Consulting Services Agreement - Cybernet Systems Corp. and Immersion Corp.
CONSULTING SERVICES AGREEMENT
(and assignment of intellectual property)
THIS AGREEMENT is made (the "Agreement") as of March 5, 1999 (the "Closing
Date") by and between Cybernet Systems Corporation, a Delaware corporation, with
an address at 727 Airport Boulevard, Ann Arbor, Michigan 48108-1639 (the
"Consultant"); and Immersion Corporation, a California corporation, with an
address at 2158 Paragon Drive, San Jose, California 95131, ("Immersion").
RECITALS
WHEREAS, the Consultant desires to provide certain force feedback
consulting services to Immersion, and Immersion desires to obtain such force
feedback consulting services from the Consultant.
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter contained, the parties hereto hereby agree as follows:
1. CONSULTING SERVICES
1.1. Scope of Consulting Services. The Consultant is an expert in
force feedback technology as applied to a variety of industry segments.
Immersion desires to obtain consulting services from the Consultant with regards
to force feedback technology and the Consultant has agreed to provide such
consulting services as described in this Section 1 ("Consulting Services"). The
Consultant will provide consulting services to Immersion in six areas of
competency: (i) industry specific consulting as described in Section 1.2
("Industry Specific Consulting"); (ii) patent related consulting as described in
Section 1.3 ("Patent Related Consulting"); (iii) product positioning and
marketing consulting as described in Section 1.4 ("Marketing and Advertising
Collaboration"); (iv) technical advice related to Immersion's business and
technology strategy as described in Section 1.5 ("Technical Advisory Board");
and (v) general technical consultation and engineering guidance as described in
Section 1.7 ("General Engineering Input").
1.2. Industry Specific Consulting. Consultant will consult with
Immersion in four discrete industry segments as follows:
(a) Automotive. The Consultant will work with Immersion to
design, coordinate and implement a business strategy for Immersion to gain entry
into and exploit the force feedback opportunities in the automotive industry.
Such services will include strategic marketing planning, industry information
gathering, introductions based on Consultant's industry contacts and lead
generation.
(b) Internet. The Consultant will consult with Immersion to
evolve Immersion's internet strategy and as one component of such strategy, the
Consultant will work
<PAGE> 2
with Immersion to develop an internet based force feedback toolkit to enable
Immersion to launch Immersion's internet force feedback product line.
(c) Telerobotics. The Consultant will advise Immersion in the
area of force feedback as implemented in telerobotics applications and will
provide Immersion with a productization roadmap which deploys Immersion's
existing technology towards a new business opportunity for Immersion in the
telerobotics area.
(d) Government and Military. The Consultant will provide
Immersion with a basic background in the military areas of interest where
deployment of force feedback may be useful, including but not limited to mine
defuser technology, rugidized computers for military applications, and other
related secure applications. In addition, the Consultant will advise Immersion
in improving Immersion's strategic planning for government contract
opportunities and will assist Immersion in targeting opportunities in government
contracts where force feedback technology would be a value-add or the subject of
basic research. In addition, Consultant will assist Immersion with and consult
with Immersion in proposal preparation, drafting of bid responses and contract
processes.
1.3. Patent Related Consulting: Consultant agrees to cooperate with
Immersion by provision of "Patent Related Consulting" which will enable
Immersion to enjoy to the fullest extent in the United States and foreign
countries, the right, title and interest in the Intellectual Property and
Related Materials as defined in and, as acquired by Immersion pursuant to, the
Agreement and Plan of Reorganization among Immersion Corporation, Immersion
Acquisition Corporation, Cybernet Systems corporation and Cybernet Haptic
Systems dated March 4, 1999 (the "Merger Agreement"). Such cooperation by
Consultant shall include reasonably prompt production of pertinent facts,
information and documents, executing and delivering such other and further
instruments of conveyance, assignment, transfer and consent, taking such other
action as Immersion may reasonably request, giving of testimony, execution of
petitions, oaths, specifications, declarations or other papers, and other
assistance, all to the extent deemed necessary or desirable by Immersion (i) for
establishing and perfecting in Immersion the right, title and interest herein
conveyed and carrying out the intent and purpose of this Agreement, (ii) for
filing and prosecuting substitute, divisional, continuing or additional
applications covering the Patents as defined in, and acquired by Immersion
pursuant to, the Merger Agreement; (iii) for filing and prosecuting applications
for reissuance of any of the Patents; (iv) for interference or other priority
proceedings involving the Patents; and (e) for legal proceedings involving the
Patents, including without limitation cancellation proceedings, priority
consents, public use proceedings, infringement actions and court actions.
Consultant agrees to provide Immersion with copies of all correspondence between
Consultant and potential infringers of the Patents. Consultant agrees to provide
Immersion with legal materials prepared by Consultant's attorneys that would
facilitate enforcement of the Patents against potential infringers.
1.4. Marketing and Advertising Collaboration. Consultant agrees to
consult with Immersion and collaborate with Immersion with respect to the
positioning of the Intellectual Property and Related Materials from a marketing
standpoint. On a going forward basis,
2
<PAGE> 3
Consultant and Immersion each agree to provide a link between Consultant and
Immersion's web sites. Consultant agrees to forward commercial business leads
related to force feedback products and services to Immersion on an ongoing basis
and if a third party, other than the government, contacts Consultant regarding
any of the Intellectual Property and Related Materials or services or products
to be provided in connection with the Intellectual Property and Related
Materials, Consultant agrees to direct such third party to Immersion. To
facilitate Immersion's marketing activities, Consultant agrees to provide
Immersion with electronic files, camera ready artwork, images and other
reproducible forms of Consultant's marketing and advertising materials related
to the hardware and software products which are included in the Intellectual
Property and Related Materials.
1.5. Technical Transfer Consulting. Within three (3) months from the
date of this Agreement, Consultant shall send an engineer of Consultant with
suitable knowledge and expertise regarding the Intellectual Property and Related
Materials to the offices of Immersion to provide an aggregate of three (3) days
(24 hours) of consulting services related to the transfer of the Intellectual
Property and Related Materials.
1.6. Technical Advisory Board. Charles Jacobus shall serve on
Immersion's Technical Advisory Board. As a member of the Technical Advisory
Board, Mr. Jacobus shall attend in person or by teleconference Technical
Advisory Board meetings, and other meetings as may be requested by Immersion
from time to time and will provide Immersion with advice on the overall business
and technology strategy of IMMERSION. Immersion shall reimburse Consultant for
all reasonable expenses incurred with respect to Mr. Jacobus's Advisory Board
activities, including reasonable travel expenses incurred in connection with
attending meetings of the Technical Advisory Board.
1.7. General Engineering Input. Consultant will, as requested by
Immersion, provide Immersion with general consultation and engineering input
with regards to force feedback related source code, mechanisms, control
algorithms, sensors, human factors, ergonomics, power electronics, safety
features, and brushless motors.
1.8. Government and Other Contracts.
(a) Force Feedback Research Collaboration. Consultant
currently has thirty-six (36) employees conducting force feedback related
research. These staff members periodically execute teaming agreements and write
proposals to Government and commercial sponsors in a wide range of activities
including force feedback. Subject to any legal or regulatory restrictions, for a
period of three years from the Closing Date (the "Exclusive Force Feedback
Teaming Period") if Consultant plans to involve a third party in a teaming
arrangement related to commercial and Government proposals (and resulting
contracts) Consultant initiates in the areas containing force feedback device
technology development or deployment, Consultant will exclusively team with
Immersion, subject to Immersion's prior written consent and mutual written
agreement on terms, when such a teaming arrangement is appropriate to the
proposed efforts. In instances where Immersion has agreed to team with
Consultant:
3
<PAGE> 4
(i) Consultant and Immersion agree to work together to
assist Consultant's proposal efforts;
(ii) Consultant agrees to use its best efforts to
prepare a compliant proposal by the required deadline and to respond to
government requests for clarification. During the Exclusive Force Feedback
Teaming Period, Consultant shall team with Immersion on Immersion initiated
proposals (and resulting contracts) when Immersion deems such a teaming
arrangement to be advantageous;
(iii) give Immersion a reasonable opportunity during the
preparation of the proposal to be included in any significant technical
discussions and activities with the government regarding the proposal;
(iv) give Immersion appropriate recognition for data and
proposal information submitted and utilized in the proposal.
During the term of any contract awarded to Consultant during the Exclusive
Force Feedback Teaming Period, or during the Exclusive Force Feedback Teaming
Period, whichever is longer, Consultant hereby grants Immersion a non-exclusive
license to all intellectual property rights arising from Consultant's force
feedback research activities. Consultant further grants Immersion a right of
first refusal to obtain an exclusive license to the intellectual property rights
arising from Consultant's force feedback research activities, at Immersion's
election and agrees to negotiate with Immersion in good faith regarding the
terms of such exclusive license.
(b) Existing Government Contracts. As of the Closing Date,
Consultant is currently a party to certain government contracts described in
Exhibit A ("Existing Government Contracts") which involve the use of the
specific Intellectual Property and Related Materials identified in Exhibit A
("Existing Government Contracts"). Immersion hereby grants Consultant a limited
license to use, and have in Consultant's possession, such Intellectual Property
and Related Materials solely within the scope of such government contracts and
to the extent required by such government contracts and only for the term of
such government contracts. Consultant agrees to promptly return all such
Intellectual Property and Related Materials, including any copies thereof, upon
termination or expiration of such government contracts. In addition, to the
extent that Consultant's force feedback research activities under such Existing
Government Contracts result in the creation of additional intellectual property
rights relating to the Intellectual Property and Related Materials, Consultant
grants Immersion a non-exclusive license to all such intellectual property
rights arising from the ongoing force feedback research activities.
(c) Government Rights. Immersion acknowledges and agrees that
any Intellectual Property Rights and Related Materials which relate to or arose
out of research conducted under a U.S. Government contract will be subject to
certain Government rights in such Intellectual Property and Related Materials
which Consultant has identified and which are set forth in Exhibit B
("Governments Rights").
4
<PAGE> 5
2. PATENT ENFORCEMENT. Immersion shall have the right to enforce the
Patents against an infringing third party and to control any such lawsuit or
settlement. Immersion shall have the right to grant a sublicense to such third
party infringer, or to settle with such third party infringer, or bring an
infringement action against the third party infringer and to use Consultant's
name in connection therewith as needed. In either event, Consultant shall assist
Immersion, at Immersion's request and expense, in pursuing such action or
sublicense. If Immersion chooses to enforce the Patents against a third party
and obtains either a settlement or judgment which includes a cash payment for
damages attributable to the Patents and which are awarded for infringement of
the Patents (to the extent not offset by a cash payment by Immersion to such
third party) (the "Award") then Immersion shall pay Consultant a certain amount
as described below. Immersion shall first subtract any litigation related
expenses and attorney fees incurred by Immersion with respect to such Patent
enforcement from the Award (the "Net Award"); provided however that if Immersion
recovers all or any portion of the actual litigation related expenses and
attorney fees, incurred by Immersion in the form of a specific award by the
court of litigation related expenses and attorney fees, Immersion shall not
subtract such actual litigation related expenses and attorney fees from the
Award. Immersion shall pay Consultant an amount equal to twenty percent (20%) of
the Net Award. The amount payable to Consultant pursuant to this Section 2
("Patent Enforcement") shall be limited to an aggregate amount of thirty million
dollars ($30,000,000).
3. PAYMENT FOR CONSULTING SERVICES. In consideration for the provision of
Consulting Services pursuant to Section 1 ("Consulting Services"), Immersion
shall pay, and grant to, Consultant, as follows:
(a) Force Feedback Services Warrant. Deliverable at the
Closing, a ten year warrant (the "Warrant") to purchase 400,000 shares of the
Common Stock of Immersion at an exercise price of two dollars and ninety-five
cents ($2.95) per share, in the form attached hereto in Exhibit C ("Force
Feedback Services Warrant").
(b) Services Cash Payment. The sum of one hundred fifty
thousand dollars ($150,000) payable at Closing, an additional seventy five
thousand dollars ($75,000) payable within thirty (30) days of January 1, 2000
and an additional seventy five thousand dollars ($75,000) payable within thirty
(30) days of January 1, 2001, each payment to be paid in cash by wire transfer
to an account designated in writing by Consultant.
4. INDEPENDENT CONTRACTOR RELATIONSHIP
4.1. Nature of Relationship. Consultant's relationship with
Immersion will be that of an independent contractor and nothing in this
Agreement should be construed to create a partnership, joint venture, or
employer-employee relationship. Since Consultant will not be an employee of
Immersion, Consultant will not be entitled to any of the benefits which
Immersion may make available to its employees, such as group insurance,
profit-sharing or retirement benefits. Consultant is not the agent of Immersion
and is not authorized to make any representation, contract, or commitment on
behalf of Immersion unless specifically requested or authorized to do so in
writing by an Immersion manager.
5
<PAGE> 6
4.2. Consultant Responsible for Taxes and Records. Consultant will
be solely responsible for and will file, on a timely basis, all tax returns and
payments required to be filed with or made to any federal, state or local tax
authority with respect to Consultant's performance of services and receipt of
fees under this Agreement. Consultant will be solely responsible for and must
maintain adequate records of expenses incurred in the course of performing
services under this Agreement. No part of Consultant's compensation will be
subject to withholding by Immersion for the payment of any social security,
federal, state or any other employee payroll taxes. Immersion will regularly
report amounts paid to Consultant by filing Form 1099-MISC with the Internal
Revenue Service as required by law.
5. CONFIDENTIAL INFORMATION
5.1. Definition of Confidential Information. "Confidential
Information" as used in this Agreement shall mean any and all technical and
non-technical information including patent, copyright, trade secret, and
proprietary information, techniques, sketches, drawings, models, inventions,
know-how, processes, apparatus, equipment, algorithms, software programs,
software source documents, and formulae related to the current, future and
proposed products and services of Immersion, IMMERSION's suppliers and
customers, and includes, without limitation, IMMERSION Innovations, IMMERSION
Property, and IMMERSION's information concerning research, experimental work,
development, design details and specifications, engineering, financial
information, procurement requirements, purchasing manufacturing, customer lists,
business forecasts, sales and merchandising and marketing plans and information.
5.2. Nondisclosure and Nonuse Obligations. Except as permitted in
this paragraph, Consultant shall neither use nor disclose the Confidential
Information. Consultant may use the Confidential Information solely to provide
the services hereunder for the benefit of IMMERSION. Consultant agrees that
Consultant shall treat all Confidential Information of IMMERSION with the same
degree of care as Consultant accords to Consultant's own Confidential
Information, but in no case less than reasonable care. Consultant agrees that
Consultant shall disclose Confidential Information only to those of Consultant's
employees who need to know such information, and Consultant certifies that such
employees have previously agreed, either as a condition of employment or in
order to obtain the Confidential Information, to be bound by terms and
conditions substantially similar to those terms and conditions applicable to
Consultant under this Agreement. Consultant agrees not to communicate any
information to IMMERSION in violation of the proprietary rights of any third
party. Consultant will immediately give notice to IMMERSION of any unauthorized
use or disclosure of the Confidential Information. Consultant agrees to assist
IMMERSION in remedying any such unauthorized use or disclosure of the
Confidential Information.
5.3. Exclusions from Nondisclosure and Nonuse Obligations.
Consultant's obligations under Paragraph 5.2 ("Nondisclosure and Nonuse
Obligations") with respect to any portion of the Confidential Information shall
not apply to any such portion which Consultant can demonstrate, (a) was in the
public domain at or subsequent to the time such
6
<PAGE> 7
portion was communicated to Consultant by IMMERSION through no fault of
Consultant; (b) was rightfully in Consultant's possession free of any obligation
of confidence at or subsequent to the time such portion was communicated to
Consultant by IMMERSION; or (c) was developed by employees of Consultant
independently of and without reference to any information communicated to
Consultant by IMMERSION. A disclosure of Confidential Information by Consultant,
either (a) in response to a valid order by a court or other governmental body,
(b) otherwise required by law, or (c) necessary to establish the rights of
either party under this Agreement, shall not be considered to be a breach of
this Agreement or a waiver of confidentiality for other purposes; provided,
however, that Consultant shall provide prompt prior written notice thereof to
IMMERSION to enable IMMERSION to seek a protective order or otherwise prevent
such disclosure.
5.4. Ownership and Return of IMMERSION Property. All materials
(including, without limitation, documents, drawings, models, apparatus,
sketches, designs, lists, and all other tangible media of expression) furnished
to Consultant by IMMERSION, whether delivered to Consultant by IMMERSION or made
by Consultant in the performance of services under this Agreement (collectively,
the "IMMERSION Property") are the sole and exclusive property of IMMERSION or
IMMERSION's suppliers or customers, and Consultant hereby does and will assign
to IMMERSION all rights, title and interest Consultant may have or acquire in
IMMERSION Property. Consultant agrees to keep all IMMERSION Property at
Consultant's premises unless otherwise permitted in writing by IMMERSION. At
IMMERSION's request and no later than five (5) days after such request,
Consultant shall destroy or deliver to IMMERSION, at IMMERSION's option, (a) all
IMMERSION Property, (b) all tangible media of expression in Consultant's
possession or control which incorporate or in which are fixed any Confidential
Information, and (c) written certification of Consultant's compliance with
Consultant's obligations under this sentence.
6. MISCELLANEOUS
6.1. Expenses of the Parties. Each party shall pay its own expenses
incurred by it in connection with the negotiation, execution and performance of
this Agreement.
6.2. Waivers. No term or provision hereof will be considered waived
by either party, and no breach excused by either party, unless such waiver or
consent is in writing signed on behalf of the party against whom the waiver is
asserted. No consent by either party to, or waiver of, a breach by either party,
whether express or implied, will constitute a consent to, waiver of, or excuse
of any other different or subsequent breach by either party.
6.3. Amendment and Modification. This Agreement may be amended,
modified and supplemented by mutual consent of the parties hereto with respect
to any of the terms contained herein, in such manner as may be agreed upon in
writing by such parties.
6.4. Notices. Any notice to any party hereto given pursuant to this
Agreement shall be given by certified or registered first-class mail, return
receipt requested, addressed as follows:
if to Immersion to: Immersion Corporation
2158 Paragon Drive
San Jose, CA 95131
Attn: Louis B. Rosenberg
7
<PAGE> 8
with a copy to: Gray Cary Ware & Freidenrich LLP
400 Hamilton Ave.
Palo Alto, CA 94301
Attn: Bruce Schaeffer
Stacy Snowman
if to the Consultant: Cybernet Systems Corporation
727 Airport Boulevard
Ann Arbor, Michigan 48108-1639
Attn: Chuck Jacobus
with a copy to: Russell & Stoychoff
2855 Coolidge, Suite 218
Troy, Michigan 48084-3216
Attn: Lyle Russell
Any such address may be changed by any party by written notice to the other
party. Any notice shall be deemed delivered when placed for delivery so
addressed with postage or other charges prepaid.
6.5. Governing Law. This Agreement is made and shall be construed in
accordance with the laws of the State of California, without regard to the
conflict of laws provisions thereof.
6.6. Successors and Assigns. This Agreement shall inure to the
benefit of, and be binding upon and enforceable against, the respective
successors and assigns of the parties hereto but may not be assigned by
Consultant without the prior written consent of Immersion.
6.7. Headings. Headings are supplied herein for convenience
only and shall not be deemed a part of this Agreement for any purpose.
6.8. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original for all purposes.
6.9. Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstances shall to any extent be
invalid or unenforceable, the remainder of this Agreement or the application of
such terms or provisions to persons or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
6.10. Publicity. Consultant and Immersion shall consult with and
cooperate with the other with respect to the content and timing of all press
releases and other public announcements concerning this agreement and the
transactions contemplated hereby. Except as
8
<PAGE> 9
otherwise provided in Section 5.8 of the Merger Agreement, this Agreement or as
may be required by law, Consultant shall not disclose any of the provisions of
this Agreement without the prior written consent of Immersion. Notwithstanding
the foregoing, disclosures of the contents hereof made to Consultant's
accountants, legal advisors, consultants or other parties who have a need to
know for the purpose of providing the services to Consultant for which they are
retained, and subject to restriction against further disclosure, are expressly
permitted. Consultant shall not disclose the existence of this Agreement nor
identify Immersion with regard to the subject matter of this Agreement,
including but not limited to any advertising, solicitation or promotional
activity, without the prior written consent and approval of Immersion, which
consent and approval shall be required for each such specific use.
6.11. Entire Agreement. This Agreement comprises the entire
agreement between the parties hereto as to the subject matter hereof and
supersedes all prior agreements and understandings between the parties relating
thereto, whether written or oral.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed by the authorized representatives of each of the parties.
Consultant: Immersion:
Cybernet Systems Corporation Immersion Corporation
By: /s/ Charles Jacobus By: /s/ Louis Rosenberg
----------------------- --------------------------
Print Name: Charles Jacobus Print Name: Louis Rosenberg
----------------------- --------------------------
Title: President Title: President
----------------------- --------------------------
Date: March 5, 1999 Date: March 5, 1999
----------------------- --------------------------
9