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Certain portions of this exhibit have been omitted based upon a request for
confidential treatment. Omitted portions have been separately filed with the
Commission.
EXHIBIT 10.22
PRODUCT DEVELOPMENT AGREEMENT
This PRODUCT DEVELOPMENT AGREEMENT (hereinafter the "Agreement") is
made as of this 31st day of July, 1996, by and between COMPUTER MOTION, INC., a
California corporation, having its principal place of business at 000-X Xxxxxxx
Xxxxx, Xxxxxx, Xxxxxxxxxx, 00000, (hereinafter referred to as "CMI"), and
SARASOTA MEMORIAL HOSPITAL, a Florida corporation, having its principal place of
business at 0000 Xxxxx Xxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxx, 00000-0000, and its
subsidiaries and affiliates (hereinafter referred to as "Hospital").
R E C I T A L S :
A. CMI has developed or acquired substantial expertise, know-how and
technical information relating to the design, development, manufacture and
testing of hardware and software for a robotic microsurgery system (hereinafter
referred to collectively as "Proprietary Information");
B. CMI is in the process of developing and refining its Zeus
Microsurgery Robotic System (the "Product");
C. CMI has developed or acquired rights to valuable hardware and
software incorporated in the Product (hereinafter referred to collectively as
"Technology") and holds patent, copyright, trade secret, trade identity and
other proprietary rights which exist in and to the Product, Proprietary
Information and Technology;
D. CMI desires to have Hospital assist in the development and
refinement of the Product and is willing to provide Hospital a prototype Product
and certain support services in connection with Hospital's use thereof on such
terms and conditions as are provided herein; and
E. Hospital has experience in the application of surgical techniques
and equipment and in clinical research activities which it desires to apply in
the use and refinement of the Product.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, CMI and Hospital, intending to be
legally bound, have agreed and do hereby agree as follows:
1. LOCATION OF DEFINITIONS
(a) "Claims" shall be defined as set forth in Paragraph 9(b).
(b) "CMI" shall be defined as set forth in the opening paragraph of
this Agreement.
(c) "Deliverable Items" shall be defined as set forth in Paragraph
2(a) and Exhibit A.
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(d) "Development Offset Payment" shall be defined as set forth in
Exhibit B.
(e) "Hospital" shall be defined as set forth in the opening paragraph
of this Agreement.
(f) "Improvement" shall be defined as set forth in Paragraph 4(b).
(g) "Product" shall be defined as set forth in Recital B.
(h) "Proprietary Information" shall be defined as set forth in Recital
A and Paragraph 7(a).
(i) "Technology" shall be defined as set forth in Recital C.
(j) "Work" shall be defined as set forth in Paragraph 4(a).
2. AGREEMENTS OF CMI
(a) CMI agrees to use diligent, good faith efforts to deliver the
"Deliverable Items" as listed on Exhibit A on the schedule specified on
Exhibit B.
(b) From the date specified on Exhibit B and throughout the term of
this Agreement, CMI shall retain and have in place a Clinical Engineer, to be
primarily stationed at the Hospital, with principle responsibility for the
day-to-day operations and activities relating to the Product. The
responsibilities of the Clinical Engineer shall include, but not be limited to
the following:
(i) The coordination of quarterly engineering meetings the
location of which shall alternate between Santa Xxxxxxx and
Sarasota;
(ii) Arranging conference calls no less than monthly between CMI
engineering personnel and the clinical staff of the Hospital;
(iii) Make hardware retrofit and software upgrades directly related
to the Product;
(iv) Training relating to modifications and improvements to
hardware and software incorporated into the Product; and
(v) General ongoing support of clinical studies and research
relating to the Product and the Work.
(c) CMI shall furnish Hospital with all available information relating
to the Product and such other materials as may be reasonably requested in
writing by Hospital. In addition, CMI management and engineering personnel shall
be available to answer questions and provide
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telephone consultation to Hospital's medical and clinical personnel, such
availability to be coordinated by the Clinical Engineer.
(d) Improvements made to the Production Version of the Product to be
delivered to Hospital at the conclusion of this Agreement shall be charged to
Hospital at CMI's Cost of Goods Sold (as defined by Generally Accepted
Accounting Principles), plus [*] percent ([*]%). "Production Version" is
defined as a system which has received all required federal regulatory
approvals and is being actively marketed on the open market.
(e) CMI shall waive any and all usage or other similar fees which would
otherwise be levied on Hospital related to the use of the Production Version of
the Product to be delivered to Hospital at the conclusion of this Agreement for
seven (7) years following such delivery.
3. AGREEMENTS OF HOSPITAL
(a) Hospital agrees to pay CMI the amounts set forth at the times
specified on Exhibit B, such payments to be effected by bank draft or by bank
wire transfer into an account designated by CMI, as specified in writing by CMI
not less than three (3) business days prior to the date such payment is due.
(b) Hospital agrees to utilize the Product in the performance of
surgical procedures and to utilize its facilities, clinical personnel and their
expertise to further develop and refine the Product and the Technology. Efforts
pursuant to this Paragraph 3(b) shall be in partial consideration for the use of
the Product during the term hereof and shall be uncompensated unless provided
for under Paragraph 4(b).
(c) Hospital shall, at its sole cost and expense, during the term of
this Agreement, provide:
(i) Secure space for the storage and utilization of the Product
for the conduct of the Work;
(ii) Office space, standard office supplies and general office
support services for utilization by the Clinical Engineer in
the performance of his duties under this Agreement;
(d) Hospital shall provide CMI with reasonable access to its clinical
and administrative personnel, its operating rooms and training facilities in
furtherance of the rights and obligations provided under this Agreement. The
Hospital shall, within thirty (30) days of the date hereof, designate a liaison
whom shall act as CMI's primary contact at the Hospital, such designation to be
subject to change from time to time by Hospital's written notice to CMI.
(e) Hospital shall fund mutually agreed upon hardware design
modifications, such modifications to be invoiced at CMI's actual cost, not to
exceed [*] in the aggregate. In the event Hospital desires hardware
modifications which are unilaterally requested by Hospital and not
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agreed to by CMI, Hospital will be responsible for the costs thereof at a rate
of [*] of the material cost relating thereto, with no additional charges being
made for labor, administration or overhead.. Any amounts payable under this
Paragraph 3(e) shall be payable by Hospital within thirty (30) days of being
submitted a written invoice with respect thereto by CMI.
4. OWNERSHIP OF THE WORK
(a) The results of the efforts by Hospital and its personnel under this
Agreement (the "Work"), and all revisions, amendments, modifications and
enhancements and sequels thereto produced by Hospital, a third party acting on
behalf of Hospital or CMI, as well as all materials produced by Hospital in
fulfillment of its obligations hereunder, including but not limited to reports,
memoranda, studies, drawings, computer programs and appurtenant object code and
source code, documentation, molds, prototypes and models, shall be the exclusive
property of CMI.
(b) In the event that Hospital shall make any modification, improvement
or enhancement (an "Improvement") to the Product or the Technology which shall
be sufficiently original and distinct so as not to constitute a derivative work
thereof or otherwise infringe on the rights of CMI or others, Hospital and CMI
shall enter into good faith negotiations with respect to the amount and form of
compensation to which Hospital shall be entitled with respect thereto. The form
of compensation contemplated under this Paragraph 4(b) shall be options for
shares of CMI common stock or royalty payments on sales of the Product
incorporating the improvement. In order to allow an evaluation of the
modification, improvement or enhancement, the Hospital will submit a written
report describing in reasonable detail the nature of the Improvements which may
be compensable under the terms of this Paragraph 4(b). Such report shall be
presented to CMI not more than forty-five (45) days after the origination of the
idea or concept relating to the Product or the Technology. CMI shall have sole
and exclusive right to prosecute and maintain any and all patents arising from
the activities contemplated by this Agreement, including any Improvement.
(c) Hospital acknowledges and agrees that CMI shall have, at its sole
and final discretion, the right to decide, specify or otherwise to determine the
following:
(i) the terms of sale of the Product, including but not limited
to wholesale and recommended retail price levels, discounts,
and returned goods policy use fees and all related matters;
(ii) territories where the Product shall be, or shall not be, sold
and distributed, and the method of sales and distribution,
whether directly by CMI, its subsidiaries or affiliates, by a
sub-licensee, or by other means;
(ii) the preparation, whether by CMI, or by a third party, of
additional versions of the Product, compatible with other
computer systems or other devices, or the preparation of any
other derivative
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works from the Product, which at all times shall be for the
sole benefit of CMI, except as otherwise agreed to by the
parties in writing.
(d) Hospital acknowledges that no such title to any such enhancements,
modifications, improvements, updates or derivative works made by Hospital to the
Technology, and related documentation, is granted under this Agreement, and that
no such assertion shall be made by Hospital. Notwithstanding anything to the
contrary in this Paragraph 4(d), Hospital shall not assign or sublicense its
right to develop, modify and enhance the Technology to any entity (other than a
subsidiary of Hospital or any entity into which Hospital merges or which
acquires substantially all of the stock or assets of Hospital) without the prior
written consent of CMI, which shall not be unreasonably withheld.
(e) The provisions of this Section 4 shall survive termination or
cancellation of this Agreement.
5. EXPENSES
Each party shall pay its own expenses incurred by such party while
engaged in the performance of their respective duties under this Agreement.
6. LIMITATION OF LIABILITY
Unless otherwise agreed upon in writing by CMI and Hospital, CMI's
maximum liability with respect to the Product and its use by Hospital during the
term of this Agreement shall not exceed the total of all amounts paid to CMI by
Hospital hereunder.
7. CONFIDENTIALITY
(a) Each party acknowledges and agrees that certain information which
it may receive from the other party will be proprietary information to the
disclosing party. Such information includes but is not limited to:
(i) (the fact that the disclosing party intends to develop or has
developed the Product;
(ii) any information concerning the Product and its intended
marketing;
(iii) any information concerning the terms and conditions of this
Agreement; except that CMI or Hospital may disclose such
terms and conditions as may be required by law;
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(iv) nonpublic information concerning the business or finances of
the disclosing party; and
(v) any other information which if disclosed to a third party
could adversely affect a competitive advantage of the
disclosing party, including expertise, know-how and technical
information relating to the design, development, manufacture
and testing of Technology integrated or to be integrated into
the Product.
All of (i) through (v) shall be collectively referred to herein as
"Proprietary Information".
(b) Each party agrees, both during and after the term of this
Agreement, to hold in confidence all Proprietary Information of the other party
and to use at least the same degree of care to prevent the unauthorized copying,
use and/or disclosure of the other party's Proprietary Information that it uses
to protect its own confidential information of like importance. Further, each
party agrees to have each of its employees, consultants, and subcontractors
having access to Proprietary Information of CMI sign an agreement to protect
such confidential information.
(c) Hospital agrees that CMI shall have the right to approve in advance
the content, time, place and manner of any announcement or other such statement
pertaining to this Agreement and the subject matter hereof, which approval shall
not be unreasonably withheld. Information which CMI will not approve for public
disclosure thereof includes, without limitation, the financial arrangements,
development and delivery schedules.
(d) Each party's respective obligation to hold the other party's
Proprietary Information in strict confidence shall not apply to any information
that:
(i) becomes known to the general public without breach of the
non-disclosure obligations of this Agreement;
(ii) is disclosed by the owner of the Proprietary Information to
others without restriction on disclosure;
(iii) is obtained from a third party without breach of a legal,
contractual or fiduciary obligation to CMI; or
(iv) is required to be disclosed in connection with any suit,
action or other dispute related to this Agreement.
(e) Each party agrees that the unauthorized use or disclosure of the
other party's Proprietary Information may cause irreparable injury to the party
concerned. Accordingly, both parties agree that the remedy at law for any breach
of this Section 7 may be inadequate and, in recognition thereof, agree that the
party suffering from unauthorized use or disclosure shall be entitled to ex
parte injunctive relief to prevent any such breach or threatened breach, without
any
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requirement that such party post any bond therefor. Both parties further agree
that all confidentiality commitments hereunder shall survive any cancellation or
termination of this Agreement.
8. PROTECTION OF PROPRIETARY RIGHTS
Hospital covenants and agrees that it shall take all actions necessary
or prudent for the protection of CMI's proprietary rights in and to the
Technology and the Work.
9. HOSPITAL'S WARRANTIES AND INDEMNIFICATIONS
(a) Hospital represents and warrants to CMI as follows:
(i) Hospital possesses full power and authority to enter into
this Agreement, and to carry out its obligations hereunder.
(ii) With respect to any intellectual property to be developed by
Hospital which Hospital will disclose to CMI in performance
of this Agreement, Hospital warrants that it has the right to
make use and disclosure thereof without liability to any
third party.
(iii) The performance of the terms of this Agreement and the
performance of Hospital's duties hereunder will not breach
any separate agreement by which Hospital is bound, or violate
or infringe any rights of any third party. Hospital shall
not, at any time during the term of this Agreement commit any
act or enter into any agreement or understanding with any
third party which is inconsistent or in conflict with this
Agreement.
(iv) There is presently no litigation or other claim, pending or
threatened, nor a fact which may be the basis of any claim,
against the Hospital which would restrict or prohibit the
transactions contemplated by this Agreement. Hospital has not
taken any action or failed to take any action which would
interfere with the rights of CMI under this Agreement.
(b) Hospital agrees to indemnify and hold CMI and its officers,
directors, agents and employees harmless from and against any and all claims,
losses, liabilities, damages, expenses and costs (including reasonable attorneys
and expert witness fees) (collectively "Claims") which result from Hospital's
negligence or misuse of the Product or any infringement in the creation of the
Work of any copyright, trademark or trade name, invasion of the right of
privacy, publicity, or other property right of any third party; or any breach of
any of the representations or warranties of Hospital contained in this
Agreement; including Claims incurred in the settlement or avoidance as a result
of any of the foregoing; provided, however, that CMI shall give prompt written
notice to
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Hospital of the assertion of any such Claim and provided further that
Hospital shall have the right to select counsel and control the defense and
settlement thereof, subject to the right of CMI to participate in any such
action or to proceed at its own expense with counsel of its own choosing.
(c) The representations, warranties and indemnification rights set
forth in this Agreement shall survive execution of this Agreement, the
performance of the obligation of Hospital hereunder and cancellation or
termination of this Agreement.
10. CMI'S WARRANTIES AND INDEMNIFICATIONS
(a) CMI represents and warrants to Hospital as follows:
(i) CMI possesses full power and authority to enter into this
Agreement, and to carry out its obligations hereunder.
(ii) With respect to any intellectual property to be developed by
CMI which CMI will disclose to Hospital in performance of
this Agreement, CMI warrants that it has the right to make
use and disclosure thereof without liability to any third
party.
(iii) The performance of the terms of this Agreement and the
performance of CMI's duties hereunder will not breach any
separate agreement by which CMI is bound, or violate or
infringe any rights of any third party. CMI shall not, at any
time during the term of this Agreement commit any act or
enter into any agreement or understanding with any third
party which is inconsistent or in conflict with this
Agreement.
(iv) There is presently no litigation or other claim, pending or
threatened, nor a fact which may be the basis of any claim,
against the CMI which would restrict or prohibit the
transactions contemplated by this Agreement. CMI has not
taken any action or failed to take any action which would
interfere with the rights of Hospital under this Agreement.
(b) CMI agrees to indemnify and hold Hospital and its officers,
directors, agents and employees harmless from and against (i) any Claims of
third parties to the extent caused by defects in the design and/or manufacture
of the Product and (ii) any and all Claims which arise from the Product or the
Technology's alleged breach of patent or other intellectual property right of
others. If such a Claim is made or appears possible, Hospital agrees to allow
CMI to modify or replace the allegedly infringing component. CMI has no
obligation under this Section 10 for any Claim to the extent based on Hospital's
modification of the Product or the Technology or its combination, operation, or
use with any other product, data or apparatus not specified or provided by CMI.
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(c) The representations, warranties and indemnification rights set
forth in this Agreement shall survive execution of this Agreement, the
performance of the obligation of CMI hereunder and cancellation or termination
of this Agreement.
11. TERM AND CANCELLATION
(a) The term of this Agreement shall commence on the date hereof and
continue until CMI delivers a Production Version of the Product, unless canceled
or terminated earlier in accordance with the provisions of this Agreement
("Production Version" is defined in Paragraph 2(d)).
(b) CMI or Hospital may cancel this Agreement on thirty (30) days
written notice to such other party without any liability whatsoever, excepting
rights or remedies provided pursuant to other provisions of this Agreement. The
Product and all materials provided to Hospital by CMI under this Agreement shall
be returned promptly to CMI upon the termination of this Agreement.
(c) Any unpaid Quarterly Development Offset fees payable at the time of
any cancellation or termination of this Agreement shall be prorated for the
portion of the applicable quarter during which this Agreement is in effect. Such
prorated fees and any other amounts payable hereunder shall be due and payable
in full upon such cancellation or termination.
12. GENERAL
(a) Any notice required or permitted to be sent hereunder shall be in
writing and shall be sent by registered or certified mail, return receipt
requested, or Federal Express, to the appropriate party at the address set forth
above, or to such other address as such party shall have designated by notice
hereunder.
(b) This Agreement shall be governed and interpreted in accordance with
the internal laws of the State of California. Any action or proceeding brought
to enforce the terms of this Agreement shall be brought in Santa Xxxxxxx County,
State of California, and each agrees to waive any objections to personal
jurisdiction, service of process and venue in the United States District Court
for Central District of California or California Superior Court for Santa
Xxxxxxx County. In the event of any legal proceeding between the parties arising
from this Agreement, the prevailing party shall be entitled to recover, in
addition to any other relief awarded or granted, its costs and expenses
(including reasonable attorneys' and expert witness' fees) incurred in any such
proceeding.
(c) This Agreement does not constitute Hospital as the agent or legal
representative of CMI, or CMI as the agent or legal representative of Hospital
for any purpose whatsoever. Neither party is granted any express or implied
right or authority by the other party to assume or to create
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any obligation or responsibility in behalf of or in the name of the other party,
or to bind the other party in any manner or thing whatsoever.
(d) Hospital shall be responsible for any withholding taxes, payroll
taxes, disability insurance payments, unemployment taxes, and other similar
taxes or charges on the payments received by its agents or employees and CMI
shall be responsible for any withholding taxes, payroll taxes, disability
insurance payments, unemployment taxes, and other similar taxes or charges on
the payments received by the Clinical Engineer.
(e) Neither party shall be deemed in default of this Agreement to the
extent that performance of their obligations or attempts to cure any breach are
delayed or prevented by reason of any act of God, fire, natural disaster,
accident, act of government, shortages of materials or supplies, or any other
cause beyond the control of such party ("force majeure") provided that such
party gives the other party written notice thereof promptly and, in any event,
within fifteen (15) days of discovery thereof and uses its best efforts to cure
any such breach. In the event of any such force majeure, the time for
performance or cure shall be extended for a period equal to the duration of the
force majeure but not in excess of six (6) months.
(f) This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the parties.
(g) Should any provision of this Agreement be held to be void, invalid,
or inoperative, the remaining provisions hereof shall not be affected and shall
continue in effect as though such unenforceable provision(s) had not been
included herein. The name of this Agreement and the headings of the sections of
this Agreement are inserted for convenience of reference only and shall not be
used or relied upon in or in connection with the construction or interpretation
of this Agreement.
(h) No failure or delay by either party in exercising any right, power,
or remedy hereunder shall operate as a waiver of any such right, power, or
remedy. It is agreed that any remedies provided for in this Agreement shall be
cumulative and shall not be exclusive of any other remedies available hereunder,
or at law or in equity. No waiver or modification of any provision of this
Agreement shall be effective unless in writing and signed by the party against
whom such waiver or modification is sought to be enforced.
(i) This Agreement, including the Exhibits hereto, sets forth the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior negotiations, understandings and agreements between the
parties hereto concerning the subject matter hereof.
(j) This Agreement may be executed in counterparts, but shall not be
binding upon the parties until it has been signed by both parties.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first written above.
Hospital: CMI:
SARASOTA COUNTY PUBLIC HOSPITAL COMPUTER MOTION, INC.
BOARD AS OWNER AND OPERATOR OF
SARASOTA MEMORIAL HOSPITAL
By: ______________________________ By: _________________________________
Name: ____________________________ Name: _______________________________
Title: ___________________________ Title: ______________________________
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EXHIBIT A
Deliverable Items
1. Fully executed copy of this Agreement.
2. One (1) prototype of the Product.
3. Retention of Clinical Engineer.
4. Hardware upgrades and design modifications.
A-1
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EXHIBIT B
Schedule of Payments and Deliverable Items
Description of
Payment or Milestone Delivery Date Payment
-------------------- ------------- -------
Upon signing of this agreement by CMI and Hospital Date hereof [*]
Pro-rata portion of initial Quarterly Development Date hereof [*]
Offset Payment, prorated for partial quarter
Delivery of prototype Product Within ___ days of the date hereof. [*]
Post-delivery payment due Within 30 days after delivery of [*]
prototype Product
Retain Clinical Engineer Within ___ days of delivery of the
Product
Quarterly Development Offset Payments 1st day of each calendar quarter [*]
during the Term of this Agreement
B-1
