Exhibit 10.1

CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been
omitted pursuant to a request for confidential treatment and, where applicable,
have been marked with an asterisk (“[****]”) to denote where omissions have been
made. The confidential material has been filed separately with the Securities
and Exchange Commission.

DEVELOPMENT AND SUPPLY AGREEMENT

This Development and Supply Agreement (the “Agreement”) is made and entered into
on June 11, 2007, (the “Effective Date”) by and between Intuitive Surgical,
Inc., a Delaware corporation, having a principal place of business at 1266 Kifer
Road, Building 101, Sunnyvale, California 94086-5304 (“Intuitive”) and Luna
Innovations Incorporated, a Delaware corporation, having a principal place of
business at 1703 S. Jefferson Street SW, Suite 400, Roanoke, Virginia 24016
(“Luna”). As used in this Agreement, each of Intuitive and Luna is a “Party” and
collectively they are the “Parties.”

BACKGROUND

 

A. Luna has developed, and currently markets and sells, a fiber-optic
shape-sensing product.

 

B. Intuitive has developed, and currently markets and sells, a
minimally-invasive robotic surgical product.

 

C. The Parties desire to collaborate on the development and commercialization of
an integrated product that is based on Intuitive’s minimally-invasive robotic
surgical product along with Luna’s fiber-optic shape-sensing product
(collectively, the “Integrated Product,” as further defined below).

 

D. Further, Luna wishes to supply to Intuitive and Intuitive to purchase from
Luna fiber-optic shape-sensing products, all on the terms set forth below.

The Parties therefore agree as follows:

 

1. DEFINITIONS

 

  1.1. “Acquirer” has the meaning set forth in Section 16.6.

 

  1.2. “Affiliate” means any corporation or other entity that is directly or
indirectly controlling, controlled by or under common control with a Party. For
the purpose of this definition, “control” means the direct or indirect ownership
of more than fifty percent (50%) of the capital stock of the subject entity
entitled to vote in the election of directors (or, in the case of an entity that
is not a corporation, interests entitled to vote in the election of the
corresponding managing authority).

 

  1.3.

“Aggregate Cure Period” means, with respect to a breach by Luna consisting of a
failure to supply Luna Product to Intuitive under Section 5.1, a total period of
[****] days following receipt of written breach notice from Intuitive with
respect to such breach, provided however, that if such Luna breach is repeated a
second or subsequent time, the cure period for any such new breach shall be
equal to the Aggregate Cure Period less the sum of any previous cure periods
used by Luna in

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

 

relation to such earlier supply breaches. For clarity, a breach of Luna’s supply
obligations attributed to an Event of Force Majeure shall not be counted against
the Aggregate Cure Period for the duration of such Event of Force Majeure.

 

  1.4. “Background Intellectual Property” has the meaning set forth in
Section 9.1.

 

  1.5. “Bankruptcy” means voluntary or involuntary proceedings by or against a
Party are instituted in bankruptcy, a receiver or custodian is appointed for a
Party, or proceedings are instituted by or against a Party for corporate
reorganization or the dissolution of a Party, which proceedings, if involuntary,
shall not have been dismissed within ninety (90) days after the date of filing,
or a Party makes an assignment for the benefit of its creditors, or
substantially all of the assets of a Party are seized or attached and not
released within ninety (90) days thereafter.

 

  1.6. “Commercial Transfer Price” has the meaning set forth in Section 6.4.

 

  1.7. “Confidential Information” has the meaning set forth in Section 12.1.

 

  1.8. “Control” means: (i) with respect to the patents and patent applications,
divisionals, continuations, and continuation-in-parts, Luna possesses (whether
by ownership or license) the right to grant licenses or pass-through rights of
the scope to be granted to Intuitive under this Agreement, and (ii) with respect
to any know how or trade secrets, Luna possesses (whether by ownership or
license) the right to disclose and deliver the same to Intuitive under this
Agreement and to grant licenses of the scope to be granted to Intuitive under
this Agreement; in the case of each of (i) and (ii), without violating the terms
of any agreement.

 

  1.9. “Development Fee” has the meaning set forth in Section 6.2.

 

  1.10. “Development Program” means the program of development of the Integrated
Product to be conducted under Section 2 of this Agreement, beginning on the
Effective Date and ending on the completion of the Milestones.

 

  1.11. “Event of Force Majeure” has the meaning set forth in Section 16.2.

 

  1.12. “[****] Fee” has the meaning set forth in Section 6.3.

 

  1.13. “[****] Period” has the meaning set forth in Section 4.2.

 

  1.14. “Field” means [****]

 

  1.15. “Forecasts” has the meaning set forth in Section 5.5.

 

  1.16. “Indemnifying Party” has the meaning set forth in Section 13.3.

 

  1.17. “In-Licensed IP” has the meaning set forth in Section 4.4.

 

-2-

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

  1.18. “Integrated Product” means, collectively, the Luna Product and the
Intuitive Product as a physically integrated product for distribution and use
under this Agreement solely within the Field.

 

  1.19. “Intellectual Property Rights” means the rights (subject to the
allocation of ownership in Section 9.2) associated with the following:
(i) United States and foreign patents and patent applications including all
divisionals, continuations, reissues, and continuations-in-part;
(ii) copyrights, copyright registrations and copyright applications;
(iii) rights in trade secrets and know how; and (iv) any similar, corresponding
or equivalent rights to any of the foregoing anywhere in the world. As used in
this Agreement, Intellectual Property Rights excludes trademarks, service marks
and similar designations of origin and rights therein.

 

  1.20. “Interrogator” means a Shape-Sensing Product, excluding the Sensors (as
defined herein).

 

  1.21. “Intuitive Dependency” has the meaning set forth in Section 2.3.

 

  1.22. “Intuitive Indemnitees” has the meaning set forth in Section 13.2.

 

  1.23. “Intuitive New Intellectual Property” has the meaning set forth in
Section 9.2.2.

 

  1.24. “Intuitive Product” means any Intuitive [****] into which Intuitive may
wish to physically integrate the Luna Product for distribution and use under
this Agreement solely within the Field.

 

  1.25. “Intuitive Receiving Point” has the meaning set forth in Section 5.6.

 

  1.26. “License Fee” has the meaning set forth in Section 6.1.

 

  1.27. “Losses” has the meaning set forth in Section 13.1.

 

  1.28. “Luna Indemnitees” has the meaning set forth in Section 13.1.

 

  1.29. “Luna Key People” has the meaning set forth in Section 2.5.

 

  1.30. “Luna New Intellectual Property” has the meaning set forth in
Section 9.2.1.

 

  1.31. “Luna Product” means the Shape-Sensing Product to be developed under the
Development Program and manufactured by or on behalf of Luna for sale to
Intuitive.

 

  1.32. “Luna Product Specifications” means the feature descriptions, technical
requirements and specifications for the Luna Product attached hereto as Exhibit
2.1, as modified from time-to-time by the Parties in accordance with Section 3
or Section 16.7 of this Agreement.

 

-3-

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

  1.33. “Milestones” means the Development Program First Milestone and Second
Milestone, as currently set forth in Exhibit 2.1, subject to Sections 2, 3, 14,
and 16.

 

  1.34. “Minimum Annual Commitment” has the meaning set forth in Section 5.4.2.

 

  1.35. “New Intellectual Property” has the meaning set forth in Section 9.2.

 

  1.36. “New Joint Intellectual Property” has the meaning set forth in
Section 9.2.2.

 

  1.37. “Nominated Manufacturer” has the meaning set forth in Section 8.3.1.

 

  1.38. “Pass Through Payment Obligations” has the meaning set forth in
Section 4.4.

 

  1.39. “Sensors” means the optical fiber sensor components of a Shape-Sensing
Product that are intended to be used in a limited number of surgical procedures
or that are otherwise considered “disposable.”

 

  1.40. “Shape-Sensing Product” means a [****]

 

  1.41. “Standby Rights” has the meaning set forth in Section 8.3.

 

  1.42. “Technology” means tangible instantiations of technology, including but
not limited to inventions, invention disclosures, trade secrets, proprietary
information, know how, technical data, documentation, concepts, processes,
formulae, systems, equipment, apparatuses, software, designs, drawings, plans,
specifications and the like.

 

  1.43. “Third Party Payment Obligations” has the meaning set forth in
Section 4.4.

 

  1.44. “Term” has the meaning set forth in Section 14.1.

 

  1.45. “FDA” means United States Food and Drug Administration, any successor
agency thereto, or any court, tribunal, arbitrator, agency, commission, official
or other instrumentality of any federal, state, county, city or other political
subdivision, domestic or foreign, that performs a function for such political
subdivision similar to the function performed by the FDA for the United States
with regard to the approval, licensing, registration or authorization to test,
manufacture, promote, market, distribute, use, store, import, transport or sell
a product in the federal, state, country, city or political subdivision.

 

2. DEVELOPMENT

 

  2.1. General. As set forth below, Luna and Intuitive each agree to use
commercially reasonable efforts to meet the Milestones set forth herein.

 

  2.2.

Luna Development Obligations. In accordance with the terms of this Agreement and
provided that Intuitive satisfies the Intuitive Dependencies in accordance with
Section 2.3 and otherwise fulfills its obligations hereunder, Luna shall use
commercially

 

-4-

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

 

reasonable efforts to develop the Luna Product in accordance with this Agreement
including the Milestones. At the end of the First Milestone, Luna shall provide
Intuitive non-binding, good-faith, estimated transfer prices of the
Interrogators and Sensors in writing.

 

  2.3. Assistance and Dependencies. Intuitive shall share its Technology as
necessary to support Luna’s performance of development obligations under this
Section 2. Intuitive acknowledges that Luna’s ability to deliver particular
deliverables by the relevant delivery dates set forth in the Milestone schedule
may be dependent on Intuitive having completed its delivery of a prior Intuitive
deliverable. Accordingly, if Intuitive is delayed in completing the delivery of
an Intuitive deliverable by the relevant delivery date, or if Intuitive
otherwise fails to provide timely decisions and approvals with respect to the
Development Program (each, a “Intuitive Dependency”), then any delivery dates of
Luna that depend on such Intuitive Dependencies shall be extended day-for-day by
the number of days Intuitive was delayed in delivering or providing the
Intuitive Dependency, provided that Luna made known to Intuitive in advance the
relevant Intuitive Dependency in writing.

 

  2.4. Project Managers. Each Party shall appoint a principal point of contact
to be its project manager (each, a “Project Manager”) who shall coordinate and
act a liaison with the other Party with respect to development activities under
this Agreement. The initial Project Managers for each Party are set forth on
Exhibit 2.4. The Project Manager for each Party may be replaced upon written
notice thereof to the other Party, in which case Exhibit 2.4 shall be
automatically amended to reflect the replacement.

 

  2.5. Key People. [****] are considered Luna key people (hereinafter the “Luna
Key People”) who are essential to the development efforts under this Agreement.
If either of the Luna Key People becomes unavailable to Luna before the
completion of the Second Milestone, then Luna shall provide written notice to
Intuitive and, upon Intuitive’s request, Luna shall, within twenty-one
(21) days, provide a successor having reasonably suitable ability and
qualifications.

 

  2.6. Periodic Review Meetings and Reports. Each Party will keep the other
Party reasonably informed of its progress with respect to development
obligations under this Agreement, and the respective Project Managers from
Intuitive and Luna will schedule review meetings at mutually agreeable times, at
least monthly, to discuss the status of the development contemplated under this
Agreement. Such discussions shall be for information purposes only and shall not
be binding upon either Party except as mutually agreed in writing.

 

3. ENGINEERING CHANGE ORDERS

 

  3.1.

Proposal. The Parties recognize that from time to time it may be necessary or
desirable to change the Milestones or the Luna Product Specifications.
Accordingly,

 

-5-

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

 

either Party may propose a change to the Luna Product Specifications or the
then-current development plan by submitting a written engineering change order
(“ECO”) to the other Party.

 

  3.2. Process.

 

  3.2.1. Luna-Proposed Change. If Luna originates an ECO, Intuitive will
promptly evaluate the ECO, which will include an analysis of the impact on
Intuitive’s development and engineering costs and timetable, and Luna may
proceed to implement the ECO if Intuitive fails to reject the ECO in writing
within ten (10) business days after receiving the ECO from Luna; provided that
Intuitive may not reject any reasonable Luna-originated ECO if such change would
not increase Intuitive’s costs in developing the Integrated Product, would not
adversely affect the Integrated Product’s performance or add technological or
health and safety risk to Intuitive’s development of the Integrated Product, or
if such change is required to satisfy governmental standards, to protect the
Luna Product integrity, or to address environmental, health or safety concerns.

 

  3.2.2. Intuitive-Proposed Change. If Intuitive originates an ECO, Luna will
promptly evaluate the ECO, which will include an analysis of the technical
feasibility of the ECO, the impact on Luna’s development and engineering costs
under this Agreement, and the impact on Luna’s ability to meet the Milestones.

 

  (a) No Adverse Effects. If the Intuitive-originated ECO is technically
feasible, would not increase Luna’s costs in performing development under this
Agreement, would not adversely affect Luna’s ability to meet the Milestones, and
would not add technological or health and safety risk to the development work to
be performed under this Agreement, Luna shall notify Intuitive and proceed with
the requested ECO (which ECO will be binding on both Intuitive and Luna).

 

  (b) Adverse Effects. If Luna reasonably believes the Intuitive-originated ECO
would increase Luna’s costs in performing its development obligations under this
Agreement, would adversely affect Luna’s ability to meet the Milestones, or
would add technological environmental, health and safety risk to the development
work to be performed under this Agreement, Luna shall notify Intuitive within
ten (10) business days after receiving the ECO from Intuitive. In such event,
Luna need not proceed with the requested ECO until an appropriate amendment to
this Agreement and any affected Exhibits are signed by both Parties. The Parties
agree to be reasonable in negotiating the amendment.

 

-6-

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

4. LICENSE; [****]

 

  4.1. License Grant. Subject to the terms and conditions of this Agreement,
Luna grants to Intuitive and its Affiliates a worldwide, transferable (subject
to Section 4.3), royalty-free (subject to the Pass-Through Payment Obligations
of Section 4.4), perpetual, non-exclusive [****] license under the [****] to
make, have made, use, import or sell the products that [****], in each case
solely within the Field; provided that Luna has no obligation to transfer or
deliver any Technology or Confidential Information to Intuitive other than as
expressly set forth in Sections 4 and 8.3.

 

  4.2. [****]

 

  4.3. Transferability.

 

  4.3.1. Only to the extent and only with respect to such Intellectual Property
Rights over which Luna’s Control includes the right to grant a transferable
license to Intuitive, Intuitive may transfer the license [****] granted to it
under Sections 4.1 and 4.2 to a third party, subject to the terms of this
Section 4.3 and Section 4.4, and provided that Intuitive and its Affiliates
shall not retain any of the rights granted to the transferee.

 

  4.3.2. As a condition to the validity and enforceability, any agreement to
transfer the license granted under Section 4.1 shall: [

 

  (a) be written and a copy promptly provided to Luna;

 

  (b) incorporate by reference this Agreement;

 

  (c) be consistent with the terms, conditions and limitations of this
Agreement, including the limitations and requirements of this Section 4.3;

 

  (d) [****]

 

  (e) name Luna as an intended third-party beneficiary of the obligations of the
transferee without imposition of obligation or liability on the part of Luna or
its licensors to the transferee subject to Section 4.3.2(d);

 

  (f) as between Luna and the transferee, the transferred license(s) shall be
expressly “as is” and shall expressly disclaim all representations, warranties
and guarantees to the transferee with respect to such licenses or any related
Intellectual Property Rights; and

 

  (g) specifically incorporate Section 12 into the body of the transfer
agreement, and cause the terms used therein to have the same meanings as in this
Agreement.

 

-7-

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

  4.3.3. Subject to the obligations and liability to Intuitive under Sections 13
(Indemnification and Defense of Infringement) and 14 (Termination), in the event
of a transfer of any licenses, [****] or Intellectual Property Rights by
Intuitive to a third party under this Section 4.3, Luna shall have [****]

 

  4.3.4. Except as otherwise set forth in this Section 4.3 or elsewhere in this
Agreement (including Section 16.6), the license granted to Intuitive under
Section 4.1 shall not be transferable or sublicensable.

 

  4.4. Pass-Through Payment Obligations. To the extent Intellectual Property
Rights licensed to Intuitive under this Section 4 are Controlled by Luna not by
ownership but by licenses granted to Luna from third-party licensors
(“In-Licensed IP”), in the event that Luna incurs royalty or other payment
obligations to third-party licensors (“Third-Party Payment Obligations”) based
on Luna’s grant of such rights under this Section 4 or the use or exercise of
such licenses by Intuitive or its transferees not attributable to sales of Luna
Product to Intuitive, Intuitive shall pay all such amounts to Luna (the “Pass
Through Payment Obligations”). For purposes of clarity, any Third-Party Payment
Obligations incurred by Luna as a result of the sale of Luna Products to
Intuitive by Luna shall not be considered Pass Through Payment Obligations under
this Section 4.4. Intuitive shall report all of its activities (and those of its
transferees) under the licenses granted under this Section 4 at such times and
in such manner as is reasonably required to permit Luna to comply with its
reporting and payment obligations.

 

5. COMMERCIAL SUPPLY

 

  5.1. Luna Product Supply. Subject to the terms and conditions of this
Agreement, following the completion of the Development Program, Luna shall use
commercially reasonable efforts to supply Intuitive with all Intuitive’s
commercial requirements for Luna Products during the Term of this Agreement.

 

  5.2. Restrictions. Intuitive shall not sell, market, promote or distribute the
Luna Product, directly or indirectly (i) to any third party that Intuitive knows
will use the Luna Product outside the Field, (ii) on a stand-alone basis, or
(iii) bundled together with or integrated into any product other than the
Integrated Product.

 

  5.3. Subdistributors. Intuitive may authorize third-party distributors or
subdistributors to market, sell or distribute the Luna Product as part of the
Integrated Product in accordance with this Section 5. Intuitive shall be liable
for the actions of its distributors and subdistributors as if performed by
Intuitive.

 

  5.4. Intuitive Purchase.

 

  5.4.1. Interrogators. Except in the event that Intuitive exercises the Standby
Rights set forth in Section 8.3, Intuitive shall exclusively purchase all its
reasonable commercial requirements of Interrogators from Luna, provided that the
Luna Products under this Agreement meet the Luna Product Specifications.

 

-8-

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

  5.4.2. Minimum Annual Commitment. Without limiting its obligations set forth
in Section 5.4.1 above, Intuitive shall purchase no less than [****]
Interrogators from Luna during the [****] Period. The following schedule (the
“Minimum Annual Commitment”) is a preliminary forecast based on current
information and is subject to change based on the Parties’ mutual agreement:

 

Calendar Year

  

Minimum Annual Commitment

[****]

   [****]

[****]

   [****]

[****]

   [****]

[****]

   [****]

[****]

   [****]

[****]

   [****]

[****]

   [****]

 

  5.4.3. Luna-Product Sensors. Luna shall have the right of first proposal and
the right of first negotiation to supply Intuitive with Sensors for the Luna
Product, and Intuitive shall negotiate in good faith the terms of such supply
with Luna. If, despite their good-faith efforts, the Parties are unable to enter
into any agreement regarding the supply of Sensors from Luna, then Intuitive
shall have the right to acquire Sensors from a third-party vendor.
Notwithstanding anything in this Agreement to the contrary, in the event that
Intuitive purchases Sensors from a third-party vendor, Luna does not guarantee,
represent or warrant (and affirmatively disclaims any guaranty, representation
or warranty) that the combination of such third-party Sensors will be compatible
with the Interrogators or that the integrated Shape-Sensing Product will meet
the Luna Product Specifications.

 

  5.5. Forecasts. At least forty five (45) days prior to the anticipated date of
Intuitive’s first customer shipment of an Integrated Product, and by the tenth
day of each calendar month thereafter, Intuitive shall provide Luna with its
best, good-faith rolling forecast showing Intuitive’s anticipated requirements
of Luna Product for each of the next twelve (12) calendar months (including
Intuitive’s anticipated required delivery dates) (collectively, the
“Forecasts”). Forecasts are for Luna’s planning purposes only and shall not
constitute a binding obligation upon Intuitive or Luna. If Intuitive believes,
in good faith, that the information provided in any Forecast is no longer
accurate, Intuitive shall promptly notify Luna and provide Luna with a revised
Forecast.

 

-9-

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

  5.6. Purchase Orders. To initiate a purchase of a Luna Product, Intuitive
shall place a firm purchase order with Luna. All purchase orders shall be
written, signed by a duly authorized Intuitive representative, and specify the
requested shipping date (from Luna’s plant or distribution center or, if
applicable, that of its subcontractor or designee), which date must be at least
ninety (90) days after the date Luna receives the purchase order, and a
destination designated by Intuitive to which the orders are to be shipped (the
“Intuitive Receiving Point”). Intuitive shall use commercially reasonable
efforts to place orders for Luna Products in an even and regular fashion to
allow for efficient scheduling of Luna’s purchasing, manufacturing and materials
management. Nothing contained in any purchase order submitted under this
Agreement shall in any way modify or add any terms or conditions to said
purchases, unless otherwise agreed in writing by the Parties.

 

  5.7. Acceptance. No purchase order shall be binding on Luna until accepted in
writing; provided that in such case, subject to capacity constraints, Luna shall
use commercially reasonable efforts to accept Intuitive’s purchase orders. Luna
shall either accept or reject each purchase order in writing within fifteen
(15) days after receiving it. To the extent Luna fails to accept or reject a
purchase order within such 15-day period, the purchase order shall be considered
accepted by Luna.

 

  5.8. Shipping. Delivery of all Luna Products shall be FCA (Incoterms 2000) at
the Intuitive Receiving Point (at which point risk of loss shall pass from Luna
to Intuitive). At the Intuitive Receiving Point, the Luna Product shall be
suitably packed for shipment in Luna’s standard shipping cartons, marked for
shipment to the Intuitive Receiving Point indicated in Intuitive’s purchase
order. The carrier for shipment to the Intuitive Receiving Point shall be as set
forth in Intuitive’s purchase order, provided that if no carrier is specified in
Intuitive’s purchase order, Luna may select the carrier. Notwithstanding FCA
delivery as set forth above, all insurance, as well as any packaging expenses
and shipping costs shall be paid by Intuitive. Intuitive shall also bear all
applicable taxes, duties, and similar charges that may be assessed against the
Luna Products or the transfer price thereof after shipment. All shipments and
all shipping and other charges shall be deemed correct unless Luna receives from
Intuitive, no later than fifteen (15) days after Intuitive’s receipt of a given
shipment, a written notice specifying the shipment, the purchase order number,
and the exact nature of the discrepancy between the order and the shipment or
the exact nature of the discrepancy in the shipping or other charges, as
applicable.

 

  5.9. Cancellations/Reschedules. Except as expressly set forth in Section 10,
Intuitive may cancel or reschedule purchase orders for Luna Products only with
Luna’s prior written approval which shall not be unreasonably withheld where
requested by Intuitive reasonably in advance.

 

  5.10.

Regulatory, Quality Compliance, and Quality Metrics. Luna’s Quality Management
System (QMS) as it applies to the manufacturing of Interrogator components and
Sensors for Intuitive hereunder, shall, to the extent legally applicable to the
manufacture of components that are incorporated into finished medical devices,

 

-10-

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

 

comply with the ISO 13485 standard for Medical Devices and FDA Quality System
regulations. Luna shall incorporate a set of checks and balances in their
manufacturing processes for Interrogators and Sensors. Upon reasonable request
from Intuitive, Luna shall on a timely basis share its manufacturing operations
quality metrics regarding and allow for a manufacturing audit of the manufacture
of Interrogators and Sensors. To the extent that Luna uses a third-party to
manufacture Interrogator components and Sensors, the third-party shall be in
compliance with applicable standards and certifications (e.g., UL
certifications).

 

6. FEES, TRANSFER PRICES AND PAYMENT TERMS

 

  6.1. License Fee. Upon the Effective Date, Intuitive shall pay Luna a fully
paid, non-refundable, up-front license fee of $[****] (the “License Fee”).

 

 

6.2.

Development Fee. Unless otherwise agreed upon by the Parties pursuant to
Section 3, Intuitive shall pay Luna a non-refundable development fee of $[****]
(the “Development Fee”) [****]

 

  6.3. [****] Fee. In addition to the Licensing Fee and the Development Fees
described in Section 6.1 and 6.2, Intuitive shall pay to Luna a non-refundable
(except as provided in Section 14.2.1(a)), [****]

 

  6.4. Commercial Transfer Price. Following the completion of the Development
Program, the transfer price to Intuitive for each Luna Product supplied
hereunder (the “Commercial Transfer Price”) shall be equal to [****]

 

  6.5. Annual Review. Luna agrees to reasonably cooperate with Intuitive in an
annual review of Luna’s development and manufacturing processes and costs
associated therewith in a continuing effort to lower the Commercial Transfer
Price.

 

  6.6. Invoicing. Luna shall submit an invoice to Intuitive upon shipment of
Luna Products. Each such invoice shall state the Commercial Transfer Price
(under Section 6.4) for the Luna Products in a given shipment, plus any
insurance, taxes or other costs incident to the purchase or shipment initially
paid by Luna but to be borne by Intuitive under this Agreement.

 

  6.7.

Payment Terms. Intuitive shall make payments to Luna under this Agreement by
check, except for the License Fee, which Intuitive shall pay by wire transfer in

 

-11-

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

 

immediately available funds to a bank account that Luna designates. All payments
shall be made in U.S. dollars. Payment for Luna Products supplied hereunder,
shall be made net thirty (30) days after the date of invoice. Payment of the
Licensing Fee, [****] Fee, and Development Fee shall be made as set forth in
Sections 6.1– 6.3. Any payments due hereunder which are not paid on the date
such payments are due shall bear interest at the lesser of one and one-half
percent (1 1/2%) per month, or if lower the maximum rate permitted by applicable
law, calculated on the number of days such payment is delinquent. This
Section 6.7 shall in no way limit any other remedies available to Luna.

 

7. COMMERCIALIZATION

 

  7.1. Diligence. Intuitive agrees to make reasonable commercial efforts to
commercialize and meet commercial demand for the Integrated Product and to
perform such clinical trials and obtain such approvals as may be necessary to
maximize worldwide sales of Integrated Products. At a minimum, Intuitive shall
meet the Minimum Annual Commitments described in Section 5.4.2. Without limiting
Luna’s rights and remedies, if Intuitive fails to meet such Minimum Annual
Commitment or otherwise breaches its obligations under this Section 7.1, subject
to Section 14.2.2, Luna may terminate Intuitive’s [****].

 

  7.2. Support. Intuitive will be responsible, at its expense, for providing
customer service for the Integrated Product.

 

  7.3. Regulatory.

 

  7.3.1. Luna shall provide Intuitive with such information, files and other
documents that it possesses and has the right to disclose that relate to Luna’s
manufacturing processes for the Luna Product as reasonably necessary to enable
Intuitive to establish and maintain regulatory filings and approvals for the
Integrated Product; provided that any data information or documentation provided
by Luna to Intuitive under this Section 7.3.1 shall remain the property of Luna.
Subject to the foregoing, as between the Parties, Intuitive is solely
responsible for obtaining and maintaining all such regulatory filings and
approvals, including all governmental licenses and approvals that may be
necessary in connection with the purchase and distribution of Integrated
Products.

 

  7.3.2. Intuitive shall report to Luna as soon as possible all claims for
personal injury (including death) that could reasonably be related to the Luna
Product, including, without limitation all claims: (i) resulting in significant
personal injury requiring more than first aid treatment or (ii) that result in
regulatory, safety, health or environmental audits.

 

-12-

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

  7.3.3. If a Party obtains knowledge that the Integrated Product has caused
death or serious injury and, as a result, the FDA has required that clinical
development of the Integrated Product be stopped, or if a Party has reason to
believe that the Integrated Product may cause death or serious injury or that
such FDA action or a recall is likely, such Party shall promptly notify the
other.

 

8. FAILURE TO SUPPLY.

 

  8.1. General. In the event Luna breaches the supply obligations described in
Section 5.1 and fails to cure such breach in accordance with Section 8.2,
Intuitive will have the Standby Rights described in Section 8.3 and the
termination right described in Section 14.2.1(d).

 

  8.2. Cure Period. In the event that Luna breaches its supply obligations under
Section 5.1, Luna shall have the right to cure such breach for the Aggregate
Cure Period.

 

  8.3. Standby Rights. Following the failure by Luna to cure its breaches of
supply obligations under this Section 5.1 within the Aggregate Cure Period in
accordance with Section 8.2, or in the case of breach attributed to an Event of
Force Majeure, following a period of sixty (60) days, Intuitive may exercise
some or all of the following rights (collectively referred to as “Standby
Rights”) upon written notice to Luna:

 

  8.3.1. Nominated Manufacturer Designation. Intuitive may either designate a
third party or designate itself as the manufacturer of Luna Product (the
“Nominated Manufacturer”), provided that such Nominated Manufacturer agrees in
advance and in writing to be bound by confidentiality obligations at least as
restrictive as those set forth in Section 12 (pursuant to which it agrees to use
any confidential information received above only for the limited purpose of
manufacturing Luna Product as described in Section 12.2).

 

  8.3.2. Transfer of Information. Upon Intuitive’s written request, Luna will
use commercially reasonable efforts to provide the Nominated Manufacturer as
promptly as practicable, and in any event within fifteen (15) business days
after Intuitive’s written request, with all relevant manufacturing information
and know-how that Luna Controls that is reasonably necessary for the Nominated
Manufacturer to produce the Luna Product.

 

  8.4.

No Minimums or Supply Obligations. To the extent Intuitive exercises the Standby
Rights described in Section 8.3, Intuitive’s purchase obligations under
Section 5.4.1 and Minimum Annual Commitment as set forth in Section 5.4.2 shall
no longer apply or have any further effect, and Luna’s supply obligations supply
under this Agreement with respect to Luna Products shall also no longer apply or
have any further effect, unless the exercise of Standby Rights is based on a
Luna breach attributed to an Event of Force Majeure that lasts for less than 120
days, in which

 

-13-

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

 

case Intuitive’s purchase obligations and Luna’s supply obligations shall resume
upon the end of such Force Majeure Event. Further, to the extent Intuitive
exercises the Standby Rights described in Section 8.3 based on a Luna breach not
attributed to an Event of Force Majeure, Intuitive will no longer be obligated
to make any Development Fee or [****] Fee payments to Luna under Sections 6.2 or
6.3 (beyond those due and owing as of the effective date of such exercise),
provided that Luna shall have no obligation to perform any further development
work under this Agreement.

 

9. INTELLECTUAL PROPERTY OWNERSHIP AND LICENSES

 

  9.1. Background Intellectual Property. Subject to the licenses granted under
this Agreement, as between the Parties, each Party retains all Intellectual
Property Rights that: (i) were created by such Party’s personnel or otherwise
obtained by such Party prior to the Effective Date, or (ii) are created by such
Party’s personnel or otherwise obtained by such Party after the Effective Date
independently and outside the scope of the Development Program (“Background
Intellectual Property”).

 

  9.2. New Intellectual Property. To the extent that one or more Parties
acquires, licenses, or creates any Technology in connection with the Development
Program, subject to the licenses granted under this Agreement, as between the
Parties, ownership of Technology and all Intellectual Property Rights therein
(“New Intellectual Property”) shall be as follows:

 

  9.2.1. Luna shall own all right, title and interest in all New Intellectual
Property related to shape sensing Technology acquired, licensed or created
solely by Luna personnel (including consultants, contractors or other third
parties working on Luna’s behalf) (“Luna New Intellectual Property”).

 

  9.2.2. Intuitive shall own all right, title and interest in all New
Intellectual Property related to shape sensing Technology (i) acquired, licensed
or created solely by Intuitive personnel (including consultants, contractors or
other third parties working on Intuitive’s behalf, but excluding Luna
hereunder), or (ii) invented or authored jointly by Luna and Intuitive personnel
(including third parties working on either Party’s behalf) (with respect to this
subclause (ii) only, the “New Joint Intellectual Property,” and with respect to
subclauses (i) and (ii) collectively, the “Intuitive New Intellectual
Property”). Luna agrees to reasonably cooperate, at Intuitive’s cost, in the
preparation, filing, prosecution, and maintenance of any Intuitive New
Intellectual Property that are jointly invented by the Parties.

 

  9.2.3.

As used in this Section 9.2, the person or persons responsible for having
created New Intellectual Property shall be determined: (i) with respect to
inventions, under principles of inventorship in accordance with U.S. patent law,
and (ii) with respect to works of authorship, under principles of

 

-14-

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

 

authorship in accordance with U.S. copyright law. Accordingly, whether an
invention an invention or work is created “jointly” shall be determined in
accordance with principles of ownership under U.S. patent or copyright law, as
applicable.

 

  9.3. Prosecution of Patents.

 

  9.3.1. Luna New Intellectual Property. Luna is responsible for filing,
prosecuting and maintaining patent applications and resulting patents on any
Luna New Intellectual Property at its own cost.

 

  9.3.2. Intuitive New Intellectual Property. Intuitive and Luna shall cooperate
in good faith in the filing, prosecution, and enforcement of any patentable New
Joint Intellectual Property. Intuitive shall pay all costs and fees associated
with the filing and prosecution of the Intuitive New Intellectual Property
(including all New Joint Intellectual Property) and shall make all reasonable
efforts to properly prosecute and maintain the New Joint Intellectual Property.
Upon request, Luna shall have the right to review and provide input on all
patent filings and responses regarding the New Joint Intellectual Property.

 

  9.4. New Intellectual Property Cross License.

 

  9.4.1. To the extent Luna is empowered to do so, (i) Luna hereby grants to
Intuitive and its Affiliates, on an “AS-IS” basis and without representation or
warranty of any kind, a worldwide, fully-paid, royalty-free, transferable,
sublicensable, perpetual license or pass-through right under the Luna New
Intellectual Property to make, have made, sell, import and use any products or
services in the Field, and (ii) [****]

 

  9.4.2. To the extent Intuitive is empowered to do so, (i) Intuitive hereby
grants Luna and its Affiliates, on an “AS-IS” basis and without representation
or warranty of any kind, a worldwide, fully-paid, royalty-free, transferable,
sublicensable, perpetual license or pass-through right under the Intuitive New
Intellectual Property to make, have made, sell, import and use any products or
services outside the Field, and (ii)[****] For the avoidance of doubt, Intuitive
does not grant Luna any license under the Intuitive New Intellectual Property
for use within the Field that are related to [****]

 

  9.5. No Implied Rights. Except as expressly provided herein, no Party hereto
grants to any other Party hereto or to any other party any rights or licenses
under such Party’s Technology or Intellectual Property Rights.

 

  9.6.

Maintenance of Luna Background Intellectual Property. With respect to the
patents and patent applications licensed to Intuitive under Section 4 including
but not limited to those listed on Exhibit 9.6, Luna agrees to use commercially
reasonable efforts to maintain all applicable licenses by third parties in good
standing and to maintain all

 

-15-

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

 

patents and patent applications Controlled by Luna during the Term, provided
that Luna may abandon any such Luna-owned patents and patent applications after
the [****] Period has ended.

 

  9.7. Enforcement and Recovery.

[****]

 

10. PRODUCT WARRANTY

 

  10.1. Luna Product Warranty. Luna warrants to Intuitive that at the time of
delivery to Intuitive, the Luna Products purchased by Intuitive shall conform in
all material respects to the Luna Product Specifications. This warranty is
contingent upon proper use of Luna Product in the application for which it is
intended as indicated in the end-user customer warranty. Luna makes no warranty
(express, implied, or statutory) for Luna Products that are modified (except as
expressly contemplated herein) or subjected to accident, misuse, neglect,
unauthorized repair, or improper testing or storage or for any Luna Product that
is combined with a product of a third-party. The warranty in this Section 10.1
is not transferable except in connection with the assignment of this Agreement
in accordance with Section 16.6.

 

  10.2. Exclusive Remedy. If any Luna Product purchased by Intuitive from Luna
fails to conform to the warranty set forth in Section 10.1, Luna’s sole and
exclusive liability and Intuitive’s exclusive remedy shall be, at Luna’s sole
election, to repair or replace the Luna Product, or component thereof, or credit
Intuitive’s account for (and where there is no balance on Intuitive’s account,
refund Intuitive) the net amount actually paid for such Luna Product, or
component thereof, provided that (i) within sixty (60) days after the date of
shipment of the Luna Product by Intuitive to Intuitive’s customer (but in any
event within one (1) year after the date of delivery by Luna to Intuitive
hereunder), Intuitive promptly notifies Luna in writing that such Luna Product
failed to conform and furnishes a detailed explanation of any alleged
nonconformity and requests a return material authorization number; (ii) within
thirty (30) days after receiving a return material authorization number from
Luna, Intuitive returns such Luna Product to Luna at Luna’s expense, to the
address designated by Luna with the return material authorization number affixed
prominently to the outside packaging; and (iii) the claimed nonconformities
actually exist and were not caused by accident, misuse, neglect, alteration,
repair or improper use or storage (other than by Luna). If such Luna Product
actually conforms, Intuitive will reimburse Luna for shipment charges for return
of the nonconforming Luna Products by Intuitive to Luna.

 

  10.3.

LUNA NEITHER ASSUMES NOR AUTHORIZES ANY OTHER PERSON TO ASSUME ANY OTHER
LIABILITIES OR MAKE ANY OTHER WARRANTIES ARISING OUT OF OR IN CONNECTION WITH
THE SALE OR USE OF LUNA SHAPE-SENSING PRODUCTS OR ANY LUNA PRODUCT. INTUITIVE
SHALL

 

-16-

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

 

MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE LUNA PRODUCTS BEYOND
THOSE EXPRESSLY SET FORTH IN THIS ARTICLE 10.

 

11. OTHER REPRESENTATIONS AND WARRANTIES

 

  11.1. By Intuitive. Intuitive warrants and represents to Luna that
(i) Intuitive has the full right and authority to enter into this Agreement and
grant the licenses granted herein; (ii) Intuitive has no outstanding
encumbrances or agreements, including any agreements with academic institutions,
universities or other third parties which would be inconsistent with the
licenses granted herein; and (iii) to Intuitive’s knowledge on the Effective
Date, there are no actions, suits or claims pending against it with respect to
its right to enter into and perform its obligations under this Agreement.

 

  11.2. By Luna. Luna warrants and represents to Intuitive that (i) Luna has the
full right and authority to enter into this Agreement and grant the licenses
granted herein; (ii) Luna has no outstanding encumbrances or agreements,
including any agreements with academic institutions, universities or other third
parties which would be inconsistent with the licenses granted herein; and
(iii) to Luna’s knowledge on the Effective Date, there are no actions, suits or
claims pending against it with respect to its right to enter into and perform
its obligations under this Agreement.

 

  11.3. Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE 10
AND THIS ARTICLE 11, LUNA MAKES NO REPRESENTATIONS OR WARRANTIES UNDER THIS
AGREEMENT, AND EXPRESSLY DISCLAIMS ANY WARRANTIES EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, VALIDITY, AND NON-INFRINGEMENT.

 

12. CONFIDENTIALITY; NON-SOLICITATION

 

  12.1. Confidential Information. Except as expressly provided in this
Agreement, during this Agreement’s Term and for three (3) years thereafter, the
receiving Party shall not publish or otherwise disclose and shall not use for
any purpose (other than the performance of obligations or exercising its license
rights under this Agreement) any information furnished to it by the other Party
pursuant to this Agreement which if disclosed in tangible form is marked
“Confidential” or with other similar designation to indicate its confidential or
proprietary nature, or if disclosed orally is indicated orally to be
confidential or proprietary by the Party disclosing such information at the time
of such disclosure and is confirmed in writing as confidential or proprietary by
the disclosing Party within a reasonable time after such disclosure
(“Confidential Information”). Notwithstanding the foregoing, Confidential
Information shall not include information that:

 

  12.1.1. was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure, as demonstrated by
written documentation of the receiving Party;

 

-17-

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

  12.1.2. was generally available to the public or otherwise part of the public
domain at the time of its disclosure to the receiving Party;

 

  12.1.3. became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of this Agreement; or

 

  12.1.4. was subsequently lawfully disclosed to the receiving Party by a person
other than a Party to this Agreement or developed by the receiving Party without
reference to any information or materials disclosed by the disclosing Party.

 

  12.2. Permitted Disclosures of Confidential Information. Notwithstanding
Section 12.1, each Party to this Agreement may disclose Confidential Information
disclosed to it by the other Party to the extent such use or disclosure is
required by law or reasonably necessary in complying with an order of a court of
law or other governmental authority, provided that if a Party is required to
make any disclosure of the other Party’s Confidential Information, the Party
subject to the disclosure requirement will promptly notify the other Party (to
the extent permitted by law) and will use reasonable efforts to secure
confidential treatment of the Confidential Information prior to its disclosure
(whether through a confidential treatment request, protective order or
otherwise).

 

  12.3. Return of Confidential Information. Within thirty (30) days after the
effective date of any termination of this Agreement, each Party shall return to
the other Party (where practicable), or at the other Party’s option destroy and
provide written certification of the destruction of, all tangible materials that
contain the other Party’s Confidential Information.

 

  12.4. Confidentiality of Agreement.

 

  12.4.1. Public or Industry Announcement. The Parties will use reasonable
efforts to mutually agree upon the contents of a Luna’s press release, which
shall be issued by Luna within four (4) business days after the Effective Date.
Each Party shall be free to publicly disclose information contained in such
press release, or in any other materials that have been previously approved for
disclosure by the other Party, without further approvals from the other Party
hereunder, to the extent there have been no material additions or changes
thereto.

 

  12.4.2.

Disclosure of Agreement. Subject to Section 12.4.1, each Party may disclose the
existence of this Agreement as it deems appropriate, provided that neither Party
shall disclose any specific terms of this Agreement, except (a) as

 

-18-

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

 

provided in Section 12.2, (b) as required by law, including in connection with
the requirements of a securities filing, (c) in confidence, to accountants,
banks, financing sources and their advisors who are subject to reasonable
confidentiality obligations, (d) in confidence in connection with the
enforcement of this Agreement or exercise of its rights under this Agreement; or
(e) in confidence, in connection with a merger or acquisition, or proposed
merger or acquisition, or the like.

 

  12.5. Non-Solicitation. During the Term and for twelve (12) months thereafter,
neither Party may solicit for employment, hire or employ (including as a
consultant or contractor) any employee of the other Party, or any individual who
has been an employee of the other Party within the previous year.

 

13. INDEMNIFICATION AND DEFENSE OF INFRINGEMENT

 

  13.1. Intuitive shall defend and indemnify Luna, and each of its directors,
officers, employees, agents, successors and assigns (collectively, “Luna
Indemnitees”), against all third-party claims, suits and proceedings, and shall
hold the Luna Indemnitees harmless for all judgments, settlements, costs,
liabilities and expenses (including without limitation, reasonable attorneys’
fees and litigation costs) (collectively, “Losses”) payable to third parties in
connection with such claims, suits and proceedings, to the extent arising from
or occurring as a result of: (i) any third-party product liability actions
alleging physical injury (including death) or property damage caused by an
Integrated Product; (ii) the actual or alleged infringement of a claim of a
patent or the actual or alleged infringement or misappropriation of some other
third-party Intellectual Property Right by the Intuitive Product; and (iii) all
acts of any transferee or arising out of any transfer under Section 4.3 of the
licenses granted to Intuitive by Luna; provided, however, that Intuitive shall
have no liability for any such Losses to the extent that such Losses were caused
by Luna’s negligence or the failure of a Luna Product to meet the Luna Product
Specifications in breach of the Luna Product warranty of Section 10.1.

 

  13.2. Luna shall defend and indemnify Intuitive, and each of its directors,
officers, employees, agents, successors and assigns (collectively, “Intuitive
Indemnitees”), against all third-party claims, suits and proceedings, and shall
hold the Intuitive Indemnitees harmless for Losses payable to third parties in
connection with such claims, suits and proceedings, to the extent arising from
or occurring as a result of (i) any third-party product liability actions
alleging physical injury (including death) or property damage caused by Luna’s
negligence or the failure of a Luna Product to meet the Luna Product
Specifications, and (ii) the actual or alleged infringement of a claim of a
patent or the actual or alleged infringement or misappropriation of some other
third-party Intellectual Property Right by a Luna Product (other than
attributable to the practice or use of New Joint Intellectual Property);
provided, however, that Luna shall have no liability for any such Losses to the
extent that such Losses were caused by the negligence of Intuitive, its
Affiliates or end customers.

 

-19-

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

  13.3. The Party seeking indemnification shall give the other Party
(“Indemnifying Party”): (i) prompt written notice of any third-party claim for
which indemnification is sought, (ii) sole control over the defense or
settlement of such claim, and (iii) reasonable assistance, at the Indemnifying
Party’s expense, in the defense and settlement of the claim. In no event,
however, may the Indemnifying Party settle any litigation in a manner that
diminishes the rights or interests of the other Party under this Agreement
and/or obligates the other Party to make any payment or take any action without
the written consent of the other Party, which consent shall not be unreasonably
withheld.

 

14. TERM AND TERMINATION

 

  14.1. Term. Subject to Sections 4 and 14.2.5, this Agreement takes effect as
of the Effective Date and, unless earlier terminated pursuant to the other
provisions of this Section 14, shall continue in full force and effect for a
period ending on the last day of the [****] Period (“Term”). The Term may be
extended by mutual written agreement of the Parties prior to the expiration of
the initial Term.

 

  14.2. Termination.

 

  14.2.1. Termination by Intuitive. Intuitive may terminate this Agreement by
written notice to Luna:

 

  (a) in the event that Luna breaches [****], provided that Luna has not cured
such breach within twenty-one (21) days of Luna receiving written notice of such
breach from Intuitive. Under this Section 14.2.1, (i) Intuitive shall retain its
licenses [****] under Sections 4 and 9, (ii) Luna shall pay back all payments
for the [****] Fee made by Intuitive to Luna under Section 6.3 of this
Agreement, and (iii) Intuitive shall have the right, at its sole discretion, to
terminate its Minimum Annual Commitment under Section 5.4.2 of the Agreement;
provided that Intuitive shall make such determination. In addition, Intuitive
shall have the right to seek additional legal recourses for intentional breach
of the [****] by Luna.

 

  (b)

in the event Luna is unable to satisfy the [****]. Under this Section 14.2.1(b),
Intuitive will no longer be obligated to make any additional Development Fee or
[****] Fee payments to Luna under Sections 6.2 or 6.3 (beyond those due and
owing as of the effective date of termination) and shall maintain the licenses
and [****]. Notwithstanding any of the foregoing to the contrary, within ten
(10) business days of Intuitive’s request, Luna shall make all commercially
reasonable efforts to allow Intuitive to review the development effort in
according to the Milestones. In such case, Luna will have the right to all
payments made by Intuitive up to, or that otherwise are accrued and owing as of,
the effective date of termination, provided that

 

-20-

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

 

Intuitive will not be required to pay those portions of the [****] or
Development Fees not accrued and owing as of the termination date. In the event
of termination by Intuitive under this Section 14.2.1(b), Luna shall be
obligated to mitigate further expenditures or commitment of funds. The foregoing
shall be Intuitive’s sole remedy and Luna’s sole liability for Luna’s any
failure by Luna [****]. However, Intuitive reserves the rights to seek other
legal recourses for Luna’s intentional breach of [****].

 

  (c) in the event Luna breaches a material obligation of the Agreement, after
Intuitive has provided written notice and following a cure period of twenty-one
(21) days. Under this Section 14.2.1(c), Intuitive will no longer be obligated
to make any Development Fee or [****] Fee payments to Luna under Sections 6.2 or
6.3 (beyond those due and owing as of the effective date of termination) and
shall maintain the licenses and [****] In addition, Intuitive shall have the
right to seek additional legal recourses for Luna’s intentional breach of a
material obligation of the Agreement after Intuitive has provided written notice
and following a cure period of twenty-one (21) days.

 

  (d) in the event Luna breaches its supply obligations and after Intuitive has
exercised its rights under Section 8. Under this Section 14.2.1(c), Intuitive
will no longer be obligated to make any Development Fee or [****] Fee payments
to Luna under Sections 6.2 or 6.3 (beyond those due and owing as of the
effective date of termination) and shall maintain the licenses and [****] In
addition, Intuitive shall have the right to seek additional legal recourses for
Luna’s intentional breach of [****]. In the event Luna misses its supply
obligations following a Force Majeure Event and after Intuitive has exercised
its rights under Section 8, Intuitive has the right to terminate the Agreement
by written notice and will no longer be obligated to make any Development Fee or
[****] Fee payments to Luna under Sections 6.2 or 6.3 (beyond those due and
owing as of the effective date of termination) and shall maintain the licenses
and [****]

 

  14.2.2. Termination by Luna. Luna may terminate this Agreement by written
notice to Intuitive:

 

  (a) in the event Intuitive breaches a material obligation of the Agreement,
after Luna has provided written notice and following a cure period of twenty-one
(21) days. In the event of termination by Luna under this Section 14.2.2(a),
[****] In addition, Luna shall have the right to seek additional legal
recourses.

 

  14.2.3.

Termination for Bankruptcy. Either Intuitive or Luna may terminate this
Agreement by written notice if the other Party enters Bankruptcy. For clarity,

 

-21-

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

 

in the event of the Bankruptcy of Luna, the licenses granted to Intuitive under
Sections 4 and 9 shall continue in perpetuity, and shall be considered full paid
up and no additional fees shall be due by Intuitive to Luna. No license
extending beyond the scope of those licenses granted under Sections 4 and 9
shall be granted by invoking this Section 14.2.3.

 

  14.2.4. No Renewal, Extension or Waiver. Acceptance of any order for any Luna
Product from Intuitive after the effective date of termination of this Agreement
shall not be construed as a renewal or extension hereof, or as a waiver of
termination of this Agreement.

 

  14.2.5. Survival. Termination of this Agreement shall not affect a Party’s
payment obligations to the other Party that have already accrued. In addition,
Sections 4 (except as provided in Section 14.2.1—14.2.3), 9, 10, 11, 12 13, 14,
and 15, shall survive expiration or termination of this Agreement for any
reason. In addition, if this Agreement is terminated for any reason, Luna’s
[****] shall have no further effect.

 

15. LIMITATION OF LIABILITY

EXCEPT FOR BREACH OF ARTICLE 12 (CONFIDENTIALITY), LIABILITY FOR AMOUNTS PAYABLE
TO THIRD PARTIES UNDER ARTICLE 13 (INDEMNIFICATION), AND INTENTIONAL BREACH BY
EITHER PARTY OF OBLIGATIONS GIVING RISE TO TERMINATION UNDER SECTION 14, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER OR ANY OTHER ENTITY FOR COSTS OF PROCUREMENT
OF SUBSTITUTE GOODS, LOST PROFITS, OR ANY OTHER SPECIAL, CONSEQUENTIAL, OR
INCIDENTAL DAMAGES. EXCEPT IN THE EVENT OF BREACH OF ARTICLE 12
(CONFIDENTIALITY), LIABILITY FOR AMOUNTS PAYABLE TO THIRD PARTIES UNDER ARTICLE
13 (INDEMNIFICATION), AND INTENTIONAL BREACH BY LUNA OF OBLIGATIONS GIVING RISE
TO TERMINATION UNDER SECTION 14, RESPECTIVELY, LUNA’S AGGREGATE LIABILITY UNDER
THIS AGREEMENT SHALL NOT EXCEED THE AGGREGATE FEES PAID BY INTUITIVE UNDER THE
AGREEMENT. FOR CLARITY, NOTHING IN THIS SECTION 15 SHALL LIMIT A PARTY’S
AGGREGATE LIABILITY UNDER SECTION 13 FOR NEGLIGENCE OR BODILY INJURY TO A PERSON
OR DEATH CAUSED BY FAILURE OF A LUNA PRODUCT TO MEET THE LUNA PRODUCT
SPECIFICATIONS, OR UNDER SECTION 14 FOR INTENTIONAL BREACH.

 

16. MISCELLANEOUS

 

  16.1. Subcontractors. Luna may subcontract the performance of its obligations
under this Agreement to third parties, provided that Luna notifies Intuitive of
the identity of any subcontractors used in the manufacture of Luna Products,
will not change subcontractors without providing Intuitive with advance notice
and obtains for Intuitive the right to inspect such subcontractors for purposes
of quality audits, consistent with Intuitive’s right to inspect Luna for such
purpose hereunder.

 

-22-

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

  16.2. Force Majeure. Nonperformance of any Party (except for payment
obligations) shall be excused to the extent that performance is rendered
impossible by strike, fire, earthquake, flood, governmental acts or orders or
restrictions, delay or failure of suppliers or service providers, or other
occurrences where failure to perform is beyond the reasonable control and not
caused by the fault, negligence or willful misconduct of the nonperforming Party
(“Event of Force Majeure”).

 

  16.3. No Implied Waivers; Rights Cumulative. No failure on the part of Luna or
Intuitive to exercise and no delay in exercising any right under this Agreement,
or provided by statute or at law or in equity or otherwise, shall impair,
prejudice or constitute a waiver of any such right, nor shall any partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right.

 

  16.4. Independent Contractors. Nothing contained in this Agreement is intended
implicitly, or is to be construed, to constitute Luna or Intuitive as partners
in the legal sense. No Party hereto shall have any express or implied right or
authority to assume or create any obligations on behalf of or in the name of any
other Party or to bind any other Party to any contract, agreement or undertaking
with any third party.

 

  16.5. Notices. All notices, requests and other communications hereunder shall
be in writing and shall be personally delivered or sent by registered or
certified mail, return receipt requested, postage prepaid, in each case to the
respective address specified below, or such other address as may be specified in
writing to the other Party hereto:

 

Intuitive:   Intuitive Surgical, Inc.   1266 Kifer Road, Building 101,  
Sunnyvale, California 94086-5304   Attn: General Counsel Luna:   Luna
Innovations Incorporated  

1703 S. Jefferson Street, SW

Suite 400

  Roanoke, Virginia 24016   Attn: General Counsel   With copy to (which shall
not constitute notice):   Wilson Sonsini Goodrich & Rosati   1700 K Street, NW  
Fifth Floor   Washington, DC 20006   Attn: Trevor J. Chaplick

 

-23-

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

  16.6. Assignment. Subject to this Section 16.6, this Agreement shall inure to
the benefit of and be binding upon the Parties hereto and their respective
permitted successors and assigns. This Agreement shall not be assignable by
either Party without the written consent of the other Party hereto; provided
that if all or substantially all of the business or assets of either Party
relating to this Agreement are transferred to another Party (an “Acquirer”),
including by way of merger, sale of assets, consolidation, change of control or
operation of law, then such Party may assign this agreement to the Acquirer in
connection with such transfer of business or assets upon written notice to the
other Party hereto.

 

  16.7. Modification. No amendment or modification of any provision of this
Agreement shall be effective unless in writing signed by all Parties hereto or
otherwise mutually agreed in accordance with Section 3 herein. No provision of
this Agreement shall be varied, contradicted or explained by any oral agreement,
course of dealing or performance or any other matter not set forth in an
agreement in writing and signed by all Parties.

 

  16.8. Severability. If any provision hereof should be held invalid, illegal or
unenforceable in any jurisdiction, all other provisions hereof shall remain in
full force and effect in such jurisdiction and shall be liberally construed in
order to carry out the intentions of the Parties hereto as nearly as may be
possible. Such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.

 

  16.9. Governing Law. This Agreement and any dispute arising from the
performance or breach hereof shall be governed by and construed and enforced in
accordance with, the laws of the State of New York, without reference to
conflicts-of-laws principles and without regard to the 1980 Convention on the
International Sale of Goods. Each Party hereby submits to the exclusive
jurisdiction of any state or federal court sitting in New York, New York in any
action arising out of or relating to this Agreement or the transactions
contemplated herein.

 

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

 

  16.11. Headings. Headings used herein are for convenience only and shall not
in any way affect the construction of or be taken into consideration in
interpreting this Agreement.

 

  16.12. Expenses. Excepts as otherwise set forth herein, each Party shall bear
its own expenses, including without limitation, fees and expenses of finders,
agents, brokers, legal counsel, financial advisors, accountants and other
representatives and advisors incurred in connection with the transactions
contemplated hereby.

 

-24-

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

  16.13. Entire Agreement. This Agreement, including the Exhibits attached
hereto, constitutes the entire agreement with respect to the subject matter
hereof, and supersedes all prior or contemporaneous understandings or
agreements, whether written or oral, between Luna and Intuitive with respect to
such subject matter.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be signed
by duly authorized officers or representatives as of the date first above
written.

 

LUNA INNOVATIONS INCORPORATED     INTUITIVE SURGICAL, INC. By:  

/s/ Kent A. Murphy

    By:  

/s/ Lonnie M. Smith

Print Name: Kent A. Murphy     Print Name: Lonnie M. Smith Title:   President
and CEO     Title:   President and CEO

 

-25-

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

EXHIBIT 2.1

[****]

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

EXHIBIT 2.4

PROJECT MANAGERS

For Luna: [****]

For Intuitive: [****]

 

-2-

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

EXHIBIT 9.6

LUNA BACKGROUND INTELLECTUAL PROPERTY

[****]

 

-3-