ISRG » Topics » NOTE 6. COMMITMENTS AND CONTINGENCIES

These excerpts taken from the ISRG 10-K filed Feb 6, 2009.

NOTE 6. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases office space in Milford, Connecticut, in Aubonne, Switzerland and in Mexicali, Mexico. The Company leases automobiles for certain sales employees. These leases have varying terms, predominantly no longer than three years.

Future minimum lease commitments under the Company’s operating leases as of December 31, 2008 are as follows (in thousands):

 

2009

   $ 1,298

2010

     1,091

2011

     531

2012

     36

2013 and beyond

     —  
      
   $ 2,956
      

Other commitments include an estimated amount of approximately $138.0 million of all open cancellable purchase orders and contractual obligations that occur in the ordinary course of business, including commitments with contract manufacturers and suppliers, for which we have not received the goods or services.

CONTINGENCIES

The Company is subject to various legal proceedings and disputes that arise in the normal course of business. These matters include product liability actions, patent infringements, contract disputes, and other matters. The Company does not know whether it will prevail in these matters nor can it assure that any remedy could be reached on commercially viable terms, if at all. Based on currently available information, the Company believes that it has meritorious defenses to these actions and should an unfavorable outcome arise, there can be no assurance such outcome would not have material adverse effect on its future results of operations, liquidity or financial position. In accordance with SFAS No. 5, “Accounting for Contingencies,” (SFAS 5), the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.

NOTE 6. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases office space in Milford, Connecticut, in Aubonne, Switzerland and in Mexicali, Mexico. The Company leases automobiles for certain sales employees. These leases have varying terms, predominantly no longer than three years.

Future minimum lease commitments under the Company’s operating leases as of December 31, 2008 are as follows (in thousands):

 

2009

   $ 1,298

2010

     1,091

2011

     531

2012

     36

2013 and beyond

     —  
      
   $ 2,956
      

Other commitments include an estimated amount of approximately $138.0 million of all open cancellable purchase orders and contractual obligations that occur in the ordinary course of business, including commitments with contract manufacturers and suppliers, for which we have not received the goods or services.

CONTINGENCIES

The Company is subject to various legal proceedings and disputes that arise in the normal course of business. These matters include product liability actions, patent infringements, contract disputes, and other matters. The Company does not know whether it will prevail in these matters nor can it assure that any remedy could be reached on commercially viable terms, if at all. Based on currently available information, the Company believes that it has meritorious defenses to these actions and should an unfavorable outcome arise, there can be no assurance such outcome would not have material adverse effect on its future results of operations, liquidity or financial position. In accordance with SFAS No. 5, “Accounting for Contingencies,” (SFAS 5), the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.

These excerpts taken from the ISRG 10-K filed Feb 14, 2008.

NOTE 6. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases office space in Milford, Connecticut and in Aubonne, Switzerland and has committed to a three year lease in Mexicali, Mexico. The Company leases automobiles for certain sales employees. These leases have varying terms, no longer than three years.

Future minimum lease commitments under the Company’s operating leases as of December 31, 2007 are as follows (in thousands):

 

2008

   $ 1,157

2009

     1,024

2010

     780

2011

     306

2012 and beyond

     20
      
   $ 3,287
      

Commitments for purchase of building and land totaled approximately $17.0 million as of December 31, 2007. This represents amounts owed on an agreement to purchase a building and land, approximately 7 acres, adjacent to our Corporate Headquarters in Sunnyvale, California and expected costs to vacate existing tenants in that building. Other commitments include an estimated amount of approximately $114.9 million of all open purchase orders and contractual obligations that occur in the ordinary course of business, including commitments with contract manufacturers and suppliers, for which we have not received the goods or services and acquisition and licensing of patent rights and patents.

CONTINGENCIES

The Company is subject to various legal proceedings and disputes that arise in the normal course of business. These matters include product liability actions, patent infringements, contract disputes, and other matters. The Company does not know whether it will prevail in these matters nor can it assure that any remedy could be reached on commercially viable terms, if at all. Based on currently available information, the Company believes that it has meritorious defenses to these actions and should an unfavorable outcome arise, there can be no assurance such outcome would not have material adverse effect on its future results of operations, liquidity or financial position. In

 

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Index to Financial Statements

accordance with Statement of Financial Accounting Standards, or SFAS, No. 5, “Accounting for Contingencies,” the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.

NOTE 6. COMMITMENTS AND CONTINGENCIES

STYLE="margin-top:6px;margin-bottom:0px; margin-left:2%; text-indent:-2%">OPERATING LEASES

The
Company leases office space in Milford, Connecticut and in Aubonne, Switzerland and has committed to a three year lease in Mexicali, Mexico. The Company leases automobiles for certain sales employees. These leases have varying terms, no longer than
three years.

Future minimum lease commitments under the Company’s operating leases as of December 31, 2007 are as follows (in
thousands):

 

















































2008

  $1,157

2009

   1,024

2010

   780

2011

   306

2012 and beyond

   20
    
  $3,287
    

Commitments for purchase of building and land totaled approximately $17.0 million as of
December 31, 2007. This represents amounts owed on an agreement to purchase a building and land, approximately 7 acres, adjacent to our Corporate Headquarters in Sunnyvale, California and expected costs to vacate existing tenants in that
building. Other commitments include an estimated amount of approximately $114.9 million of all open purchase orders and contractual obligations that occur in the ordinary course of business, including commitments with contract manufacturers and
suppliers, for which we have not received the goods or services and acquisition and licensing of patent rights and patents.

SIZE="2">CONTINGENCIES

The Company is subject to various legal proceedings and disputes that arise in the normal course of business. These
matters include product liability actions, patent infringements, contract disputes, and other matters. The Company does not know whether it will prevail in these matters nor can it assure that any remedy could be reached on commercially viable
terms, if at all. Based on currently available information, the Company believes that it has meritorious defenses to these actions and should an unfavorable outcome arise, there can be no assurance such outcome would not have material adverse effect
on its future results of operations, liquidity or financial position. In

 


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Index to Financial Statements



accordance with Statement of Financial Accounting Standards, or SFAS, No. 5, “Accounting for Contingencies,” the Company records a
liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings,
advice of legal counsel, and other information and events pertaining to a particular case.

This excerpt taken from the ISRG 10-K filed Feb 15, 2007.

NOTE 6. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases office space for research and development in Milford, Connecticut and sales office space in St. Germain en Laye, France and Aubonne, Switzerland. In connection with the acquisition of Computer Motion, the Company assumed leases in Goleta, California. These leases have varying terms, the longest of which extends to September 2007. As of December 31, 2006, the Company sublet 93% of its office space in Goleta. The Company leases automobiles for certain sales employees. These leases have varying terms, no longer than three years.

Future minimum lease commitments, net of sublease income of $0.3 million under the Company’s operating leases as of December 31, 2006 are as follows (in thousands):

 

2007

   $ 817

2008

     533

2009

     209

2010

     94

2011 and beyond

     112
      
   $ 1,765
      

CONTINGENCIES

The Company is subject to various legal proceedings and disputes that arise in the normal course of business. These matters include product liability actions, patent infringements, contract disputes, and other matters. The Company does not know whether it will prevail in these matters nor can it assure that any remedy could be reached on commercially viable terms, if at all. Based on currently available information, the Company believes that it has meritorious defenses to these actions and while the outcome of these matters cannot be predicted with certainty, the Company does not believe the outcome of any of these matters will have a material adverse impact on its financial position, results of operations or cash flows. In accordance with Statement of Financial Accounting Standards, or SFAS, No. 5, “Accounting for Contingencies,” the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.

 

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This excerpt taken from the ISRG 10-K filed Mar 15, 2006.

NOTE 11. COMMITMENTS AND CONTINGENCIES

 

OPERATING LEASES

 

The Company leases office space for research and development in Milford, Connecticut and sales office space in St. Germain en Laye, France. In connection with the acquisition of Computer Motion, the Company assumed leases in Goleta, California. These leases have varying terms, the longest of which extends to September 2007. As of December 31, 2005, the Company sublet approximately 90% of its office space in Goleta.

 

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Future minimum lease commitments, net of sublease income of $0.7 million under the Company’s operating leases as of December 31, 2005 are as follows (in thousands):

 

2006

   $ 626

2007

     366

2008

     70

2009

     34
    

     $ 1,096
    

 

Rent expense was approximately $0.2 million, $0.4 million, and $3.2 million for the years ended December 31, 2005, 2004, and 2003, respectively.

 

CONTINGENCIES

 

The Company is subject to various legal proceedings and disputes that arise in the normal course of business. These matters include product liability actions, contract disputes, and other matters. The Company does not know whether it will prevail in these matters nor can it assure that any remedy could be reached on commercially viable terms, if at all. Based on currently available information, the Company believes that it has meritorious defenses to these actions and that the resolution of these cases is not likely to have a material adverse effect on its business, financial position or future results of operations. In accordance with Statement of Financial Accounting Standards, or SFAS, No. 5, “Accounting for Contingencies,” the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.

 

This excerpt taken from the ISRG 10-K filed Mar 16, 2005.

NOTE 10. COMMITMENTS AND CONTINGENCIES

 

OPERATING LEASES

 

The Company entered into a lease arrangement of office and manufacturing space in Sunnyvale, California effective January 2002 (the “Sunnyvale Lease”). Under the Sunnyvale Lease, the Company was required to lease additional space in the same building starting in January 2004. The Sunnyvale Lease was scheduled to expire on April 30, 2007. On April 30, 2004, the Company purchased the property for approximately $20.0 million and canceled the Sunnyvale Lease. In addition, the Company leases office space for research and development in Milford, Connecticut and sales office space in St. Germain en Laye, France. In connection with the acquisition of Computer Motion, the Company assumed leases in Goleta, California. These leases have varying terms, the longest of which extends to September 2007. As of December 31, 2004, the Company sublet approximately 92% of its office space in Goleta.

 

Future minimum lease commitments, net of sublease income of $1.5 million, under the Company’s operating leases as of December 31, 2004 are as follows (in thousands):

 

2005

   $ 632

2006

     506

2007

     275

2008

     55

2009

     39
    

     $ 1,507
    

 

Rent expense was approximately $0.4 million, $3.2 million, and $2.5 million for the years ended December 31, 2004, 2003, and 2002, respectively.

 

CONTINGENCIES

 

In September 2002, the Company discovered that one of its employees had purchased approximately $900,000 in administrative supplies without the authorization or knowledge of its management. This matter was investigated by law enforcement authorities and the Company’s advisors. The Company has since terminated this employee’s employment and have taken actions intended to ensure that no similar incidents can occur in the future, including implementing additional controls relating to its cash disbursement process. In addition, the Company is seeking to recover its loss. The Company has filed a claim with its insurance carrier, from which the Company received proceeds of $500,000, and filed suit against the sellers of the administrative supplies in December 2002. The Company’s complaint alleged that each of the defendants has (i) violated various sections of the Racketeer Influenced and Corrupt Organization, or RICO, Act through their extortion, coercion, intimidation, fraud, bribery and racketeering activity in connection with the unauthorized purchase of office supplies and (ii) committed unlawful business acts and practices in violation of Cal. Bus. & Prof. Code Section 17200 et seq. The Company’s suit seeks to recover actual and treble damages, costs and attorney fees for the damage caused by each of defendants through their illegal conduct. In January 2003, the Company amended its complaint to allege that each defendant further unlawfully offered prizes and gifts in violation of Cal. Bus. & Prof. Code Section 17537 and unlawfully failed to advertise limitations on the quantity of its sales in violation of Cal. Bus. & Prof. Code Section 17500.5. The amended complaint reiterates the Company’s claim to recover actual and treble damages, costs and attorney fees. A settlement was reached in July 2004 in which the other parties in the lawsuit agreed to pay the Company $250,000 over a maximum of three years.

 

In February 2004, the University of Miami, a former customer of Computer Motion filed a lawsuit against the Company in the US District Court, Southern District of Florida. The Company received the complaint in April, 2004. The customer alleges that it relied to its detriment on representations made by Computer Motion in connection with Computer Motion’s sale of products to the customer, which representations the customer

 

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believes were not fulfilled. The customer is seeking damages. The Company filed a motion to dismiss the fraud-based complaints and an answer defending the breach of contract claim. After discovery was completed, the Company filed a motion for summary judgment to dismiss the entire case. In January, 2005, the Court granted the Company’s motion for summary judgment and dismissed the case against the Company in its entirety. In February 2005, the customer filed a notice of appeal.

 

In November 2003, Tzamal Jacobson Ltd., an Israeli company, filed suit against the Company and Computer Motion in the District Court in Tel-Aviv—Jaffa, Israel, Civil File 2293/03 alleging breach of a distribution contract and seeking damages. The Company received the complaint in April, 2004. Following the acquisition of Computer Motion, the Company withdrew Computer Motion’s distributorship offer to this Israeli company. The Company intends to vigorously defend the suit, and it has filed a motion to have the case dismissed on jurisdictional grounds. The court has not yet ruled on the motion.

 

In October 2003, SIC System, S.R.L., a former Italian distributor for Computer Motion, filed suit against the Company and Computer Motion seeking damages in the Civil Court of Rome, Italy. In the complaint, SIC System alleges that the Company breached the distribution agreement between SIC System and Computer Motion when, following its acquisition of Computer Motion, the Company deleted two products previously covered under the distribution agreement. The distribution agreement provides, among other things, that (1) it shall be governed and construed under the laws of the State of California and (2) in the event of any dispute or controversy arising under the distribution agreement or the transactions contemplated thereunder, the parties mutually consent to the exclusive jurisdiction of a court of competent jurisdiction within Santa Barbara County, California. The Company is defending this lawsuit on both jurisdictional grounds and on the merits. To date, the Italian Court has ruled that SIC System’s service of process in filing its complaint is defective and has ordered SIC System to re-serve its complaint on or about October 6, 2004, which service the Company did not receive. The parties have submitted briefs to the court on the service of process issue. The Italian court has not ruled on jurisdiction or other pending issues pertaining to the applicable law or appropriate forum.

 

In November, 2003, the Company filed a lawsuit against SIC System, S.R.L. in the United States District Court for the Central District of California for declaratory relief, breach of contract and preliminary and permanent injunction. In particular, the Company sought a judicial declaration of the rights and obligations of the parties under a distribution agreement, specifically that the Company effectively deleted the products from the distribution agreement, and a preliminary and permanent injunction prohibiting SIC System from proceeding with the Italian Action. The complaint was served on SIC System in November, 2003, and the Court entered default against SIC Systems in March, 2004. In August, 2004, the Court entered a judgment in favor of the Company in the amount of $195,155 for breach of contract. The Court also awarded judgment in favor of the Company as to its claim for declaratory relief. The Court awarded judgment in favor of SIC Systems as to the Company’s claim for preliminary and permanent injunction. The Court found the Company as the prevailing party. The Company intends to enforce this judgment against SIC System in the Italian portion of the lawsuit.

 

The foregoing proceedings could be expensive to litigate, may be protracted and the Company’s confidential information may be compromised. Whether or not the Company is successful in these lawsuits, these proceedings could consume substantial amounts of its financial and managerial resources. At any time, the other parties may file additional claims against the Company, or the Company may file claims against them, which could increase the risk, expense and duration of the litigations.

 

The Company is subject to legal proceedings and claims, including those discussed above, that arise in the normal course of its business. The Company does not know whether it will prevail in these matters nor can it assure that any remedy could be reached on commercially viable terms, if at all. In accordance with SFAS No. 5, “Accounting for Contingencies,” the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.

 

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