all costs and expenses of the Underwriters, including the
fees and disbursements of counsel for the Underwriters, incident to the offer
and sale of directed shares of the Common Stock by the Underwriters to employees
and persons having business relationships with the Company and its Subsidiaries.
The Company shall not, however, be required to pay for any of the Underwriters
expenses (other than those related to qualification under NASD regulation and
State securities or Blue Sky laws) except that, if this Agreement shall not be
consummated because the conditions in Section 6 hereof are not satisfied, or
because this Agreement is terminated by the Representatives pursuant to Section
11 hereof, or by reason of any failure, refusal or inability on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement or
to comply with any of the terms hereof on its part to be performed, unless such

                                      -10-

<PAGE>
 
failure to satisfy said condition or to comply with said terms be due to the
default or omission of any Underwriter, then the Company shall reimburse the
several Underwriters for reasonable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Shares or in contemplation of performing
their obligations hereunder; but the Company shall not in any event be liable to
any of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Shares.

     6.  CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
         --------------------------------------------- 

     The several obligations of the Underwriters to purchase the Firm Shares on
the Closing Date and the Option Shares, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company contained
herein, and to the performance by the Company of its covenants and obligations
hereunder and to the following additional conditions:

         (a)  The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representatives and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance of the Shares.

         (b)  The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Brobeck, Phleger &
Harrison LLP, counsel for the Company, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters (and stating
that it may be relied upon by counsel to the Underwriters) to the effect that:

              (i)      The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement; each of the
Subsidiaries has been duly organized and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; the Company and each of the
Subsidiaries are duly qualified to transact business in all jurisdictions in
which the conduct of their business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon the business of
the Company and the Subsidiaries taken as a whole; and the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable and are owned by the Company or a
Subsidiary; and, to the best of such counsel's knowledge, the outstanding shares
of capital stock of each of the Subsidiaries is owned free and clear of all
liens, encumbrances and

                                      -11-

<PAGE>
 
equities and claims, and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into any shares of capital stock or of ownership interests in the
Subsidiaries are outstanding.

              (ii)     The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of the Company's Common Stock have been duly authorized; the
outstanding shares of the Company's Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable; all of the Shares conform
to the description thereof contained in the Prospectus; the certificates for the
Shares, assuming they are in the form filed with the Commission, are in due and
proper form; the shares of Common Stock, including the Option Shares, if any, to
be sold by the Company pursuant to this Agreement have been duly authorized and
will be validly issued, fully paid and non-assessable when issued and paid for
as contemplated by this Agreement; and no preemptive rights of stockholders
exist with respect to any of the Shares or the issue or sale thereof.

              (iii)    Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Shares or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.

              (iv)     The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order proceedings
with respect thereto have been instituted or are pending or threatened under the
Act.

              (v)      The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects with
the requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
and related schedules therein).

              (vi)     The statements under the captions "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as such
statements constitute a summary of documents referred to therein or matters of
law, fairly summarize in all material respects the information called for with
respect to such documents and matters.

              (vii)    Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.

                                      -12-

<PAGE>
 
              (viii)   Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the Subsidiaries
except as set forth in the Prospectus.

              (ix)     The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Charter or By-Laws of the Company, or any
agreement or instrument known to such counsel to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries may
be bound.

              (x)      This Agreement has been duly authorized, executed and
delivered by the Company.

              (xi)     No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD or as required by State securities
and Blue Sky laws as to which such counsel need express no opinion) except such
as have been obtained or made, specifying the same.

              (xii)    The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.

     In rendering such opinion, Brobeck, Phleger & Harrison LLP may rely as to
matters governed by the laws of states other than California or Federal laws on
local counsel in such jurisdictions, provided that in each case Brobeck, Phleger
& Harrison LLP shall state that they believe that they and the Underwriters are
justified in relying on such other counsel.  In addition to the matters set
forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to believe
that (i) the Registration Statement, at the time it became effective under the
Act (but after giving effect to any modifications incorporated therein pursuant
to Rule 430A under the Act) and as of the Closing Date or the Option Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ii) the Prospectus, or any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements, in the light of the
circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein).  With respect to such statement, Brobeck,
Phleger & Harrison LLP may state that their belief is based upon the procedures
set forth therein, but is without independent check and verification.

                                      -13-

<PAGE>
 
         (c)  The Representatives shall have received from Wilson Sonsini
Goodrich & Rosati, Professional Corporation ("Wilson Sonsini"), counsel for the
Underwriters, an opinion dated the Closing Date or the Option Closing Date, as
the case may be, substantially to the effect specified in subparagraphs (ii),
(iii), (iv), (ix) and (xi) of Paragraph (b) of this Section 6, and that the
Company is a duly organized and validly existing corporation under the laws of
the State of Delaware. In rendering such opinion Wilson Sonsini may rely as to
all matters governed other than by the laws of the State of California or
Federal laws on the opinion of counsel referred to in Paragraph (b) of this
Section 6. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of such
counsel which leads them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Prospectus, or any supplement thereto, on
the date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact, necessary in
order to make the statements, in the light of the circumstances under which they
are made, not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information therein). With
respect to such statement, Wilson Sonsini may state that their belief is based
upon the procedures set forth therein, but is without independent check and
verification.

         (d)  The Representatives shall have received at or prior to the Closing
Date from Wilson Sonsini a memorandum or summary, in form and substance
satisfactory to the Representatives, with respect to the qualification for
offering and sale by the Underwriters of the Shares under the State securities
or Blue Sky laws of such jurisdictions as the Representatives may reasonably
have designated to the Company.

         (e)  You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to you, of PricewaterhouseCoopers, LLP confirming
that they are independent public accountants within the meaning of the Act and
the applicable published Rules and Regulations thereunder and stating that in
their opinion the financial statements and schedules examined by them and
included in the Registration Statement comply in form in all material respects
with the applicable accounting requirements of the Act and the related published
Rules and Regulations; and containing such other statements and information as
is ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.

         (f)  The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case may
be, each of them severally represents as follows:

                                      -14-

<PAGE>
 
              (i)      The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his knowledge, contemplated by the Commission;

              (ii)     The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;

              (iii)    All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;

              (iv)     He or she has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the Registration
Statement were true and correct, and such Registration Statement and Prospectus
did not omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment; and

              (v)  Since the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company and the Subsidiaries taken as a whole, whether or not
arising in the ordinary course of business.

         (g)  The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representatives may reasonably have requested.

         (h)  The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq Stock Market.

         (i)  The Lockup Agreements described in Section 4(j) are in full force
and effect.

     The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Representatives and to Wilson Sonsini, counsel for
the Underwriters.

     If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representatives by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.

                                      -15-

<PAGE>
 
     In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).

     7.  CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
         -------------------------------------------- 

     The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.

     8.  INDEMNIFICATION.
         --------------- 

         (a)  The Company agrees:

                       (1)   to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of the Act,
against any losses, claims, damages or liabilities to which such Underwriter or
any such controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading any act or failure to act, or (iii) any
alleged act or failure to act by any Underwriter in connection with, or relating
in any manner to, the Shares or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon matters covered by clause (i) or (ii) above
(provided, that the Company shall not be liable under this clause (iii) to the
extent that it is determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its gross negligence or willful misconduct);
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement, or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or such amendment or supplement, in reliance upon and in conformity
with written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof. The Company
also agrees to indemnify and hold harmless DBSI and each person, if any, who
controls DBSI within the meaning of either Section 15 of the Act, or Section 20
of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments incurred as a result of DBSI's participation as a
"qualified independent underwriter" within the meaning of Rule 2720 of the
National Association of Securities Dealers' Conduct Rules in connection with the
offering of the Shares, except for any losses, claims, damages, liabilities and
judgments resulting from DBSI's or such controlling person's willful misconduct.

                       (2)   to reimburse each Underwriter and each such
controlling person upon demand for any legal or other out-of-pocket expenses
reasonably incurred by such 

                                      -16-

<PAGE>
 
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage or liability, action or proceeding or in
responding to a subpoena or governmental inquiry related to the offering of the
Shares, whether or not such Underwriter or controlling person is a party to any
action or proceeding. In the event that it is finally judicially determined that
the Underwriters were not entitled to receive payments for legal and other
expenses pursuant to this subparagraph, the Underwriters will promptly return
all sums that had been advanced pursuant hereto.

         (b)  Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer, or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.

         (c)  In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party 
shall pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party

                                      -17-

<PAGE>
 
shall have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the indemnifying party shall pay as incurred (or
within 30 days of presentation) the fees and expenses of the counsel retained by
the indemnified party in the event (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel,
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them or (iii) the indemnifying party shall
have failed to assume the defense and employ counsel acceptable to the
indemnified party within a reasonable period of time after notice of
commencement of the action. It is understood that the indemnifying party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm for all such indemnified parties. Such firm shall be designated in
writing by you in the case of parties indemnified pursuant to Section 8(a) and
by the Company in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. In addition, the indemnifying party will not,
without the prior written consent of the indemnified party, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action or proceeding of which indemnification may be sought hereunder (whether
or not any indemnified party is an actual or potential party to such claim,
action or proceeding) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action or proceeding.

         (d)  The Company and each subsidiary of the Company, whether direct or
indirect, jointly and severally, agree to indemnify and hold harmless DBSI and
its affiliates and each person, if any, who controls DBSI or its affiliates
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) (i) caused by any untrue statement or alleged untrue statement
of a material fact contained in any material prepared by or with the consent of
the Company for distribution to Participants in connection with the Directed
Share Program, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; (ii) caused by the failure of any Participant to pay for
and accept delivery of Directed Shares that the Participant has agreed to
purchase; or (iii) related to, arising out of, or in connection with the
Directed Share Program other than losses, claims, damages or liabilities (or
expenses relating thereto) that are finally judicially determined to have
resulted from the bad faith or gross negligence of DBSI.

         (e)  To the extent the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in

                                      -18-

<PAGE>
 
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

     The Company, and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(e) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(e).  The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 8(e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.  Notwithstanding the
provisions of this subsection (e),  (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter, and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.  The Underwriters' obligations in this
Section 8(e) to contribute are several in proportion to their respective
underwriting obligations and not joint.

         (f)  In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.

         (g)  Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.

                                      -19-

<PAGE>
 
     9.  DEFAULT BY UNDERWRITERS.
         ----------------------- 

     If on the Closing Date or the Option Closing Date, as the case may be, any
Underwriter shall fail to purchase and pay for the portion of the Shares which
such Underwriter has agreed to purchase and pay for on such date (otherwise than
by reason of any default on the part of the Company), you, as Representatives of
the Underwriters, shall use your reasonable efforts to procure within 36 hours
thereafter one or more of the other Underwriters, or any others, to purchase
from the Company such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase.  If during such 36
hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then  (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or  (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company or you
as the Representatives of the Underwriters will have the right, by written
notice given within the next 36-hour period to the parties to this Agreement, to
terminate this Agreement without liability on the part of the non-defaulting
Underwriters or of the Company except to the extent provided in Section 8
hereof.  In the event of a default by any Underwriter or Underwriters, as set
forth in this Section 9, the Closing Date or Option Closing Date, as the case
may be, may be postponed for such period, not exceeding seven days, as you, as
Representatives, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected.  The term "Underwriter" includes any person
substituted for a defaulting Underwriter.  Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.

     10.  NOTICES.
          ------- 

     All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows:

     if to the Underwriters, to:

     Deutsche Bank Securities Inc.
     One South Street
     Baltimore, Maryland 21202
     Attention:______________

                                      -20-

<PAGE>
 
     with a copy to:

     Deutsche Bank Securities Inc.
     31 West 52nd Street
     New York, New York 10019
     Attention: General Counsel

     if to the Company, to:

     Align Technologies, Inc.
     442 Potrero Avenue
     Sunnyvale, California 94086
     Attention: Zia Chisti

     with a copy to:

     Brobeck, Phleger & Harrison LLP,
     One Market, Spear Street Tower
     San Francisco, California 94105
     Attention: John W. Larson, Esq.

     11.  TERMINATION.
          ----------- 

          (a)  This Agreement may be terminated by you by notice to the Company
at any time prior to the Closing Date if any of the following has occurred: (i)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change or any development
involving a prospective material adverse change in or affecting the condition,
financial or otherwise, of the Company and its Subsidiaries taken as a whole or
the earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company and its
Subsidiaries taken as a whole, whether or not arising in the ordinary course of
business, (ii) any outbreak or escalation of hostilities or declaration of war
or national emergency or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make it
impracticable or inadvisable to market the Shares or to enforce contracts for
the sale of the Shares, or (iii) suspension of trading in securities generally
on the New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, (iv) the enactment, publication, decree or
other promulgation of any statute, regulation, rule or order of any court or
other governmental authority which in your opinion materially and adversely
affects or may materially and adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by United States or New York
State authorities, (vi) any downgrading, or placement on any watch list for
possible downgrading, in the rating of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Exchange Act); (vii) the suspension of trading of the
Company's Common Stock by The Nasdaq Stock Market, the Commission, or any other
governmental authority or, (viii) the taking of any action by any

                                      -21-

<PAGE>
 
governmental body or agency in respect of its monetary or fiscal affairs
which in your reasonable opinion has a material adverse effect on the
securities markets in the United States; or

         (b)  as provided in Sections 6 and 9 of this Agreement.

     12.  SUCCESSORS.
          ---------- 

     This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder.  No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.

     13.  INFORMATION PROVIDED BY UNDERWRITERS.
          ------------------------------------ 

     The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.

     14.  MISCELLANEOUS.
          ------------- 

     The reimbursement, indemnification and contribution agreements contained in
this Agreement and the representations, warranties and covenants in this
Agreement shall remain in full force and effect regardless of  (a) any
termination of this Agreement,  (b) any investigation made by or on behalf of
any Underwriter or controlling person thereof, or by or on behalf of the Company
or its directors or officers and  (c) delivery of and payment for the Shares
under this Agreement.

     This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

     This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Maryland.

                                      -22-

<PAGE>
 
     If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.

                                    Very truly yours,

                                    ALIGN TECHNOLOGY, INC.

                                    By:
                                        ---------------------------------------
                                        Zia Chisti, Chief Executive Officer


The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.

DEUTSCHE BANK SECURITIES INC.
BEAR STEARNS & CO. INC.
J.P. MORGAN & CO., INC.
FLEETBOSTON ROBERTSON STEPHENS INC.

As Representatives of the several
Underwriters listed on Schedule I

By:  Deutsche Bank Securities, Inc.

By:
    -------------------------------
    Authorized Officer

<PAGE>
 
                                   SCHEDULE I

                            Schedule of Underwriters


                                               Number of Firm Shares To 
            Underwriter                              Be Purchased
------------------------------------------     ------------------------
Deutsche Bank Securities, Inc.

Bear Stearns & Co. Inc.

J.P. Morgan & Co. Inc.

FleetBoston Robertson Stephens Inc.
                                               ------------------------
 
                Total
                                               ========================



<PAGE>
 
                                                                    EXHIBIT 10.3

                           LEAVE & LICENCE AGREEMENT
                           -------------------------

THIS LEAVE & LICENCE AGREEMENT is made here at the Pearl Continental Hotel,
Lahore, on this day of January 26th, 2000.

                                    BETWEEN

MESSRS. PAKISTAN SERVICES LIMITED, through its Director having its registered
office at Pearl Continental hotel Building, Club Road, Karachi, (hereinafter
referred to as " the Licensor"), of the One Part,

                                      AND

M/S. Align Technology Pakistan through its Country Manager, Ioannis Demetriades,
having its registered office at Pavillion #44, Pearl Continental Hotel,
(hereinafter referred to as "the Licensee") of the Other Part.

WHEREAS the Licensor is the owner of Pearl Continental Hotel, Lahore,
(hereinafter referred to as "the Hotel") situated on plat of land, bearing City
Survey No. S-19-R-122, Shahrah-e-Quaid-e-Azam, Lahore.

AND WHEREAS the said Licensor for the benefit, comfort and convenience of its
guests, passengers and visitors has decided to grant licence to the Licensee for
the use and occupation of Shop No. 37-38-39-40-41-42-43-44-45-46-47-58-59-60-61-
62 & 63 measuring approx. 5413.35 square feet at Pearl Continental Hotel,
Lahore, within the hotel premises on such terms and subject to such conditions
as are given hereunder.

AND WHEREAS the Licensee is desirous of and
 has agreed to avail of the licence
and to being allowed the privilege of using Shop No. 37-38-39-40-41-42-43-44-45-
46-47-58-59-60-61-62 & 63 measuring approx. 5413.35 square feet on the terms and
conditions appearing here in below.

AND WHEREAS the Licensee has also expressly stated and does hereby expressly
state that Licensee in its turn has no intention, whatsoever, to become a tenant
of the said premises.

NOW, THEREFORE, THIS AGREEMENT WITNESSETH as follows:

1.   Period of Agreement:

     The Licensee, under this Agreement, shall have the leave and license to use
     Shop No. 37-38-39-40-41-42-43-44-45-46-47-58-59-60-61-62 & 63 measuring
     5413.35 square feet, belonging to and in the possession of the Licensor,
     for a period of Three (3) years i.e. from 01.01.2000 to 31.12.2002. This
     agreement will further be extended for two years subject to revision of the
     terms.

2.   Licence fee plus amenities charges:

     i)    Licence Fee

           The licence fee shall be at the rate of Rs. 5/= per sq. ft. per month
           amounting to Rs. 27067(Rupees Twenty seven thousand sixty seven only)
           per month plus Central, Provincial and local Government duties
           thereon which at present is 22.5% amounting to Rs. 6090 (Rupees six
           thousand & ninty only) per month for the LEAVE & LICENCE to use the
           said premises. This license fee is payable in advance every month
           during the validity of this agreement,

     ii)   Amenities Charges:

           a)  The amenities, being air-conditioning, heating ventilation,
               electric supply and installations, chemically treated cold water
               supply for drinking purposes, sanitation and telephone
               installation, being in the exclusive control of the Hotel
               Management, may be used by the Licensee subject to the permission
               for use thereof being given the Licensor and further subject to
               such terms and conditions as may be proposed by the Licensor in
               this regard.

<PAGE>
 
           b)  For the amenities provided as referred to (ii) (a) above, the
               Licensee shall pay Rs. 243601 (Rupees Two Lakh forty three
               thousand six hundred and one only) per month @ Rs. 45/- per sq.
               ft. per month PLUS Central, Provincial & Local government duties
               which at present is 22.5% amounting to Rs. 54810/= (Rupees Fifty
               four thousand eight hundred and ten only) thereon. These charges
               are payable in advance every month during the validity of this
               agreement.

           c)  The telephone calls charges and electricity consumption charges
               shall be paid separately by the Licensee which are not included
               in 2(i) and 2(ii)(b) above. However, telephone calls from the
               Hotel/s Exchange would be paid at the Hotel's prescribed rate on
               daily basis while the electricity consumption charges shall be
               paid in accordance with the sub-meter reading on monthly basis.

     iii)  Undertaking:

           The Licensee hereby undertakes to pay to the Licensor in advance the
           monthly licence fee as well as the monthly payment for amenities
           together with Government Duties thereon referred to as 2(i) and
           2(ii)(b) above respectively amounting to Rs. 3,31,568/= (Rupees Three
           lakh thirty one thousand five hundred sixty eight only) for the
           period of Agreement through post dated cheques.

3.   Cost escalation on account of rates. duties and taxes:

That if, during the period of continuance of this Agreement, there is any
further cost escalation on account of any additional levy of the rates, duties
and taxes on the premises/arcade and /or on the utilities and amenities by the
Government-Federal/Provincial and /or the Local Bodies, the Licensee shall pay
the same to the Licensor in proportion to the area of the premises licensed to
the Licensee.

4.   Validity of Licence Agreement:

This Agreement shall cease to be of any legal force or effect on 31.12.2002.
Should the Licensee desire a renewal of this Licence Agreement, a written
request to that effect may be made by the Licensee to the Licensor at least 30
days prior to the said date of 31.12.2002 whereafter the parties hereto may
agree to such renewal terms and conditions by or before the said date of expiry.
A fresh Licence Agreement shall be signed between the parties for any renewed
period *of Leave and Licence to occupy and use the said premises, which may be
granted by the Licensor to the Licensee.

5.   Expiry of Licence:

In case no request for renewal is received under clause A above and/or no
Agreement is reached regarding the terms and conditions of such renewal by or
before the date of expiry of this Agreement, the Licensee shall, on the day
after the said date of expiry, or such further period as may be allowed by the
Licensor for this purpose, remove his employees and property belonging to him
and hand over the said premises to the Licensor in the same good condition in
which it was at the time of signing of this Agreement, reasonable wear and tear
expected.

6.   Licensor rights and liabilities:

     i)    Licensor may from time to time appoint any of its officers and
           employees or any other person to exercise proper control or take
           necessary action for compliance of any or all the terms and
           conditions of these presents and until otherwise communicated in
           writing by the Licensor, the General Manager of the Hotel shall be
           such person.

     ii)   Repair and rectification:

           The Licensor shall carry out normal repairs including replacement of
           electrical fittings and shall remedy any defect or leakage within a
           month of the notice given by the Licensee. If the Licensor fails to
           provide remedy for defects or leakage within a month, the Licensee
           can utilize, at its own initiative, third party services

                                       2

<PAGE>
 
           to carry out the required job. The licensee needs to notify the
           Licensor prior to the utilization of third-party services. If the
           Licensor fails to provide remedy for defects or leakage within a
           month, the Licensee does not require the approval of the Licensor to
           invite the utilization of third-party services. However, the third-
           party service needs to co-ordinate with the Hotel Maintenance staff
           prior to the utilization of the third-party services, The Licensor
           will be responsible for bearing the cost of the third-party services.

     iii)  Licensor's rights and liabilities:
           --------------------------------- 

           The Licensor may carry out any work to maintain, repair, alter,
           reduce or extend the common areas of the center without any prior
           approval/notice to the Licensor. In the event that the business
           operations of the Licensee are directly adjacent to and affected by
           the work to maintain, repair, alter reduce or extend the common areas
           of the center, prior notice should be given to the Licensee. The
           Licensor and Licensee should then co-ordinate as to how and when the
           work is going to be carried out.

     iv)   Notice of proposed works:
           ------------------------ 

           If the Licensor proposes to refurbish, redevelop or extend the center
           or any part of it, and work cannot be carried out practically without
           vacant possession of the premises, the Licensor may give not less
           than two months' notice ("relocation notice") to the Licensee giving
           details of proposed work and requiring him to move to alternative
           premises in the center.

     v)    Offer of alternative premises:
           ----------------------------- 

           In the relocation notice, the Licensor must offer the Licensee a new
           licence agreement of the alternative premises at the same licence fee
           on the same terms and conditions as this, licence agreement except
           that the terms of new licence, agreement will be for the remainder of
           the terms of this agreement.

     vi)   Acceptance of termination:
           ------------------------- 

           Within one month after relocation notice is given to him, the
           Licensee may give a written notice to the Licensor (Termination
           Notice) in which case this agreement ends three months after the
           relocation was given unless the parties agree that it is to end at
           some other time. If the Licensee does not give a termination notice,
           the Licensee will be taken to have accepted the offer of new licence
           agreement or alternative premises unless the parties ,have agreed on
           same other conditions.

     vii)  Lock and key:
           ------------ 

           The premises shall remain in possession of the Licensor who will
           always be entitled to put its own lock in the said premises but shall
           give a duplicate key to the Licensee for the use of the premises by
           the Licensee. The Licensor shall in no case held responsible for any
           theft committed in the premises in any view of the matter whatsoever.

     viii) Lien
           ----

           The Licensor shall have a lien on all belongings and properties of
           the Licensee for the time being, in or upon the premises of the
           Licensor.

     ix)   Rights of revoking licence:
           -------------------------- 

           The Licensor reserves the rights to revoke the licence agreement in
           the event of any breach of the terms and conditions of the licence
           agreements by the Licensee. The Licensee will be given three-months
           notice to vacate the said premises.

                                       3

<PAGE>
 
7.   Licensee's rights and liabilities:

     i)    Scope of business:
           ----------------- 

           The Licensee hereby undertakes to utilize the said premises for
           carrying on the business of Computer Software Development and
           Computer Image Processing in the name and style of "Align Technology
           Pakistan" and/or such other business as the Licensor may, upon a
           written request to that effect being made from the Licensee's side,
           allow the later in writing to carry on at the said premises
           considering the decorum of the Hotel.

     ii)   Prohibition for use of premises other than the business allowed:
           --------------------------------------------------------------- 

           The Licensee shall not use the said premises for any purpose other
           than that for which the licence is granted, as aforesaid, nor shall
           the Licensee use the said premises in a manner as to cause damage to
           the structure or any internal or external part thereof and/or
           inconvenience, annoyance or nuisance to the guests, passengers and
           visitors as well as Licensor and his employees.

     iii)  Trading hours.
           ------------- 

           The Licensee shall observe and carry on its business on timing as
           determined from time to time by the Licensor.

           The Licensee must: 

           a)  Keep the premises open for the care taking of the house.

           b)  Obtain the Licensor's consent before opening the premises outside
               those hours.

           c)  Pay its share of Licensor's costs of opening and operating the
               center outside those hours: and

           d)  Pay to the Licensor's liquidated damages of Rs. 1,000/-(Rupees
               one thousand only) per working hour.

     iv)   Discipline:
           ---------- 

           The Licensee must not do anything, which is or may cause a nuisance,
           inconvenience or annoyance to the guests, passengers, visitors,
           landlord and other people on the center.

           The Licensee must not use any sound or light equipment which may be
           hard or seen outside the premises and which, in the Licensor's
           opinion, may cause a nuisance. Should the question arise as to
           whether the Licensee is causing such inconvenience, annoyance or
           nuisance, the matter shall be referred to the General Manager of the
           Hotel whose decision shall be final and binding on the Licensee.

     v)    Use of common areas:
           ------------------- 

           a)  The Licensee may use the common areas along with other Licensees
               in the center.

           b)  The Licensee, his employees and staff must not use the common
               areas designated for the Hotel staff.

     vi)   Rules:
           ----- 

           The Licensee must comply with rules. The Licensor may vary the rules
           at any time, so long as they are not inconsistent with the licence
           agreement.

                                       4

<PAGE>
 
     vii)  Insurance:
           --------- 

           The Licensor shall not be liable for any accidental damage or injury
           inside the said premises which may happen by reason of breakage or
           want of repair of any part of the said Premises or any cause
           whatsoever except if it is caused by the negligence or willful
           misconduct of the Licensor, its employees or agents. The Licensee
           shall indemnify the Licensor against all claims or liabilities in
           respect of personal injury which may at any time or times during the
           continuance of this licence, be caused in the said premises to any
           guest, passenger, visitor, customer, guest & employee of the hotel,
           Licensor, and / or costs incurred for defending any action or
           proceedings and/or contesting, defending or securing such claims
           except if it is caused by the negligence or willful misconduct of the
           Licensor, -its employees or its agents. The Licensee shall produce
           immediately on signing of this agreement a copy of insurance coverage
           under Third Party Legal Liability Policy obtained by the Licensee. A
           certificate be given by the Licensee to the Licensor in this respect.
           Non submission of insurance coverage and certificate there of will
           tantamount to Licensee's consent to cancel the Licence.

     viii) Alteration:
           ---------- 

           The Licensee shall not make any alteration in the said premises
           without first obtaining the permission of the Licensor in writing.

     ix)   Sub-Licensing:
           ------------- 

           The Licensee shall not sub-licence the said premises or any part
           thereof to anybody else under any circumstances.

     x)    Government dues to be paid within due date:
           ------------------------------------------ 

           The Licensee shall pay in time and within due date to the appropriate
           person or authority all cusses, rates, charges, fees, duties and
           taxes in respect of the business conducted by the Licensee in the
           said premises.

     xi)   Binding on Licensee's employees:
           ------------------------------- 

           Employees that are hired by the Licensee shall conform to the rules
           and regulations governing the conduct of the staff of the Hotel.

     xii)  Prohibition for cooking and heating:
           ----------------------------------- 

           The Licensee shall not do any cooking or heating through the use of
           electrical appliances, gas or oil stoves or otherwise, without the
           consent of the Licensor.

     xiii) Decoration:
           ---------- 

           The Licensee shall decorate the premises according to the standard
           and designs laid down by the Licensor, and such decoration shall not
           be beyond 10% of the total wall and ceiling areas if inflammable
           material like wood, straw matting polystyrene, etc. are used in
           decorating the premises. All such plans to be submitted to the
           Licensor for its approval.

     xiv)  Indemnity:
           --------- 

           The Licensee does, hereby agree to indemnify the Licensor and save it
           harmless from all claims, demands, damages, costs, actions and
           charges to which the Licensor may become subject or it may have to
           pay or be held liable, therefore by reason of any injury to person,
           reputation or property suffered or sustained by any agent, employee,
           guest and passenger or visitor of the Licensor arising out of any
           activity or negligence or omission of the Licensee, its agent or
           employees.

                                       5

<PAGE>
 
     xv)   Notice period for terminating the agreement:
           ------------------------------------------- 

           This agreement may be terminated by the Licensee at any time during
           its validity and subsistence by giving the Licensor three month's
           written notice of his intention to that effect. The provisions of
           paragraph 5 above shall mutates mutandis apply to such termination of
           this agreement by the Licensee. The Licensor shall refund the
           unutilised portion of advance licence fee and amenities charges
           received under clause 2 of this agreement after deducting three
           months' notice period Licence fee, amenities charges, duties and
           taxes etc. and any other amount due to Licensor under this agreement.

     xvi)  Compliance of legal requirements:
           -------------------------------- 

           The Licensee shall do nothing to injure the reputation of the hotel
           and offend against any law, statute, rules, regulations and bye-laws
           issued by the Federal, Provincial, Local, Municipal or any other
           competent authority in any way or to permit or suffer to be done any
           act or thing which may in any way impair the business or reputation
           of the Hotel Licensor or Licensee.

     xvii) Compliance of Licensor's guidelines:
           ----------------------------------- 

           The Licensee shall observe all necessary guidelines and directions
           issued by the Licensor from time to time in respect of usage of the
           premises and the business transacted.

8.   Security Deposit:  -   Rs. 6,400,000/=

     The Licensor may retain the security deposit up to three months after the
     expiry of licence date or until the Licensee has paid all moneys due to the
     Licensor and performed all his obligations under this agreement.

     The Licensee agrees to and permits the Licensor to utilise the security
     deposit as it may deem fit and proper for its business purposes and need
     not to keep the same in a special accounts as required under Section 226 of
     the Companies Ordinance, 1984.

9.   Liquidated damages:

     Without prejudice to any other provision of this Agreement, the Licensee
     shall be liable to pay by way of liquidated damages a sum of Rs. 2,000/=
     per day per shop for delay in payment of each monthly licence fee and a sum
     of Rs. 400,000/= (Rupees Four Hundred Thousand only) for each month or any
     part thereof for which he over stays at the said premises after the date on
     which he is obliged to vacate and hand over the said premises to the
     Licensor under any provision of this agreement.

     The sum referred to above may be recovered by the Licensor from money(s)
     due and payable to the Licensee or by encashing any performance bond/
     guarantee which the Licensee may have furnished or otherwise as provided by
     law.

10.  Notice:

     All notices required by this agreement must be in writing.

11.  Method of service:

     i)    The Licensor may serve a notice on the Licensee:

           a)  Giving it to the Licensee personally.

           b)  Leaving it at the premises - or

           c)  Delivering, posting or faxing it to the Licensee business address
               last known to the Licensor or, if the Licensee is a company, to
               its registered office

                                       6

<PAGE>
 
     ii)   The Licensee may serve a notice on the Licensor by delivering,
           posting or faxing it to the address of the Licensor notified to the
           Licensee.

12.  Validity of Licensor's notice:

     Any notice by the Licensor will be valid if it is: -

     i)    Executed under seal of the Licensor; or

     ii)   Signed on behalf of the Licensor by Pakistan Services Limited (the
           owner of the premises).

13.  Arbitration:

     i)    All disputes, claims, differences, etc. as to the true meaning, scope
           import and/or interpretation of any provision of this Agreement and
           all other matters related therewith and/or incidental thereto shall
           be resolved through arbitration to be conducted in accordance with
           the provisions of the Arbitration Act. 1940 as amended or its
           subsequent statutory replacement.

     ii)   Either party desirous of invoking clause (a) above shall give written
           notices to that effect to the other party and shall also state
           therein the Precise issue being sought to be referred to arbitration.
           The parties shall, thereafter agree upon a sole Arbitrator within a
           maximum period of thirty days from the date of service of the said
           notice, failing which, either party may approach a court of competent
           jurisdiction for the same purpose.

                                       7

<PAGE>
 
IN WITNESS WHEREOF the parties have signed this Agreement on the day and place
herein above mentioned.

LICENSOR
--------

Signed and delivered by the within named
Licensor M/s. Pakistan Services Limited      ________________________________   
through its Director                         

LICENSEE
--------

Signed and delivered by the within named
Licensor M/s. ALIGN TECHNOLOGY PAKISTAN      ________________________________
through its Country Manager, Mr. Ioannis
Demetriades, Passport Number  BB004116
 
WITNESSES:
 
1. ________________________________          2. _______________________________

                                       8

<PAGE>
 
                           ALIGN TECHNOLOGY PAKISTAN

                           [FLOWCHART OF OPERATIONS]

                                       9

<PAGE>
 
         SQUARE FOOTAGE MEASUREMENTS FOR ALIGN FACILITIES IN PAKISTAN


<TABLE> 
<CAPTION> 
PC Facility
-----------
----------------------------------------------------------------------------------------------------------------------------------
                      Square Feet On Lease   Area Of Corridor that Align Occupies        Total      Effective Space For Office Use
----------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>                    <C>                                         <C>        <C>
----------------------------------------------------------------------------------------------------------------------------------
                                     5,413                                               8,063                               8,063
----------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------- 

----------------------------------------------------------------------------------------------------------------------------------

<CAPTION> 
Bhallah House
-------------
----------------------------------------------------------------------------------------------------------------------------------
                         Covered Space     Additional Space (Garden, Lawn, Driveways)    Total      Effective Space For Office Use
----------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>               <C>                                          <C>         <C>
----------------------------------------------------------------------------------------------------------------------------------
                                10,500                                         24,500   35,000                              10,500
----------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------- 

----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       10

<PAGE>
 
Facility Wise Personnel Distribution
------------------------------------


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
             Align     Clinical     Operations    Director of     Information       Chinese     Pakistani    Software   Director,
           Graphics    Assistant     Managers    Orthodontics   Systems Manager     Software     Software     Quality     Human  
           Designers   Directors                                                  Instructors   Engineers    Assurance  Resources
---------------------------------------------------------------------------------------------------------------------------------
<S>        <C>         <C>          <C>          <C>            <C>               <C>           <C>          <C>        <C>      
Bhallah          229          18             1              0                 0             0           0          0          0   
House                                                                                                                             
--------------------------------------------------------------------------------------------------------------------------------- 
PC               239          25             1              1                 1             3           7          1          1   
--------------------------------------------------------------------------------------------------------------------------------- 
Total            468          43             2              1                 1             3           7          1          1   
--------------------------------------------------------------------------------------------------------------------------------- 
                                                                   
<CAPTION> 
-----------------------------------------------------------------------------------------------------------------------------
               Supply        Production         Systems           Shift         Clinical       Support     Country     Total
               Manager         Manager/       Administrator      Managers        Quality        Staff                 Manager
                             Coordinator                                        Assurance
----------------------------------------------------------------------------------------------------------------------------- 
<S>            <C>           <C>              <C>                <C>            <C>            <C>         <C>        <C>
Bhallah              1                 0                  0             2                0          20           0        271
House                                                                        
----------------------------------------------------------------------------------------------------------------------------- 
PC                   0                 1                  1             2                1          11           1        296
----------------------------------------------------------------------------------------------------------------------------- 
Total                1                 1                  1             4                1          31           1        567
----------------------------------------------------------------------------------------------------------------------------- 
</TABLE>
 

                                       11



<PAGE>
 
                                                                    Exhibit 10.4


        STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT--LEASE-MODIFIED NET
                   AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

1.   Basic Provisions ("Basic Provisions").

     1.1 Parties: This Lease ("Lease"), dated for reference purposes only, June
20, 2000, is made by and between James S. Lindsey ("Lessor") and Align
Technology, Inc. ("Lessee") (collectively the "Parties," or individually a
"Party").
 

     1.2(a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 881 Martin Avenue, located in the City
of Santa Clara, County of Santa Clara, State of California, with zip code 95050,
as outlined on Exhibit A attached hereto ("Premises"). The "Building" is that
certain building containing the Premises and generally described as (describe
briefly the nature of the Building): An approximately 55,913 square foot
freestanding building which is art of a two building, approximately 156,282
square foot project. In addition to Lessee's rights to use and occupy the
Premises as hereinafter specified, Lessee shall have non-exclusive rights to the
Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but
shall not have
 any rights to the tool, exterior walls or utility raceways of the
Building or to any other buildings in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along wish all
other buildings and improvements thereon, are herein collectively referred to as
the "Industrial Center" (Also see Paragraph 2.)

     1.2(b) Parking: 224 unreserved vehicle parking spaces ("Unreserved Parking
Spaces"); and zero reserved vehicle parking spaces ("Reserved Parking Spaces").
(Also see Paragraph 2.6.)

     1.3 Term: 5 years and zero months ("Original Term") commencing July 1, 2000
("Commencement Date") and ending June 30, 2005 ("Expiration Date"). (Also see
Paragraph 3.)

     1.4 Early Possession: Not applicable. (Also see Paragraphs 3.2 and 3.3.)

     1.5 Base Rent: $167,739.00, per month ("Base Rent"), payable on the first
day of each month commencing __________________________. (Also see Paragraph 4.)

[X]  If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum One attached hereto.

     1.6(a) Base Rent Paid Upon Execution: $167,739.00 as Base Rent for the
period July 1 - July 31, 2000 .

     1.6(b) Lessee's Share of Common Area Operating Expenses: 35.8 percent
(35.8%) ("Lessee's Share") as determined by

[X]  prorata square footage of the Premises as compared to the total square
footage of the project

     1.7 Security Deposit: $1,175,000.00 ("Security Deposit"). (Also see
Paragraph 5.)

     1.8 Permitted Use: Office, administration, light assembly, research and
development, testing engineering, warehouse and related legal uses ('Permitted
Use"). (Also see Paragraph 6.)

     1.9 Insuring Party. Lessor is the "Insuring Party." (Also see Paragraph 8.)

     1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):

[_]  _________________________________ represents Lessor exclusively ("Lessor's
Broker");

<PAGE>
 
[_]  _________________________________ represents Lessee exclusively ("Lessee's
Broker"); or

[X]  CPS represents both Lessor and Lessee ("Dual Agency"). (Also sea Paragraph
15.)

     1.10(b) Payment to Brokers. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Brokers) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Brokers) (or in the event there is no
separate written agreement between Lessor and said Brokers(s), the sum of
$_________) for brokerage services rendered by said Brokers) in connection with
this transaction.

     1.11 Guarantor. Not Applicable. (Also see Paragraph 37.)

     1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 49 through 73, and Exhibits A through A, all off which
constitute a pan of this Lease.

2.   Premises, Parking and Common Areas.

     2.1 Letting. Lessor hereby leases to Lessee, and lessee hereby leases from
Lessor, the Premises, for the term, al the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been used in calculating rental and/or Common Area Operating Expenses, is
an approximation which Lessor and Lessee agree is reasonable and the rental and
Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not subject to
revision whether or not the actual square footage is more or less.

     2.2 Condition. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee selling forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non- compliance
shall be the obligation of Lessee al Lessee's sole cost and expense.

     2.3 Compliance with Covenants, Restrictions end Building Code. Lessor
warrants that any Improvements (other than those constructed by Lessee or all
Lessee's direction shall comply with all applicable covenants or restrictions of
record and applicable building codes, regulations and ordinances in effect on
the Commencement Date, Lessor further warrants to Lessee that Lessor has no
knowledge of any claim having been made by any governmental agency that a
violation or violations of applicable building codes, regulations, and
ordinances exist with regard to the Premises as of the Commencement Date. Said
warranties shall not apply to any Alterations or Utility installations (defined
in Paragraph 7.3(a)) made or to be made by Lessee. If the Premises do not comply
with said warranties, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee given within six (6) months
following the Commencement Date and setting forth with specificity the nature
and extent of such non-compliance, take such action, at Lessor's expense, as may
be reasonable or appropriate to rectify the non-compliance. Lessor makes no
warranty that the Permitted Use in Paragraph 1.8 permitted for the Premises
under Applicable Laws (as defined in Paragraph 2.4).

     2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers(s) to satisfy itself with respect to the condition
of the Premises (including but not limited to the electrical and fire sprinkler
system, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease; and 

                                       2

<PAGE>
 
(c) that neither Lessor, not any of Lessor's agents, has made any oral or
written representations or warranties with respect to said matter other than as
set forth in this Lease.

     2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any non-
compliance of the Premises with said warranties.

     2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spares and Reserved Parking Spaces specified in Paragraph
1.2(b) on (hose portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall net use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no target than lull-
size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also sea Paragraph 2.9.1

         (a) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.

         (b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, Then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessen, which
cost shall be immediately payable upon demand by Lessor.

         (c) Lessor shall al the Commencement Date of This Lease, provide the
parking facilities required by Applicable Law.

     2.7 Common Areas - Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor. Lessee and other lessees of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.

     2.8 Common Areas - Lessee's Rights. Lessor hereby grants to Lessee, for the
benefit of Lessee and its employees, suppliers, shippers, contractors, customers
and Invitees, during the term of this Lease, the non-exclusive right to use, in
common wish others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Industrial Center. Under no circumstances
shall the right herein granted to use the Common Areas be deemed to include the
right to store any property, temporarily or permanently, in the Common Areas.
Any such storage shall be permitted only by the prior written consent of Lessor
or Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

     2.9 Common Areas - Rules and Regulations. Lessor or such other persons) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the right, from time to time, to establish, modify, amend
and enforce reasonable Rules and Regulations with respect thereto in accordance
with Paragraph 40. Lessee agrees to abide by and conform to all such Rules and
Regulations, and to cause its employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance wish said rules and regulations by
other lessens of the Industrial Center.

                                       3

<PAGE>
 
    2.10 Common Areas - Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:

         (a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;

         (b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;

         (c) To designate other land outside the boundaries of the Industrial
Center to be a part of the Common Areas;

         (d) To add additional buildings and improvements to the Common Areas;

         (e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and

         (f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Industrial Center as Lessor may, In
the exercise of sound business judgment, deem to be appropriate.

3.   Term.

     3.1 Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.

     3.2 Early Possession. If an Early Possession Date is specified in Paragraph
1.4 and it Lessee totally or partially occupies the Premises after the Early
Possession Date but prior to the Commencement Date, the obligation to pay Base
Rent shall be abated for the period of such early occupancy. All other terms of
this Lease, however, (including but not limited to the obligations to pay
Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph B) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.

     3.3 Delay In Possession. If for any reason Lessor cannot deliver possession
of the Premises to Lessee by the Early Possession Date, if one is specified In
Paragraph 1.4, or if no Early Possession Date is specified, by the Commencement
Date, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease, or the obligations of Lessee
hereunder, or extend the term hereof, but in such case, Lessee shall not, except
as otherwise provided herein, be obligated to pay rent or perform any other
obligation, of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date. Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder, provided further,
however, that it such written notice of lessee is not received by Lessor within
said ten (10) day period. Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, it
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts. changes or omissions of Lessee.

4.   Rent.

     4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as the
same may be adjusted from time to time, to Lessor in lawful money of the United
States without offset or deduction, on or before the day

                                       4

<PAGE>
 
on which it is due under the terms of this Lease. Base Rent and all other rent
and charges for any period during the term hereof which is for less than one
lull month shall be prorated based upon the actual number of days of the month
involved. Payment of Base Rent and other charges shall be made to Lessor at its
address stated herein or to such other persons or at such other addresses as
Lessor may from time to time designate In writing to Lessee.

     4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rant, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:

         (a) "Common Area Operating Expenses" are defined, for purposes of this
Lease, as all costs incurred by Lessor relating to the ownership and operation
of the Industrial Center, including, but not limited to, the following:

             (i) The operation, repair and maintenance, In neat, clean, good
order and condition, of the following:


                 (aa) The Common Areas, Including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities, fences and gates, elevators and root.

                 (bb) Exterior signs and any tenant directories.

                 (cc) Fire detection and sprinkler systems.

             (ii)  The cost of water, gas, electricity and telephone to service
the Common Areas.

             (iii) Trash disposal, property management and security services and
the costs of any environmental inspections.

             (iv)  Reserves set aside for maintenance and repair of Common
Areas.

             (v)   Real Property Taxes (as defined in Paragraph 10.2) to be paid
by Lessor for the Building and the Common Areas under Paragraph 10 hereof.

             (vi)  The cost of the premiums for the insurance policies
maintained by Lessor under Paragraph 8 hereof.

             (vii) Any deductible portion of an insured loss concerning the
Building or the Common Areas.

             (viii) Any other services to be provided by Lessor that are stated
elsewhere in this Lease to be a Common Area Operating Expense.

         (b) Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Building or to any other building in the
industrial Center or to the operation, repair and maintenance thereof, shall be
equitable allocated by Lessor to all buildings in the industrial Center.

         (c) The inclusion of the improvements, facilities and services set
forth in SubParagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere in this Lease to provide
the same or some of them.

         (d) Lessee's Share of Common Area Operating Expenses shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's 

                                       5

<PAGE>
 
option, however, an amount may be estimated by Lessor from time to time of
Lessee's Share of annual Common Area Operating Expenses and the same shall be
payable monthly or quarterly, as Lessor shall designate during each 12-month
period of the Lease term, on the same day as the Base Rent is due hereunder.
Lessor shall deliver to Lessee within sixty (60) days after the expiration of
each calendar year a reasonably detailed statement showing Lessee's Share of the
actual Common Area Operating Expenses incurred during the preceding year. If
Lessee's payments under this Paragraph 4.2(d) during said preceding year exceed
Lessee's Share as indicated on said statement, Lessee shall be credited the
amount of such over- payment against Lessee's Share of Common Area Operating
Expenses next becoming due. If Lessee's payments under this Paragraph 4.2(d)
during said preceding year were less than Lessee's Share as indicated on said
statement, Lessee shall pay to Lessor the amount of the deficiency within ten
(10) days after delivery by Lessor to Lessee of said statement.

5. Security Deposit. Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee tails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days alter written request therefore
deposit movies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional movies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the initial Security Deposit bears to the
initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option,
to the last assignee, it any, of Lessee's interest herein), that portion of the
Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.

6. Use.

   6.1   Permitted Use.

         (a) Lessee shall use and occupy the Premises only for the Permitted Use
set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit the
use of the Premises in a manner that is unlawful, creates waste or a nuisance,
or that disturbs owners and/or occupants of or causes damage to the Premises or
neighboring premises or properties.

         (b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee. Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or !he mechanical or electrical systems therein, does not conflict wish uses by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. It Lessor elects to withhold such consent, Lessor shall within
five (5) business days alter such request give a written notification of same,
which notice shall include an explanation of Lessor's reasonable objections to
the change in use.

   6.2   Hazardous Substances.

         (a) Reportable Uses Require Consent. The term "Hazardous Substance" as
used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment, or the Premises;'(ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any

                                       6

<PAGE>
 
applicable statute or common law theory. Hazardous Substance shall include, but
not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products
or by-products thereof. Lessee shall not engage in any activity in or about the
Premises which constitutes a Reportable Use (as hereinafter defined; of
Hazardous Substances without the express prior written consent of Lessor and
compliance in a timely manner (at Lessee's sole cost and expense) with all
Applicable Requirements (as defined in Paragraph 6.3). "Reportable Use" shall
mean (i) the installation or use of any above or below ground storage tank, (ii)
the generation, possession. storage, use, transportation, or disposal of a
Hazardous Substance that requires a permit from, or wish respect to which a
report, notice, registration or business plan is required to be tiled with, any
governmental authority, and (iii) the presence in, on or about the Premises of a
Hazardous Substance, with respect to which any Applicable Laws require that a
notice be given to persons entering or occupying the Premises or neighboring
properties. Notwithstanding the foregoing. Lessee may, without Lessor's prior
consent, but upon notice to Lessor and in compliance with all Applicable
Requirements, use any ordinary and customary materials reasonably required to be
used by Lessee in the normal course of fire Permitted Use, so long as such use
is not a Reportable Use and does not expose the Premises or neighboring
properties to any meaningful risk of contamination or damage or expose Lessor to
any liability therefor. In addition, Lessor may (but without any obligation to
do so) condition its consent to any Reportable Use of any Hazardous Substance by
Lassos upon Lessee's giving Lessor such additional assurances as Lessor, in its
reasonable discretion. deems necessary to protect itself, the public, the
Premises and the environment against damage, contamination or injury and/or
liability therefor, including but not limited to the installation (and, at
Lessor's option, removal on or before Lease expiration or earlier termination)
of reasonably necessary protective modifications to the Promises (such as
concrete encasements) and/or the deposit of an additional Security Deposit under
Paragraph 5 hereof.

         (b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises or the Building, other than as previously consented to by
Lessor. Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in. on, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system).

         (c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Promises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement.

     6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating In any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation storage, spill, or release of
any Hazardous Substance), now in effect or which may hereafter come into effect.
Lessee shall, within live (5) days after receipt of Lessor's written request,
provide Lessor with copies of all documents and information, including but not
limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or

                                       7

<PAGE>
 
actual claim, notice, citation, warning, complaint or report pertaining to or
involving failure by Lessee or the Premises to comply with any Applicable
Requirements.

     6.4 Inspection; Compliance with Law. Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises ("Lenders") shall have the right
to enter the Premises al any time in the case of an emergency, and otherwise al
reasonable times, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Lessee with this Lease and all Applicable
Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to
employ experts and/or consultants in connection (herewith to advise Lessor with
respect to Lessee's activities, including but not limited to Lessee's
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The costs and expenses of any such
Inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.

7.   Maintenance, Repairs, Utility Installations, Trade Fixtures and
Alterations.

     7.1 Lessee's Obligations.

         (a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance wish Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.

         (b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and substance for
and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation system
for the Premises. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain the contract for the heating, air conditioning and
ventilating systems, and if Lessor so elects, Lessee shall reimburse Lessor,
upon demand, for the cost thereof.

         (c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair, in accordance with Paragraph
13.2 below.

     7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, lances, signs and utility systems
serving the

                                       8

<PAGE>
 
Common Areas and all parts thereof, as well as providing the services for which
there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall
not be obligated to paint the exterior or interior surfaces of exterior walls
nor shall Lessor be obligated to maintain, repair or replace windows, doors or
plate glass of the Premises. Lessee expressly waives the benefit of any statute
now or hereafter in effect which would otherwise afford Lassos the fight to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Building. Industrial Canter or Common Areas in good order,
condition and repair.

     7.3 Utility Installations, Trade Fixtures, Alterations.

         (a) Definitions; Consent Required. The term "Utility Installations" is
used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make non-
structural Utility Installations to the interior of the Premises (excluding the
roof) without Lessor's consent but upon notice to Lessor, so long as they are
not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire defection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.

         (b) Consent. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented to
Lessor in written form with detailed plans. All consents given by Lessor,
whether by virtue of Paragraph 7.3(a) or by subsequent specific consent, shall
be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may, (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor wish a
lien and completion bond in an amount equal to one and one-hall times the
estimated cost of such Alteration or Utility Installation.

         (c) Lien Protection. Lessee shall pay when due all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee al or for
use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, al its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satiety any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises. If Lessor shall require, Lessee shall
furnish to Lessor a surely bond satisfactory to Lessor in an amount equal to one
and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorneys' tees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.

     7.4 Ownership, Removal, Surrender, end Restoration.

                                       9

<PAGE>
 
         (a) Ownership. Subject to Lessor's right to require their removal and
to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations, and Utility Installations made to the Premises
by Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, al any time and at its option, elect in writing to
Lessee to be the owner of all or any specified pare of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
SubParagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
installations shall, al the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.

         (b) Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee-Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.

         (c) Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, clean and
free of debris and In good operating order, condition and slate of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, malarial or ground water contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the properly of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.

8.   Insurance; Indemnity.

     8.1 Payment of Premiums. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be
prorated to coincide with the corresponding Commencement Date or Expiration
Date.

     8.2 Liability Insurance.

         (a) Carried by Lessee. Lessee shall obtain and keep in force during the
term of this Lease a Commercial General Liability policy of insurance protecting
Lessee, Lessor and any Lenders) whose names have been provided to Lessee in
writing (as additional insureds) against claims for bodily injury, personal
injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
infra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "Insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.

         (b) Carried by Lessor. Lessor shall also maintain liability insurance
described in Paragraph 8.2(a) above, in addition to and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured (herein.

     8.3 Property Insurance-Building, Improvements and Rental Value.

                                       10

<PAGE>
 
         (a) Building end Improvements. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for lull replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved,
such latter amount is less than lull replacement cost. Lessee-Owed Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available and
commercially appropriate, Lessor's policy or policies shall insure against all
risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender), Including coverage for any additional
costs resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Building required to be demolished or removed
by reason of the enforcement of any building, zoning, safely or land use laws as
the result of a covered loss, but not including plate glass insurance. Said
policy or policies shall also contain an agreed valuation provision in lieu of
any co-insurance clause, waiver of subrogation, and inflation guard protection
causing an increase In the annual property insurance coverage amount by a factor
of not lass than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located.

         (b) Rental Value. Lessor shall also contain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that in
the event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises, to provide for one full year's loss
of rental revenues from the date of any such loss. Said insurance shall contain
an agreed valuation provision in lieu of any co-insurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected rental income,
Real Property Taxes, insurance premium costs and other expenses, if any,
otherwise payable, for the next 12-month period. Common Area Operating Expenses
shall include any deductible amount in the event of such loss.

         (c) Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.

         (d) Lessee's Improvements. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.

     8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed $1,000
per occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property and the restoration of Trade Fixtures and
Lessee-Owned Alterations and Utility Installations. Upon request from Lessor,
Lessee shall provide Lessor with written evidence that such insurance is in
force.

     8.5 Insurance Policies. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are located,
and maintaining during the policy term a "General Policyholders Rating" of at
least B+, V, or such other rating as may be required by a Lender, as set forth
in the most current issue of "Best's Insurance Guide." Lessee shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance required under Paragraph 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior written notice to Lessor. Lessee 

                                       11

<PAGE>
 
shall at least thirty (30) days prior to the expiration of such policies,
furnish Lessor with evidence of renewals or "insurance binders" evidencing
renewal thereof, or Lessor may order such insurance and charge the cost thereof
to Lessee, which amount shall be payable by Lessee to Lessor upon demand.

     8.6 Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages (whether in contract or in tort) against the
other, for loss or damage to their property arising out of or incident to the
perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.

     8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rants and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to the defense or pursuit
of any claim or any action or proceeding involved therein, and whether or not
(in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing mailers, Lessee upon notice from Lessor shall defend the
same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.

     8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other detects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a pan
from other sources or places, and regardless of whether the cause of such damage
or injury or the means of repairing the same is accessible or not. Lessor shall
not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.

9.   Damage or Destruction.

     9.1 Definitions.

         (a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.

         (b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50% ) or more of
the then Replacement Cost of the Premises (excluding Lessee-Owned Alterations
and Utility Installations and Trade Fixtures) immediately prior to such damage
or destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lassoes of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then

                                       12

<PAGE>
 
Replacement Cost (excluding Lessee-Owned Alterations and Utility Installations
and Trade Fixtures of any lessees of the Building) of the Building shall, at the
option of Lessor, be deemed to be Premises Total Destruction.

         (c) "Insured Loss" shall mean damage or destruction to the Premises
other than lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage
limits involved.

         (d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor al the time of the occurrence to (heir condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codas, ordinances or
laws, and without deduction for depreciation.

         (e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.

     9.2 Premises Partial Damage - Insured Loss. If Premises Partial Damage that
is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
lull force and effect. In the event, however, that there is a shortage of
insurance proceeds and such shortage is due to the fact that, by reason of the
unique nature of the improvements in the Premises, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, Lessor shall complete them as soon as reasonably possible and this
Lease shall remain in lull force and effect. If Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days (hereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within such ten (10) day period,
and it Lessor does not so elect to restore and repair, then this Lease shall
terminate sixty (60) days following the occurrence of the damage or destruction.
Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for arty funds contributed by Lessee to repair any
such damage or destruction. Premises Partial Damage due to flood or earthquake
shall be subject to Paragraph 9.3 rather than Paragraph 9:2, notwithstanding
that there may be some insurance coverage, but the net proceeds of any such
insurance shall be made available for the repairs if made by either Party.

     9.3 Partial Damage - Uninsured Loss. If Premises Partial Damage that is not
an Insured Loss occurs, unless caused by a negligent or willful act of Lessee
(in which event Lessee shall make the repairs at Lessee's expense and this Lease
shall continue in lull force and effect). Lessor may al Lessor's option, either
(i) repair such damage as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) give
written notice to Lessee within thirty (30) days after receipt by Lessor of
knowledge of the occurrence of such damage of Lessor's desire to terminate this
Lease as of the date sixty (60) days following the date of such notice. In the
event Lessor elects to give such notice of Lessor's intention to terminate this
Lease, Lessee shall have the right within ten (10) days after the receipt of
such notice to give written notice to Lessor of Lessee's commitment to pay for
the repair of such damage totally al Lessee's expense and without reimbursement
from Lessor. Lessee shall provide Lessor with the required funds or satisfactory
assurance thereof within thirty (30) days following such commitment from Lessee.
In such event this Lease shall continue in lull force and effect, and Lessor
shall proceed to make such repairs as soon as reasonably possible after the
required funds are available. If Lessee does not give such notice and provide
the funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor's notice of termination.

          9.4  Total Destruction.  Notwithstanding any other provision hereof if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured 

                                       13

<PAGE>
 
Loss or was caused by a negligent or willful act of Lessee. In the event,
however, that the damage or destruction was caused by Lessee, Lessor shall have
the right to recover Lessor's damages from Lessee except as released and waived
in Paragraph 9.7.

     9.5 Damage Near End of Term. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one month's Base Rent, whether or not an Insured Loss, Lessor may, at Lessor's
option, terminate this Lease effective sixty (60) days following the date of
occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the Date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, Then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days alter Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense repair such damage as soon as reasonably possible and
this Lease shall continue in full force and effect. If Lessee fails to exercise
such option and provide such funds or assurance during such period, then this
Lease shall terminate as of the date set forth in the first sentence of this
Paragraph 9.5.

     9.6 Abatement of Rent; Lessee's Remedies.

         (a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent, Common Area Operating Expenses and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction, repair, remediation or restoration.

          (b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice.  If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice.  If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect.  "Commence" as used in this Paragraph
9.6 shall mean either the unconditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises, whichever
occurs first.

     9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or $100,000 whichever is greater, give written
notice to Lessee within thirty (30) days altar receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days shat the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the excess costs of (a) investigation and remediation of such
Hazardous Substance Condition to the extent required by Applicable Requirements,
over (b) an amount equal to twelve (12) times the then monthly Base Rent or

                                       14

<PAGE>
 
$100,000, whichever is greater. Lessee shall provide Lessor with the funds
required at Lessee or satisfactory assurance thereof within thirty (30) days
following said commitment by Lessee. In such event this Lease shall continue in
lull force and effect, and Lessor shall proceed to make such investigation and
remediation as soon as reasonably possible alter the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time period specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.

     9.8 Termination - Advance Payments. Upon termination of this Lease pursuant
to this Paragraph 9, Lessor shall return to Lessee any advance payment made by
Lessee to Lessor and so much of Lessee's Security Deposit as has not been, or is
not then required to be, used by Lessor under the terms of this Lease.

     9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination at this Lease and hereby waive
the provisions of any present or future statute to the extent if is inconsistent
herewith.

10.  Real Property Taxes.

     10.1 Payment of Taxes. Lessor shall pay the Real Properly Taxes, as defined
in Paragraph 10.2, applicable to the Industrial Center, and except as otherwise
provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.

     10.2 Real Property Tax Definition. As used herein, the term "Real Property
Taxes" shall include any form of real estate lax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed upon the Industrial Center by any authority having the
direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage, or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Industrial Center or any portion thereof, Lessor's
right to rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "Real Property Taxes" shall also Include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason of events
occurring, or changes in Applicable Law taking effect, during the term of this
Lease, including but not limited to a change in the ownership of the Industrial
Center or in the improvements thereon, the execution at this Lease, or any
modification, amendment or transfer thereof, and whether or not contemplated by
the Parties. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate lax year shall be included in the calculation
of Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.

     10.3 Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirely of any increase in Real Property Taxes it assessed solely by
reason at Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.

     10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion at the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.

     10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all 

                                       15

<PAGE>
 
other personal property to be assessed and billed separately from the real
property at Lessor. If any of Lessee's said property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to
Lessee's property within ten (10) days alter receipt at a written statement
seeing forth the taxes applicable to Lessee's property.

11.  Utilities.

     Lessee shall pay directly for all utilities and services supplied to the
Premises, including but not limited to electricity, telephone, security, gas and
cleaning of the Premises, together with any taxes thereon. If any such utilities
or services are not separately metered to the Premises or separately billed to
the Premises, Lessee shall pay to Lessor a reasonable proportion to be
determined by Lessor at all such charges jointly metered or billed with other
premises in the Building, in the manner and within the time periods set forth in
Paragraph 4.2(d).

12.  Assignment end Subletting.

     12.1 Lessor's Consent Required.

          (a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.

          (b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.

          (c) The involvement at Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale. acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth at Lessee as It was represented to Lessor at the time of lull
execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth at Lessee was or is greater, shall be considered an assignment at
this Lease by Lessee to which Lessor may reasonably withhold its consent. "Net
Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.

          (d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-curable Breach without
the necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days' written notice ("Lessor's Notice"), increase the monthly Base Rent for the
Premises to the greater of the then lair market rental value at the Premises, as
reasonably determined by Lessor, or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the new lair market rental value,
it disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next installment(s) at Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (110%) of
the price previously in effect, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined wish reference to the index applicable to the time
of such adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor's Notice.

                                       16

<PAGE>
 
          (e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.

     12.2 Terms and Conditions Applicable to Assignment and Subletting.

          (a) Regardless of Lessor's consent, any assignment or Subletting shall
not (i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, nor (iii) alter the primary liability at Lessee for
the payment of Base Rent and other sums due Lessor hereunder or for the
performance at any other obligations to be performed by Lessee under this Lease.

          (b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.

          (c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.

          (d) In the event of any Default or Breach of Lessee's obligation under
this lease, Lessor may proceed directly against Lessee, any Guarantors or anyone
else responsible for the performance of the Lessee's obligations under this
Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.

          (e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000, as reasonable consideration for Lessor's considering and
processing the request for consent. Lessee agrees to provide Lessor with such
other or additional information and/or documentation as may be reasonably
requested by Lessor.

          (f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.

     12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

          (a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice 

                                       17

<PAGE>
 
from Lessor stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor the rents and other charges due
and to become due under the sublease.. Subleases shall rely upon any such
statement and request from Lessor and shall pay such rents and other charges to
Lessor without any obligation or right to inquire as to whether such Breach
exists and notwithstanding any notice from or claim from Lessee to the contrary.
Lessee shall have no right or claim against such sublessee, or, until the Breach
has been cured, against Lessor, for any such rents and other charges so paid by
said sublessee to Lessor.

          (b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease Lessor, at its option and without any obligation to
do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.

          (c) Any matter or thing requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.

          (d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any pare of the Premises without Lessor's prior written
consent.

          (e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice.  The sublessee shall
have a right of reimbursement and offset Item and against Lessee for any such
Defaults cured by the sublessee.

13.  Default; Breach; Remedies.

     13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure alter notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:

          (a) The vacating of the Premises without the intention to reoccupy.
Same, or the abandonment of the Premises.

          (b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent, Lessee's Share of Common Area
Operating Expenses, or any other monetary payment required to be made by Lessee
hereunder as and when due, the failure by lessee to provide Lessor with
reasonable evidence of insurance or surely bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.

          (c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, it applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation 

                                       18

<PAGE>
 
or information which Lessor may reasonably require of Lessee under the terms of
this lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.

          (d) A Default by Lessee as to the terms, covenants conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee. other than those
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee it
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.

          (e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition tiled against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located al the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located al the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided however, in the
event that any provision of this SubParagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.

          (f) The discovery by Lessor that any financial statement of Lessee or
of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially
false.

          (g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance wish the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing (iv) a Guarantor's refusal .to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.

     13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may al its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, al its own
option, may require all (inure payments to be made under this Lease by Lessee to
be made only by cashier's check. In the event of a Breach of this Lease by
Lessee (as defined in Paragraph 13.1), with or without further notice or demand,
and without limiting Lessor in the exercise of any right or-remedy which Lessor
may have by reason of such Breach, Lessor may:

          (a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall Immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth al the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not 

                                       19

<PAGE>
 
limited to the cost of recovering possession of the Premises, expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable attorneys' fees, and that portion of any leasing commission paid by
Lessor in connection with this Lease applicable to the unexpired term of this
Lease. The worth at the time of award of the amount referred to in provision
(iii) of the immediately preceding sentence shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco or
the Federal Reserve Bank District in which the Premises are located at the time
of award plus one percent (1%). Efforts by Lessor to mitigate damages caused by
Lessee's Default or Breach of this Lease shall not waive Lessor's right to
recover damages under this Paragraph 13.2. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have
the right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under SubParagraph 13.1(b), (c) or (d) was not previously given,
a notice to pay rent or quit, or to perform or quit, as the case may be, given
to Lessee under any stature authorizing the forfeiture of leases for unlawful
detainer shall also constitute the applicable notice for grace period purposes
required by SubParagraph 13.1(b), (c) or (d). In such case, the applicable grace
period under the unlawful detainer statue shall run concurrently after the one
such statutory notice, and the failure of Lessee to cure the Default within the
greater of the two (2) such grace periods shall constitute both an unlawful
detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute.

          (b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.

          (c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.

          (d) The expiration or termination of this Lease and/or the termination
of Lessee's right to possession shall not relieve Lessee from liability under
any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee's occupancy of the Premises.

     13.3 Inducement Recapture In Event of Breach. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms. covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined In Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initialed the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.

     13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or deed of trust covering the Premises.
Accordingly, ff any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a tale charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event 

                                       20

<PAGE>
 
constitute a waiver of Lessee's Default or Breach with respect to such overdue
amount, nor prevent Lessor from exercising any of the other rights and remedies
granted hereunder. In the event that a late charge is payable hereunder, whether
or not collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.

     13.5 Breech by Lessor. Lessor shall riot be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by any Lenders) whose name and address shall have been furnished to Lessee
in writing (or such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for Its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.

14.  Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such raking (or in the
absence o f such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority lakes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in lull force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur it the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, whether such award shall be made -as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, That Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In he event that this Lease is
not terminated by reason of such condemnation. Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal and
other expenses incurred by Lessor in the condemnation matter, repair any damage
to the Premises caused by such condemnation authority. Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.

15.  Brokers' Fees.

     15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10 is/are the
procuring cause of this Lease.

     15.2 Representations and Warranties. Lessee and Lessor each represent and
warrant to the other that it has had no dealings wish any person, firm, broker
or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys fees
reasonably incurred with respect thereto.

16.  Tenancy and Financial Statements.

     16.1 Tenancy Statement. Each Party (as "Responding Party") shall within ten
(10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a 

                                       21

<PAGE>
 
statement in writing in a form similar to the then most current "Tenancy
Statement" form published by the American Industrial Real Estate Association,
plus such additional information, confirmation and/or statements as may be
reasonably requested by the Requesting Party.

     16.2 Financial Statement. If Lessor desires to finance, refinance, or sell
the Premises or the Building, or any part thereof, Lessee and all Guarantors
shall deliver to any potential lender or purchaser designated by Lessor such
financial statements of Lessee and such Guarantors as may be reasonably required
by such lender or purchaser, including but not limited to Lessee's financial
statements for the past three (3) years. A11 such financial statements shall be
received by Lessor and such lender or purchaser in confidence and shall be used
only for the purposes herein set forth.

17.  Lessor's Liability. The term "Lessor" as used herein shall mean the owner 
or owners at the time in question of the fee lisle to the Premises. In the event
of a transfer of Lessor's lisle or Interest In the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.

18.  Severabililty. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.

19.  Interest on Past-Due Obligations. Any monetary payment due Lessor 
hereunder, other than late charges, not received by Lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the stale in which
the Premises are located plus tour percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.

20.  Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.

21.  Rent Defined. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.

22.  No Prior or other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of other Party to this Lease and as to
the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party beneficiary
of the provisions of this Paragraph 22.

23.  Notices.

     23.1 Notice Requirements. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours, and shall be deemed sufficiently given if served
in a manner specified in this Paragraph 23. The addresses noted adjacent to a
Party's signature on this Lease shall be that Party's address for delivery or
mailing of notice purposes. Either Party may be written notice to the other
specify a different address for notice purposes, except that upon Lessee's
taking possession of the Premises, the Premises shall constitute Lessee's
address for the purpose of mailing or delivering notice to Lessee. A copy of all
notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.

                                       22

<PAGE>
 
     23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone confirmation of receipt of the
transmission thereof, provided a copy is also delivered via delivery or mail. If
notice is received on a Saturday or a Sunday or a legal holiday, it shall be
deemed received on the next business day.

24.  Waivers. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee. or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof. Any payment given Lessor by Lessee may be accepted by
Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.

25.  Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or saxes applicable thereto.

26.  No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.

27.  Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies a
law or in equity.

28.  Covenants and Conditions. All provisions, of this Lease to be observed or
performed by Lessee are both covenants and conditions.

29. inding Effect; Choice of Law. This Lease shall be binding upon the Parties,
their personal representatives, successors and assigns and be governed by the
laws of the Stale in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.

30.  Subordination; Attornment; Non-Disturbance.

     30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice 

                                       23

<PAGE>
 
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative Dates of the documentation or
recordation thereof.

     30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.

     30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor alter the execution of this lease. Lesson's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.

     30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be
effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.

                                       24

<PAGE>
 
31.  Omitted.

32.  Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents 
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may al any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may al any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.

33.  Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.

34.  Signs. Lessee shall not place any sign upon the exterior of the Premises or
the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.

35.  Termination; Merger. Unless specifically staled otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing sublessee Lessor's failure within !en (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.

36.  Consents.

          (a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' tees)
incurred in the consideration of. or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor wilt incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.

          (b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to this particular matter for which consent is being
given.

                                       25

<PAGE>
 
37.  Guarantor.

     37.1 Form of Guaranty. If there are to be any Guarantors of this Lease per
Paragraph 1.11, the form of the guaranty to be executed by each such Guarantor
shall be in the form most recently published by the American Industrial Real
Estate Association, and each such Guarantor shall have the same obligation as
Lessee under this lease, including but not limited to the obligation to provide
the Tenancy Statement and information required in Paragraph 16.

     37.2 Additional Obligations of Guarantor. It shall constitute a Default of
the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.

38.  Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.

39.  Options. 39.1 Definition. As used in this Lease, the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of lust refusal to lease the Premises or the right of lust
otter to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the fight to purchase other property of Lessor, or the right of first refusal to
purchase other properly of Lessor, or the right of first offer to purchase other
property of Lessor:

     39.2 Options Personal to Original Lessee. Each Option granted to Lessee in
this Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and
cannot be voluntarily or involuntarily assigned or exercised by any person or
entity other than said original Lessee while the original Lessee is in lull and
actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from This Lease in any manner,
by reservation or otherwise.

     39.3 Multiple Options. In the event that Lessee has any multiple Options to
extend or renew this Lease, a later option cannot be exercised unless the prior
Options to extend or renew this Lease have been validly exercised.

     39.4 Effect of Default on Options.

          (a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the even) That Lessor has given to Lessee three
(3) or more notices of separate Defaults under Paragraph 13.1 during the twelve
(12) month period immediately preceding the exercise of the Option, whether or
not the Defaults are cured.

          (b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a)

                                       26

<PAGE>
 
          (c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days attar such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) it Lessee commits a Breach of this Lease.

40.  Rules end Regulations. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations') which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.

41.  Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its. agents and invitees and their property from the acts of third parties.

42.  Reservations. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.

43.  Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.

44.  Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.

45.  Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.

46.  Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Panics hereto.

47.  Amendments. This Lease may be modified only in writing, signed by the
parties in Interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent, payable under this Lease. As long as they do not
materially change lessee's obligations hereunder, Lessee agrees to make such
reasonable non- monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.

48.  Multiple Parties. Except as otherwise expressly provided herein. if more
than one person or entity is named herein as either Lessor or Lessee. the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.

                                       27

<PAGE>
 
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN.  AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO.  THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED.  THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.

     IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S
     REVIEW AND APPROVAL.  FURTHER.  EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
     CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS,
     UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES.  NO REPRESENTATION OR
     RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
     OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS
     TO THE LEGAL SUFFICIENCY, LEGAL EFFECT.  OA TAX CONSEQUENCES OF THIS LEASE
     OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON
     THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
     THIS LEASE.  IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA,
     AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE
     CONSULTED.

The parties hereto have executed this Lease al the place and on the dates
specified above their respective signatures.


<TABLE>

Executed at:                                                                Executed at:
<S>          <C>                                               <C>          <C>
on:                                                            on:
           -----------------------------------------                      -------------------------------------------
By LESSOR:                                                     By LESSEE:
 
James S. Lindsey                                               Align Technology, Inc.

By:                   /s/ James S. Lindsey                     By:                      /s/ Kelsey Wirth
           -----------------------------------------                      -------------------------------------------
                          James S. Lindsey                                                  Kelsey Wirth

Title:                                                         Title:       President
           -----------------------------------------                 ------------------------------------------------
 
Address:     18 Cypress Avenue                                 Address:     442 Potrero Ave
             Kentfield, CA 94904                                            Sunnyvale, CA 94086

Telephone:   (415) 453-2583                                    Telephone:   (408) 738-1500
Facsimilie:  (415) 453-8465                                    Facsimilie:  (408) 738-7150


BROKER:                                                        BROKER:

Executed at:                                                   Executed at:

on:                                                            on:
           -----------------------------------------                      -------------------------------------------
By:                                                            By:
           -----------------------------------------                      -------------------------------------------
Name Printed:                                                               Name Printed:
  
Title:                                                         Title:
           -----------------------------------------                      -------------------------------------------
</TABLE>


                                       28

<PAGE>
 

<TABLE>

<S>          <C>                                               <C>          <C>

Address:                                                       Address:
           -----------------------------------------                      -------------------------------------------
Telephone:   (   )                                             Telephone:   (   )
Facsimilie:  (   )                                             Facsimilie:  (   )
           -----------------------------------------                      -------------------------------------------
</TABLE>


NOTE:  These forms are often modified to meet changing requirements of law and
needs of the Industry.  Always write or call to make sure you are utilizing the
most current form:  AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South
Flower Street, Suite 600, Los Angeles, CA 90017.  (213) 687-8777.

                                       29

<PAGE>
 
                                  Addendum to
        Standard Industrial/Commercial Multi-Tenant Lease - Modified Net
                                    between
                                James S. Lindsey
                                      and
                             Align Technology, Inc.

     This Addendum is entered into this June 20, 2000, by and between James S.
Lindsey ("Lessor") and Align Technology, Inc. ("Lessee") for Premises located at
881 Martin Avenue, Santa Clara, CA 95050.

     This Addendum modifies the Standard Industrial/Commercial Multi-Tenant
Lease - Modified Net ("Agreement"), and all "Section" references are to the
numbered paragraphs of the relevant portions of the Agreement. Notwithstanding
anything to the contrary set forth in the Agreement, any attachment, appendix or
other document, the following terms and conditions shall apply, and all
conflicting, inconsistent or additional terms or conditions shall be of no force
or effect.

49.  Rent. Lessee shall pay to Lessor, for each calendar month of the term,
monthly base rent as shown below, in advance, on the first day of each calendar
month, without prior or notice or demand.


<TABLE>
<CAPTION>
Month                                                               Base Rent per month
-------------------------------                                  ------------------------
<S>                                                              <C>
July 1, 2000 thru June 1, 2001                                          $167,739.00
July 1, 2001 thru June 1, 2002                                          $174,448.56
July 1, 2002 thru June 1, 2003                                          $181,426.50
July 1, 2003 thru June 1, 2004                                          $188,683.56
July 1, 2004 thru June 1, 2005                                          $196,230.90
</TABLE>



50.  Notwithstanding Paragraph 4.2(a), Lessee shall engage and pay for its own
separate trash service.

51.  Lessee shall not embark upon any new penetrations of the roof membrane
without specific written approval by Lessor.

52.  Notwithstanding Paragraph 4.2(a) (vii), if an insured loss occurs within
Lessee's demised premises, then Lessee shall pay the entire insurance deductible
amount, not to exceed $5000.00. In case of glass breakage upon the premises from
vandalism, Lessee shall pay for the costs of replacement in excess of what is
available, from insurance.

53.  Notwithstanding anything contained in the Lease, Lessor shall be
responsible, at Lessor's sole cost, to make repairs to the roof membrane. Should
the roof membrane require replacement, Lessor shall accomplish the replacement
at Lessor's sole cost. Subsequent to any roof replacement, roof maintenance and
repairs shall be governed by Paragraph 4.2.

54.  Paragraph 13.1 (b) is to be deleted and the following language substituted:


          13.1(b)(i) The failure by Lessee to make any payment of Base Rent,
Lessee's Share of Common Area Operation Expenses, or any other monetary payment
required to be made by Lessee hereunder as and when due.

          13.1(b)(ii) Except as expressly otherwise provided in this Lease, the
failure of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) days following written notice thereof by or on behalf of Lessor to Lessee.

                                       30

<PAGE>
 
55.  Paragraphs 15.2, 15.3, and 31 of the Lease are hereby deleted.

56.  DISCLOSURE:  One of the principals of the Premises is a licensed California
real estate agent acting as an agent in this transaction.

57.  At the end of Paragraph 6.2(c), add "The foregoing indemnity does not apply
to any Hazardous Substance or other material which is present in, on or about
the Premises or the Property as of the Commencement Date or such Hazardous
Substance or material which migrates to or under the Premises or the Property
from outside the Property or Premises during the term of this Lease, unless due
to release by Tenant or its employees, agents, contractors and invitees."

58.  Notwithstanding Paragraph 7.1(a), Lessee shall not be responsible for a
repair if Lessee can show that the repair is required exclusively because of a
prior use.

59.  The consents required of Lessor in Paragraphs 12.1 (a) and (b) shall not be
unreasonably withheld by Lessor.

60.  Paragraph 12.2(e) line 4, the phrase "or ten percent (10%) of the monthly
Base Rent applicable to the portion of the Premises which is the subject of the
proposed assignment or sublease, whichever is greater" is deleted.

61.  Paragraph 12.2(g) shall be deleted.

62.  Paragraph 12.2 (h) shall be deleted and the following language substituted:
Lessor, as a condition to giving its consent to any assignment or subletting,
may require that Lessee pay to Lessor fifty percent (50%) of sublease profits
after subleasing commissions. In addition, if Lessee proposes to sublease or
assign seventy percent (70%) or more of the building, then Lessor, by written
notice given to Lessee prior to the effective date of the assignment or the
Commencement Date of the Sublease, may cancel this Lease.

63.  Paragraph 16.2 shall be modified to the effect that Lessor shall only
require Lessee to furnish a financial statement once in any twelve- (12)- month
period.

                                       31

<PAGE>
 
64.  OPTION TO RENEW - ARBITRATED RENT: Lessee is given the option to extend the
term subject to all the provisions contained in this Lease, except for base
monthly rent, for a period of FIVE (5) years ("extended term") following the
expiration of the initial term, by giving notice of exercise of the option
("option notice") to Lessor at least four (4) months but no more than six (6)
months before the expiration of the initial term. Provided that, if Lessee is in
default beyond any applicable notice and cure periods on the date of giving the
option notice, the option notice shall be totally ineffective, or if Lessee is
in default on the date the extended term is to commence, Lessor may elect that
the extended term shall not commence and this Lease shall expire at the end of
the initial term. The base rent shall be set at the commencement of the option
period at fair market (highest and best use) rent. The parties shall have
fifteen (15) days after Lessor receives the option notice in which to agree on
base monthly rent during the extended term. If the parties agree on the base
monthly rent for the extended term during that period, they shall immediately
execute an amendment to this Lease stating the base monthly rent for the
extended term. If the parties are unable to agree on the base monthly rent for
the extended term within that period, then within ten days after the expiration
of that period, each party, at its cost and by giving notice to the other party,
shall appoint a real estate appraiser with at least five years' full-time
commercial appraisal experience in the area in which the premises are located,
to other party can apply to the then President of the county real estate board
of Santa Clara bounty, or the Presiding Judge of the Superior Court of that
county, for the selection of a third appraiser who meets the qualifications
stated in this paragraph. Each of the parties shall bear one half of the cost of
appointing the third appraiser and of paying the third appraiser's fee. The
third appraiser, however selected, shall be a person who has not previously
acted in any capacity for either party. Within thirty days after the selection
of the third appraiser, a majority of the appraisers shall set the base monthly
rent for the extended term. If a majority of the appraisers are unable to set
the base monthly rent within the stipulated period of time, the three appraisals
shall be added together and their total divided by three; the resulting quotient
shall be the base monthly rent for the premises during the extended term. In no
event shall the base rent at the commencement of the option period be less than
the rent for the last month of the initial term. Following the exercise of the
option, the rent shall be increased annually on each anniversary of the
beginning of the extended term by four percent (4%).

65.  Add the following language to the beginning of Paragraph 3.1: "Lessee shall
have access to the premises 24 hours per day, 7 days a week".

66.  Section 8.8. Insert at the beginning of Section 8.8: "Except to the extent
caused by the willful misconduct of Lessor or persons under Lessor's control".

67.  Section 40.0 Insert as the last sentence. "To the extent that there is a
conflict between the terms of this Lease and the Rules and Regulation, the terms
of this Lease shall control".

68.  Notwithstanding Paragraph 51, Lessor hereby consents to Lessee's
installation on the roof and penetration of the roof membrane if necessary, of:
(i) additional HVAC units, as needed, (ii) a parabolic antenna and (iii) a
satellite dish.

69.  Notwithstanding anything to the contrary contained in Sections 6.4 or 32 or
elsewhere in this Lease, except in case of emergency, neither Lessor nor any
parties under Lessor's control shall enter onto the Premises unless (i) Lessor
has given Lessee at least 24 hours prior notice (ii) Lessor has complied and
shall comply with Lessee's security requirement (which Lessor acknowledges will
be extensive, due to the extremely sensitive and confidential nature of Lessee's
business), which may include but are not limited to the requirement that a
representative of Lessee accompany Lessor or the parties under Lessor's control
when in certain parts of the premises.

70.  The terms of Article 12 of this Lease and Articles 59 through 62 of this
Addendum also shall not apply to any assignment or other transfer to an entity
which controls, is controlled by or is under common control with Lessee or any
successor to Lessee or which succeeds, to substantially all of Lessee's assets
and business by merger, consolidation, reorganization or purchase.
Notwithstanding anything to the contrary in this Lease, ,for the purposes of
Article 12 of this lease and Articles 59 through 62 of this Addendum, the term
"assignment" shall not be deemed to include the trading of Lessee's stock on a
nationally recognized exchange or pursuant to an initial public offering.

                                       32

<PAGE>
 
71.  Lessor acknowledges that, subject to Lessor's reasonable requirements
regarding design, Lessee plans to make extensive renovations to the Premises
(collectively, the "Initial Improvement").  The Initial Improvements may include
but shall not be limited to construction of dental lab operations, data
acquisition lab operations  shall be in an amount equal to the full amount
required to restore the conference rooms to their original condition as of the
date of full execution of this Lease, as reasonably estimated by Lessor's
architect.  In the event that the amount of the Conference Room Deposit is
estimated by Lessor's architect to be in excess of One Hundred Thousand Dollars
($100,000), Lessee shall be entitled to provide the Conference Room Deposit to
Lessor in the form of an irrevocable letter of credit.  Lessor shall have
recourse to the Conference Room Deposit only to the extent that such deposit is
necessary to compensate Lessor for the actual cost incurred by Lessor for such
restoration, and any amount of the Conference Room Deposit in excess of such
actual cost shall be refunded to lessee within ten (10) days after the
completion of such restoration, whether undertaken by Lessee or Lessor.

72.  The phrase "Reasonable amounts of" shall be inserted before the text of
Section 4.2(a)(iv).

73.  The following sentence shall be inserted after the first sentence of
Section 7.4(c): "Notwithstanding the foregoing, if this Lease is terminated due
to damage pursuant to the terms of Article 9, Lessee shall not be required to
repair any damage to the premises due to casualty upon surrender of the Premises
to Lessor.".

In Witness Whereof, Align Technology, Inc., and Lessor have executed this
Addendum to the Agreement as of the date first written above.


<TABLE>

<S>     <C>                                                       <C>      <C>

LESSOR:                                                                     LESSEE:  Align Technology, Inc.

By:                  /s/ James S. Lindsey                         By:           /s/ Kelsey Wirth
   -------------------------------------------------                 ----------------------------------------------
Date:                6-24-00                                      Name:    Kelsey Wirth
     -----------------------------------------------
                                                                  Title:   President

                                                                  Date:    6-22-00
                                                                       --------------------------------------------

                                                                  By:
                                                                     ----------------------------------------------

                                                                  Name:
                                                                       --------------------------------------------

                                                                  Title:
                                                                        -------------------------------------------

                                                                  Date:
                                                                       --------------------------------------------
</TABLE>
                 

CONSULT YOUR PROFESSIONAL ADVISORS: THIS DOCUMENT HAS BEEN PREPARED FOR
SUBMISSION TO YOUR ATTORNEY, TAX ACCOUNTANT, GEOLOGIST OR OTHER PROFESSIONAL
ADVISOR FOR APPROVAL FROM THE STANDPOINT OF PROTECTION OF YOUR INTERESTS AND
RIGHTS.  NO REPRESENTATION OR RECOMMENDATION IS MADE BY CPS THE COMMERCIAL
PROPERTY SERVICES COMPANY, OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS DOCUMENT OR THE
TRANSACTION RELATING THERETO.  ADDRESS THESE QUESTIONS TO YOUR ATTORNEY AND/OR
OTHER PROFESSIONAL ADVISORS.

                                       33

<PAGE>
 
                                   EXHIBIT A


                            [BLUEPRINT OF BUILDING]

                                       34



<PAGE>
 
                                                                    EXHIBIT 10.6

                               LEASING AGREEMENT
                               -----------------

This leasing agreement is made here at the Bhallah House, Bhalla Stop, Lahore,
on this day Of September 01st, 2000.

                                    BETWEEN

Dr. Saadia Khawar Khan Christo w/o Dr. Atta Ullah Chishti R/o Bhalla House,
Bhalla Stop, Multan Road, Lahore (hereinafter called "the lessor") on the one
part.

                                      AND

Align Technology Pakistan through Ioannis Demetriades its Country Manager,
Pavilion # 44, Pearl Continental Hotel, Lahore, (hereinafter called "the
lessee") on the other part.

Whereby it is agreed as follows:

1.   The lessor shall grant and the lessee shall accept the lease of the house
     known as Bhallah House, Shallah Stop, Multan Road, Lahore. The leased
     premises consist of a total area of over 35,000 square feet. The leased
     premises are made up of 10,500 square feet of covered space, and 24,500
     square feet of uncovered space consisting of driveways, car and cycle
     stands, garden and lawn.

2.   The leasing agreement is for a period of 10 years. The leasing agreement is
     renewable at the end of the specified term at the option of both parties,
     and in case the tenancy will neither be terminated nor will be renewed then
     the parties shall abide by the terms of the present deed.

3.   The leasing fee shall be at the rate of U.S. $ 1,100.00 per month.
 The rent
     will be payable in advance on or before the 7' day of each calendar month.

4.   The lessee agrees to the following:

     .    To pay all races and utility charges except the house tax

     .    Not to alter the premises without the lessors consent

     .    To use the premises for the office of the "Align Technology Pakistan"
          only

     .    Not to assign or sublet without the lessors consent

     .    in the case of non-payment, the lessor has the right to occupy the
          leased premises

5.   The lessor agrees to the following:

     .    To white wash and color-wash every year such parts as are now White
          washed or color washed


<PAGE>
 
     .    To paint the wood work every third year

6.   Both the lessor and me lessee agree to me following:

     .    That they will have the rights and liabilities specified in section
          108,' transfer of property act, 1882 except in clause (I), (J) and (M)
          thereof; and

     .    Each party will provide the other party one month's advance notice in
          case of termination of the leasing agreement

                                  In witness whereof the parties have put their 
                                  signatures hereunder an this 22nd day of
                                  August, 2000.

Witness                           Lessor

_____________________________     _________________________________

                                       2



<PAGE>

                                                                    EXHIBIT 10.7

 
                     SHELTER SERVICES AGREEMENT BETWEEN E4
                            ALIGN TECHNOLOGY, INC.
                                      AND
                            ELAMEX, S. A. de C. V.


<TABLE>
<C>  <S>                                                 <C>
 1.  Manufacturing Space...............................   2
 2.  Space Services....................................   3
 3.  Import/Export Services............................   3
 4.  Mexican Customs, Duties, Taxes and Other Charges..   4
 5.  U.  S.  Customs, Duties, Taxes and Other Charges..   5
 6.  Product Assembly..................................   5
 7.  Personnel Services and Manning Table..............   5
 8.  Invoicing and Other Charges.......................   8
 9.  Term..............................................   9
10.  Early Termination and Termination Options.........  10
11.  Warranties........................................  11
12.  Relationship of the Parties.......................  12
13.  Insurance.........................................  12
14.  Notices...........................................  13
15.  Force Majeure.....................................  14
16.  Bailment..........................................  14
17.  Arbitration.......................................  16
18.  Environmental Indemnity...........................  19
19.  Default...........................................  20
20.  Miscellaneous.....................................  20
</TABLE>


<PAGE>
 
                       SHELTER SERVICES AGREEMENT BETWEEN
                             ALIGN TECHNOLOGY, INC
                                      AND
                             ELAMEX, S. A. de C. V.

This agreement ("Agreement") made as of this 15th day of February, 2000 by Align
Technology, Inc., with principal offices at 442 Potrero Avenue (hereinafter
ALIGN) and Elamex, S.A. de C.V., a company duly incorporated in the Republic of
Mexico, with principal offices in Cd. Juarez, Chihuahua, Mexico, (hereinafter
"ELAMEX").

A. Whereas, ALIGN desires to have ELAMEX assemble products in Mexico from parts,
   materials and certain equipment supplied by ALIGN (the "Product");
   and

B. Whereas, ELAMEX desires to perform such services and
 maintains status as a
   Maquiladora duly authorized by the Mexican Secretary of Commerce and
   Industrial Development, and

C. Whereas, both parties warrant and represent that they are duly authorized to
   execute this Agreement, and such authorization is in full force and effect.

     Now, therefore, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties agree as follows:

1.   Manufacturing Space

1.1.    ELAMEX agrees to perform the Services for ALIGN at the ELAMEX facility
        designated as Elamex Plant No. 11 located in the Fernandez Industrial
        Park, in Cd. Juarez, Chihuahua, Mexico (the "Facility"), parts,
        materials, production supplies, packaging material and certain equipment
        supplied by and belonging to ALIGN. ELAMEX shall arrange sufficient
        Facility and facility services ("Services") to enable it to assemble the
        Product. Such Facility and Services shall include, at a minimum:

                                    2 of 24

<PAGE>
 
1.1.1.  A space of 7500 square feet for the assembly of the Product, warehousing
        of parts and assembled Product, offices and allocated space
        ("Space") as described in Exhibit A.

1.2.    The Facility will have at a minimum:

1.2.1.  Modern devices for the supply of heat, evaporative cooling, lighting and
        water,

1.2.2.  Industrial electrical power, and

1.2.3.  A dedicated Mexican non-toll telephone line, with extensions for the
        resident manager and his staff as well as normal office
        furnishing.

1.3.    Upon request by ALIGN for additional Services, ELAMEX shall use its best
        efforts to provide the same in an efficient manner at a fair and
        reasonable cost.

2.   Space Services

2.1.    ELAMEX shall supply the following services, at ALIGN's expense, to the
        Space;

2.1.1.  Utilities for heating, lighting and cooling;

2.1.2.  Janitorial services, including trash and refuse removal;

2.1.3.  Repair and maintenance of the Space and the Facility, and

2.1.4.  Facility security.

2.2.    All expenses will be charged to ALIGN with a mark up according to
        Exhibit B.

3.   Import/Export Services

3.1.    ELAMEX shall provide all necessary administrative services to effect
        shipment of equipment and material to and from Mexico, using the
        information supplied by ALIGN. ALIGN will supply such information in a
        timely fashion so that ELAMEX may obtain all necessary permits. Such
        administrative services shall include, but not be limited to, securing
        Mexican import permits, preparation of 

                                    3 of 24

<PAGE>
 
        required customs clearance papers, and all necessary trucking, handling,
        moving, and storage.

3.2.    ELAMEX will provide importation of raw materials and parts from ELAMEX'
        warehouse in E1 Paso, Texas to Mexico, and exportation of assembled
        Product to El Paso, Texas, where the carriage and insurance cost
        concerning such importation shall be paid by ALIGN according to the
        schedule attached hereto as Exhibit C.

3.3.    ALIGN will provide the trailer(s) as required. ELAMEX may rent
        trailer(s) on behalf of ALIGN, if so instructed. ALIGN shall reimburse
        such cost at the actual cost plus a markup according to Exhibit B.

4.   Mexican Customs, Duties, Taxes and Other Charges

4.1.    ELAMEX will be the importer of record for Mexican Customs purposes.

4.2.    ELAMEX shall pay all Mexican customs tariffs, duties, bonds, and Mexican
        customs brokers' charges, and any and all other charges, fees, levies,
        or assessments made pursuant to Mexican law in effect as of the
        commencement date of this Agreement, as to the importation to and
        exportation from Mexico of ALIGN's Product and/or equipment. ALIGN will
        reimburse for any expenses incurred by ELAMEX that are not included in
        the Schedule of Services detailed in Exhibit C.

4.3.    ALIGN will reimburse ELAMEX for its payment of the Mexican Derecho de
        Tramite Aduanero ("DTA") tax The DTA tax is a tax on raw materials,
        tools, machinery, equipment, accessories and spare parts imported into
        Mexico. At the present time, the DTA tax is .176% on equipment and
        $114.00 (One hundred and fourteen 00/100 pesos) per truck for parts,
        materials and assembled products.

4.4.    ALIGN shall pay all imposed Mexican inventory taxes as to ALIGN's
        Product and equipment in ELAMEX' possession at the Facility. ELAMEX
        shall substantiate such taxes.

                                    4 of 24

<PAGE>
 
5.   U.  S.  Customs, Duties, Taxes and Other Charges

5.1.    ALIGN will be the importer and exporter of record for U. S. Customs'
        purposes.

5.2.    ALIGN shall pay all U. S. customs tariffs, duties, bonds, and any and
        all other charges fees, levies, or assessments made pursuant to U. S.
        Customs Code as to the importation to and exportation from the U. S. of
        ALIGN's Product and/or equipment related to this Agreement.

6.   Product Assembly

6.1.    ELAMEX agrees to instruct its personnel to assemble the Product in
        accordance with the specifications provided by ALIGN and are attached
        hereto as Exhibit F Exhibit D attached hereto is a list of the various
        items that are currently the Product. Such Exhibit D may be modified in
        writing from time to time at ALIGN's convenience. ALIGN may revise its
        specifications at any time at its sole discretion and may use its
        engineering change order control procedure or other methods of
        communication of revisions to ELAMEX. ELAMEX agrees to comply with such
        revisions or promptly notify ALIGN if it is unable to comply.

6.2.    The parties understand that the assembly process productivity and
        efficiency are the responsibility of ALIGN and will be administered by
        ALIGN through its representative. ELAMEX shall make available to ALIGN
        and to ALIGN's representative any support services in the areas of
        engineering, systems and quality assurance that ELAMEX has the resources
        to provide. The price ELAMEX will charge ALIGN for those services will
        be communicated to ALIGN before the rendering of such services.

7.   Personnel Services and Manning Table

7.1.    ELAMEX shall assign personnel to perform the transportation, receiving,
        handling and storage of parts and the assembly, packaging and shipment
        of the Product. Such personnel shall include but shall not be limited to
        assembly operators, material handlers, mechanics, quality control
        inspectors, warehousemen, test technicians and group leaders. ELAMEX
        shall also assign 

                                    5 of 24

<PAGE>
 
        production supervisors, superintendents and engineers to manage the
        assembly of the Product. ELAMEX shall provide overall project management
        including accounting, import/export, personnel services, quality
        control, and materials and production management. ELAMEX will use its
        best effort to ensure employee continuity. The position, numbers and
        levels shall be listed in a Manning Table similar to the example
        attached hereto as Exhibit D. The Manning Table may be modified from
        time to time by mutual agreement.

7.2.    Should fluctuation in ALIGN's production schedules require that the
        number of direct or indirect labor employees be reduced, such reduction
        may be realized through the application of any combination of the
        following procedures at ALIGN's written request:

7.2.1.  ELAMEX may use its best efforts to place the excess employees in one of
        its other operations;

7.2.2.  ALIGN may instruct ELAMEX to allow for the reduction through natural
        attrition; and/or

7.2.3.  ALIGN may instruct ELAMEX to terminate the employment of the number of
        excess employees through payment to them of legal severance.

7.3.    The parties understand that the total number of employees assigned by
        ELAMEX to ALIGN according to the terms of this Agreement will at no time
        be less than the total number indicated on the Manning Table, except
        during the ramp up period which will begin on 15, 2000 and will end on
        May 15, 2000.

7.4.    There will be no cost to ALIGN resulting from the application of the
        procedures described in paragraphs 7.2.1 and 7.2.2 herein. Should ALIGN
        opt for the application of the procedure described in 7.2.3, ALIGN shall
        pay ELAMEX the full amount of any severance benefits made under Mexican
        law. ELAMEX will notify ALIGN in writing as to the amount of such
        severance in advance of any such payments.

                                    6 of 24

<PAGE>
 
7.5.    Should ALIGN's production schedules require that the number of direct or
        indirect labor employees be increased, ALIGN will notify ELAMEX in
        writing as to the number of additional personnel it will require.
        Requests for additional personnel shall not be in excess of 40 direct
        labor operators per workweek.

7.6.    Exhibit D attached hereto is a description of the employee positions,
        the skill levels and hourly rates of the direct labor, indirect labor
        and overall project management. ELAMEX will not make modifications to
        Exhibit D without ALIGN's written approval, except as provided for in
        paragraph 8.1 and/or 8.2, hereinafter.

7.7.    ELAMEX may require, at ALIGN's expense, a medical physical examination
        of all applicants before employment and will employ only those
        applicants who are physically able to perform their assigned tasks.

7.8.    All personnel hired by ELAMEX and assigned to ALIGN to perform assembly,
        supervisory and administrative services shall be paid by ELAMEX. ELAMEX
        shall maintain all accounting, administrative payroll taxes, and
        required contributions and bookkeeping records pertaining to such
        personnel. ELAMEX also will hire a nurse to be on the premises, as
        required bylaw. Neither ELAMEX nor any of its employees shall in any
        sense be considered an employee or an agent of ALIGN, nor shall ELAMEX
        employees be entitled or eligible to participate in any benefit or
        privileges given or extended by ALIGN to its employees. ALIGN agrees not
        to hire any Mexican national employees during the Term of this Agreement
        except for plant managers, which will be on ALIGN's U. S. A. payroll.

7.8.1.  Mexican national personnel employed by either by ALIGN or by a Mexican
        contractor retained by ALIGN to provide it with assembly or
        manufacturing prior to the date of execution of this Agreement, will not
        constitute a breach by ALIGN of its obligation under the terms of this
        paragraph 7.8.

                                    7 of 24

<PAGE>
 
7.8.2.  After the ramp up period as defined in paragraph 7.3 hereinabove, should
        ELAMEX not comply for more than two consecutive weeks with the request
        with for additional personnel up to the maximum number of direct labor
        employees as provided for in paragraph 7.5 hereinabove, ALIGN may seek
        second source in Mexico for manufacture of the Product.

7.9.    For the following eighteen (18) months after termination, ALIGN
        covenants and agrees not to hire any of ELAMEX' active or inactive
        management employees without ELAMEX' written consent.

8.   Invoicing and Other Charges

8.1.    ALIGN shall reimburse ELAMEX any and all expenses incurred by ELAMEX in
        accordance with the terms of this Agreement, plus additional percentage
        of those expenses according to the schedule on Exhibit B.

8.2.    Invoices shall be submitted weekly by ELAMEX to ALIGN's representative
        for review and approval. A listing of all expenses for which ELAMEX
        requires reimbursement shall be attached to each invoice. ALIGN agrees
        to pay such invoices in U. S. dollars within 20 calendar days of the
        date of the invoice. ALIGN further agrees to pay ELAMEX a late payment
        charge to be calculated at the annualized rate of 18%, accruable per day
        from the date that payment is due through the date that payment is
        received by ELAMEX or ELAMEX' bank. For invoicing purposes, each week
        shall be in on Monday at 12:00 a.m. and end on Sunday at 11:59 p.m.

8.3.    All payroll and non-payroll related expenditure must be approved by one
        of ALIGN's authorized representatives. All non-payroll expenditures will
        be authorized prior to their being incurred.

8.4.

8.5.    The persons authorized by ALIGN to approve expenditures and examples of
        their respective signatures are listed and attached hereto as Exhibit E.

                                    8 of 24

<PAGE>
 
8.6.    ALIGN will reimburse and pay ELAMEX all government mandated expenses
        related to any employee severance or termination in connection with any
        and all employees hired at ALIGN's discretion at the actual cost plus a
        markup according to Exhibit B.

8.7.    ALIGN further agrees to reimburse and pay ELAMEX any out-of-pocket cost
        arising from or pursuant to ELAMEX compliance with applicable laws,
        regulations, policies, rulings, directive and any other requirement
        (including ALIGN'S written requests) concerning the environment, health
        and/or safety requirements resulting from the use of certain materials
        and processes in the assembly of the Product.

8.8.    If ALIGN fails to pay timely, as required by the teams of this
        Agreement, any of its indebtedness to ELAMEX, ALIGN hereby agrees to
        assign and make over to ELAMEX all of its interest in all inventory of
        raw materials, work-in-process, and finished goods of ALIGN, while the
        same are on the premises of the Facility or otherwise under the control
        or possession of ELAMEX, in order to secure all present and future
        indebtedness of ALIGN to ELAMEX ALIGN must advise ELAMEX in writing,
        before the execution of this Agreement, of any prior lien or interest
        granted on such items. In addition, ALIGN warrants and hereby represents
        to ELAMEX that no other entity shall be granted any interest in such
        items without the prior written approval of ELAMEX.

8.9.    Payment shall be addressed to ELAMEX via wire transfer in The United
        Stares of America.

9.   Term

9.1.    The initial term ("Term") of this Agreement shall be for a period of one
        (1) year commencing on 6, 2000 ("Commencement Date"). ALIGN shall have
        the option to renew this Agreement in its entirety for successive
        periods of one (1) year each. Renewal of this Agreement for such
        successive one (1) year periods shall be automatic and irrevocable,
        unless ELAMEX or ALIGN request that the Agreement not be renewed and
        such request is received by the other party at least 

                                    9 of 24

<PAGE>
 
        one hundred and eighty (180) days prior to the end of the first one (1)
        year term or any successive term thereafter.

10.  Early Termination and Termination Options

10.1.   Upon termination or expiration of this Agreement, and provided that
        ALIGN has paid or tenders at the date of termination all sums due ELAMEX
        hereunder, the options described in Sections 10.1.1 and 10.1.2 maybe
        exercised by ALIGN.

10.1.1. ALIGN may request an orderly shutdown of the assembly operation. Return
        of materials, tools, parts, Equipment, and other related property of
        ALIGN by ELAMEX shall be completed at ALIGN's expense. Furthermore,
        ALIGN agrees to:

10.1.2. Pay all severance costs of the applicable ELAMEX personnel as specified
        in Section 10.3(a); or

10.2.   ALIGN may request that all Services and employee-related contracts and
        obligations be transferred from ELAMEX to ALIGN's Mexican affiliate (the
        "Affiliate") to be incorporated by ALIGN for such purpose as follows:

10.2.1. The ELAMEX employees that occupy the positions listed on the then
        current Manning Table shall be transferred to the Affiliate on ALIGN's
        request. The costs arising therefrom, including but not limited to legal
        expenses and employee severance for employees not transferred, if any,
        shall be borne by ALIGN; and

10.2.2.

10.3.   In the event ALIGN terminates this Agreement in violation hereof before
        the end of the Term, or breaches this Agreement, it shall pay liquidated
        damages consisting of (i) the average of the monthly administrative fee
        for each month until the end of the term of the Agreement or for six
        months, whichever is shorter, (ii) the legal severance costs as required
        by Mexican law, (iii) any labor and operating costs then owed to ELAMEX
        by ALIGN under Section 8. In the event 

                                    10 of 24

<PAGE>
 
        this Agreement is extended for one (1) or more term, ALIGN'S obligation
        to the payment of liquidated damages will be equal to the end of the
        then current term or for 90 days which ever is shorter.

11.  Warranties

11.1.   ELAMEX and ALIGN mutually represent, covenant and warrant as follows:

11.1.1. Neither party nor any officer, director, controlling shareholder, or
        employee of either party a prohibited by any agreement, contract, of
        other obligation from engaging in the services to be performed pursuant
        hereto;

11.1.2. Neither the execution of this Agreement nor compliance with the terms
        and conditions hereof shall constitute a breach of any statute,
        ordinance, law, or regulation of any governmental authority or of any
        instrument or document to which either party is or may be bound;

11.2.   Each party shall perform all of its mutual obligations created by the
        terms of this Agreement in compliance with all applicable U.S. and
        Mexican laws and regulations. A party shall not be considered in default
        or breach of this Agreement, however, if it fails to perform all of its
        obligations created by the terms of this Agreement in compliance with
        all applicable U.S. and Mexican laws and regulations, because of, in
        connection with, or pursuant to the other party's acts or failure to
        act.

11.3.   Each party shall indemnify, defend, and hold the other party harmless
        from and against any and all claims, lawsuits, costs, customs penalties,
        damages, expenses, and liabilities of whatsoever nature and kind
        (including, but not limited to, attorney's fees and legal assistant's
        fees, litigation and court costs, amounts paid in settlement, and
        amounts paid to discharge judgments), as incurred, directly or
        indirectly related to or arising from, the breach or untruthfulness of
        any of the representations and warranties of this Agreement or such
        party's failure to comply with the terms of this Agreement or U.S. and
        Mexican laws and regulations applicable, including any obligation
        derived from Mexican labor law, IMSS law, 

                                    11 of 24

<PAGE>
 
        INFONAVIT law, income tax law and State and Federal payroll tax laws and
        any other law or legal provision so long as the indemnified party is not
        in material fault with respect thereto.

12.  Relationship of the Parties

12.1.   Nothing contained in this Agreement shall be construed to imply a joint
        venture, partnership, or principal-agent relationship between the
        parties, and neither party, by virtue of this Agreement, shall have any
        right, power or authority to act or create any obligation, expressed or
        implied, on behalf of the other party. Neither shall this Agreement be
        construed to create a light, expressed or implied, on behalf of or for
        use of any parties, aside from ALIGN and ELAMEX, and ALIGN and ELAMEX
        shall not be obligated, separately or jointly, to any third parties by
        virtue of this Agreement.

13.  Insurance

13.1.   Insurance coverage of ALIGN's property that is in ELAMEX' possession
        will be by ELAMEX under a "Special Causes of Loss" form, subject to the
        terms, conditions and exclusions of ELAMEX' insurance policies. ELAMEX
        is to provide coverage up to an amount of $500,000 for the benefit of
        ALIGN and naming ALIGN as an additional insured. ALIGN will be
        responsible for the amount of any deductible. To be certain that the
        amount ELAMEX provides to the insurance carrier is adequate, it is
        incumbent upon ALIGN to notify ELAMEX immediately in writing of any need
        to increase or decrease insurance amounts on ALIGN replacement value of
        machinery, equipment and value of inventories in ELAMEX' possession.
        ELAMEX, through its insurer, will also provide a maximum of $2,000,000
        sub-limit on flood insurance per location. This limit is shared by
        ELAMEX and all of its customers and will be prorata based on ALIGN'S
        limits as a portion of the total limit of all ELAMEX' customers and
        ELAMEX. ELAMAX shall give ALIGN an opportunity to review and approve the
        policy and shall provide a certificate evidencing such insurance with a

                                    12 of 24

<PAGE>
 
        provision that coverage may not be canceled without 30 days prior notice
        to ALIGN. This certificate will fulfill ELAMEX' obligation under this
        paragraph.

13.2.   The parties release each other, and their respective authorized
        representatives, from any claim for damage to any person or to the
        Facility and the fixtures, personal property, improvements and
        alterations in or to the Facility that are caused by or result from
        risks insured against and paid for under any insurance policies carried
        by the parties or in force at the time any such claim arose.

14.  Notices

14.1.   All notices required to be sent to either party to this Agreement shall
        be in writing and sent by FedEx, DHL, UPS or registered or certified
        mail, postage or delivery prepaid, return receipt requested, to the
        address of the other party hereto, as set forth below, or to such other
        addresses as may hereafter be designated in writing:

14.1.1. As to ALIGN.

        Company

        Address

        City, State, Zip

        Telephone:

        Fax:

        Attention: Mr.

14.1.2. As to ELAMEX:

        Elamex, S. A. de CV.
        220 North Kansas, Suite 566
        (closest US port of entry), TX 79901
        Attention: Mr. Hector Raynal, President and CEO
        Telephone: (915) 774-8236
        Fax: (915) 774-8377

14.1.3. Notice shall be effective five business days after receipt is
        confirmed.

                                    13 of 24

<PAGE>
 
15.  Force Majeure

15.1.   Anything herein to the contrary notwithstanding, ELAMEX shall not be
        required to perform any term, condition, or covenant in this Agreement
        if such performance is delayed or prevented by Force Majeure ("Force
        Majeure") which, for purposes of this Agreement, shall mean the
        following: acts of God, strikes, lockouts, material or labor
        restrictions imposed by any governmental authorities, suspension of
        civil rights, floods, and any other causes not reasonably within the
        control of ELAMEX, which by the exercise of due diligence ELAMEX is
        unable, wholly or in part, to prevent or overcome and which prevent
        the performance by either party of the terms of this Agreement.

15.2.   If a Force Majeure continues for more than thirty (30) consecutive days,
        ALIGN or ELAMEX may terminate this Agreement after thirty (30)
        consecutive days of a Force Majeure by providing thirty (30) days
        written notice to the appropriate party of such termination, provided
        such notice is sent while performance of this Agreement is prevented
        by such Force Majeure, and in that event, ELAMEX will transfer ALIGNS
        property to ALIGN in (closest US port of entry), Texas, at ALIGNS
        expense provided all Mexican, customs requirements are satisfied.
        ALIGN's entire obligation to ELAMEX after such termination will be the
        payment of any unpaid amounts due to ELAMEX as stated in paragraph 8
        plus employee severance costs.

16.  Bailment

16.1.   Property delivered by ALIGN to ELAMEX under the terms of this Agreement
        is deemed to be bailed to ELAMEX for ALIGN's benefit. The initial
        property to be bailed to ELAMEX is described in Exhibit D attached. All
        Product and other items bailed to ELAMEX shall be described in a
        pedimento, separate from any goods owned by any other person, entity, or
        organization, including ELAMEX. It shall be ELAMEX' responsibility to
        ensure that the bailed property is insured, which cost shall be borne by
        ALIGN. ALIGN may, at its option, procure its own insurance.

                                    14 of 24

<PAGE>
 
16.2.   The bailment is a free bailment.  ALIGN will provide equipment, raw
        materials and other items to ELAMEX, free of charges, subject to the
        terms of this Agreement.

16.3.   ALIGN agrees to deliver equipment, raw materials and other items to
        ELAMEX, and ELAMEX agrees to accept delivery of such, in accordance
        with the terms described herein.

16.4.   ELAMEX agrees:

16.4.1. to use the equipment, raw materials and other items exclusively to
        carry out activities required to manufacture the Product for the
        benefit of ALIGN;

16.4.2. to use such equipment, raw materials and other items in accordance with
        industry standards and the corresponding laws, regulations, norms,
        ordinances and rules in force in Mexico; and

16.4.3. that the equipment, raw materials and other items shall not be used
        outside the Facility, except with the prior written consent of ALIGN.
        ELAMEX may not use or permit the use of the equipment, raw materials and
        other items in any manner so as to cause ALIGN or the owner of such to
        lose deductions, credits or other benefits of ownership thereof.

16.5.   ELAMEX shall promptly notify ALIGN of knowledge of any damage to
        equipment, raw materials or other items.

16.6.   Upon delivery to ELAMEX, equipment will bear marks showing that ALIGN
        owns such.  ELAMEX shall ensure that equipment remains so marked
        throughout the term of this Agreement.

16.7.   ALIGN or its designated agent shall have the right, from time to time,
        to inspect equipment, raw materials, Product and ELAMEX records and
        books with respect to such at any reasonable time. Such inspections will
        be allowed during normal office hours and be requested three (3) days
        prior to the date of inspection.

                                    15 of 24

<PAGE>
 
17.  Arbitration

17.1.   Commercial Nature. The parties hereto recognize this Agreement is of a
        commercial nature and will be construed in accordance with applicable
        commercial laws. All disputes, controversies or claims (Hereinafter
        singularly, "Controversy" and collectively, "Controversies") arising out
        of this Agreement shall be settled by binding arbitration pursuant to
        the following express procedure:

17.2.   Applicability. All Controversies arising in connection with this
        Agreement shall be settled by mutual consultation in good faith between
        the parties as promptly as possible, but in any event within five (5)
        calendar days from the date the other party was formally notified in
        writing of the Controversy. If the parties fail to reach an amicable
        settlement within such term, the Controversy shall be settled by binding
        arbitration using the procedural rules of the American Arbitration
        Association ("AAA") in effect upon the execution of this Agreement, with
        the following exceptions: i) at the request of either party, the
        arbitral tribunal may take any interim measures it deems necessary
        respecting the conduct of the business affairs of the parties, including
        measures to preserve the status quo in existence immediately prior to a
        certain date and measures for the conservation or protection of the
        assets of the parties; ii) while the parties shall be bound by the AAA
        procedural rules, the parties shall not be required to choose a AAA
        arbitrator, except in the case set out in section 17.6 below.

17.3.   Exclusive Method. The parties hereto agree that such arbitration shall
        be the sole and exclusive method of resolving any and all Controversies.
        Until completion of such: procedures, no party may take any action not
        contemplated herein to force a resolution of the Dispute by any
        judicial, other arbitral or similar process, except to the limited
        extent necessary to (i) avoid expiration of a claim that might
        eventually be permitted hereby or (ii) obtain interim relief, including
        injunctive relief, to preserve the status quo or prevent irreparable
        harm.

                                    16 of 24

<PAGE>
 
17.4.   Request for Arbitration. A party may at any time serve its request for
        arbitration upon the other in accordance with the notice provisions of
        this Agreement. Such request for arbitration shall formally request
        arbitration and shall specify in detail the reasons therefore, the
        amount involved, if any, and the particular remedy sought.

17.5.   Response. The party that has not requested arbitration shall respond to
        the request for arbitration within ten (10) calendar days of receipt of
        such notice by delivering a written response in accordance with the
        notice provisions of this Agreement. The response shall describe
        counterclaims, if any, the amount involved, and the particular remedy
        sought. If a party farts to respond within the allotted time to the
        request for arbitration, the arbitrator selected pursuant to paragraph
        17.6 below shall resolve the Controversy within thirty (30) calendar
        days counted as of the deadline for such response.

17.6.   Appointment of Arbitrator. The parties agree to choose the person who
        shall act as arbitrator within five (5) working days following the date
        of delivery of the request for arbitration. The patties will not be
        required to choose a AAA arbitrator within this five-day period. If the
        parties do not reach an Agreement regarding the arbitrator within of
        five (5) working days, the arbitrator shall be appointed by the AAA
        pursuant to its Rules within a period of ten (10) working days from the
        date of delivery of the request for arbitration by the party requesting
        the arbitration, and for such purposes the parties waive their right to
        appoint an arbitrator and agree to accept the appointment made pursuant
        to the criteria of the AAA.

17.7.   Qualified Arbitrator. The arbitrator selected in accordance with
        paragraph 17.6 above shall be an individual not related to or employed
        at any time by either of the parties or any of their affiliates.

17.8.   Place of Arbitration.  All arbitration sessions hereunder shall beheld
        and conducted at a site in (closest LS port of entry), Texas chosen by
        the responding party.

                                    17 of 24

<PAGE>
 
17.9.   Arbitration Hearing; No Discovery. The arbitration hearing shall
        commence within thirty (30) calendar days of appointment of the
        arbitrator. The hearing shall in no event last longer than two (2)
        calendar days. There shall be no discovery or dispositive motions (such
        as motions for summary judgment or to dismiss or the like) except as may
        be permitted by the arbitrator, and any such discovery or dispositive
        notions permitted by the arbitrator shall not in any way extend the time
        limits contained herein. The arbitrator shall not be bound by any rules
        of civil procedure or evidence other than the applicable rules of the
        AAA, and may require the parties to submit some or all of their case by
        written brief such other manner as the arbitrator may determine. It is
        the intention of the parties to limit live testimony and cross
        examination to the absolute minimum necessary to ensure parties receive
        a fair hearing on significant and material issues.

17.10.  Remedies. The arbitrator shall not extend, modify or suspend any of the
        terms o Agreement, but shall have the authority to assess damages
        sustained by reason of breach of this Agreement and to make an award as
        he or she sees fit. In the event either party fails to appear at any
        properly noticed arbitration proceeding, an award ma entered against
        such party by default. The decision of the arbitrator shall be final
        binding on all parties.

17.11.  Language.  The arbitration shall be conducted in English.

17.12.  Arbitrator's fees. The arbitrator shall be compensated at no more than
        the star hourly rate charge by arbitrators appointed by the AAA. The
        prevailing party shall be entitled to recover from the non-prevailing
        party all costs and expenses of the arbitration, including the
        arbitrator's Fees and reasonable attorneys' fees.

17.13.  Applicable Law and jurisdiction. The applicable commercial laws of Texas
        govern this Agreement. The parties acknowledge that any competent
        courts, wherever located, shall have jurisdiction to enforce the
        arbitral awards) issued pursuant to arbitral procedure, and the parties
        expressly waive their right to the 

                                    18 of 24

<PAGE>
 
        jurisdiction that by reason of their present or future domiciles or by
        any other reason under which they fall.

17.14.  Performance of the Parties' Obligations. The parties agree to continue
        performing respective obligations under this Agreement while the
        Controversy is being resolved.

17.15.  Confidentiality. All matters relating to any arbitration hereunder shall
        be designate confidential information, shall be maintained in strict
        confidence by the AAA arbitrator, and the parties, and shall be deemed
        to have been delivered in furtherance of Dispute settlement and shall be
        exempt from discovery and production, and shall not be admissible in
        evidence (whether as an admission or otherwise), in any arbitral or
        proceeding for the resolution of the Dispute or otherwise.

17.16.  Post Award Interest. The award of the arbitrators shall be in dollars
        and shall bear interest, until paid, at an annual rate equal to twice
        the prime rate as recorded in the Wall Street Journal on the of the
        award (or if such date is not a business day on the next business day).

18.  Environmental Indemnity

18.1.   ALIGN shall have no liability and ELAMEX shall indemnify, defend and
        hold harmless ALIGN and its agents and representatives against any and
        all claims, judgments, ages, encumbrances, liens, reasonable attorney's
        fees and reasonable consultant fees, as incurred to the extent they
        arise from violations of law, regulations or norms related to Hazardous
        Substances (as hereinafter defined) at or about the Facility caused or
        permitted by ELAMEX, its agents, employees, contractors or invitees.

18.2.   ELAMEX shall have no liability and ALIGN shall indemnify, defend and
        hold harmless ELAMEX and its agents and representatives against, any and
        all claims, judgments, damages, encumbrances, reasonable attorney's fees
        and reasonable consultant fees, as incurred, to the extent they arise
        from violations of law, 

                                    19 of 24

<PAGE>
 
        regulations or norms related to Hazardous Substances (as hereinafter
        defined) at or about the Facility caused directly by the independent
        acts or omissions of ALIGN's representatives, its agents, employees,
        contractors or invitees.

18.3.   For the purposes hereof, the term "Hazardous Substance" shall mean (i)
        any substance, chemical or wastes that are listed or defined as
        hazardous, toxic or dangerous under Mexican Federal and State Law,
        including ecological norms and regulations, or the Comprehensive
        Environmental Response Compensation and Liability Act 142 U.S.C 9601 et
        seq., and (ii) radioactive materials, petroleum or hydrocarbons.

19.  Default

19.1.   A party may terminate this Agreement immediately upon written notice to
        the other, unless otherwise specified herein, upon the occurrence of any
        of the following events:

19.2.   The commission of a breach of any undertakings, obligations or covenants
        contained herein and the failure to cure the breach, within thirty
        (30) days after written notification thereof;

19.3.   If any petition in bankruptcy has been filed by or against a party, or
        any order shall be issued or any resolution passed for the winding up,
        liquidation or dissolution of a party, or if a receiver shall be
        appointed for a party or its property, or if any substantial portion of
        its goods or property shall be taken in execution, or if a party shall
        cease to be a going concern, or makes an assignment for the benefit of
        creditors; or

19.4.   Any assignment by a party hereto in violation of this Agreement of all
        or any portion of its rights or obligations under this Agreement to any
        person or entity.

20.  Miscellaneous

20.1.   The terms and provisions contained herein constitute the entire
        agreement between the parties and shall supersede all previous
        communications, oral or 

                                    20 of 24

<PAGE>
 
        written, between the parties hereto concerning the subject matter of
        this Agreement. No agreement of understanding varying or extending the
        same shall be binding upon either party hereto unless in writing and
        signed by a duly authorized officer or representative thereof.

20.2.   Each individual executing this Agreement on behalf of a corporation
        represents and warrants that he is duly authorized to execute and
        deliver this Agreement on behalf of said corporation in accordance with
        a duly adopted resolution of the Board of Directors of said corporation,
        a copy of which shall be delivered within fourteen (14) days of the
        execution of this Agreement.

20.3.   All covenants and agreements of ELAMEX and ALIGN which, by their terms
        or by reasonable implication, are to be performed, in whole or in part,
        after the expiration or termination of this Agreement, shall survive
        such expiration or termination for any reason.

20.4.   If, for any reason, any provision(s) of this Agreement is/are determined
        to be invalid or unenforceable, such invalidity or unenforceability
        shall not affect the remaining provisions of this Agreement.

20.5.   All exhibits/schedules referenced in this Agreement may be modified,
        amended, or changed as approved in writing by the parties to this
        Agreement. Such written approval shall indicate the date said
        modification, amendment, or change is effective and be signed by all
        parties to this Agreement.

20.6.   This Agreement was prepared following arm's length negotiations between
        the parties and is to be deemed as prepared jointly by the parties
        hereto. In the event of any uncertainty or ambiguity existing in this
        Agreement, it shall not be interpreted against either party but
        according to the application of general rules of construction and
        interpretation of contracts.

20.7.   This Agreement tray be executed in identical counterparts, in which
        event, each of said counterparts shall be deemed an original. All such
        counterparts taken together shall constitute one and the same
        instrument.

                                    21 of 24

<PAGE>
 
20.8.   Time is of the essence of this Agreement. No failure by a party to take
        action on account of any default by the other party, whether in a single
        instance or repeatedly, shall constitute a waiver of any default or of
        the required performance. No expressed waiver by a party of any
        provision or performance hereunder or any default by the other party
        shall be construed as a waiver of any future provision, performance, or
        default.

20.9.   This Agreement shall be binding upon and shall inure to the benefit of
        the parties hereto and their respective successors and assigns. No
        obligation or requirement contained in this Agreement may be assigned to
        or assumed by another entity without the express written consent of the
        parties hereto, except that ELAMEX may assign performance of all or part
        of its duties to a subsidiary without affecting any obligation of ELAMEX
        imposed by this Agreement.

20.10.  The titles and headings contained in this Agreement are for convenience
        only and shall have no substantive effect. As used herein, the phrase,
        "this Agreement" or "the Agreement" shall be deemed to include all
        exhibits and schedules referenced herein. The English language version
        of this Agreement shall control over a Spanish version, if any, hereof.


In Witness whereof, the parties hereto have executed this Agreement as of
______________.

Elamex, S. A. de C.  V.                        Align Technologies, Inc.

By: Hector M. Raynal                           By: ____________________
Title: President and CEO                       Title: _________________
Date: _________________                        Date: __________________

          Witness:                                    Witness:

By: ____________________                    By: ___________________
Date: __________________                    Date: _________________

                                    22 of 24

<PAGE>
 
                            [ORGANIZATIONAL CHART]

                                    23 of 24

<PAGE>
 
                       [ALIGN TECHNOLOGY PAKISTAN CHART]

                                    24 of 24



<PAGE>
 
                                                                    Exhibit 10.8



September 7, 1999


Mr. Zia Chishti
Align Technology, Inc.
442 Potrero Avenue
Sunnyvale, CA 94086

Re:  Joint Development Program



Dear Mr. Chishti::

Reference is made to earlier discussions and joint work between personnel of 3D
Systems, Inc. ("3D") with personnel of Align Technology, Inc. ("ALIGN") and the
December 14, 1998 and January 9, 1999 Confidentiality and Non-Disclosure
Agreements between these two organizations in which both corporations pledged to
safeguard and not disclose the Confidential Information of the other.

In those earlier discussions, the ALIGN personnel outlined ALIGN's extensive
experience with build styles to make dental alignment tools.  The 3D personnel
outlined 3D's research experience and marketing efforts regarding its SLA 7000
imaging system technology, including but not limited to its special
stereolithographic build styles.

It is now anticipated that joint laboratory testing and analysis of the testing
results will be conducted at both 3D's and ALIGN's facilities dining the next
twelve (12) months studying the efficacy of 3D's SLA 7000 imaging system with
respect to ALIGN's total build style and speed in making dental alignment tools.

Therefore, 3D and ALIGN
 wish to enter into a joint development program.  The
primary objective of this program will be to jointly develop special build
styles for use on the SLA 7000 imaging system that will produce dental alignment
tools.  Other objectives will be to share system technological information on
how to reduce "dead" time in the SLA 7000 imaging system, and to otherwise make
the building of such tools more efficient.

In consideration of the premises set forth above, 3D and ALIGN agree to the
following conditions for this joint development program.

1.   Term of Agreement
     -----------------

This agreement shall be in effect for a period of one (1) year from the date of
full execution of this Letter Agreement, after which period the results of the
program will be reviewed and a joint 

<PAGE>
 
Align Technology, Inc.
Page 2 of 6

determination of additional work, if any, or further Agreements, if any, will be
made. 3D and ALIGN may before or at that time extend or renew this Agreement by
a written document on mutually acceptable terms.

2.   Work Agenda
     -----------

The agreed to planned project and milestone chart for this development work is
attached hereto as Appendix A.  Immediately upon full execution of this
Agreement, representatives from both 3D and ALIGN will periodically meet to
discuss a detailed work agenda in line with the planned project and milestone
chart.  Work will then proceed according to that mutually agreed upon agenda.

3.   Furnished Resources and Place of Work
     -------------------------------------

ALIGN and 3D agree to provide the necessary equipment at their respective
facilities in Sunnyvale, California and Valencia, California for the development
work.  ALIGN and 3D agree that they will independently supply sufficient
quantities of resin material for this development work.  It is agreed that the
work will be carried on at both ALIGN and 3D's facilities, as needed.

4.   Compensation
     ------------

Each party shall bear its own cost.  3D shall pay the substantial Non-Recurring
Engineering costs necessary to reduce dead time and optimize build styles.  In
consideration of this, and to assure consistent quality and performance, ALIGN
agrees to use only 3D supplied materials in its SLA imaging systems.

5.   Confidentiality of Information
     ------------------------------

     (a)  Information exchanged between ALIGN and 3D under this Agreement may
          include business or technical information which is confidential to the
          respective parties (hereinafter referred to as Confidential
          Information).  The parties agree to treat such Confidential
          Information received hereunder as follows:

          (1)   The party receiving Confidential Information will exercise the
                same degree of care to prevent disclosure of the Confidential
                Information for the period specified below as it takes to
                preserve and safeguard its own Confidential Information but, in
                any event, no less than a reasonable degree of care.
          (2)   The obligations of the receiving party, contained in Paragraph
                (1) above, shall not apply to any Confidential Information
                which:
                a)    is already known to the receiving party or is
                      independently developed by it;

<PAGE>
 
Align Technology, Inc.
Page 3 of 6

                b)    is publicly available or becomes publicly available
                      without a breach of agreement by the receiving party,

                c)    is rightfully received by the receiving party from a 
                      third party;

                d)    is furnished by the disclosing party to a third party
                      without a similar restriction of the third party's rights;

                e)    is not either (i) first disclosed in writing and
                      identified thereon as confidential or proprietary, or (ii)
                      if first disclosed orally, identified as confidential or
                      proprietary at the time of oral disclosure, reduced to
                      writing and identified thereon as confidential or
                      proprietary by the disclosing party and the writing
                      delivered to the receiving party within thirty (30) days
                      after oral disclosure; or

                f)    is the subject of a subpoena or a demand for production of
                      documents in connection with any suit or arbitration
                      proceeding, any administrative procedure or before a
                      governmental or administrative agency.

          (3)   All information which is deemed to be Confidential Information
                hereunder and which is disclosed by either party hereunder
                during the term hereof, shall be safeguarded as required by
                Paragraph (1) above by the receiving party for a period of five
                (5) yews from the date of disclosure, unless earlier
                specifically released by the disclosing party in a duly executed
                writing or made available from examination of a product made
                publicly available by the disclosing party.

          (4)   Unless explicitly stated otherwise, in this Agreement, the
                parties agree that no party is under any obligation to disclose
                Confidential Information by virtue of this Agreement. The
                parties recognize that from time to time during the term of this
                Agreement one party may wish to disclose information of
                character which is considered by such party to be so highly
                proprietary that additional restrictions on use or disclosure
                must be agreed to by the receiving party prior to disclosure. In
                such event, the parties agree that such information shall not be
                subject to this Agreement, but that the parties shall attempt to
                negotiate a separate Agreement governing the disclosure of
                such information prior to its disclosure.

          (5)   In the event of a breach of any of the obligations stated in
                this Confidentiality Clause, the injured party may proceed
                against the other party in law or in equity for such damages or
                other relief as a court may deem appropriate, consequential and
                indirect damages excepted.

<PAGE>
 
Align Technology, Inc.
Page 4 of 6

6.   Ownership of Developed Know-How
     -------------------------------

All know-how resulting from this joint development effort will be jointly owned,
provided that jointly developed know-how related specifically to dental
alignment shall only be used by 3D and ALIGN themselves and not by or through
third parties.  ALIGN shall we such inventions directly internally or indirectly
by having 3D provide the required dental alignment tools for ALIGN.  3D owns all
know-how, inventions, and patents issuing thereon for 3D's work carried out
prior to the starting date of this joint effort.  ALIGN owns all know-how,
inventions, and patents issuing thereon for ALIGN'S work carried out prior to
the starting date of this joint effort.

7.   Patentable Inventions
     ---------------------

Any patentable invention, made under this agreement shall be owned by the party
making it, if a sole inventor or jointly with the other party if jointly made.
However, joint inventions related specifically to dental alignment shall only be
used by 3D and ALIGN themselves and not by or through third parties.  ALIGN
shall use such inventions directly internally or indirectly by having 3D provide
the required dental alignment tools for ALIGN.  The parties agree to cooperate
in executing any necessary patent documents for filing for patent protection on
such inventions.  Each party agrees to cooperate, at the other party's
reasonable request, in the preparation of patent applications and in executing
patent documents for obtaining patent protection on such inventions.  The cost
of preparing, filing, and prosecuting patent applications will be borne by the
party owning the patent rights.

8.   3D's Right to Market Jointly Developed Know-How and Patents
     -----------------------------------------------------------

With respect to any ALIGN sole invention or any ALIGN interest in any Joint
Invention made in connection with or which is a result of any exchange of
Confidential Information between ALIGN and 3D, ALIGN hereby grants to 3D a
permanent and royalty-free non-exclusive license to use the same in its own
operations and a permanent and royalty bearing right to grant sublicenses to
third parties to use the same at a reasonable royalty to be agreed upon by and
between ALIGN and 3D.

With respect to any 3D sole inventions or any 3D interest in any Joint Invention
made in connection with or as a result of any exchange of Confidential
Information between ALIGN and 3D, 3D hereby grants to ALIGN a non-exclusive,
royalty-free and permanent license to use the same in its own operations, with
no right to grant sublicenses to third parties.

9.   Independent Contractors
     -----------------------

Each party will perform its obligation as an independent contractor and will be
solely responsible for its own financial obligations.  This Agreement will not
create a joint venture, partnership, or 

<PAGE>
 
Align Technology, Inc.
Page 5 of 6

principal and agent relationship between the parties. Neither party will have
the authority or will represent that it has the authority to assume or create
any obligation, express or implied, on behalf of the other, except as expressly
provided in this Agreement.

10.  Liability for Injury
     --------------------

Each party will indemnify and hold the other party harmless from all loss and
liability on account of claims of personal injury, death, and/or property damage
resulting from any negligent act or omission by the party, including that
party's agents, employees, or subcontractors in the course of performing this
Agreement.

11.  Rights or Obligations
     ---------------------

No rights or obligations other than those expressly recited herein are to be
implied from this Agreement.  Nothing herein shall in any way affect the present
or prospective rights of the parties under the patent and copyright laws of any
country, or be construed as granting any license under any present or future
patent or application therefor of any party, or preclude the marketing of any
product of a party, except as provided by patents and copyrights.

12.  Assignment and Binding Effect
     -----------------------------

This Agreement may not be assigned by either party without the prior written
consent of the other party, except to a successor of the total business of the
assigning party, which consent shall not be unreasonably withheld.  This
Agreement shall be binding upon the parties hereto, their successors, legal
representatives, and permitted assigns, and all parties that control, are
controlled by, or are under common control of a party hereto.

13.  Governing Law
     -------------

This Agreement will be interpreted in accordance with the laws of the State of
California.

14.  Termination
     -----------

Either party shall have the independent right to terminate this Agreement at any
time, prior to its normal expiration date, by giving the other party a thirty
(30) day written notice to that effect.  Paragraphs 5, 6, 7, 8, 10, 11, and 12
shall survive the termination or expiration of this Agreement.

15.  Entire Agreement
     ----------------

This is the entire Agreement between the parties relating to the subject matter
hereof, and supersedes and replaces any prior agreements or understandings,
written or oral, relating thereto.  

<PAGE>
 
Align Technology, Inc.
Page 6 of 6

This Agreement shall not be amended or modified except in a writing duly
executed by officers or authorized representatives of the parties.

If ALIGN agrees to the foregoing, please sign and date both duplicate copies of
this Letter Agreement and then return one copy to 3D.  Upon 3D's receipt of the
completely signed copy, this Agreement shall become a binding Agreement between
3D and ALIGN.

                                 Yours truly,

                                 3D SYSTEMS, INC.


                                 By:____________________________

                                 Title:_________________________

                                 Date:__________________________


ACCEPTED AND AGREED TO:

ALIGN TECHNOLOGY, INC.


By:_____________________________

Title___________________________

Date:___________________________

RD.jg
Attachment - Appendix A

<PAGE>
 
                                  APPENDIX A

                    Planned Project and Milestone Chart for
                        Align Technology and 3D Systems
                  Joint Development of Optimized Build Style


8/30/99   Initial team meeting with Align Technology and 3D Systems in Valencia,
          California, to develop a solution approach (project plan) for
          optimizing the SLA 7000 system for Align's specific application
          requirements. The proposed plan places an SLA 7000 system (rental
          program) at Align's Sunnyvale facility. Align will have access to
          parameter freedom and specially developed build styles.

8/31/99   3D determines availability of personnel and equipment.

9/3/99    SL 5410 placed in SLA 500 system (3D, Valencia) to warm up in
          preparation for single hatch build run of 72 arcs. 72 arcs built on
          SLA 7000 system with 0.006" layer thickness and standard hatch style.
          Actual build time: 7:08.

9/7/99    Built 72 arcs with single hatch build style on SLA 500 system with SL
          5410 to gain experience with the single hatch style. Built 72 arcs
          with custom developed (first iteration) of a single hatch style on the
          SLA 7000 system.9/8/99 3D eliminates some fill vectors and builds 72
          arcs with single hatch style.

9/9/99    3D attempts to reduce "dead" time with software changes. Align makes
          payment of $26,000 for the first month rental fee for an SLA 7000
          system rental under the 3D SLA Rental Program.

9/10/99   Proposed ship date for SLA 7000 rental system.

9/17/99   Proposed delivery and installation of SLA 7000 rental system at Align.

9/22/99   Technology installation of SLA 7000 system at Align complete.

9/23/99-  Align continues work to optimize parameters on operating SLA 7000 
10/25/99  system with at least weekly feedback to Scot Thompson at 3D during
          initial reporting period in preparation for a potential larger scale
          implementation.

<PAGE>
 
                               SOFTWARE LICENSE


<TABLE>
<CAPTION>
3D SYSTEMS INC.
------------------------------------------------------------------------------------------------------------------------------------
CUSTOMER ADDRESS                                                 INSTALLATION SITE ADDRESS
------------------------------------------------------------------------------------------------------------------------------------

ALIGN TECHNOLOGY, INC.                                           ALIGN TECHNOLOGY, INC. 
442 Potrero Avenue                                               442 Potrero Avenue
Sunnyvale, CA 94086                                              Sunnyvale, CA 94086
Attn: Len Hedge
Phone: (408) 738-1500
Facsimile: (408) 738-7150
------------------------------------------------------------------------------------------------------------------------------------
SOFTWARE INFORMATION
------------------------------------------------------------------------------------------------------------------------------------
        ITEM              PRODUCT NO.                                     PRODUCT DESCRIPTION
------------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                <C>
         1                                   SLA 7000 Buildstation Software
 
         2                                   3D Lightyear Windows NT Part Preparation Software
 
 
------------------------------------------------------------------------------------------------------------------------------------
OFFER AND ACCEPTANCE
------------------------------------------------------------------------------------------------------------------------------------
                                                           PLEASE READ:
This document, when signed by Customer, is an acceptance by Customer to 3D's offer to license from 3D the Software listed above on
the terms and conditions attached hereto. Please read all of the terms and conditions carefully. If accepted by 3D, an authorized
officer will sign the Agreement in the space below and it will become a License Agreement.
------------------------------------------------------------------------------------------------------------------------------------
                        DATE PROPOSED                                           PROPOSAL VALID UNTIL
------------------------------------------------------------------------------------------------------------------------------------
OFFERED BY:                                                ACCEPTED BY:         3D SYSTEMS, INC.
                                                                                26081 Avenue Hall
                                                                                Valencia, California 91355
CUSTOMER NAME__________________________________                                 (805) 285-5600   FAX (805) 257-3205

BY:_________________________DATE_______________            BY__________________ DATE_______________________________

TITLE__________________________________________            TITLE___________________________________________________
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>
 
                                                          Number WR-083099JS-001
                          SOFTWARE LICENSE AGREEMENT
                              TERMS & CONDITIONS

                                                                     PAGE 2 OF 2


1.   GENERAL PROVISION - 3D has developed proprietary computer programs and
     related information (Software) intended to increase the utilization and
     effectiveness of equipment manufactured by 3D.  If either party believes
     that other matters beyond those covered in this Agreement, that party will
     (a) write them on the front of this Agreement or (b) staple a copy or
     description of them to this Agreement and initial them before signing;
     otherwise, they are not included as part of this Agreement for the license
     for the use of the Software.  Provided Customer has signed this Agreement
     (or any Amendment to it), even if Customer's signature was after the
     proposal expiration date, this Agreement will become a binding contract
     when and if it is executed by an appropriate official of 3D in Valencia,
     California.  If part of this contract is prohibited, the remainder of it
     will still be valid.

2.   WARRANTY - 3D warrants that at the time of installation, the Software will
     perform in accordance with the specification as described in 3D's reference
     manuals when used on equipment manufactured by 3D.  3D agrees to promptly
     correct any faults, inaccuracies, inconsistencies or omissions in the
     Software, notified to 3D during the warranty period.  The warranty period
     is one (1) year and shall start sixty (60) days after delivery to the
     carrier (F.O.B. 3D's Plant) or upon installation, whichever is sooner.
     THIS WARRANTY IS INSTEAD OF ANY OTHER WARRANTIES, SUCH AS MERCHANTABILITY
     OR FITNESS FOR INTENDED OR PARTICULAR PURPOSES.

3.   INSTALLATION - 3D agrees to install the Software on 3D's manufactured
     equipment at the Customer location designated.  3D will be responsible for
     insuring that all 3D sample programs are functioning properly.  It is the
     Customer's responsibility to acquire or create the required Software
     libraries for inclusion with the 3D Software, all CAD interfaces and for
     the total systems operation.  Installation and maintenance will be
     performed by 3D between 8:00 am and 5:00 pm, Local Time, on normal working
     days.  3D and Customer will cooperate to satisfy any Customer security
     requirements and still allow full and free access to the Equipment.

4.   PAYMENT - Payment and the amount of the one-time license and installation
     fees are included in that certain Proposal and Agreement for the purchase
     of 3D equipment referred to on the first page of this Agreement.

5.   PATENTS - If anyone claims the Software infringes their U.S. Patent,
     copyright, trade secret or other proprietary right, 3D will indemnify and
     hold Customer harmless from any damages, judgments or settlements
     (including costs and reasonable attorneys' fees) resulting from the claim
     if Customer promptly notifies 3D in writing of the claim and permits 3D to
     elect to take over the defense of the action.  If 3D takes over the
     defense, it may select the counsel and have the sole right to defend or
     settle the matter.  3D may substitute comparable non-infringing Software,
     or modify the Software (which still must meet the specification) to make it
     non-infringing, or obtain a right for the Customer to continue using the
     Software (all at 3D's expense).  If the software is not as warranted, 3D's
     liability for damages resulting from this Agreement or any breach thereof,
     including liability for patent or copyright infringements or warrant of
     title, regardless of the form of action, shall not exceed the charges paid
     to 3D by Customer under this Agreement.  Notwithstanding the foregoing, 3D
     shall not be obligated to defend or be liable for costs and damages for
     patent or copyright infringement if the infringement arises out of a claim
     based upon any portion of the UNIX Software, provided, however, that this
     exclusion does not apply to any additions or enhancements to the UNIX
     Software made by 3D.

     In the event the Software is used on equipment other than equipment
     manufactured by 3D, this Agreement shall forthwith terminate, the warranty
     shall be void, 3D shall have no liability to the Customer as a result 

<PAGE>
 
     of the Customer's use or non-use of the Software, and 3D shall have no
     obligation to install or repair the Software.

6.   TITLE - Title to all Software, algorithms, derivations, modifications, and
     any and all reproductions thereof, remains in 3D and the Customer agrees to
     return all such material to 3D within thirty (30) days after the
     termination or expiration of this Agreement.  None of the Software,
     algorithms, derivations, modifications or reproductions may be sublet,
     sublicensed, assigned, or any other interest transferred by the Customer
     without prior written consent of an officer of 3D.  A nominal Re-Licensing
     fee may be charged upon approved authorization of transfer.  Any attempt by
     Customer to sublet, sublicense, assign or transfer any of the rights,
     duties or obligations under this Agreement shall terminate this Agreement.

7.   MODIFICATIONS - 3D may change the Software specifications at any time
     without notice as long as the modification(s) will not materially affect
     the performance of the Software.

8.   USE - Customer agrees to limit the use of the Software and its derivations
     to use with the 3D equipment on which the Software is initially installed.
     Customer agrees that it shall not reverse compile or disassemble any
     portion of the Software.  Customer will refrain from disclosing or
     permitting the transfer of this Software to any third parties without 3D's
     prior written consent.  Customer agrees that all of these restrictions on
     the use of the Software are reasonable.

9.   TERM - The term of the Software License shall begin on the date that this
     Agreement is executed by both parties and shall continue until canceled as
     provided herein.


     This Agreement and any licenses granted hereunder are subject to
     cancellation for cause by either party or for failure to comply with any
     terms and conditions herein; provided however, that the party in breach
     shall have sixty (60) days to cure such breach following written
     notification.  This Agreement and any licenses granted hereunder are
     further subject to cancellation if the other party files or has filed
     against it any bankruptcy proceedings or makes an assignment for the
     benefit of creditors, or by Customer at any time upon sixty (60) days
     written notice to 3D.

10.  OTHER

     A.   This Agreement will be interpreted under California law and both 3D
          and Customer will be subject to jurisdiction of state and federal
          courts in Los Angeles County, California.
     B.   Both 3D and Customer will comply with all laws applicable to this
          Agreement.
     C.   All notices given under this Agreement will be effective when received
          in writing.  Notices to the Customer and 3D will be sent to the
          address on the front page of this Agreement.  Either party can give
          notice of an address change.

11.  COMPLETE AGREEMENT - Customer acknowledges that it has read this Agreement,
     understands it, and agrees to be bound by its terms and conditions.
     Further, Customer agrees that it is the complete and exclusive statement of
     this Agreement between the parties, which supersedes all proposals, printed
     provisions on subordinate Customer documents including purchase orders,
     oral or written Agreements, and all other communications between the
     parties relating to the subject matter of this Agreement.

<PAGE>
 
                               RENTAL AGREEMENT
                                                                     PAGE 1 OF 4


3D CAPITAL CORPORATION


<TABLE> 
<CAPTION> 
------------------------------------------------------------------------------------------------------------------------------------
          CUSTOMER ADDRESS                                                                INSTALLATION SITE ADDRESS
------------------------------------------------------------------------------------------------------------------------------------
ALIGN TECHNOLOGY, INC.
442 Potrero Avenue                                                               ALIGN TECHNOLOGY, INC.
Sunnyvale, CA 94086                                                              475 Potrero Avenue
Attn: Len Hedge                                                                  Sunnyvale, CA  94086
Phone:  (408) 738-1500
Facsimile:  (408) 738-7150

------------------------------------------------------------------------------------------------------------------------------------
CONTACT NAME/TITLE                          TELEPHONE               CONTACT NAME/TITLE                   TELEPHONE
                                                                                                         (     )
------------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT
------------------------------------------------------------------------------------------------------------------------------------
ITEM      MODEL                                 DESCRIPTION                                     LASER USAGE          BASE RENT
                                                                                                     FEE 
------------------------------------------------------------------------------------------------------------------------------------
<S>     <C>              <C>                                                                    <C>                  <C>
 1                       SLA 7000 Rental Program Consisting of:                                   UNLIMITED           $26,000    
 
        SLA-7000         Stereolithography Apparatus
                         Buildstation software
                         3D Lightyear Windows NT part preparation software (including automatic 
                         support generation and QuickCast investment casting functionality)
                         two platforms
                         Training Credit (One Student)
 
        PCA-500          Post Cutting Apparatus
 
        SL-7510          Polymer Cilbatool SL 7510 (Initial VAT Fill) Use of Cibatool resins      
                         sold by 3D Systems is a requirement of this rental agreement.
                         
                         (Service and Laser Refurbs included during term of Lease)
 
                         Freight, Freight Insurance, Installation, Packaging and Handling 
                         included.
 
                         CUSTOMER SHALL HAVE THE OPTION TO PURCHASE ADDITIONAL SL 7510 RESIN  
                         WITH A TWELVE PERCENT (12%) DISCOUNT PROVIDED CUSTOMER ISSUES A 
                         BLANKET PURCHASE ORDER TO 3D SYSTEMS COMMITTING TO $125,000 IN 
                         RESIN SALES OVER A TWELVE CONSECUTIVE MONTH PERIOD.
------------------------------------------------------------------------------------------------------------------------------------
                                                                                      TOTAL AMOUNT
                                                                                      EXCLUSIVE OF TAXES
------------------------------------------------------------------------------------------------------------------------------------
NON-REFUNDABLE               PREPAYMENT DUE:              TAXABLE           TAX EXEMPT NO.        PREPARED BY: NAME AND PHONE
   DEPOSIT                                                [_] YES                                 Roger Peterson (861) 285-5800 
   Waived                       $28,000                   [_] NO                                  Extension 2382            
                                                                                                                 
------------------------------------------------------------------------------------------------------------------------------------

OFFER AND ACCEPTANCE
------------------------------------------------------------------------------------------------------------------------------------
PLEASE READ: THIS RENTAL AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS ATTACHED HERETO. NO OTHER TERMS AND CONDITIONS WILL APPLY.
PLEASE READ ALL TERMS AND CONDITIONS CAREFULLY. BY SIGNING BELOW CUSTOMER REPRESENTS THAT CUSTOMER HAS READ THE TERMS AND
CONDITIONS ATTACHED HERETO AND HAS ENTERED INTO THE RENTAL AGREEMENT PURSUANT TO SUCH TERMS AND CONDITIONS
------------------------------------------------------------------------------------------------------------------------------------
ACCEPTED BY:                                                              OFFERED/ACCEPTED BY:
 
__________________________________                                        3D Capital Corporation
 (TYPE OR PRINT CUSTOMER NAME)                                            26081 Avenue Hall
                                                                          Valencia, California 91355
By:______________________DATE_____                                        (881) 285-5600   FAX (881) 257-3205
 
                                                                          Roger Peterson, Director Credit and Leasing
__________________________________                                        -------------------------------------------
 (TYPE OR PRINT NAME AND TITLE)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>
 
                               RENTAL AGREEMENT
                             TERMS AND CONDITIONS

On the terms and subject to the conditions of this Agreement, 3D Capital
Corporation, it's successors, or assigns (collectively "3D"), hereby rents to
Customer, and Customer hereby hires from 3D equipment specifically identified on
the first page of this Agreement (the "Equipment").

1.   TERM OF THE AGREEMENT
 
     This Agreement shall be valid and binding from the date on which it has
been accepted by 3D (the "Effective Date"), and shall remain in effect until all
obligations of either party hereto have been fully performed or satisfied.  The
("Acceptance Date") is the date that Customer accepts the Equipment as stated in
the "Installation Acceptance" certificate.  The "Rental Term" shall commence on
the first day of the month following the month in which the Acceptance Date
occurs (the "Commencement Date") and shall continue on a month-to-month basis
thereafter.

     Either party may terminate the Rental Term at any time upon providing
written notice to the other, specifying the date of such termination, however,
in no event shall said notice be less than 30 days prior to the date of
termination.

2.   DELIVERY AND INSTALLATION

     3D shall deliver and install the Equipment at the Installation Site set
forth on the first page of this Agreement not later than ninety (90) days after
the Effective Date.  Customer shall prepare the Installation Site, at its own
expense, in accordance with 3D's site specifications no later than thirty (30)
days prior to the scheduled delivery date.  Customer shall assume responsibility
for compliance with all laws and shall obtain, at its own expense, any permits
required for installation and use.

     Upon expiration or termination of the Rental Term, Customer shall
relinquish possession of the Equipment to 3D personnel for preparation and
subsequent shipment to 3D.  Any damage or excessive wear found by 3D personnel
shall be paid by Customer at 3D's then current replacement and or repair costs,
including labor.  All packing and freight charges shall be at 3D's expense.

3.   MONTHLY CHARGES

     Upon the Effective Date Customer agrees to pay to 3D the "Deposit" and the
first month's "Base Rent" as specified on the face of this Agreement.  Late
charges of five percent (5%) per month shall be applied to any invoice not paid
within ten (10) days.

     "Interim Rent" shall be due and payable on the Commencement Date in an
amount equal to 1/30th of the Base Rent times the number of days elapsed from
and including the Acceptance Date to and excluding the Commencement Date.

     After the first month, and during the Rental Term, Customer agrees to pay
to 3D the Base Rent as set forth on the face of this Agreement.  The Base Rent
will be invoiced at the beginning of each monthly period of the Rental Term, and
payment is due upon receipt of the invoice.

     Monthly laser usage which exceeds the "Laser Hours" specified on the face
of the Agreement will be subject to additional fees.  Such additional fees, if
any, will be calculated by multiplying the number of laser hours in excess of
the Laser Hours specified on the face of the Agreement times the "Laser Usage
Fee" specified on the face of the Agreement, and will be added to the succeeding
months invoice.  Said additional fees, if any, are dependent upon accurate laser
meter readings.  Customer must take and forward to 3D an accurate and timely
meter reading on the last day of each monthly period.

     Any deductions of laser hours for down time must be approved by 3D Field
Support Personnel and supported by Field Service Reports.  Upon prior notice, 3D
shall have reasonable access to the Equipment to monitor the meter readings.

     Customer shall pay for the usage and replenishment of Polymers at their
then stated market prices.

4.   TAXES

     Customer shall pay all applicable federal, state and local sales, use,
property or other taxes arising on charges hereunder or from the use of the

<PAGE>
 
Equipment. 3D shall be responsible for taxes based on its income generated from
this Agreement.

5.   OWNERSHIP

     The Equipment is and shall remain 3D's property and may be removed from
Customer's premises by 3D or its duly authorized agents at any time after
termination or expiration of the Rental Term.  This Agreement constitutes a
Rental o bailment of the Equipment and shall not in any way be deemed a sale or
the creation of a security interest.  Customer shall not have or at any time
acquire, any right, title or interest in or to the Equipment, except the right
to possession and use as provided for in this Agreement.  All installations,
replacements, or substitutions of parts or accessories with respect to the
Equipment shall constitute accession and shall become part of the Equipment and
shall be similarly owned by 3D.  If deemed necessary by 3D, 3D may execute a
UCC-1 Financing Statement (to be filed by 3D in the office of the appropriate
Secretary of State) as an acknowledgement that the Equipment in the custody of
Customer is owned by 3D.  Customer shall not move the Equipment from the
installation site without the expressed written permission of 3D.

6.   MAINTENANCE

     3D shall service the Equipment as required.  Customer shall have access to
3D's toll free customer support line, from 6:00 a.m. to 6:00 p.m. (Mountain
Time), in order to report any problems Customer may encounter in the operation
of the Equipment.  Customer agrees to give 3D access to the Equipment when
necessary for maintenance.  Maintenance occasioned by the negligence of
Customer, or by the use of attachments not provided and installed by 3D, or by
any abnormal use, or by movement of the Equipment to another location is not
covered by the Maintenance Agreement and Customer agrees to pay for such
services at 3D's then current rates.

7.   ALTERATIONS AND ATTACHMENTS

     No alterations or attachments to the Equipment shall be made without 3D's
prior written consent.  If Customer makes any alterations or additions to the
Equipment, Customer shall remove, at its own expense, such alterations or
attachments and restore the Equipment to its previous condition, upon receipt of
notice from 3D.

8.   RISK OF LOSS AND INSURANCE

     Customer agrees that upon the delivery of the Equipment to the Installation
Site and continuing until the Equipment is returned to 3D, Customer is
responsible for any and all loss or damage thereto, regardless of the cause
thereof.  If any item of the Equipment is damaged, destroyed or lost, Customer
shall be liable for the cost of repairing that item by 3D, or if 3D determines,
in its sole discretion, that repair cannot be made or is not practical, Customer
shall be liable for the replacement cost of the item of Equipment, less any
insurance proceeds received by 3D.  3D is not obligated to replace damaged,
destroyed or lost Equipment and upon such an occurrence, 3D has the right to
terminate the Rental Term.

     Customer shall assume the risk of and hold 3D, its directors, officers,
employees, agents and assignees harmless from and against any and all loss,
liability, claim, cost, damage or expense of any kind or nature caused directly
or indirectly by the use, performance, deficiency, defect in or inadequacy of
(i) any item of the Equipment, or (ii) the products, parts and/or services
created by or arising from the use of the Equipment.

     Customer shall maintain at its own expense comprehensive general liability
insurance and broad form contractual liability insurance, issued by companies
satisfactory to 3D.  Such insurance shall be for primary coverage and shall have
limits of no less the $500,000 for each person, $1,000,000 for each occurrence
and $500,000 for property damage per each occurrence.  The property damage
coverage must cover the Equipment of 3D held in the custody, care and control of
the Customer and such policy must designate 3D as a named insured thereunder.
Customer shall submit to 3D, no later than 15 days prior to the date the
Equipment is to be delivered to Customer, an insurance certificate evidencing
compliance with the required coverage.

     Customer shall notify 3D, within two days of the occurrence thereof, of any
accident, incident, damage, destruction, loss or other similar occurrence
concerning the Equipment.

9.   INDEMNIFICATION

     Customer agrees to indemnify, defend and hold harmless 3D, its directors,
officers, employees, agents and assignees from any loss, damage, claim,
liability and expense (including reasonable attorneys' fees and other expenses
of litigation) arising from or related to acts of commission or omission by
Customer under this Agreement.  This indemnity 

<PAGE>
 
provision shall survive the termination of the Rental Term of this Agreement.

     3D agrees to defend Customer in any suit brought against Customer alleging
that the Equipment rented hereunder, uncombined with non-3D equipment, directly
infringes upon a United States patent owned by others, provided 3D is promptly
notified, given the assistance required and permitted to direct the defense.
Further, 3D shall pay any final judgment, based on such infringement, rendered
in such suit by a court of last resort, but shall not be responsible for
settlements or costs incurred without its consent.  If Customer's use of such
Equipment is enjoined, or if 3D desires to minimize its liability hereunder, 3D
may at its option either:  (i) substitute other equally suitable equipment; (ii)
modify the Equipment so that it no longer infringes; (iii) obtain for Customer
the right to continue use; or (iv) take back the equipment, releasing Customer
from the obligation of paying rentals not yet due.  The foregoing states the
entire liability of 3D for patent infringement.  No indemnity shall apply to
equipment made or modified to Customer's own specifications or design, nor for
any infringement caused solely by the combination of the Equipment with any
other apparatus by Customer.

10.  ASSIGNMENT

     Customer shall not assign, transfer or pledge all or any part of this
Agreement nor sell, rent or lend all or any item of the Equipment or permit it
to be used by anyone other than Customer and any effort by Customer to do so
shall be void and without effect.  Without notifying Customer, 3D may assign
this Agreement or any rights, title, interests or obligations thereunder at any
time.  If 3D assigns this Agreement, 3D's assignee shall have all the rights,
powers, privileges and remedies of 3D set forth in this Agreement.

11.  NON-DISCLOSURE

     Customer shall not disclose any of 3D's confidential information to third
persons or use such information for Customer's own benefit or the benefit of
others or use such information in any way that is adverse to 3D's interest.
Confidential information shall include any of 3D's developments, inventions,
business knowledge, know-how, discoveries, production methods and any and all
other confidential or proprietary information which may be disclosed to Customer
in connection with the installation, maintenance and use of the Equipment.

12.  SOFTWARE LICENSE
     Concurrent with executing this Agreement, Customer shall enter into a
Software License Agreement with 3D in the form attached hereto.

13.  DELAY

     3D shall not be liable for delays in manufacture, delivery or maintenance
due to causes beyond its control, including without limitation, acts of God,
strikes and difficulties in obtaining materials or labor.  In the event of such
delay, 3D's obligation to deliver the Equipment shall be extended for a
reasonable period or, if measurable, a period equal to the time lost by such
delay.

14.  DEFAULT

     A default under this Agreement shall be deemed to have occurred if Customer
has breached or failed to comply with a provision of this Agreement and such
breach or noncompliance continues in effect for 5 days.  Customer shall also be
deemed in "default" under this Agreement:  (i) upon the commencement by or
against Customer of any proceeding in Bankruptcy or similar law; (ii) upon the
appointment of a receiver for Customer; (iii) if Customer is adjusted insolvent;
or (iv) if any substantial part of Customer's property is or becomes subject to
seizure, levy, assignment or sale for or by any creditor or governmental agency
without being released or satisfied within 10 days thereafter.  Upon default by
Customer, 3D may in addition to its other rights and remedies at law or equity,
terminate this Agreement, sue Customer for and recover all charges and other
payments under this Agreement then accrued and unpaid and/or take possession of
any or all the Equipment and Software provided under or in conjunction with this
Agreement, without demand or notice, wherever the same may be located, without
any court order or other process of law.

15.  GENERAL PROVISIONS

     The remedies of 3D set forth in this Agreement shall be cumulative and in
addition to remedies existing in equity or law.  If any provision of this
Agreement is held to be invalid or unenforceable, the remainder of this
Agreement shall remain valid and in full force and effect.  This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.  Attorneys' fees incurred by either party in enforcing the terms and
provisions of 

<PAGE>
 
this Agreement shall be borne by the losing party in such a proceeding. In no
event shall 3D be liable for any consequential or incidental damages, including,
but not limited to, loss of profits, arising under this Agreement. All notices
required to be given under this Agreement shall be made in writing and sent by
registered or certified mail or other means agreed upon by the parties, to the
addresses listed herein. Any amendments, changes or modifications of this
Agreement shall not be valid unless made in writing and signed by both parties.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE IN, AND TO BE PERFORMED
WITHIN, SAID STATE. 3D AND CUSTOMER IRREVOCABLY WAIVE ANY OBJECTION TO ANY
ACTION PERTAINING TO THIS AGREEMENT BEING BROUGHT IN FEDERAL OR STATE COURTS IN
LOS ANGELES COUNTY, CALIFORNIA AND ANY CLAIM THAT SUCH ACTION WAS BROUGHT IN AN
INCONVENIENT FORUM.

16.  WARRANTY

     EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, 3D MAKES NO WARRANTIES,
EITHER EXPRESS OR IMPLIED, AND SHALL NOT, BY VIRTUE OF HAVING RENTED THE
EQUIPMENT COVERED BY THIS AGREEMENT, BE DEEMED TO HAVE MADE ANY REPRESENTATION
OR WARRANTY AS TO THE MERCHANTABILITY, DESIGN, FITNESS FOR ANY PARTICULAR
PURPOSE, OR CONDITION OF THE EQUIPMENT, OR THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN.

17.  COMPLETE AGREEMENT

     This Agreement constitutes the entire agreement and understanding between
the parties hereto and supersedes all prior agreements, understandings and
communications relating to the subject matter of this Agreement.



<PAGE>
 
                                                                   EXHIBIT 10.11

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.

                               WARRANT AGREEMENT

             To Purchase Shares of the Series B Preferred Stock of

                             ALIGN TECHNOLOGY INC.

               Dated as of April 12,1999 (the "Effective Date")

          WHEREAS, Align Technology Incorporated, a Delaware corporation (the
"Company") has entered into a Loan and Security Agreement dated as of April 12,
1999, and related Promissory Note(s) (collectively, the "Loans") with Comdisco,
Inc., a Delaware corporation (the "Warrantholder'); and

          WHEREAS, the Company desires to grant to Warrantholder, in
consideration for such Loans, the right to purchase shares of its Series B
Preferred Stock;

          NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loans and in consideration of mutual covenants and agreements
contained herein,
 the Company and Warrantholder agree as follows:

1.        GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
          ---------------------------------------------- 

          The Company hereby grants to the Warrantholder, and the Warrantholder
is entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe to and purchase, from the Company, 266,667 fully paid and non-
assessable shares of the Company's Series B Preferred Stock ("Preferred Stock")
at a purchase price of $3.00 per share (the "Exercise Price").  The number and
purchase price of such shares are subject to adjustment as provided in Section 8
hereof.

2.        TERM OF THE WARRANT AGREEMENT.
          ----------------------------- 

          Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i) ten
(10) years or (ii) five (5) years from the effective date of the Company's
initial public offering, whichever is shorter.

          Notwithstanding the term of this Warrant Agreement fixed pursuant to
the above paragraph, the right to purchase Preferred Stock as granted herein
shall expire, if not previously 

                                       1.

<PAGE>
 
exercised immediately upon the closing of a merger or consolidation of the
Company with or into another corporation or entity when the Company's
stockholders immediately before the consummation of such transaction do not hold
at least 50% of the outstanding securities of the surviving entity, or the sale
of all or substantially all of the Company's properties and assets to any other
person (collectively, a "Merger"); provided in which Warrantholder realizes a
value for its shares equal to or greater than $9.00 per share.

          The Company shall notify the Warrantholder if the Merger is proposed
in accordance with the terms of 8(f) hereof, and if the Company fails to deliver
such written notice, then notwithstanding anything to the contrary in this
Warrant Agreement, the rights to purchase the Company's Preferred Stock shall
not expire until the Company has delivered written notice of the Merger and the
notice period set forth in 8(f) hereof has expired.  Such notice shall also
contain such details of the proposed Merger as are reasonable in the
circumstances.  If such closing does not take place, the Company shall promptly
notify the Warrantholder that such proposed transaction has been terminated, and
the Warrantholder may rescind any exercise of its purchase rights promptly after
such notice of termination of the proposed transaction if the exercise of
Warrants has occurred after the Company notified the Warrantholder that the
Merger was proposed.  In the event of such recission, the Warrants will continue
to be exercisable on the same terms and conditions contained herein.

3.        EXERCISE OF THE PURCHASE RIGHTS.
          --------------------------------

          The purchase rights set forth in this Warrant Agreement are
exercisable by the Warrantholder, in whole or in part, at any time, or from time
to time, prior to the expiration of the term set forth in Section 2 above, by
tendering to the Company at its principal office a notice of exercise in the
form attached hereto as Exhibit I (the "Notice of Exercise"), duly completed and
executed.  Promptly upon receipt of the Notice of Exercise and the payment of
the purchase price in accordance with the terms set forth below, and in no event
later than twenty-one (21) days thereafter, the Company shall issue to the
Warrantholder a certificate for the number of shares of Preferred Stock
purchased and shall execute the acknowledgment of exercise in the form attached
hereto as Exhibit 11 (the "Acknowledgment of Exercise") indicating the number of
shares which remain subject to future purchases, if any.

          The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below.  If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:

                    X = Y(A-B)
                        ------
                          A

          Where:  X =  the number of shares of Preferred Stock to be issued to
                       the Warrantholder.

                  Y =  the number of shares of Preferred Stock requested to be
                       exercised under this Warrant Agreement.

                  A =  the fair market value of one (1) share of Preferred
                       Stock.

                                       2.

<PAGE>
 
                  B =  the Exercise Price.

          For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:

                       (i)    if the exercise is in connection with an initial
                  public offering of the Company's Common Stock, and if the
                  Company's Registration Statement relating to such public
                  offering has been declared effective by the SEC, then the fair
                  market value per share shall be the product of (x) the initial
                  "Price to Public" specified in the final prospectus with
                  respect to the offering and (y) the number of shares of Common
                  Stock into which each share of Preferred Stock- is convertible
                  at the time of such exercise;

                       (ii)   if this Warrant is exercised after, and not in
                  connection with the Company's initial public offering, and:

                              (a) if traded on a securities exchange, the fair
                       market value shall be deemed to be the product of (x) the
                       average of the closing prices over a five (5) day period
                       ending three days before the day the current fair market
                       value of the securities is being determined and (y) the
                       number of shares of Common Stock into which each share of
                       Preferred Stock is convertible at the time of such
                       exercise; or

                              (b) if actively traded over-the-counter, the fair
                       market value shall be deemed to be the product of (x) the
                       average of the closing bid and asked prices quoted on the
                       NASDAQ system (or similar system) over the five (5) day
                       period ending three days before the day the current fair
                       market value of the securities is being determined and
                       (y) the number of shares of Common Stock into which each
                       share of Preferred Stock is convertible at the time of
                       such exercise;

                       (iii)  if at any time the Common Stock is not listed on
                  any securities exchange or quoted in the NASDAQ System or the
                  over-the-counter market, the current fair market value of
                  Preferred Stock shall be the product of (x) the highest price
                  per share which the Company could obtain from a willing buyer
                  (not a current employee or director) for shares of Common
                  Stock sold by the Company, from authorized but unissued
                  shares, as determined in good faith by its Board of Directors
                  and (y) the number of shares of Common Stock into which each
                  share of Preferred Stock is convertible at the time of such
                  exercise, unless the Company shall become subject to a merger,
                  acquisition or other consolidation pursuant to which the
                  Company is not the surviving party, in which case the fair
                  market value of Preferred Stock shall be deemed to be the
                  value received by the holders of the Company's Preferred Stock
                  on a common equivalent basis pursuant to such merger or
                  acquisition.

          Upon partial exercise by either cash or Net Issuance, the Company
shall promptly issue an amended Warrant Agreement representing the remaining
number of shares purchasable 

                                       3.

<PAGE>
 
hereunder. All other terms and conditions of such amended Warrant Agreement
shall be identical to those contained herein, including, but not limited to the
Effective Date hereof.

4.   RESERVATION OF SHARES.
     ----------------------

     (a)  Authorization and Reservation of Shares. During the term of this
          ----------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.

     (b)  Registration or Listing. If any shares of Preferred Stock required to
          ------------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.

5.   NO FRACTIONAL SHARES OR SCRIP.
     ------------------------------

     No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.

6.   NO RIGHTS AS SHAREHOLDER.
     -------------------------

     This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.

7.   WARRANTHOLDER REGISTRY.
     -----------------------

     The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.

8.   ADJUSTMENT RIGHTS.
     ------------------

     The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:

     (a)  Capital Reorganization.  If at any time there shall be a capital
          ----------------------                                          
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, where the
Company's Stockholders before such transaction do not hold at least 50% of the
outstanding securities of the successor entity after such transaction
(hereinafter referred to as a "Reorganization"), then, as a part of such
Reorganization, lawful provision shall be made so 

                                       4.

<PAGE>
 
that the Warrantholder shall thereafter be entitled to receive, upon exercise of
the Warrant, the number of shares of preferred stock or other securities of the
successor company resulting from such Reorganization, equivalent in value to
that which would have been issuable if Warrantholder had exercised this Warrant
immediately prior to the Reorganization. In any such case, appropriate
adjustment (as determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant Agreement
with respect to the rights and interest of the Warrantholder after the
Reorganization to the end that the provisions of this Warrant Agreement
(including adjustments of the Exercise Price and number of shares of Preferred
Stock purchasable) shall be applicable to the greatest extent possible.

     (b)  Reclassification of Shares.  If the Company at any time shall, by
          --------------------------                                       
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.

     (c)  Subdivision or Combination of Shares.  If the Company at any time
          ------------------------------------
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.

     (d)  Stock Dividends.  If the Company at any time shall pay a dividend
          ---------------                                                  
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's Preferred
Stock, then the Exercise Price shall be adjusted, from and after the record date
of such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (ii) the denominator of which shall be the total number of all shares of the
Company's Preferred Stock outstanding immediately after such dividend or
distribution.  The Warrantholder shall thereafter be entitled to purchase, at
the Exercise Price resulting from such adjustment, the number of shares of
Preferred Stock (calculated to the nearest whole share) obtained by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of shares of Preferred Stock issuable upon the exercise hereof immediately prior
to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.

     (e)  Antidilution Rights.  Additional antidilution rights applicable to
          -------------------                                               
the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter").  The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter.  The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which 

                                       5.

<PAGE>
 
such stock or security is to be sold, (b) the number of shares to be issued, and
(c) such other information as necessary for Warrantholder to determine if a
dilutive event has occurred.

     (f)  Notice of Adjustments.  If:  (i) the Company shall declare any
          ---------------------                                         
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription pro rata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger;
(Iv) there shall be any Reorganization; (v) there shall be an initial public
offering; or (vi) there shall be any voluntary dissolution, liquidation or
winding up of the Company; then, in connection with each such event, the Company
shall send to the Warrantholder: (A) at least twenty (20) days'- prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution, subscription rights (specifying
the date on which the holders of Preferred Stock shall be entitled thereto) or
for determining rights to vote in respect of such Merger, dissolution,
liquidation or winding up; (B) in the case of any such Merger, dissolution,
liquidation or winding up, at least twenty (20) days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Preferred Stock shall be entitled to exchange their Preferred Stock
for securities or other property deliverable upon such Merger or any such
Reorganization, dissolution, liquidation or winding up); and (C) in the case of
a public offering, the Company shall give the Warrantholder at least twenty (20)
days written notice prior to the effective date thereof.

          Each such written notice shall set forth, in reasonable detail, (i)
the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.

     (g)  Timely Notice.  Failure to timely provide such notice required by
          -------------                                                    
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder.  The notice period shall
begin on the date Warrantholder actually receives a written notice containing
all the information specified above.

9.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
     ---------------------------------------------------------

     (a)  Reservation of Preferred Stock.  The Preferred Stock issuable
          -------------------------------                               
upon exercise of the Warrantholder's rights has been duly and validly reserved
and, when issued in accordance with the provisions of this Warrant Agreement,
will be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal securities
laws.  The Company has made available to the Warrantholder true, correct and
complete copies of its Charter and Bylaws, as amended.  The issuance of
certificates for shares of Preferred Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance tax
in respect thereof, or other cost incurred by the Company in connection with
such exercise and the related issuance of shares of Preferred Stock.  The
Company shall not be required to pay any tax which

                                       6.

<PAGE>
 
may be payable in respect of any transfer involved and the issuance and delivery
of any certificate in a name other than that of the Warrantholder.

     (b)  Due Authority.  The execution and delivery by the Company of this
          -------------                                                    
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Loans and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Loans and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.

     (c)  Consents and Approvals. No consent or approval of, giving of notice 
          ----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.

     (d)  Issued Securities. All issued and outstanding shares of Common Stock,
          -----------------    
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:

               (i)       The authorized capital of the Company consists of (A)
          10,000,000 shares of Common Stock, of which 2,807,145 shares are
          issued and outstanding, (B) 2,175,000 shares of Series A Preferred
          Stock, of which 2,175,000 shares are issued and outstanding and are
          convertible into 2,175,000 shares of Common Stock, (C) 3,825,000
          shares of Series B Preferred Stock, of which 3,424,365 shares are
          issued and outstanding and are convertible into 3,424,365 shares of
          Common Stock.

               (ii)      The Company has reserved (A) 765,000 shares of Common
          Stock for issuance under its 1997 Equity Incentive Plan, under which
          512,393 options are outstanding. There are no other options, warrants,
          conversion privileges or other rights presently outstanding to
          purchase or otherwise acquire any authorized but unissued shares of
          the Company's capital stock or other securities of the Company.

               (iii)  In accordance with the Company's Articles of
          Incorporation, no shareholder of the Company has preemptive rights to
          purchase new issuances of the Company's capital stock.

                                       7.

<PAGE>
 
          (e) Insurance.  The Company has in full force and effect insurance
              ---------                                                     
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.

          (f) Other Commitments to Register Securities.  Except as set forth in
              ----------------------------------------                         
this Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.

          (g) Exempt Transaction.  Subject to the accuracy of the
              ------------------                                 
Warrantholder's representations in Section 10 hereof, the issuance of the
Preferred Stock upon exercise of this Warrant will constitute a transaction
exempt from (i) the registration requirements of Section 5 of the 1933 Act, in
reliance upon Section 4(2) thereof, and (ii) the qualification requirements of
the applicable state securities laws.

          (h) Compliance with Rule 144.  At the written request of the
              ------------------------                                
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.

10.       REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
          ---------------------------------------------------

          This Warrant Agreement has been entered into by the Company in
reliance upon the following representations and covenants of the Warrantholder:

          (a) Investment Purpose.  The right to acquire Preferred Stock or the
              ------------------                                              
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.

          (b) Private Issue.  The Warrantholder understands (i) that the
              -------------                                             
Preferred Stock issuable upon exercise of this Warrant is not registered under
the 1933 Act or qualified under applicable state securities laws on the ground
that the issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.

          (c) Disposition of Warrantholder's Rights.  In no event will the
              -------------------------------------                       
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an 

                                       8.

<PAGE>
 
opinion of counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.

     (d) Financial Risk.  The Warrantholder has such knowledge and experience
         --------------                                           
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.

     (e) Risk of No Registration.  The Warrantholder understands that if the
         -----------------------                                        
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "l934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act", or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.

     (f) Accredited Investor.   Warrantholder is an "accredited investor" within
         -------------------                                             
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.

11.  TRANSFERS.
     ----------
     
          Subject to the terms and conditions contained in Section 10 hereof,
this Warrant Agreement and all rights hereunder are transferable in whole or in
part by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers.  The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in the

                                       9.

<PAGE>
 
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.

12.  MISCELLANEOUS.
     --------------

     (a)  Effective Date. The provisions of this Warrant Agreement shall be
          ---------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.

     (b)  Attorney's Fees. In any litigation, arbitration or court proceeding
          ----------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.

     (c)  Governing Law. This Warrant Agreement shall be governed by and
          -------------
construed for all purposes under and in accordance with the laws of the State of
California.

     (d)  Counterparts.  This Warrant Agreement may be executed in two or
          ------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     (e)  Notices. Any notice required or permitted hereunder shall be given in
          -------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847)518-5088 and (ii) to the Company at 442
Potrero Ave., Sunnyvale, CA 94086, Attention: Chief Financial Officer (and/or if
by facsimile, (408) 738-7150) or at such other address as any such party may
subsequently designate by written notice to the other party.

     (f)  Remedies. In the event of any default hereunder, the non-defaulting
          --------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.

     (g)  No Impairment of Rights. The Company will not, by amendment of its
          -----------------------         
Charter or through any other means, avoid or seek to avoid the-observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.

                                      10.

<PAGE>
 
     (h)  Survival. The representations, warranties, covenants and conditions of
          --------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.

     (i)  Severability. In the event any one or more of the provisions of this
          ------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.

     (j)  Amendments.  Any provision of this Warrant Agreement may be
          ----------                                                 
amended by a written instrument signed by the Company and by the Warrantholder.

          IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duty authorized as of the
Effective Date.

 

                              Company:  ALIGN TECHNOLOGY INC.


                              By:____________________________

                              Title:_________________________
                                              CEO


                              Warrantholder: COMDISCO, INC.



                              By:____________________________
                                        JILL C. HANSES

                              Title:_________________________
                                      SENIOR VICE PRESIDENT

                                      11.

<PAGE>
 
                                   EXHIBIT I

                              NOTICE OF EXERCISE

TO:  ___________________________

(1)  The undersigned Warrantholder hereby elects to purchase _________ shares of
     the Series B Preferred Stock of ___________________, pursuant to the terms
     of the Warrant Agreement dated the _____ day of ______________, 19__ (the
     "Warrant Agreement") between ___________________________ and the
     Warrantholder, and tenders herewith payment of the purchase price for such
     shares in full, together with all applicable transfer taxes, if any.

(2)  In exercising its rights to purchase the Series B Preferred Stock of
     __________________________, the undersigned hereby confirms and
     acknowledges the investment representations and warranties made in Section
     10 of the Warrant Agreement.

(3)  Please issue a certificate or certificates representing said shares of
     Series 6 Preferred Stock in the name of the undersigned or in such other
     name as is specified below.


___________________________
(Name)

___________________________
(Address)



Warrantholder: COMDISCO, INC.

By: _________________________

Title: ______________________
 
Date:  ______________________

                                      12.

<PAGE>
 
                                  EXHIBIT II

                          ACKNOWLEDGMENT OF EXERCISE


     The undersigned ______________________________, hereby acknowledge receipt
of the "Notice of Exercise" from Comdisco, Inc., to purchase _____ shares of the
Series B Preferred Stock of _____________, pursuant to the terms of the Warrant
Agreement, and further acknowledges that _____ shares remain subject to purchase
under the terms of the Warrant Agreement.


                                        Company:

                                        By:___________________________

                                        Title:________________________

                                        Date:_________________________

                                      13.

<PAGE>
 
                                  EXHIBIT III

                                TRANSFER NOTICE

(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information.  Do not use this form to purchase shares.)

     FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to


_____________________________________
(Please Print)

whose address is_____________________
 

_____________________________________


              Dated:_____________________________


              Holders Signature: ________________
                      
              Holder Address:    ________________
 

              __________________________________ 

Signature Guaranteed:____________________



NOTE:      The signature to this Transfer Notice must correspond with the name
           as it appears on the face of the Warrant Agreement, without
           alteration or enlargement or any change whatever. Officers of
           corporations and those acting in a fiduciary or other representative
           capacity should file proper evidence of authority to assign the
           foregoing Warrant Agreement.

                                      14.



<PAGE>
 
                                                                   EXHIBIT 23.1
 
                      CONSENT OF INDEPENDENT ACCOUNTANTS
 
   We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated August 18, 2000, except as to Note 11, as to which the date
is November 13, 2000 relating to the consolidated financial statements of
Align Technology, Inc., which appears in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such
Registration Statement.
 
/s/ PricewaterhouseCoopers LLP
 
San Jose, California
November 14, 2000





<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   12-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1999             DEC-31-2000
<PERIOD-START>                             JAN-01-1999             JAN-01-2000
<PERIOD-END>                               DEC-31-1999             SEP-30-2000
<CASH>                                           7,172                  52,067
<SECURITIES>                                     5,253                   3,927
<RECEIVABLES>                                      347                   2,479
<ALLOWANCES>                                      (33)                   (300)
<INVENTORY>                                        366                     667
<CURRENT-ASSETS>                                   669                   3,294
<PP&E>                                           4,007                  14,093
<DEPRECIATION>                                   (690)                 (2,155)
<TOTAL-ASSETS>                                  17,091                  75,567
<CURRENT-LIABILITIES>                            3,747                  14,376
<BONDS>                                              0                       0
<PREFERRED-MANDATORY>                           32,755                 115,708
<PREFERRED>                                          0                       0
<COMMON>                                         2,220                  91,926
<OTHER-SE>                                    (21,634)               (148,012)
<TOTAL-LIABILITY-AND-EQUITY>                    17,091                  75,567
<SALES>                                            411                   3,236    
<TOTAL-REVENUES>                                   411                   3,236
<CGS>                                          (1,754)                (11,313)
<TOTAL-COSTS>                                 (13,362)                (37,917)
<OTHER-EXPENSES>                                   276                   1,490
<LOSS-PROVISION>                                     0                       0
<INTEREST-EXPENSE>                               (986)                 (8,807)
<INCOME-PRETAX>                               (15,415)                (97,461)
<INCOME-TAX>                                         0                       0
<INCOME-CONTINUING>                                  0                       0
<DISCONTINUED>                                       0                       0
<EXTRAORDINARY>                                      0                       0
<CHANGES>                                            0                       0
<NET-INCOME>                                  (15,415)                (97,461)
<EPS-BASIC>                                     (7.31)                 (35.87)
<EPS-DILUTED>                                   (7.31)                 (35.87)
        

</TABLE>