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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 10.10
SALES AGREEMENT
THIS SALES AGREEMENT (the "Agreement") is made and entered into as of
the 28th day of May, 1997, between COMPUTER MOTION, INC. (as defined below,
"CMI"), a California corporation, and MEDTRONIC, INC. (as defined below,
"Medtronic"), a Minnesota corporation.
WITNESSETH:
WHEREAS, CMI and Medtronic have entered into a Debenture Purchase
Agreement dated March 19, 1997 (the "Debenture Purchase Agreement") pursuant to
which (i) Medtronic purchased a $4 million convertible debenture dated March 19,
1997 (the "Debenture") and received a security interest in CMI's intellectual
property pursuant to a Security Agreement dated March 19, 1997 (the "Security
Agreement"), and (ii) Medtronic and CMI agreed to the Principal Terms attached
to the Debenture Purchase Agreement as Exhibit C thereto (the "Principal
Terms"); and
WHEREAS, the parties desire to enter into this Agreement further
elaborating on the Principal Terms in more detail.
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and for other valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties mutually
agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1) Specific Definitions. As used in this Agreement, the following
terms have the meanings set forth or referenced below:
"Affiliate" of a specified person (natural or juridical) means a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified. "Control"
shall mean ownership of more than 50% of the shares of stock entitled to vote
for the election of directors in the case of a corporation, and more than 50% of
the voting power in the case of a business entity other than a corporation.
"Change of Control" means, with respect to CMI, any of the following events: (1)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) in a single transaction acquires "beneficial ownership" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of CMI
representing 50% or more of the combined voting power (with respect to the
election of directors) of CMI's then outstanding securities; (2) the
consummation of a merger, combination or consolidation of CMI with or into any
other corporation, other than a merger, combination or consolidation which would
result in the voting securities of CMI outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or
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by being converted into voting securities of the surviving entity) more than 50%
of the combined voting power (with respect to the election of directors) of the
securities of CMI or of such surviving entity outstanding immediately after such
merger, combination or consolidation; or (3) the consummation of a plan of
complete liquidation of CMI or of an agreement for the sale or disposition by
CMI of all or substantially all of CMI's business or assets.
"CMI" means Computer Motion, Inc. and its Affiliates.
"Confidential Information" means know-how, trade secrets, and other unpublished
or proprietary information disclosed (whether before or during the term of this
Agreement) by one of the parties (the "disclosing party") to the other party
(the "receiving party") or generated under this Agreement, excluding information
which:
(a) is now or comes to be in the public domain through no fault of the
receiving party;
(b) is released without restriction to the receiving party by the
disclosing party in writing;
(c) is lawfully obtained by the receiving party from third parties;
(d) can be demonstrated by competent proof to have been known by the
receiving party prior to any disclosure of "Confidential Information by
the disclosing party;
(e) has been in the possession of the receiving party, as a result of
disclosure under this Agreement, for a period of five (5) years; or
(f) is required by law to be disclosed; provided that the receiving
party has given the disclosing party prompt written notice of such
disclosure requirement and has cooperated with the disclosing party so
that the disclosing party may seek a protective order or other
appropriate remedy to avoid or limit such disclosure.
All Confidential Information disclosed by one party to the other under
this Agreement shall be in writing and bear a legend "Proprietary,"
"Confidential" or words of similar import or, if disclosed in any manner other
than writing, shall be preceded by an oral statement indicating that the
information is Company proprietary or confidential, and shall be followed by
transmittal of a reasonably detailed written summary of the information provided
to the receiving party with identification as Confidential Information
designated as above within thirty (30) days.
"FDA" means the U.S. Food and Drug Administration.
"FDA Good Manufacturing Practices" means as defined in 21 Code of Federal
Regulations Part 820.
"Field of Use" means minimally invasive cardiothoracic surgical procedures.
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"Intellectual Property" means all patents, trade names, trademarks, service
marks, copyrights, and applications or registrations for any of the foregoing,
inventions, discoveries, know-how, trade secrets, data, information, technology,
processes, formulas, drawings, designs, computer programs, licenses, and all
amendments, modifications, and improvements to any of the foregoing.
"Medtronic" means Medtronic, Inc. and its Affiliates.
"Medtronic Competitors" means any person engaged in the manufacture or sale of
cardiac surgery products that are marketed to the same class of persons (e.g.
cardiac surgeons) to whom Medtronic markets the Systems.
"Medtronic Territory" means those countries included within Medtronic's
currently designated "Europe", "Middle East" and "Africa" sales regions as more
fully described on Schedule 1.1 hereto.
"Net Revenues of Systems" in North America for a particular period means the
aggregate amount CMI invoices non-Affiliated third parties (or invoices
Medtronic pursuant to Section 2.3) for the sale, lease, license or other use of
Systems during such period, excluding sales, use or excise tax, freight, duty or
insurance included therein, discounts, rebates, and credits or repayments due to
rejection, defects or returns, and excluding a reasonable allowance for bad
debts and excluding amounts invoiced for installation fees, training, and other
services. In the event CMI combines the Systems with other CMI products in a
package in which the individual Systems are not invoiced separately, then CMI's
Net Revenues attributable to the Systems component of such combined package
shall be established by CMI in good faith; provided, however, that if the
Systems component of such combined package is sold, leased, or licensed as an
individual product by CMI in the same geographic area, then CMI's Net Revenues
attributable to such Systems in the combined package shall be based on the Net
Revenues of such Systems when sold, leased, or licensed individually in such
geographic area.
"North America" means The United States of America and Canada, including all
territories and possessions thereof.
"Prime Rate" means, for any calendar quarter, the prime commercial lending rate
quoted by the Wall Street Journal, as in effect on the first day of such
quarter.
"Specifications" means the current specifications for the Systems, as may be
amended from time to time hereafter by CMI.
"Systems" means CMI's current and future computer and voice controlled robotic
systems that position and maneuver both visualization equipment and instruments
for minimally invasive surgical solutions in the Field of Use, including
disposables and reusables, and further including without limitation current and
future ZEUS systems.
1.2) Other Terms. Other terms may be defined elsewhere in the text of
this Agreement and shall have the meaning indicated throughout this Agreement.
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1.3) Other Definitional Provisions.
(a) The words "hereof," "herein," and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provisions of this
Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) References to an "Exhibit" are, unless otherwise
specified, to one of the Exhibits attached to or referenced in this
Agreement, and references to an "Article" or a "Section" are, unless
otherwise specified, to one of the Articles or Sections of this
Agreement.
(d) The term "person" includes any individual, partnership,
joint venture, corporation, trust, unincorporated organization or
government or any department or agency thereof.
(e) The term "Dollars" or "$" shall refer to the currency of
the United States of America.
(f) The term "knowledge" means actual knowledge of a fact or
the knowledge which such person or its officers or employees could
reasonably be expected to have based on reasonable investigation and
inquiry.
(g) All references to time shall refer to Minneapolis,
Minnesota time.
ARTICLE 2
MEDTRONIC AS SALES AGENT IN NORTH AMERICA
-----------------------------------------
2.1) Appointment. Subject to commencement of the term of this Agreement
as set forth in Section 6.1, CMI hereby appoints Medtronic and Medtronic hereby
accepts appointment as CMI's exclusive sales agent for sales of the Systems in
the Field of Use in North America. Medtronic's duties, to be performed by
applicable portions of Medtronic's "cardiac surgery sales force" (i.e. the sales
force within Medtronic responsible for selling the products of Medtronic's
Cardiac Surgery Business) listed on Schedule 2.1, shall include (without
limitation of the other provisions of this Agreement):
(i) introducing the Systems and distributing literature and sales
materials about the Systems to current and potential customers who may
be interested in purchasing a System;
(ii) providing CMI with names of and contacts for potential purchasers
of Systems;
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(iii) passing along to CMI information or ideas of which Medtronic's
cardiac surgery sales force becomes aware in the Field of Use for
increasing utilization or new potential applications of the Systems;
and
(iv) acting as an account manager to monitor the performance of, and
customer satisfaction with, the Systems within Medtronic accounts in
the Field of Use, including but not limited to reviewing and suggesting
ways to improve utilization of the Systems within such accounts, and
communicating this information to CMI on a regular basis.
Except as otherwise agreed to by the parties, Medtronic will not have the right
to quote prices on the Systems to potential customers.
2.2) CMI Sales and Distribution.
(a) CMI shall retain the exclusive right to distribute Systems within
the Field of Use in North America and, subject to Sections 4.1 and 4.2, outside
the Field of Use worldwide and within the Field of Use outside of the Medtronic
Territory. CMI shall establish a direct sales force for Systems in North America
through a combination of CMI employees and/or independent third-party sales
representatives. CMI shall use its best efforts to ensure that any such
independent third-party sales representatives of Systems in North America are
not Medtronic Competitors. During the term of Medtronic's sales agency pursuant
to this Article 2, CMI shall not appoint or permit any persons other than CMI
employees or independent third-party sales representatives to act as
distributors or sales agents for the System in the Field of Use in North
America. For clarification purposes, the parties acknowledge that CMI is not
restricted from licensing any third party, whether or not a competitor of
Medtronic, rights for such third party to make and sell devices developed by
such third party which are adapted to be used with the System (such third
parties are referred to herein as "Compatible Product Sellers"). Such Compatible
Product Sellers may promote and market their products for use with the Systems
and train their customers on the use of their products with the Systems;
provided, however, that such Compatible Product Sellers shall not be permitted
to promote or market the Systems independently. Subject to Section 4.2, nothing
herein shall impair CMI's rights to distribute or sell any product for any use
outside of the Field of Use.
(b) CMI shall cooperate with Medtronic as Medtronic reasonably requests
to enable Medtronic to include the System in Medtronic's "strategic alliance"
sales program, including making a CMI sales manager available to participate
with Medtronic in such meetings with such customers as Medtronic may reasonably
request; provided that such sales manager (i) shall be an employee of CMI, and
(ii) shall enter into a confidentiality agreement providing that all information
received by such CMI sales manager in connection with Medtronic's "strategic
alliance" program shall be held strictly confidential.
2.3) Completion of Sales. Except as otherwise agreed to by the parties,
CMI shall be solely responsible for undertaking and completing the actual sale
and invoicing of all Systems in North America and the collection of accounts
receivable therefrom; provided that, in those instances where Medtronic
reasonably believes it is necessary for Medtronic to invoice sales of Systems to
a customer under Medtronic's "strategic alliance" sales program (in order
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for Medtronic to obtain credit under such program for the sale of such System),
CMI and Medtronic shall cooperate to have CMI invoice Medtronic for such Systems
and thereby allow Medtronic to invoice the sales of Systems to such "strategic
alliance" customer. In such event, Medtronic shall pay CMI the price quoted by
CMI to Medtronic or such customer for the Systems so purchased by Medtronic.
Such payment shall be due and payable 60 days after CMI's invoice date.
2.4) North America Installation and Service; Training.
(a) CMI shall be solely responsible for installing and servicing all
Systems at CMI's cost and expense.
(b) CMI shall be solely responsible for providing, at CMI's cost and
expense, customer and physician in-service training to any purchaser of a System
in North America. CMI shall coordinate with Medtronic and allow Medtronic the
opportunity to concurrently train those purchasers who are also purchasers of
Medtronic's cardiothoracic surgical products on the use of such Medtronic
products with the Systems, provided that Medtronic shall bear its proportional
share of the cost for any such training. Notwithstanding the foregoing,
Medtronic and CMI shall share the cost of training at those designated "centers
of excellence", as the parties may mutually agree, with the sites, strategy,
scope and cost of such training as may be mutually agreed to by the parties.
(c) CMI will provide training for Medtronic's U.S. and Canadian sales
personnel on such dates and at such locations as Medtronic reasonably designates
to CMI. Medtronic will be responsible for all out-of-pocket expenses incurred by
CMI personnel in the course of such training, unless Medtronic elects to receive
such training at a scheduled CMI training session for other CMI sales personnel.
2.5) Regulatory Approvals.
(a) CMI shall be solely responsible for obtaining, at CMI's cost and
expense and in CMI's name, all necessary regulatory and other approvals from the
FDA and any other applicable regulatory agencies prerequisite to the commercial
sale of the Systems in the Field of Use in North America. Such approval efforts
shall include, but not necessarily be limited to, the preparation and filing of
any required Investigational Device Exemption, Pre-Market Approval or Section
510(k) filings and the establishment and oversight of any required clinical
investigations and clinical follow-up relating to future commercial sale of the
Systems. CMI shall promptly notify Medtronic of receipt of any such approvals,
and shall provide Medtronic with such information regarding the status of
pending approvals as Medtronic may reasonably request.
(b) CMI shall be responsible for obtaining, at CMI's cost and expense,
all import licenses and permits as may be required to import the Systems into
the United States (if applicable) and Canada in accordance with then prevailing
laws and regulations of such country. All such filings and registrations of the
Systems shall be in the name of CMI. Medtronic shall cooperate fully with CMI in
its efforts to obtain any such approvals.
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2.6) Sales and Marketing.
(a) Medtronic and CMI shall jointly develop and carry out protocols and
sales strategies for use by the Medtronic sales agents and CMI sales
representatives to co-market the Systems and Medtronic's minimally invasive
cardiac surgery products to potential customers in North America.
Notwithstanding the foregoing, CMI shall have no responsibility to market
Medtronic's minimally invasive cardiac surgical products except in connection
with CMI Systems. CMI and Medtronic also will establish protocols and procedures
for coordinating System demonstrations.
(b) CMI and Medtronic shall jointly fund such additional marketing
clinical studies for use of Medtronic minimally invasive surgical products in
connection with the Systems as the parties mutually agree, the results of which
could be used by either or both of Medtronic and CMI in connection with the
marketing and sale of the Systems in the Field of Use.
(c) CMI shall be responsible for designing, developing and producing,
at CMI's cost and expense, Systems sales and marketing and promotional materials
for use in the Field of Use in North America. CMI, at its cost, shall provide
Medtronic with reasonable and adequate quantities of such appropriate sales and
marketing and promotional materials. In addition, CMI and Medtronic may jointly
develop sales and marketing materials that feature and showcase both the Systems
and Medtronic's minimally invasive surgical products, with the costs thereof to
be paid as mutually agreed by the parties.
(d) CMI and Medtronic may jointly fund and participate in those North
America trade shows as mutually agreed to by the parties. As further mutually
agreed to by the parties, employees of CMI and Medtronic, respectively, shall be
allowed to interact with customers in the appropriate trade show booth of the
other. In addition, Medtronic shall have the right to demonstrate the Systems in
its North America trade show booths in connection with the application of its
minimally invasive surgical products.
2.7) Medtronic's Commission.
(a) In consideration of Medtronic's performance as sales agent for the
Systems in North America, CMI shall pay to Medtronic on a calendar quarterly
basis a commission in an amount equal to [*] percent [*] of CMI's [*] of Systems
in the Field of Use in North America. Such payments shall be made within 45 days
after the end of each calendar quarter, and shall be accompanied by a written
statement setting forth the calculation of such amount in such detail as
Medtronic may reasonably request. CMI shall also give Medtronic monthly
estimates of the amount of commissions which have accrued for payment to
Medtronic.
(b) Medtronic will pay a percentage commission to Medtronic's cardiac
surgery sales force marketing the System in North America, the rate(s) of which
shall be in Medtronic's sole discretion.
(c) CMI shall keep accurate written records sufficient in detail to
enable CMI's Net Revenues of Systems in the Field of Use in North America to be
determined and verified
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by Medtronic. Such records for each calendar quarter shall be retained by CMI
for a period of not less than three years after the end of such quarter.
(d) Upon reasonable notice and during regular business hours, CMI shall
from time to time (but no more frequently than once annually) make available the
records referred to in Section 2.7(c) for audit by independent accounting
representatives selected by Medtronic and reasonably acceptable to CMI to verify
the accuracy of the statements provided to Medtronic. Such representatives shall
execute a suitable confidentiality agreement reasonably acceptable to CMI prior
to conducting such audit. Such representatives may disclose to Medtronic only
their conclusions regarding the accuracy of CMI's calculation of CMI's Net
Revenues of Systems in the Field of Use in North America, and shall not disclose
CMI's confidential business information to Medtronic without the prior written
consent of CMI. Such audit shall be at Medtronic's cost and expense unless such
audit demonstrates that CMI's Net Revenues of Systems in the Field of Use in
North America was understated in the written report given to Medtronic pursuant
to Section 2.7(a) above by more than 5%, in which event CMI shall reimburse
Medtronic for all costs and expenses incurred in connection with such audit.
2.8) Noncompetition. During the term of Medtronic's sales agency
pursuant to this Article 2, Medtronic shall not market or sell in North America
minimally invasive cardiothoracic surgery products which are competitive with
the Systems in the Field of Use ("Competitive Products").
2.9) Demonstration Units. Medtronic will be entitled to purchase from
CMI a reasonable number of System demonstration units, as mutually determined by
CMI and Medtronic, for use in selected Medtronic training centers at a transfer
price equal to CMI's fully burdened manufacturing costs reasonably determined in
accordance with generally accepted accounting principles (excluding freight,
duties and customs, and any extraordinary start-up costs). This "reasonable
number of demonstration units" will be consistent with the number of Medtronic
"training centers" for the Systems in North America. Medtronic and CMI will
agree by December 31, 1997 upon terms pursuant to which CMI will be entitled to
reasonable access and use of such Medtronic "training centers" in North America.
During the fourth quarter of calendar 1998 or upon earlier availability,
Medtronic may purchase two (2) demonstration Systems for use in Medtronic's
"training centers" in North America at a price equal to [*]. Payment for all
demonstration units purchased by Medtronic shall be made within 15 days of CMI's
invoice. No commission shall be payable by CMI to Medtronic with respect to such
sales of demonstration units. Medtronic shall not be entitled to resell such
demonstration units.
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ARTICLE 3
MEDTRONIC AS DISTRIBUTOR IN EUROPE, MIDDLE EAST AND AFRICA
----------------------------------------------------------
3.1) Appointment.
(a) Subject to commencement of the term of this Agreement as set forth
in Section 6.1, CMI hereby appoints Medtronic, and Medtronic hereby accepts
appointment, as CMI's exclusive distributor, with the right to sell and
distribute the Systems in the Field of Use in the Medtronic Territory. CMI
represents and warrants to Medtronic that all other distributorship agreements
or sales representative agreements, if any, written or oral, with any third
party permitting the sale of Systems in the Field of Use in the Medtronic
Territory have been terminated at CMI's sole cost and expense. For clarification
purposes, the parties acknowledge that CMI is not restricted from licensing
Compatible Product Sellers, whether or not a competitor of Medtronic, rights to
make and sell devices developed by such Compatible Product Seller which are
adapted to be used with the System. Such Compatible Product Sellers may promote
and market their products for use with the Systems and train their customers on
the use of their products with the Systems; provided, however, that such
Compatible Product Sellers shall not be permitted to promote or market the
Systems independently.
(b) Medtronic may appoint subdistributors for the sale or distribution
of Systems in the Field of Use in the Medtronic Territory, and will provide to
CMI a list of such subdistributors from time to time. Notwithstanding such
appointment of subdistributors, Medtronic shall remain fully responsible for the
performance of all of its covenants and obligations hereunder, and any sales by
CMI to such Medtronic subdistributors shall be billed by CMI to Medtronic
directly.
(c) CMI shall promptly forward to Medtronic all leads for sales of
Systems in the Field of Use in \the Medtronic Territory.
(d) During the term of Medtronic's distribution rights pursuant to this
Article 3. Medtronic shall not market or sell Competitive Products (as defined
in Section 2.8) in the Medtronic Territory.
3.2) Regulatory Approvals.
(a) Medtronic shall be solely responsible for obtaining as desired by
Medtronic, at Medtronic's cost and expense and in Medtronic's name, all
necessary regulatory and other approvals from the applicable regulatory agencies
prerequisite to the commercial sale of the Systems in the Field of Use in the
Middle East and Africa. Any such approval efforts which are undertaken by
Medtronic shall include, but not necessarily be limited to, the preparation and
filing of any required filings and the establishment and oversight of any
required clinical investigations and clinical follow-up relating to future
commercial sale of the Systems in the Field of Use in the Middle East and
Africa.
(b) In Europe, CMI will be responsible for gaining, at CMI's cost and
expense and in CMI's name, the CE Xxxx under the appropriate Medical Device
Directive. Medtronic will be responsible for all dealings with the appropriate
Competent Authority such as Notification,
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Medical Device Vigilance and national labeling issues, provided that CMI will
bear final legal responsibility for the content of all its own labeling.
Medtronic will assist CMI in translating the directions for use of the System
and other System labeling into the requisite languages for obtaining the CE Xxxx
as follows: (i) Medtronic will recommend vendors to perform such translations
for CMI at CMI's expense, and (ii) Medtronic will send drafts of such
translations to Medtronic personnel in the applicable country for review and
comment by such personnel. The commercial printing of such directions for use
and labeling will either (as the parties may agree) be the responsibility of CMI
and the costs thereof included in CMI's fully-burdened manufacturing cost, or be
the responsibility of Medtronic and excluded from the calculation of CMI's
fully-burdened manufacturing cost. Medtronic will also be named as the
"Authorized Representative" as defined in the Directives. Medtronic may also
distribute Systems in particular countries within Europe under country-specific
regulatory approvals prior to CMI's gaining the CE Xxxx or in particular
countries where CE Xxxx approval is not the requisite form of commercial sale
approval, and in such circumstances CMI shall (i) provide Medtronic with such
information and cooperation as is necessary to obtain any such country-specific
approvals in Europe, (ii) bear the expenses of meeting any applicable product
design and manufacturing facility requirements, and (iii) take all steps as are
necessary to meet the EMC Directive.
3.3) Pricing.
(a) For the period from the date hereof until December 31, 1998,
Medtronic shall purchase the reusable (or "hardware") and/or disposable
components of the System from CMI at price(s) (the "Transfer Prices") to be
agreed to by the parties on or before March 31, 1998 based on expected market
conditions for the System and the following parameters: (i) the target Transfer
Prices for the hardware components shall target a [*] ([*]%) gross margin for
CMI, shall give Medtronic all of the upside profit potential thereafter, and
shall in no event exceed $[*] per set of System hardware components (as
presently contemplated), and (ii) the Transfer Prices for the disposables shall
assure Medtronic a minimum [*] of [*] ([*%]) and CMI a minimum of [*] of [*]
([*%]), with a formula whereby Medtronic would share a [*] of any additional
upside profit with CMI. In the event the parties are unable to agree upon such
Transfer Prices then such dispute shall be settled by binding arbitration
pursuant to Section 10.15. No later than December 31, 1998, and by each December
31 thereafter, the parties shall amend the Transfer Price for the following
twelve-month period pursuant to a formula to be mutually agreed to by the
parties, taking into account then market conditions and the foregoing
parameters.
(b) In addition, Medtronic shall be entitled to purchase from CMI a [*]
of demonstration Systems, as mutually determined by CMI and Medtronic, at a
price equal to [*]. Such [*] of demonstration Systems shall be consistent with
the number of Medtronic's "sales specialists" that Medtronic hires to
demonstrate and sell the Systems in the Medtronic Territory. Such demonstration
units may not be resold by Medtronic.
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(c) Payments made by Medtronic for Systems purchased for resale by
Medtronic pursuant to Section 3.3(a) shall be due and payable in full within
sixty (60) days after the date of invoice by CMI. Payments made by Medtronic for
demonstration Systems shall be due and payable in full within fifteen (15) days
after the date of invoice by CMI.
3.4) Inspection and Warranty
(a) In the event of any shortage, damage or discrepancy in or to a
shipment of Systems or in the event any of the Systems fail to comply with the
then current Specifications for the Systems, Medtronic shall report the same to
CMI and furnish such written evidence or other documentation as CMI reasonably
may deem appropriate. If the substantiating evidence delivered by Medtronic
demonstrates that such shortage, damage or discrepancy or non-conformity with
Specifications existed at the time of delivery of the Systems at the F.O.B.
point, Medtronic may return the Systems to CMI at CMI's expense, and at
Medtronic's request CMI shall use all reasonable efforts to deliver promptly
replacement Systems to Medtronic in accordance with the delivery procedures set
forth herein.
(b) CMI represents and warrants to Medtronic that all Systems sold and
delivered to any account under this Agreement will have been manufactured, if
required by law, in accordance with FDA Good Manufacturing Practices, European
Medical Device Directive requirements, ISO 9001 certification or successor
requirements, and all other applicable manufacturing requirements, and that
continually during the term of this Agreement no Systems delivered by CMI to
Medtronic or to any Medtronic account shall be adulterated or misbranded at the
time of delivery within the meaning of the U.S. Food, Drug and Cosmetic Act and
regulations thereunder. CMI shall cause Medtronic's regulatory personnel to be
provided with reasonable access from time to time to the facilities and records
of CMI for the purpose of confirming CMI's compliance with all applicable
requirements noted in this Section.
(c) CMI warrants to Medtronic and to Medtronic's customers that Systems
sold by CMI will not infringe any currently issued patents, trade secrets,
trademarks, or other intellectual property rights of any third party, and that
such products shall, when delivered at the F.O.B. point, meet the Specifications
and shall be free from defects in materials and workmanship. Medtronic shall
invoice CMI for, and CMI shall promptly pay, Medtronic's reasonable labor
charges and Medtronic's out-of-pocket materials, handling, shipping,
transportation, insurance and other expenses actually incurred in replacing
defective Systems which were under warranty.
(d) THE WARRANTIES SET FORTH ABOVE ARE IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, WHICH ARE HEREBY DISCLAIMED AND EXCLUDED BY CMI, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE, EXCEPT CMI SHALL ALSO PROVIDE WITH RESPECT TO SYSTEMS SOLD TO
MEDTRONIC OR TO MEDTRONIC'S CUSTOMERS SUCH OTHER WARRANTIES AS CMI CUSTOMARILY
PROVIDES TO ITS CUSTOMERS OR END-USERS OF THE SYSTEMS IN THE FIELD OF USE (A
COPY OF THE CURRENT VERSION OF SUCH CUSTOMER WARRANTY IS ATTACHED HERETO AS
SCHEDULE 3.4).
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3.5) Sales and Service.
(a) Medtronic shall be solely responsible for selling, installing and
servicing all Systems in the Field of Use in the Medtronic Territory. The
Systems shall be sold under CMI trademarks and trade names subject to
Medtronic's right to indicate its status as distributor thereof on sales and
marketing materials for the Systems.
(b) Subject to Section 3.7 below, Medtronic shall be solely responsible
for providing customer and physician training to any purchaser of Systems for
use in the Field of Use in the Medtronic Territory.
(c) Medtronic shall be solely responsible for establishing the
marketing, selling and pricing strategies for the Systems in the Field of Use in
the Medtronic Territory. Such strategies will be available for review by CMI.
3.6) Marketing.
(a) CMI, at CMI's cost and expense, shall provide Medtronic from time
to time as requested by Medtronic with an adequate supply of Systems sales,
marketing, advertising and promotional materials in English for use in the
Medtronic Territory. Medtronic shall have the right, at its cost and expense and
subject to the reasonable approval of CMI, to adapt or modify the CMI sales,
marketing, advertising and promotional materials and user manuals as deemed
appropriate by Medtronic to reflect the culture or business practices and
languages of the particular regions within the Medtronic Territory and to
reflect Medtronic as the exclusive distributor of the Systems, or as otherwise
deemed appropriate by Medtronic.
(b) CMI and Medtronic may jointly fund and participate in trade shows
as mutually agreed to by the parties. As further mutually agreed to by the
parties, employees of CMI and Medtronic, respectively, shall be allowed to
interact with customers in the appropriate trade show booth of the other. In
addition, Medtronic shall have the right to demonstrate the Systems in its trade
show booths in connection with the application of its minimally invasive
surgical products.
3.7) Training.
(a) CMI, one time at its cost and expense, will provide the initial
technical training of Medtronic's sales specialists and field service
supervisors in the use, installation and service of the Systems on such date and
place as Medtronic shall designate. CMI shall also provide, at its cost and
expense, any additional training necessary with respect to any enhancements or
modifications made by CMI to the System. Medtronic will be responsible for the
cost and expense of ongoing training of its field sales and service
representatives, such training to be provided by CMI (e.g., Medtronic will pay
travel costs for its sales personnel). CMI will be responsible for the costs and
expenses of CMI's personnel and training materials for one additional annual
training course. In the event Medtronic requests any additional training, CMI
shall provide such training at a cost to Medtronic of $500 per day plus travel,
meals and other expenses reasonably incurred by CMI training personnel.
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(b) CMI will provide training for the "customer trainers" (i.e., those
Medtronic personnel and other third parties engaged in training customers at
training sites) on such dates and at such places as Medtronic shall designate to
CMI (not to exceed once per quarter). CMI will bear the cost of such training
and Medtronic will bear the costs associated with the Medtronic personnel and
customers.
3.8) Orders.
(a) Medtronic and CMI shall jointly develop order and delivery
procedures and guidelines for the Systems, including quarterly forecasts that
correspond to Medtronic's fiscal periods. Medtronic's orders shall be given no
less favorable treatment by CMI than orders from customers in North America. The
parties intend that Medtronic will maintain minimal inventories of Systems and
that, under most circumstances, CMI will ship Systems directly to locations
designated by Medtronic.
(b) Medtronic shall submit purchase orders for Systems to CMI in
writing, whether by mail, telecopier, telegram or otherwise, which shall, at a
minimum, set forth the product numbers, quantities, delivery dates, and shipping
instructions and shipping addresses for all Systems ordered. All orders shall be
subject to acceptance in accordance with the terms of this Agreement by CMI at
its office. Each purchase order shall, upon acceptance by CMI, give rise to a
contract between Medtronic and CMI for the sale of the Systems ordered and shall
be subject to and governed by the terms of this Agreement. The terms and
conditions of this Agreement shall so govern and supersede any additional or
contrary terms set forth in Medtronic's purchase order or any CMI or Medtronic
acceptance, confirmation, invoice or other document unless duly signed by an
officer of Medtronic and an officer of CMI and expressly stating and identifying
which specific additional or contrary terms shall supersede the terms and
conditions of this Agreement. Deliveries will first commence to Medtronic no
earlier than 90 days from the date Medtronic delivers its initial forecast to
CMI.
(c) On or before March 31, 1998, Medtronic shall provide CMI with a
twelve-month international sales plan indicating by month the number of Systems
anticipated to be sold by Medtronic or purchased by Medtronic for use as
demonstration units (as updated as provided herein, the "Plan"). The Plan shall
be updated by Medtronic on a monthly basis (on or before the first day of each
subsequent month) for a rolling successive twelve-month period. The first three
months of each Plan shall constitute a firm purchase commitment by Medtronic for
delivery of the number of Systems specified therein. The fourth through sixth
months of each Plan shall constitute a firm purchase commitment only insofar as
Medtronic agrees not to reduce the quantity specified therein by more than 50%,
but Medtronic otherwise may modify such quantity in the next Plan. The seventh
through twelfth months of each Plan shall be used for purposes of facilitating
Medtronic's marketing plans and meeting the lead times required by certain of
CMI's suppliers, but are not legally binding on Medtronic in any manner.
(d) CMI shall not be required to deliver quantities in excess of 100%
of forecasted requirements unless CMI has been given at least 90 days advance
written notice of the quantities to be delivered which exceed the forecasted
amounts; provided, however, that CMI shall use all commercially reasonable
efforts to supply such excess.
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(e) No purchase order shall be modified or canceled except upon the
mutual agreement of the parties. Mutually agreed change orders shall be subject
to all provisions of this Agreement, whether or not the change order so states.
Notwithstanding the foregoing, any purchase order may be cancelled by Medtronic
as to any Systems which are not delivered within sixty (60) days of the delivery
date requested by Medtronic, and any such cancellation shall not limit or affect
any contract remedies available to Medtronic with respect thereto. Any such
cancellation by Medtronic must be by written notice to CMI given within fifteen
(15) business days after such 60th day.
(f) All deliveries of Systems shall be F.O.B. CMI's manufacturing
facility. Except as provided in Section 3.4 above, CMI shall have no further
responsibility for Systems, and all risk of damage to or loss or delay of
Systems shall pass to Medtronic, upon their delivery at the aforesaid F.O.B
point. All Systems deliveries shall be made by a common carrier specified by
Medtronic or, in the event that no carrier shall have been specified by
Medtronic on or before the date fifteen (15) days prior to the requested
shipment date, a common carrier reasonably selected by CMI.
(g) CMI shall promptly inform Medtronic of any modifications or
enhancements of the Systems or any other material changes in the Specifications
for the Systems. If such changes would affect the applicable regulatory
approvals of the Systems, Medtronic shall not be required to purchase such
Systems. Notwithstanding the foregoing, CMI shall not, without Medtronic's
consent, make any changes to the Product which would make the System less useful
or effective for the Field of Use.
(h) CMI shall be responsible for packaging and any necessary
sterilization of Systems purchased under this Agreement in accordance with the
Specifications.
3.9) Upgrades. CMI shall make software and hardware upgrades and
replacement parts available to Medtronic for the Systems at prices and on terms
and conditions no less favorable than those offered to CMI's "preferred
customers" (defined as distributors, not "end users") if any, in the Field of
Use.
3.10) Reports. Medtronic shall provide CMI, on a quarterly basis, with
current customer lists for Systems sold by Medtronic and physician users (of
which Medtronic is aware) of the Systems in the Field of Use in the Medtronic
Territory. Medtronic also will periodically provide CMI with the customer name
and address for each System installation in the Field of Use in the Medtronic
Territory for warranty and regulatory purposes. Medtronic shall report any
"adverse events" (as defined by FDA regulations) promptly to CMI.
3.11) Export/Import Approvals.
(a) CMI shall be responsible for obtaining, at CMI's cost and expense,
all export licenses and permits as may be required to export the Systems from
the country of manufacture into the particular countries within the Medtronic
Territory.
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(b) Medtronic shall be responsible for obtaining, at Medtronic's cost
and expense, all import licenses and permits as may be required to import the
Systems into particular countries within the Medtronic Territory as selected by
Medtronic in accordance with then prevailing laws and regulations of such
countries. All such filings and registrations of the Systems shall be in the
name of Medtronic, whenever feasible in accordance with prevailing laws and
regulations. CMI shall cooperate fully with Medtronic in its efforts to obtain
any such approvals.
3.12) Development Sites. Medtronic will assist CMI in establishing a
reasonable number of System development sites in Europe. Medtronic will receive
a fee equal to [*]% of all proceeds received by CMI for the placement of Systems
in each of the selected sites, excluding from such proceeds any development,
consulting or upgrade expenses charged to such site. Such fee will be payable
when and as the proceeds are received by CMI.
ARTICLE 4
FIRST REFUSAL FOR OTHER DISTRIBUTION RIGHTS
-------------------------------------------
4.1 Right of First Refusal Outside Medtronic Territory.
(a) In the event that CMI proposes to enter into any distribution,
sales representative or similar license agreement which would give such third
party rights to sell the Systems with any third party regarding the sale,
distribution or licensing of the Systems in the Field of Use in North America
and/or outside the Medtronic Territory (such regions to be described as (i)
Japan (ii) Asia Pacific (excluding Japan), (iii) Australia/New Zealand, and (iv)
Central/South America), then, prior to entering into any discussions regarding
such distribution, sales representative or similar license agreement, CMI shall
notify Medtronic in writing of such intention to enter into such discussions,
including the material terms and provisions upon which CMI would be willing to
enter into such a distribution, sales representative or similar license
agreement for such region (for purposes of this Section 4.1, "CMI's Notice").
(b) For a period of 45 days after Medtronic's receipt of CMI's Notice
(for purposes of this Section 4.1, the "Exclusive Period"), CMI shall negotiate
in good faith exclusively with Medtronic regarding such distribution, sales
representative or similar license agreement for the applicable region specified
in CMI's Notice. During the Exclusive Period, CMI will not solicit offers from,
negotiate with, or provide information to any third party regarding any
distribution, sales representative or similar license relationship for Systems
in such region.
(c) If Medtronic and CMI fail to reach mutual agreement upon the terms
and provisions of a definitive agreement for such distribution, sales
representative or license relationship, then CMI may enter into a definitive
agreement for such distribution, sales representative or similar license
relationship with a third party for the applicable region specified in CMI's
Notice; provided that CMI may not enter into such definitive agreements unless
the terms and provisions thereof are, in the aggregate, no less favorable to CMI
than the terms and provisions proposed by Medtronic during the Exclusive Period.
If CMI fails to enter into such definitive agreement for the applicable region
within 180 days after expiration of the Exclusive Period, then Medtronic's
rights under this Section shall be reinstated and CMI may not enter into
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any distribution, sales representative or similar license relationship with
respect to Systems in such region without first giving Medtronic a new CMI's
Notice and complying with the terms of this Section.
(d) Medtronic's rights under this Section 4.1 shall terminate upon a
Change of Control of CMI. Notwithstanding the foregoing, Medtronic will continue
to have distribution rights to the Systems in any such region pursuant to the
terms of any then effective distribution agreement between CMI and Medtronic.
4.2 Right of First Refusal Outside Field of Use.
(a) In the event that CMI proposes to enter into any distribution,
sales representative or license agreement with any third party regarding the
sale, distribution or licensing of the Systems for use in enabling minimally
invasive surgical procedures in cardiology (outside of the Field of Use), [*]
procedures, then, prior to entering into any discussions regarding such
distribution, sales representative or licensing agreement, CMI shall notify
Medtronic in writing of such intention to enter into such discussions, including
the material terms and provisions upon which CMI would be willing to enter into
such a distribution, sales representative or licensing agreement for such
procedures (for purposes of this Section 4.2, "CMI's Notice").
(b) For a period of 45 days after Medtronic's receipt of CMI's Notice
(for purposes of this Section 4.2, the "Exclusive Period"), CMI shall negotiate
in good faith exclusively with Medtronic regarding such distribution, sales
representative or licensing agreement for the applicable procedures specified in
CMI's Notice. During the Exclusive Period, CMI will not solicit offers from,
negotiate with, or provide information to any third party regarding any
distribution, sales representative or licensing relationship for Systems for
such procedures.
(c) If Medtronic and CMI fail to reach mutual agreement upon the terms
and provisions of a definitive agreement for such distribution, sales
representative or licensing relationship, then CMI shall have [*] days from the
earlier of expiration of the Exclusive Period or termination by Medtronic of
negotiations between CMI and Medtronic in which to negotiate and enter into a
definitive agreement for such distribution, sales representative or licensing
relationship with a third party for the applicable procedures specified in CMI's
Notice; provided that CMI may not enter into such definitive agreements unless
the terms and provisions thereof are, in the aggregate, no less favorable to CMI
than the terms and provisions proposed by Medtronic during the Exclusive Period.
If CMI fails to enter into such definitive agreement for the applicable
procedures within such definitive agreement for the applicable procedures within
such [*] period, then Medtronic's rights under this Section shall be reinstated
and CMI may not enter into any distribution, sales representative or licensing
relationship for the sale of Systems for such procedures without first giving
Medtronic a new CMI's Notice and complying with the terms of this Section.
(d) Medtronic's rights under this Section 4.2 will terminate at the end
of the "Initial Term" (as defined below).
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ARTICLE 5
PRODUCT DEVELOPMENT
-------------------
5.1) Customized Systems. Medtronic may refer new product ideas or
product customization requests for the Systems in the Field of Use to designated
CMI marketing representatives. CMI shall undertake development of Medtronic's
custom product requests in a reasonable and timely manner consistent with the
way in which CMI undertakes custom product requests for its customers in North
America.
5.2) New Products. CMI and Medtronic shall each have the right, in
their respective discretion, to offer to the other party the opportunity to
co-develop products or technologies with potential application inside or outside
the Field of Use which the offering party owns or has the right to use, subject
to such mutually acceptable terms and conditions as the parties may agree. The
cost of such co-development efforts shall be shared as may be mutually agreed to
by the parties.
ARTICLE 6
TERM AND TERMINATION
--------------------
6.1) Initial Term. The initial term (the "Initial Term") for
Medtronic's rights and obligations as the sales agent for Systems in North
America and the exclusive distributor for Systems in the Medtronic Territory
shall commence on the date the Debenture is converted into shares of CMI common
stock and continue until the third anniversary of the initial commercial release
of Systems in Europe for the Field of Use.
6.2) Renewal Term; Performance Objectives.
(a) The Initial Term of Medtronic's rights and obligations as sales
agent for Systems in North America may be renewed for successive periods (a
"Renewal Term") by mutual agreement of the parties. The parties agree to
negotiate in good faith the terms and provisions of any Renewal Period. The
Initial Term of Medtronic's rights and obligations as exclusive distributor for
Systems in the Medtronic Territory shall be automatically renewed for an
additional three year period (a "Renewal Term"), provided Medtronic has met or
exceeded certain reasonable and mutually agreeable performance objectives to be
established by the parties pursuant to (b) below and as further specified in
Schedule 6.2 hereto (the "Performance Objectives"). Thereafter, the term will be
automatically renewed for additional (2) years periods (each a "Renewal Term"),
provided Medtronic has met or exceeded the Performance Objectives for the
Medtronic Territory for the then current Renewal Term to be established by the
parties.
(b) CMI and Medtronic shall negotiate in good-faith to establish on or
before December 31, 1997 the Performance Objectives for the Medtronic Territory
for the Initial Term. Six (6) months prior to the end of the Initial Term and
any Renewal Term, CMI and Medtronic shall negotiate in good faith the
Performance Objectives for the Medtronic Territory for the upcoming Renewal
Term. The Performance Objectives for the Medtronic Territory shall take into
account such factors as the size of the market, average selling prices of the
Systems,
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potential applications of the Systems, selling cycle, CMI's manufacturing
capacity, size of the relative sales forces, and other relevant factors. There
shall be one set of Performance Objectives with respect to Medtronic's rights
and obligations as the sales agent for Systems in North America on an aggregate
basis, and one set of Performance Objectives with respect to Medtronic's rights
and obligations as the exclusive distributor for Systems in the Medtronic
Territory on an aggregate basis. In the event the parties are unable to agree
upon the Performance Objectives for the Medtronic Territory, then such dispute
shall be settled by binding arbitration pursuant to Section 10.15.
6.3) Termination for Failure to meet Performance Objectives.
(a) Subject to Article 8 hereof, if Medtronic fails to meet the
Performance Objectives for North America, CMI shall have the right to terminate
Medtronic's future rights and obligations as sales agent for North America. CMI
shall give Medtronic written notice of any such intent to terminate, and
Medtronic shall have sixty (60) days in which to cure such failure to meet the
Performance Objectives or present CMI with reasonable evidence of a plan that
will cure any such failure to meet the Performance Objectives within an
additional 60 days. In the event Medtronic does not cure such failure within
such additional 60 days, CMI shall have the right to terminate Medtronic's
rights as sales agent for North America. CMI's rights under this Section 6.3(a)
shall be CMI's sole and exclusive remedy for Medtronic's failure to meet the
Performance Objectives with respect to North America.
(b) Upon any such termination of Medtronic's rights and obligations as
sales agent in North America pursuant to Subsection 6.3(a) above, CMI will
repurchase from Medtronic, at Medtronic's cost, Medtronic's entire inventory of
demonstration Systems, accessories and related materials that Medtronic may have
as of the termination date relating to Medtronic's activities as North America
sales agent. For purposes of CMI's repurchase of demonstration units,
Medtronic's cost of the Systems shall be adjusted in accordance with the
depreciation schedule attached hereto as Schedule 6.3. Notwithstanding the
foregoing, CMI shall not be obligated to repurchase any Systems, accessories or
related materials which are not in good repair or which are not, due to any
action or inaction by Medtronic, suitable for their original intended purposes.
(c) If (i) CMI has elected to utilize a "procedure-based pricing
strategy" in North America (which strategy would involve the payment of
Medtronic's commission over the collective term of individual System
agreements), and (ii) CMI terminates Medtronic's rights and obligations as its
North American sales agent for failure to meet the Performance Objectives
pursuant to subsection (a) above, CMI will be required to pay Medtronic for only
[*] of the revenue-based commissions earned but not yet paid on all such
agreements in effect on the termination date, up to a maximum of [*] of such
revenue-based commissions from the date CMI gives Medtronic written notice of
failure to meet such Performance Objectives. This formula will recognize that
all such agreements were entered into during the period that Medtronic was CMI's
sales agent, and that Medtronic's revenue-based commissions were to be paid over
the term of each such agreement; provided that Medtronic will not be entitled to
the full amount of such revenue-based commissions as a result of its failure to
meet the mutually agreed Performance Objectives.
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6.4) Conversion to Non-Exclusive for Failure to meet Performance
Objectives. Subject to Article 8 hereof, if Medtronic fails to meet the
Performance Objectives for the Medtronic Territory, CMI shall have the right to
convert Medtronic's future rights and obligations as distributor for the
Medtronic Territory to a non-exclusive basis. CMI shall give Medtronic at least
90 days prior written notice of any such intent to convert to non-exclusive, and
Medtronic shall have sixty (60) days in which to cure such failure to meet the
Performance Objectives or present CMI with reasonable evidence of a plan that
will cure any such failure to meet the Performance Objectives within an
additional 60 days. In the event Medtronic does not cure such failure within
such additional 60 days, CMI shall have the right to convert Medtronic's rights
as distributor in the Medtronic Territory to nonexclusive. CMI's rights under
this Section 6.4 shall be CMI's sole and exclusive remedy for Medtronic's
failure to meet the Performance Objectives with respect to the Medtronic
Territory.
6.5) Termination for Change of Control; Nonrenewal. In the event (i)
CMI has elected to utilize a "procedure-based pricing strategy" in North
America, and (ii) there has been a Change of Control of CMI, then CMI will have
the right, exercisable by written notice to Medtronic within 90 days after such
Change of Control, to terminate Medtronic's rights and obligations as its North
American sales agent effective six months after such written notice. In the
event of such termination, or in the event of nonrenewal of the Initial Term or
any Renewal Term of Medtronic's rights as sales agent for the Systems in North
America, Medtronic will be entitled to receive payment for [*] percent of the
revenue-based commissions earned but not yet paid on all such agreements in
effect on the termination or expiration date. In the event of such termination
or nonrenewal, CMI will repurchase from Medtronic, [*], any inventory of Systems
(including demonstration Systems), accessories and related materials that
Medtronic may have as of the termination date relating to Medtronic's activities
as North American sales agent. For purposes of CMI's repurchase of demonstration
units, Medtronic's cost of the Systems shall be adjusted in accordance with the
depreciation schedule attached hereto as Schedule 6.3. Notwithstanding the
foregoing, CMI shall not be obligated to repurchase any Systems, accessories or
related materials which are not in good repair or which are not, due to any
action or inaction by Medtronic, suitable for their original intended purposes.
In no event will CMI have the right to terminate Medtronic's rights as the
exclusive distributor for the Systems in the Medtronic Territory, or any other
region, upon any Change in Control of CMI (other than upon expiration of the
term of the exclusive distribution rights as provided herein between CMI and
Medtronic).
6.6) Medtronic's Termination for CMI Breach.
(a) Subject to Article 8 hereof, if CMI breaches any of its material
obligations under this Agreement with respect to Article 2 and/or Article 3 of
this Agreement, then Medtronic shall be entitled to terminate Medtronic's rights
and obligations under Article 2 and/or, at Medtronic's election, Article 3 of
this Agreement. Medtronic shall give CMI written notice of any such intent to
terminate, specifying whether such termination will apply to Medtronic's rights
and obligations under Article 2 or Article 3, or both, and CMI shall have sixty
(60) days in which to cure such material breach.
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(b) Upon any such termination pursuant to Subsection 6.6(a) above, CMI
will repurchase from Medtronic, at a price equal to [*] thereof, Medtronic's
entire inventory of Systems (including demonstration Systems), accessories and
related materials as of the termination date relating to Medtronic's rights and
obligations under Article 2 and/or Article 3 of this Agreement, as applicable.
For purposes of CMI's repurchase of demonstration units, Medtronic's cost of the
Systems shall be adjusted in accordance with the depreciation schedule attached
hereto as Schedule 6.3. Notwithstanding the foregoing, CMI shall not be
obligated to repurchase any Systems, accessories or related materials which are
not in good repair or which are not, due to any action or inaction by Medtronic,
suitable for their original intended purposes.
(c) Upon any such termination pursuant to Subsection 6.6(a) above with
respect to Medtronic's rights and obligations under Article 2, if CMI has
elected to utilize a "procedure-based pricing strategy" in North America, CMI
shall continue to pay Medtronic for [*] percent [*]% of all revenue-based
commissions which would have become due and payable but for such termination on
all such North America "procedure-based pricing" customer agreements in effect
on the termination date.
6.7) CMI's Termination for Medtronic Breach.
(a) Subject to Article 8 hereof and except as otherwise provided in
Section 6.4, if Medtronic breaches any of its material obligations under this
Agreement with respect to Article 2 and/or Article 3 of this Agreement, then CMI
shall be entitled to terminate Medtronic's rights and obligations under Article
2 and/or, at CMI's election, Article 3 of this Agreement. CMI shall give
Medtronic written notice of any such intent to terminate, specifying whether
such termination will apply to Medtronic's rights and obligations under Article
2 or Article 3, or both, and Medtronic shall have sixty (60) days in which to
cure such material breach.
(b) Upon any such termination pursuant to Subsection 6.7(a) above, CMI
shall have the option, exercisable within 20 days after such termination, to
repurchase from Medtronic, at Medtronic's cost, Medtronic's entire inventory of
Systems (including demonstration Systems), accessories and related materials, as
of the termination date relating to Medtronic's rights and obligations under
Article 2 and/or Article 3 of this Agreement, as applicable. In the event CMI
fails to exercise such repurchase option, Medtronic shall have the right to
sell-off its remaining inventory of Systems. For purposes of CMI's repurchase of
demonstration units, Medtronic's cost of the Systems shall be adjusted in
accordance with the depreciation schedule attached hereto as Schedule 6.3.
Notwithstanding the foregoing, CMI shall not be obligated to repurchase any
Systems, accessories or related materials which are not in good repair or which
are not, due to any action or inaction by Medtronic, suitable for their original
intended purposes.
(c) Upon any such termination pursuant to Subsection 6.7(a) above with
respect to Medtronic's rights and obligations under Article 2, if CMI has
elected to utilize a "procedure-based pricing strategy" in North America, CMI
shall continue to pay Medtronic for [*] percent [*]% of all revenue-based
commissions which would have become due and payable but for such termination on
all such North America "procedure-based pricing" customer agreements in effect
on the termination date up to a maximum of eighteen months (measured from the
date CMI gives Medtronic written notice of such breach).
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6.8) Rights and Obligations on Termination. In the event of termination
of all or a portion of this Agreement for any reason, the parties shall have the
following rights and obligations:
(a) Termination of all or a portion of this Agreement shall not release
either party from the obligation to make payment of all amounts
previously due and payable;
(b) In the event of the termination of Medtronic's distribution rights
with respect to all of the Medtronic Territory in accordance with
Section 6.6 or Section 6.7, (i) all purchase orders for Systems which
provide for delivery after the effective date of termination shall be
cancelled, (ii) Medtronic shall assign, at CMI's cost and expense, all
regulatory approvals and files regarding sales of Systems in such
geographic area to CMI, and (iii) Medtronic and CMI shall cooperate to
assure continued service and support to customers in such geographic
area who purchased Systems from Medtronic. CMI hereby acknowledges
Medtronic's right to continue to sell Systems purchased from CMI to any
person or entity in the Medtronic Territory until such time as
Medtronic's entire inventory of Systems is sold; and
(c) Without limitation of Section 10.6 hereof, the parties' payment and
audit obligations pursuant to Articles 2 and 3 hereof, and the parties
obligations pursuant to Articles 7, 9 and 10 hereof, shall survive
termination of this Agreement.
ARTICLE 7
INDEMNIFICATION
---------------
7.1) CMI's Liability. CMI shall indemnify, defend and hold harmless
Medtronic and each of its subsidiaries, officers, directors, employees,
shareholders and distributors from and against and in respect of any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, interest and penalties, costs and expenses (including, without
limitation, reasonable legal fees and disbursements incurred in connection
therewith and in seeking indemnification therefor, and any amounts or expenses
required to be paid or incurred in connection with any action, suit, proceeding,
claim, appeal, demand, assessment or judgment) ("Indemnifiable Losses"),
resulting from, arising out of, or imposed upon or incurred by any person to be
indemnified hereunder by reason of (i) any breach of representation, warranty,
covenant or agreement on the part of CMI under this Agreement, (ii) total or
partial Systems recalls, or (iii) alleged defects in materials, workmanship,
product performance, or design of the Systems, but in any event excluding
matters for which Medtronic is responsible under Section 7.2 below. CMI shall
maintain product liability insurance or self-insurance in such amounts as is
advisable pursuant to ordinary good business practice for a similar company in a
similar type of business, and shall provide Medtronic with evidence of this
coverage.
7.2) Medtronic's Liability. Medtronic shall indemnify, defend and hold
harmless CMI and each of its subsidiaries, officers, directors, employees,
shareholders and suppliers from and against and in respect of any and all
demands, claims, actions or causes of action, assessments,
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losses, damages, liabilities, interest and penalties, costs and expenses
(including, without limitation, reasonable legal fees and disbursements incurred
in connection therewith and in seeking indemnification therefor, and any amounts
or expenses required to be paid or incurred in connection with any action, suit,
proceeding, claim, appeal, demand, assessment or judgment) ("Indemnifiable
Losses"), resulting from, arising out of, or imposed upon or incurred by any
person to be indemnified hereunder by reason of (i) any breach of
representation, warranty, covenant or agreement on the part of Medtronic under
this Agreement, (ii) product claims whether written or oral, made or alleged to
be made, by Medtronic in its advertising, publicity, promotion, or sale of any
Systems where such product claims were not provided by or approved by CMI, or
(iii) negligent handling by Medtronic of the Systems, but in any event excluding
matters for which CMI is responsible under Section 7.1 above.
7.3) Third Party Claims. If a claim by a third party is made against
any indemnified party, and if the indemnified party intends to seek indemnity
with respect thereto under this Article 7, such indemnified party shall promptly
notify the indemnifying party of such claim; provided, however, that failure to
give timely notice shall not affect the rights of the indemnified party so long
as the failure to give timely notice does not materially adversely affect the
indemnifying party's ability to defend such claim against a third party. The
indemnifying party shall be entitled to settle or assume the defense of such
claim, including the employment of counsel reasonably satisfactory to the
indemnified party, as provided below. If the indemnifying party elects to settle
or defend such claim, it shall notify the indemnified party within thirty (30)
days (but in no event less than twenty (20) days before any pleading, filing or
response on behalf of the indemnified party is due) of its intent to do so. If
the indemnifying party elects not to settle or defend such claim or fails to
notify the indemnified party of its election within thirty (30) days (or such
shorter period provided above) after receipt of the indemnified party's notice
of a claim of indemnity hereunder, the indemnified party shall have the right to
contest, settle or compromise the claim without prejudice to any rights to
indemnification hereunder. Regardless of which party is controlling the
settlement or defense of any claim, (i) both the indemnified party and
indemnifying party shall act in good faith, (ii) the indemnifying party shall
not thereby permit to exist any lien, encumbrance or other adverse charge upon
any asset of any indemnified party or of its subsidiaries, (iii) the
indemnifying party shall permit the indemnified party to participate in such
settlement or defense through counsel chosen by the indemnified party, provided
that all fees, costs and expenses of such counsel in an action controlled by the
indemnifying party shall be borne by the indemnified party, unless the
indemnifying party and indemnified party have conflicting available defenses to
such third party claim, in which case such fees, costs and expenses shall be
borne by the indemnifying party, (iv) no entry of judgment or settlement of a
claim may be agreed to without the written consent of both the indemnified party
and the indemnifying party, which consents shall not be unreasonably withheld,
and (v) the indemnifying party shall agree promptly to reimburse the indemnified
party for the full amount of such claim pursuant to this Article 7. So long as
the indemnifying party is reasonably contesting any such claim in good faith as
permitted herein, the indemnified party shall not pay or settle any such claim;
provided that the indemnified party may settle any such claim so long as the
indemnifying party is not adversely affected thereby. The controlling party
shall deliver, or cause to be delivered, to the other party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the settlement or
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defense of any such claim, and timely notices of, and the right to participate
pursuant to (iii) above in any hearing or other court proceeding relating to
such claim.
7.4) Cooperation as to Indemnified Liability. Each party hereto shall
cooperate fully with the other parties with respect to access to books, records,
or other documentation within such party's control, if deemed reasonably
necessary or appropriate by any party in the defense of any claim which may give
rise to indemnification hereunder.
ARTICLE 8
FORCE MAJEURE
-------------
8.1) Force Majeure. "Force Majeure" shall mean any event or condition,
not existing as of the date of signature of this Agreement, not reasonably
foreseeable as of such date and not reasonably within the control of either
party, which prevents in whole or in material part the performance by one of the
parties of its obligations hereunder, such as act of God, act of government, war
or related actions, civil insurrection, riot, sabotage, strike, epidemic, fire,
flood, windstorm, and similar events.
8.2) Notice. Upon giving notice to the other party, a party affected by
an event of Force Majeure shall be released without any liability on its part
from the performance of its obligations under this Agreement, except for the
obligation to pay any amounts due and owing hereunder, but only to the extent
and only for the period that its performance of such obligations is prevented by
the event of Force Majeure.
8.3) Suspension of Performance. During the period that the performance
by one of the parties of its obligations under this Agreement has been suspended
by reason of an event of Force Majeure, the other party may likewise suspend the
performance of all or part of its obligations (other than payment obligations)
hereunder to the extent that such suspension is commercially reasonable.
ARTICLE 9
INTELLECTUAL PROPERTY
---------------------
9.1) Trademark License. Medtronic shall have a royalty-free license to
use all trademarks, trade names and logotypes of CMI relating to the Systems
solely in connection with the sale or other distribution, promotion, advertising
and/or maintenance of the Systems in the Field of Use. Medtronic shall acquire
no right, title or interest in such CMI trademarks, trade names and logotypes,
other than as provided for above, and Medtronic shall not use any CMI
trademarks, trade names and logotypes as part of Medtronic's corporate or trade
name or permit any third party under Medtronic's control to do so without the
prior written consent of CMI. All rights under this Section 9.1 shall terminate
upon termination of this Agreement under Article 6, subject to Section 6.8(b).
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9.2) Ownership. CMI represents and warrants to Medtronic the following:
CMI is the exclusive owner or licensee of all right, title and interest in and
to all Intellectual Property used in the research, design, development,
manufacture or sale of the Systems (the "CMI Intellectual Property") free and
clear of any liens, charges, security interests, mortgages, pledges,
restrictions, adverse claims or any other encumbrances of any kind except for
Medtronic's security interest. To the knowledge of CMI, neither CMI, its
business, any of the Systems, nor the execution and performance of this
Agreement and the transactions contemplated herein, infringes, misuses,
misappropriates or conflicts with the rights, including patent and other
intellectual property rights or contract rights, of others. To the knowledge of
CMI, the CMI Intellectual Property is valid and has not been challenged in any
judicial or administrative proceeding. To the knowledge of CMI, CMI has not
failed to take any necessary steps or appropriate actions to record its
interests, or to protect its rights, in the CMI Intellectual Property. To the
knowledge of CMI, no person or entity nor such person's or entity's business or
products has infringed, misused, misappropriated or conflicted with the CMI
Intellectual Property or currently is infringing, misusing, misappropriating or
conflicting with the CMI Intellectual Property.
9.3) Protection of CMI's Intellectual Property and Improvements. During
the term of this Agreement, CMI shall promptly inform Medtronic of any
invention, improvement, upgrading or modification relating to the Systems or
CMI's Intellectual Property relating to the Systems.
ARTICLE 10
MISCELLANEOUS
-------------
10.1) Non-Disclosure. Except as permitted or required for performance
by the party receiving such Confidential Information of its rights or duties
hereunder, each party agrees (i) not to disclose or use any Confidential
Information of the other party obtained in connection with the performance of
this Agreement, and (ii) not to disclose or provide any of such Confidential
Information of the other party to any third party and to take appropriate
measures to prevent any such disclosure by its present and future employees,
officers, agents, subsidiaries, or consultants.
10.2) Relationship. This Agreement does not make either party the
employee, agent or legal representative of the other for any purpose whatsoever.
Neither party is granted any right or authority to assume or to create any
obligation or responsibility, express or implied, on behalf of or in the name of
the other party. In fulfilling its obligations pursuant to this Agreement, each
party shall be acting as an independent contractor.
10.3) Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and the successors or assigns of the parties
hereto; provided, that (i) the rights and obligations of CMI herein may not be
assigned except to any person who succeeds to substantially all of the assets
and business of CMI to which this Agreement relates, and (ii) the rights and
obligations of Medtronic herein may not be assigned except to any person who
succeeds to substantially all of that portion of Medtronic's business to which
this Agreement relates.
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10.4) Complete Agreement. This Agreement, the Debenture Purchase
Agreement, the Debenture, the Security Agreement, and the Exhibits hereto and
thereto constitute the entire agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements whether written
or oral relating hereto. This Agreement supersedes those portions of the
Principal Terms that are directly related to the subject matter hereof.
10.5) Governing Law. Except as set forth in Section 10.15, the parties
agree that in the event of any dispute, the resolution of that dispute shall be
conducted on the state or federal courts in and for the county of Santa Barbara,
California. The parties agree that this contract is entered into and is to be
performed in the county of Santa Xxxxxxx. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of California,
including all matters of construction, validity, performance and enforcement,
without giving effect to principles of conflict of laws.
10.6) Survival. All of the representations, warranties, and covenants
made in this Agreement, and all terms and provisions hereof intended to be
observed and performed by the parties after the termination hereof, shall
survive such termination and continue thereafter in full force and effect.
10.7) Waiver, Discharge, Amendment, Etc. The failure of any party
hereto to enforce at any time any of the provisions of this Agreement shall in
no way be construed to be a waiver of any such provision, nor in any way to
affect the validity of this Agreement or any part thereof or the right of the
party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to be a waiver of any other or subsequent
breach. Any amendment to this Agreement shall be in writing and signed by the
parties hereto.
10.8) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed as original and all of which
together shall constitute one instrument.
10.9) Titles and Headings; Construction. The titles and headings to
Sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. This Agreement shall be construed without regard to any presumption
or other rule requiring construction hereof against the party causing this
Agreement to be drafted.
10.10) Benefit. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties to this Agreement or
their respective successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
10.11) Notices. All notices or other communications to a party required
or permitted hereunder shall be deemed given if in writing and delivered
personally or sent by telecopy (with confirmation of transmission) or certified
mail (return receipt requested) to such party at the following addresses (or at
such other addresses as shall be specified by like notice):
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if to Medtronic, to:
Medtronic, Inc.
Corporate Center
0000 Xxxxxxx Xxxxxx X.X.
Xxxxxxxxxxx, XX 00000
Attention: General Counsel
FAX (000) 000-0000
with a copy to:
Medtronic, Inc.
Corporate Center
0000 Xxxxxxx Xxxxxx X.X.
Xxxxxxxxxxx, XX 00000
Attention: Vice President Corporate Development and
Associate General Counsel
FAX (000) 000-0000
and if to CMI, to:
Computer Motion, Inc.
000-X Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxx
FAX (000) 000-0000
with a copy to:
Stradling, Yocca, Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxx
FAX (000) 000-0000
Medtronic or CMI may change their respective above-specified recipient and/or
mailing address by notice to the other party given in the manner herein
prescribed. All notices shall be deemed given on the day when actually delivered
as provided above (if delivered personally or by telecopy) or on the day shown
on the return receipt (if delivered by mail).
10.12) Illegality. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
10.13) Public Announcement. Each of the parties to this Agreement
hereby agrees with the other parties hereto that, except as may be required to
comply with the requirements of applicable law or any exchange upon which such
party's capital stock is listed or traded, no press release or similar public
announcement or communication will be made or caused to be made
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concerning the execution or performance of this Agreement unless specifically
approved in advance by Medtronic and CMI. The foregoing shall not restrict
either party's communications with employees, customers or private investors.
10.14) Execution of Further Documents. Each party agrees to execute and
deliver without further consideration any further applications, licenses,
assignments or other documents, and to perform such other lawful acts as the
other party may reasonably require to fully secure and/or evidence the rights or
interests herein.
10.15) Dispute Resolution. Any dispute with respect to the
determination of the Transfer Prices pursuant to Section 3.3 or the Performance
Objectives pursuant to Section 6.2(b) which remains unresolved for a period of
at least 90 days despite the parties good faith efforts to negotiate a
resolution thereof may be submitted by either party to binding arbitration
pursuant to the commercial arbitration rules of the American Arbitration
Association. The arbitrator shall be an individual mutually agreed to by the
parties, or if the parties are unable to agree, selected by the AAA, who is
knowledgeable and experienced in the high-technology medical device industry.
IN WITNESS WHEREOF, each of the parties has caused this Sales Agreement
to be executed in the manner appropriate to each, as of the date first above
written.
COMPUTER MOTION, INC.
By
_____________________________________
Its
____________________________
MEDTRONIC, INC.
By
_______________________________________
Its
_____________________________
ATTACHMENTS:
Schedule 1.1 - The Medtronic Territory
Schedule 2.1 - Medtronic's "cardiac surgery sales force"
Schedule 3.4 - CMI's System product warranty
Schedule 6.2 - Performance Objectives
Schedule 6.3 - Depreciation Schedule
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Schedule 1.1
The Medtronic Territory
-----------------------
1. Europe. Europe shall include all of continental Europe, and further
include the United Kingdom, Ireland and the Scandinavian countries and
Eastern Europe, including the Czech Republic, Serbia, Russia and
Central Independent States of the former USSR.
2. Middle East. The Middle East shall include all of the Middle East north
and east of the Red Sea, from Turkey in the north and west, to Iran in
the east and Yemen in the south, excluding Afghanistan and Pakistan.
3. Africa. Africa shall include the entire continent of Africa and all
islands appurtenant thereto.
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Schedule 2.1
Medtronic's "Cardiac Surgery Sales Force"
-----------------------------------------
Medtronic's "cardiac surgery sales force" shall mean: (1) Medtronic's DLP sales
force (selling cannulae and related products); (2) Medtronic's heart valve sales
force (selling heart valves and related products); and /or (3) such other sales
force(s) as Medtronic, with CMI's consent (not to be unreasonably withheld),
deems appropriate to promote the System.
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SCHEDULE 3.4
CMI PRODUCT WARRANTY
COMPUTER MOTION
The Leader in Medical Robotics
================================================================================
SERVICE WARRANTY
The Zeus System is covered by warranty against defects in materials and
workmanship or malfunctions under normal use and operation. The warranty period
is twelve (12) months from the date of sale. The warranty does not apply when
the System has been subject to misuse, abuse, neglect, improper installation or
operation that has been altered, adjusted, or tampered with by any person other
than authorized service personnel.
This warranty is limited to the repair (parts and labor) of or replacement with
new or refurbished-to-new equipment -- at Computer Motion's discretion -- of
any product that is returned within the specified warranty period, and which,
after examination, shall disclose that the product is defective.
A Service Manual is included with each System. Only trained personnel should be
allowed to repair or maintain the System. The Computer Motion Technical Service
Department can supply support during business hours at 000-000-0000.
Should a malfunction occur, troubleshooting should first be done by the OR
staff or hospital biomedical staff. If, after consultation with Computer Motion
service personnel, the unit needs to be returned, freight must be prepaid by
the purchaser. Freight back ("return") is paid by Computer Motion.
After the warranty period has expired, a service contract will be available.
Computer Motion reserves the right to service the unit both during and after
the warranty period.
===============================================================================
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Schedule 6.2
Performance Objectives
----------------------
North America. The Performance Objectives for North America shall be considered
to have been satisfied so long as Medtronic uses commercially reasonable best
efforts to perform its obligations under Section 2.1.
Medtronic Territory. The Performance Objectives for the Medtronic Territory
shall consist of aggregate unit volume sales targets for the hardware components
of the System to be negotiated pursuant to Section 6.2(b) based on the factors
specified therein.
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Schedule 6.3
Depreciation of Demonstration Systems
-------------------------------------
CMI's repurchase of demonstration Systems shall be at a depreciated
price based on the generally accepted accounting principles and depreciation
schedule used by CMI for financial accounting purposes.
