**Exhibit 10.9**

 

**LICENSEAND DEVELOPMENT AGREEMENT**

** **

**DATED ASOF**

** **

**SEPTEMBER9, 2008**

** **

**BETWEEN**

** **

**POWERMEDICAL INTERVENTIONS, INC.**

** **

**AND**

** **

**INTUITIVESURGICAL, INC.**

 

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**TABLE OF CONTENTS**

 
| **1.       **DEFINITIONS                  | **1**                                                                |
|------------------------------------------------------------------------------|----------------------------------------------------------------------|
| ** **                                                                   | ** **                                                           | ** ** |
| 1.1.                                                                         | CERTAIN  DEFINITIONS                                                 | 1 |
| 1.2.                                                                         | OTHER  DEFINED TERMS                                                 | 7 |
|                                                                         |                                                                 |   |
| **2.       **LICENSES                     | **8**                                                                |
| ** **                                                                   | ** **                                                           | ** ** |
| 2.1.                                                                         | LICENSE  GRANTS TO ISRG                                              | 8 |
| 2.2.                                                                         | NON-EXCLUSIVE  LICENSE TO USE TECHNICAL INFORMATION                  | 9 |
| 2.3.                                                                         | SUBLICENSES                                                          | 9 |
| 2.4.                                                                         | THIRD  PARTY MANUFACTURERS                                           | 10 |
| 2.5.                                                                         | DISTRIBUTORS                                                         | 10 |
| 2.6.                                                                         | TRADEMARK  LICENSE                                                   | 10 |
|                                                                         |                                                                 |   |
| **3.       **DEVELOPMENT ACTIVITIES       | **10**                                                               |
| ** **                                                                   | ** **                                                           | ** ** |
| 3.1.                                                                         | GENERAL                                                              | 10 |
| 3.2.                                                                         | FURTHER  DEVELOPMENT PROPOSALS                                       | 11 |
|                                                                         |                                                                 |   |
| **4.       **REGULATORY MATTERS           | **11**                                                               |
| ** **                                                                   | ** **                                                           | ** ** |
| 4.1.                                                                         | REGULATORY  APPROVALS                                                | 11 |
| 4.2.                                                                         | REGULATORY  INFORMATION AND NOTIFICATION WITH RESPECT TO THE DEVICE  | 11 |
| 4.3.                                                                         | RECALLS                                                              | 12 |
|                                                                         |                                                                 |   |
| **5.       **RELOAD SUPPLY                | **12**                                                               |
| ** **                                                                   | ** **                                                           | ** ** |
| **6.       **ISRG REQUIREMENTS            | **12**                                                               |
| ** **                                                                   | ** **                                                           | ** ** |
| 6.1.                                                                         | PRELIMINARY  DESIGN REVIEW                                           | 12 |
| 6.2.                                                                         | CRITICAL  DESIGN REVIEW                                              | 12 |
| 6.3.                                                                         | FIRST  COMMERCIAL SALE                                               | 12 |
|                                                                         |                                                                 |   |
| **7.       **LICENSE PAYMENTS             | **12**                                                               |
| ** **                                                                   | ** **                                                           | ** ** |
| 7.1.                                                                         | LICENSE  ISSUANCE FEE                                                | 12 |
| 7.2.                                                                         | MILESTONE  PAYMENTS                                                  | 12 |
| 7.3.                                                                         | PAYMENT  TERMS                                                       | 13 |
|                                                                         |                                                                 |   |
| **8.       **INTELLECTUAL PROPERTY        | **13**                                                               |
| ** **                                                                   | ** **                                                           | ** ** |
| 8.1.                                                                         | OWNERSHIP  OF IP                                                     | 13 |
| 8.2.                                                                         | OWNERSHIP  OF PMII PROPERTY                                          | 13 |
| 8.3.                                                                         | OWNERSHIP  OF DEVICE                                                 | 13 |
| 8.4.                                                                         | OWNERSHIP  OF NEW PMII IP                                            | 13 |
| 8.5.                                                                         | OWNERSHIP  OF NEW ISRG IP                                            | 14 |
| 8.6.                                                                         | ASSIGNMENT  OF INTELLECTUAL PROPERTY                                 | 14 |
|                                                                         |                                                                 |   |
| **9.       **PROSECUTION OF PATENT RIGHTS | **14**                                                               |
| ** **                                                                   | ** **                                                           | ** ** |
| 9.1.                                                                         | PROSECUTION  AND MAINTENANCE OF PATENT RIGHTS                        | 14 |
| 9.2.                                                                         | COOPERATION  WITH RESPECT TO LICENSED PATENT RIGHTS                  | 14 |
| 9.3.                                                                         | ELECTION  NOT TO PROSECUTE; LICENSED PATENT RIGHTS; RIGHT TO STEP IN | 15 |

 

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| 9.4.                                                                                      | NEW  ISRG IP                                       | 15         |
|-------------------------------------------------------------------------------------------|----------------------------------------------------|------------|
|                                                                                      |                                               |       |
| **10.       **ENFORCEMENT OF LICENSED IP               | **16**                                             |
| ** **                                                                                | ** **                                         | ** ** |
| 10.1.                                                                                     | RIGHTS  TO ENFORCE                                 | 16         |
| 10.2.                                                                                     | ENFORCEMENT  BY PRIMARY ENFORCEMENT PARTY          | 16         |
| 10.3.                                                                                     | ENFORCEMENT  ACTION BY THIRD PARTY                 | 17         |
| 10.4.                                                                                     | AMOUNTS  RECOVERED                                 | 18         |
| 10.5.                                                                                     | LIMITATION  ON SETTLEMENTS                         | 18         |
|                                                                                      |                                               |       |
| **11.       **CONFIDENTIALITY                          | **18**                                             |
| ** **                                                                                | ** **                                         | ** ** |
| 11.1.                                                                                     | LIMITED  DISCLOSURE AND USE                        | 18         |
| 11.2.                                                                                     | EXCEPTIONS                                         | 18         |
| 11.3.                                                                                     | USE  OF NAME; DISCLOSURE OF TERMS OF THE AGREEMENT | 19         |
| 11.4.                                                                                     | TERMINATION                                        | 19         |
| 11.5.                                                                                     | PERMITTED  DISCLOSURE TO RELATED PERSONS           | 19         |
|                                                                                      |                                               |       |
| **12.       **REPRESENTATIONS AND WARRANTIES           | **20**                                             |
| ** **                                                                                | ** **                                         | ** ** |
| 12.1.                                                                                     | MUTUAL  REPRESENTATIONS AND WARRANTIES             | 20         |
| 12.2.                                                                                     | REPRESENTATIONS  AND WARRANTIES OF PMII            | 20         |
| 12.3.                                                                                     | DISCLAIMER                                         | 21         |
|                                                                                      |                                               |       |
| **13.       **INDEMNIFICATION; LIMITATION OF LIABILITY | **21**                                             |
| ** **                                                                                | ** **                                         | ** ** |
| 13.1.                                                                                     | PMII’S  INDEMNIFICATION OBLIGATIONS           | 21         |
| 13.2.                                                                                     | ISRG’S  INDEMNIFICATION OBLIGATIONS           | 22         |
| 13.3.                                                                                     | NOTICE  OF CLAIMS                                  | 23         |
| 13.4.                                                                                     | THIRD  PARTY BENEFICIARIES                         | 23         |
| 13.5.                                                                                     | LIMITATION  OF LIABILITY                           | 24         |
| 13.6.                                                                                     | INSURANCE                                          | 24         |
|                                                                                      |                                               |       |
| **14.       **DISPUTE RESOLUTION; ARBITRATION          | **24**                                             |
| ** **                                                                                | ** **                                         | ** ** |
| 14.1.                                                                                     | ARBITRATION  AS EXCLUSIVE REMEDY                   | 24         |
| 14.2.                                                                                     | INTERIM  RELIEF; INJUNCTIONS                       | 24         |
| 14.3.                                                                                     | APPLICABLE  LAW                                    | 24         |
|                                                                                      |                                               |       |
| **15.       **TERM AND TERMINATION                     | **25**                                             |
| ** **                                                                                | ** **                                         | ** ** |
| 15.1.                                                                                     | LICENSE  TERM                                      | 25         |
| 15.2.                                                                                     | TERMINATION  BY ISRG                               | 25         |
| 15.3.                                                                                     | MATERIAL  BREACH BY PMII                           | 25         |
| 15.4.                                                                                     | MATERIAL  BREACH BY ISRG                           | 25         |
| 15.5.                                                                                     | AFTER  TERMINATION                                 | 25         |
| 15.6.                                                                                     | SECTION 365(N)                                | 26         |
|                                                                                      |                                               |       |
| **16.       **GENERAL                                  | **26**                                             |
| ** **                                                                                | ** **                                         | ** ** |
| 16.1.                                                                                     | WAIVERS  AND AMENDMENTS                            | 26         |
| 16.2.                                                                                     | ENTIRE  AGREEMENT                                  | 26         |
| 16.3.                                                                                     | SEVERABILITY                                       | 27         |
| 16.4.                                                                                     | RELATIONSHIP  OF THE PARTIES                       | 27         |

 

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| 16.5.  | NO  ELECTION OF REMEDIES               | 27 |
|--------|----------------------------------------|----|
| 16.6.  | COSTS  AND EXPENSES                    | 27 |
| 16.7.  | FORCE  MAJEURE                         | 27 |
| 16.8.  | NOTICES                                | 27 |
| 16.9.  | WAIVER  OF JURY TRIAL                  | 28 |
| 16.10. | COUNTERPARTS  AND FACSIMILE SIGNATURES | 28 |
| 16.11. | BENEFITS  AND BURDENS; ASSIGNMENTS     | 29 |
| 16.12. | INTERPRETATION                         | 29 |
| 16.13. | LICENSE  REGISTRATION AND RECORDAL     | 29 |
| 16.14. | NON-SOLICITATION                       | 30 |

 

List of Exhibits

 
| Exhibit 1.1(v)  | Licensed  Patent Rights  |
|----------------------|--------------------------|
| Exhibit 1.1(ii) | Reload  Specifications   |
| Exhibit 1.1(kk) | Statement of  Work       |
| Exhibit 14      | Arbitration  Procedures  |
| Exhibit 16.13   | Registration  of License |

 

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**LICENSE AND DEVELOPMENT AGREEMENT**

 

This License and Development Agreement (this “Agreement”)is made as of September 9, 2008 (“Agreement Date”), by and betweenPower Medical Interventions, Inc., a Delaware corporation having itsprincipal place of business at 2021 Cabot Boulevard, Langhorne, Pennsylvania19047 (“PMII”), and Intuitive Surgical, Inc.,a Delaware corporation having its principal place of business at 1266 Kifer Road,Sunnyvale, California 94086 (“ISRG”). Capitalized terms that are used, but not defined, on this page ofthis Agreement shall have the meanings set forth in Section 1.

 

**BACKGROUND**

 

A.                                 PMII is in the businessof, among other things, developing and manufacturing automated surgicaldevices;

 

B.                                   ISRG is in thebusiness of, among other things, developing, marketing, and selling roboticsurgical systems;

 

C.                                   ISRG desires toco-develop with PMII, market, and sell a new cutting and stapling Device to beinstalled on ISRG’s Robotic Systems and desires to license from PMII certainrights that may relate to the Device;

 

D.                                    PMII desireslicense such rights to ISRG, subject to the terms and conditions set forthherein;

 

E.                                    In connection withsuch license, and contemporaneously with execution of this Agreement, PMII andISRG are entering into a Reload Supply Agreement (“Supply Agreement”)pursuant to which PMII will supply to ISRG disposable Reloads for the Device,and ISRG will purchase such Reloads from PMII.

 

In view of the foregoing and for other goodand valuable consideration, receipt and sufficiency of which are herebyacknowledged, the Parties agree as follows:

 

1.                                       Definitions.

 

1.1.                              CertainDefinitions.  For purposes of thisAgreement, in addition to the terms that are defined on first use in thisAgreement, the following terms shall have the following meanings:

 

### (a)                                  “Affiliate”shall mean a person that directly or indirectly, through one or moreintermediaries, controls, or is controlled by, or is under common control with,the person specified.  For purposes ofthis definition, the terms “control”, “controlled by”, and “under commoncontrol with” shall mean the possession, directly or indirectly, of the powerto direct or cause the direction of the management or policies of such personand, in the case of an entity, shall require (a) in the case of acorporate entity, direct or indirect ownership of more than 50 percent of thesecurities having the right to vote for the election of directors, and (b) inthe

 

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### case of a non-corporate entity, direct or indirectownership of more than 50 percent of the equity interests with the power todirect the management and policies of such non-corporate entity.

 

### (b)                                 “Changeof Control” shall mean, with respect to either Party, the sale of all orsubstantially all of assets or issued and outstanding capital stock of suchParty, or merger or consolidation involving such Party in which stockholders ofsuch Party immediately before such merger or consolidation do not own immediatelyafter such merger or consolidation capital stock or other equity interests ofthe surviving corporation or entity representing more than fifty percent invoting power of capital stock or other equity interests of such survivingcorporation or entity outstanding immediately after such merger orconsolidation.

 

### (c)                                  “Commercialize”shall mean to sell, offer for sale, import, export, transport, register,distribute, promote, and market, together with other activities typicallyassociated with commercialization of a medical product.

 

### (d)                                 “CommerciallyReasonable Efforts” means timely application of efforts and resources,consistent with the exercise of prudent business judgment by a company withsimilar financial resources which intends to exploit a medical product ofsimilar market potential with a view to making a profit, taking into accountsuch matters as product efficacy and safety, size of market, anticipatedlabeling, competitiveness of alternative products, strength of patent or tradesecret protection, likelihood of obtaining Regulatory Approval, andcommercially appropriate prioritization with respect to other company projectsand products.

 

### (e)                                  “Complaint”shall mean any written, electronic, or oral communication that allegesdeficiencies related to the identity, quality, durability, reliability, safety,effectiveness, or performance of a product or device after it is released fordistribution in the marketplace.

 

### (f)                                    Theterm “conceived and reduced topractice” (or any other form thereof, e.g., “conception and reduction to practice”)shall mean either conception and actual reduction to practice of the relevantinvention or, in the case of conception coupled with constructive reduction topractice, that the constructive reduction to practice of the invention must besuch as would enable a person skilled in the relevant art to actually reducethe conceived invention to practice without undue experimentation, or research,or exercise of inventive skill.

 

### (g)                                 “ConfidentialInformation” shall mean all ideas and information of any kind that are heldin confidence by one person and transferred, disclosed, or made available bysuch person to a receiving person and are identified at the time of disclosureas being proprietary or confidential, or would reasonably be regarded asproprietary or confidential by a reasonable business person in likecircumstances. The obligations in this Agreement with respect to ConfidentialInformation shall not apply to any portion of the Confidential Information thatthe receiving person can demonstrate by legally sufficient evidence (i) nowor hereafter, through no act or failure to act on the part of the receivingperson, is or becomes public; (ii) is known to the receiving person or oneof its Affiliates at the time such person receives such ConfidentialInformation from the disclosing person; (iii) is hereafter furnished tothe receiving person by an unrelated third person without violating anyagreement with the disclosing person; or (iv) is 

 

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### independently developed by the receiving person or oneof its Affiliates without use of any Confidential Information received from theother person.

 

### (h)                                 “Control”or “Controlled” shall mean the ability of a person to grant a license orsublicense under Intellectual Property, other than as a result of thisAgreement and without violating the terms of any agreement or other arrangementwith any third party.

 

### (i)                                     “CriticalDesign Review” shall mean the specific stage of development of the Devicethat is described in the Statement of Work as the “Critical Design Review”.  ISRG shall interpret this defined term in thecontext of the development of the Device in the same manner that it interpretsthis term in the context of its development of other products.

 

### (j)                                     Theterms “Developed” and “Develops” shall mean (i) with respectto patentable subject matter, conceived and reduced to practice; (ii) withrespect to copyrightable subject matter, reduced to a tangible medium ofexpression; and (iii) with respect to Know-How, created or discovered.

 

### (k)                                  “Device”shall mean the cutting and stapling device developed under this Agreement to beinstalled on ISRG’s Robotic System.

 

### (l)                                     “FDA”shall mean the United States Food and Drug Administration.

 

### (m)                               “Fieldof Use” shall mean the use of a Robotic System for any medical or surgicaldiagnosis, treatment, or procedure on any part of a human or animal body.

 

### (n)                                 “FirstCommercial Sale” shall mean the first sale by ISRG or an Affiliate of ISRGto an end user for use in the United States, Canada, Japan, or a country of theEuropean Union, other than in connection with any investigational research,clinical study, or design or process validation.

 

### (o)                                 “GovernmentalAuthority” shall mean any nation, territory, or government (or unionthereof), foreign, domestic, or multinational, any state, local, or otherpolitical subdivision thereof, and any bureau, court, tribunal, board,commission, department, agency, or other entity exercising executive,legislative, judicial, regulatory, or administrative functions of government,including all taxing authorities and all European notified bodies, includingnotified bodies within the sense of Article 16 of the European UnionMedical Device Directive 93/42/EEC, and all other entities exercisingregulatory authority over medical products or devices.

 

### (p)                                 Thephrase “has application in the Field of Use” or “have application inthe Field of Use” shall mean that a reasonable person, skilled in the Fieldof Use and the technology related to the relevant Licensed IP, could reasonablyconclude that the technology, enhancement, or other item in question might wellhave commercial value if utilized (with or without further enhancement ordevelopment) in the Field of Use.

 

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### (q)                                 “ImprovementPeriod” shall mean the period of time beginning on the Agreement Date andexpiring on the first to occur of (i) the third anniversary of theAgreement Date and (ii) a Change of Control of PMII.

 

### (r)                                    “ImprovementPeriod Patent Rights” shall mean any Patent Rights conceived or applied forby PMII during the Improvement Period.

 

### (s)                                  “IntellectualProperty” or “IP” shall mean: (i) Patent Rights; (ii) trademarks,service marks, trade names, brand names, certification marks, designs, logosand slogans, commercial symbols, business name registrations, domain names,trade dress and other indications of origin and general intangibles of likenature, the goodwill associated with the foregoing, and registrations in anydomestic or foreign jurisdiction of, and applications in any such jurisdictionto register, the foregoing, including any extension, modification, or renewalof any such registration or application; (iii) research and developmentdata, formulae, ideas, know-how, research, analysis, experiments, proprietaryprocesses and procedures, algorithms, models and methodologies, technicalinformation, technologies, techniques, innovations, creations, concepts,designs, industrial designs, procedures, trade secrets and confidentialinformation, and rights in any domestic or foreign jurisdiction to limit theuse or disclosure thereof by any person; (iv) writings and other works ofauthorship of any type (including patterns, drawings, data, the contentcontained on any web site), whether copyrightable or not, in any suchjurisdiction, and any copyrights and moral rights therein (“Copyrights”);(v) computer software (whether in source code or object code form),databases, compilations, and data; and (vi) registrations or applicationsfor registration of copyrights in any domestic or foreign jurisdiction, and anyrenewals or extensions thereof; and (vii) any similar intellectualproperty or proprietary rights.

 

### (t)                                    “IrrevocableLicense Fee” means the total amount of Twenty Million Dollars(US$20,000,000; *i.e.*, the sum of the License Feeand the three Milestone Payments), paid to PMII pursuant to Section 7hereof.

 

### (u)                                 “Know-How” shall mean all data andinformation owned by, used by, or held for use by or on behalf of or licensedto (or otherwise Controlled by) PMII or a PMII Affiliate and maintained inconfidence by PMII or a PMII Affiliate, including all processes, plans,designs, research, operating manuals, methods, compounds, formulae,discoveries, developments, designs, drawings, technology, techniques,procedures, specifications, inventions, computer programs, and any otherscientific or technical data or information conceived, memorialized, developed,and/or reduced to practice, in each case whether or not patentable in anyjurisdiction.  Until such time as anyparticular patent has been published in accordance with the terms of a patentapplication or such patent application has been published, the term “Know-How” shall be deemed to includeall inventions disclosed in such patent application.

 

### (v)                                 “LicensedIP” shall mean, only to the extent that the IP in Sections 1.1(v)(i)-(iv) belowapplies to linear staplers, or linear cutters, or their associated drive orcontrol components, or any combination thereof:

 

#### (i)                                     (a) PatentRights owned or Controlled by PMII or any PMII Affiliate on the Agreement Date,including without limitation those set forth on Exhibit 1.1(v) attachedhereto; (b) Improvement Period Patent Rights owned or Controlled by PMIIor any 

 

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####  

#### PMIIAffiliate; and (c) Patent Rights to New PMII IP (subject to the limitationset forth in clause (v) above, such rights are hereinafter collectivelyreferred to as “Licensed Patent Rights”);

 

#### (ii)                                  PMIIField Know-How;

 

#### (iii)                               NewPMII IP (as defined in Section 8.4); and

 

#### (iv)                              IntellectualProperty as defined in Subsections (iii)—(vii) of Section 1.1(s),that is owned or Controlled by PMII or any PMII Affiliate on the Agreement Dateor during the Improvement Period.

 

### (w)                               “Licensed Marks” shall mean thetrade name and mark “Power Medical Interventions, Inc.”

 

### (x)                                   “Lien”shall mean all liens, pledges, charges, mortgages, encumbrances, restrictions,licenses, adverse rights or claims, and security interests of any kind or naturewhatsoever.

 

### (y)                                 “Litigation Matter” shall mean anyclaim, investigation, arbitration, grievance, litigation, action, suit, orproceeding, administrative or judicial, to which a Party is (or, to such Party’sknowledge, is threatened in writing to be made) a party, or relating to theLicensed IP, the Reload, the Device, or this Agreement (whether such Party is aplaintiff, defendant, or otherwise), at law or in equity or otherwise, orbefore any Governmental Authority.

 

### (z)                                   “Party”shall mean each of ISRG and PMII (but not their respective Affiliates), whotogether are sometimes referred to as the “Parties”.  As used in this Agreement, references to “thirdparties” do not include either Party or the Affiliates of either Party.

 

### (aa)                            “PatentCosts” shall mean the costs and expenses paid to outside legal counsel,Governmental Authorities, and other third parties incurred in connection withpreparing, filing, prosecuting, obtaining, and maintaining Licensed IP, ortaking any Patent Prosecution Action, including costs and expenses of patentinterference, re-examination, reissue, protest, opposition, nullification, andsimilar proceedings (and any appeal thereof in any court or administrativeagency).

 

### (bb)                          “PatentProsecution Action” shall mean any and all actions that may be taken inconnection with preparing, filing, prosecuting, obtaining, and maintainingthroughout the world patent protection for Licensed IP, including patentapplications and other related material submissions and correspondence with anypatent authorities, and including with regard to any patent interference,re-examination, reissue, protest, opposition, nullification, and similarproceedings (and any appeal thereof in any court or administrative agency).

 

### (cc)                            “PatentRights” means (i) any and all written, oral, and visual ideas,concepts, and inventions, whether or not any such idea, concept, or inventionhas been filed as a patent application or submitted by the inventor(s) toany attorney or other person for evaluation as to patentability, (ii) anypatents, patent applications, any patents issuing therefrom worldwide, and allprovisional rights with respect to patent applications, (iii) anyimprovements, 

 

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### substitutions, divisionals, patents of addition,continuations, continuations-in-part, reissues, renewals, registrations,confirmations, re-examinations, extensions, supplementary protectioncertificates, term extensions (under applicable patent law or regulation orother law or regulation), and certificates of invention of any patents orpatent applications, and (iv) all rights to exploit any of the foregoing.

 

### (dd)                          Theterm “person” shall mean an individual, corporation, partnership,limited partnership, limited liability company, unincorporated association,trust, joint venture, union or other organization or entity, including aGovernmental Authority.

 

### (ee)                            “PMIIField Know-How” shall mean any Know-How owned or Controlled by PMII or anyPMII Affiliate that has application in the Field of Use.

 

### (ff)                                “PMIIProperty” shall mean: (i) Licensed IP; and (ii) Licensed Marks.

 

### (gg)                          “PreliminaryDesign Review” shall mean the specific stage of development of the Devicethat is described in the Statement of Work as the “Preliminary Design Review”.  ISRG shall interpret this defined term in thecontext of the development of the Device in the same manner that it interpretsthis term in the context of its development of other products.  For the avoidance of doubt, the Parties agreethat successful completion of a Preliminary Design Review for the Device is anecessary condition precedent for a Critical Design Review of the Device.

 

### (hh)                          “RegulatoryApproval” shall mean any and all approvals (including any necessarygovernmental price or reimbursement approvals), licenses, registrations, orauthorizations of the applicable Governmental Authority necessary for the use,storage, import, promotion, marketing, and Commercialization of the Device orReload.

 

### (ii)                                  “Reload”shall mean a disposable cartridge containing staples that can be attached tothe Device.  Initial specifications forthe Reload are set forth in Exhibit 1.1(ii) and in the Statement ofWork.  Such initial specifications willbe refined as mutually agreed by the Parties to include detailed manufacturingspecifications for the Reloads to be supplied by PMII to ISRG under the SupplyAgreement.

 

### (jj)                                  “RoboticSystem” shall mean a system of one or more computer-controlled manipulatorsand mechanical arms that operates autonomously or is operated remotely (e.g.,teleoperated) by a human, including attachable components or assemblies thatoperate as part of (and not separately from) such a system during any medicalor surgical diagnosis, treatment, or procedure.

 

#### (i)                                     Forthe avoidance of doubt, Robotic Systems shall include: (A) ISRG’sda Vinci® surgical systems, (B) detachable surgical instruments thatoperate as part of (and not separately from) such da Vinci® surgicalsystems during any medical or surgical diagnosis, treatment, or procedure, (C) componentsand assemblies that make up such da Vinci® surgical systems; and (D) improvementsto the foregoing that are not inconsistent with the first sentence of this Section 1.1.

 

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#### (ii)                                 Forthe avoidance of doubt, Robotic Systems do not include: (A) powered orunpowered instruments that are hand positioned for tissue manipulation duringopen or endoscopic surgical procedures, such as PMII’s powered endoscopiclinear cutter instruments (*e.g.*, i60Articulating Endoscopic Linear Cutter and other powered stapling instrumentsCommercialized prior to the Agreement Date), (B) conventional manuallaparoscopic instruments; and (C) improvements to the foregoing that areconsistent with clause 1.1(jj)(ii)(A) above.

####  

### (kk)                            “Statementof Work” shall mean the Statement of Work attached hereto as Exhibit 1.1(kk).

###  

### (ll)                                  “Sublicensee”shall mean any person to whom ISRG sublicenses its rights under this Agreementin the manner provided in Section 2.3, but the term “Sublicensee” shallnot include any person who manufactures a Reload for ISRG or an Affiliate ofISRG but does not sell such Reloads other than to ISRG or an Affiliate of ISRG.

###  

### (mm)                      “Technology”shall mean any idea, data, writing, invention, discovery, improvement, tradesecret, development, know-how, method, technique, formula, process, or othertechnology, whether or not patentable, copyrightable, or protectable as a tradesecret, confidential information, or know-how, or any other form of intellectualproperty.

###  

1.2.                              OtherDefined Terms.  Definitions of thedefined terms listed below are contained in the Section set forth oppositethe defined term in the table below:

 
| **Defined Term**     | ** ** | **Section of Agreement** |
|---------------------------|------------|------------------------------------|
|                      |       |                               |
| Agreement                 |       | Preamble                           |
| Agreement  Date           |       | Preamble                           |
| Bankruptcy  Code          |       | Section 15.6                  |
| Copyrights                |       | Section 1.1(s)                |
| Designated  Jurisdictions |       | Section 9.1                   |
| Development  Proposal     |       | Section 3.2                   |
| Force  Majeure            |       | Section 16.7                  |
| Indemnified  Party        |       | Section 13.3                  |
| Indemnifying  Party       |       | Section 13.3                  |
| Infringement              |       | Section 10.1                  |
| IP Transfer               |       | Section 2.1(d)                |
| ISRG                      |       | Preamble                           |
| ISRG  Indemnified Parties |       | Section 13.1(a)               |
| License Fee               |       | Section 7.1                   |
| License Term              |       | Section 15.1                  |
| Licensed  Patent Rights   |       | Section 1.1(v)(i)             |
| Milestone  Payment        |       | Section 7.2                   |
| New ISRG IP               |       | Section   8.5                 |
| New PMII IP               |       | Section 8.4                   |
| Non-Prosecution  Notice   |       | Section 9.3                   |
| PMII Product              |       | Section 13.1                  |
| PMII                      |       | Preamble                           |

 

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| PMII  Indemnified Parties     |   | Section 13.2(a) |
|-------------------------------|--------|----------------------|
| Primary  Enforcement Party    |   | Section 10.1    |
| Regulatory  Applications      |   | Section 4.1     |
| Technical  Information        |   | Section 2.2     |
| Requested  Prosecution Action |   | Section 9.3     |
| Requesting  Party             |   | Section 13.6    |
| Supply  Agreement             |   | Recitals             |
| Third Party  Claim            |   | Section 13.1    |

#  

2.                                       Licenses.

 

2.1.                              LicenseGrants to ISRG.

 

### (a)                                  Subjectto the terms and conditions of this Agreement, PMII hereby grants to ISRG aworldwide, perpetual, non-transferable (except as set forth in Section 16.11),royalty-free, exclusive license under any and all Licensed IP in the Field ofUse, such exclusive license including but not limited to the right to make,have made, use, offer for sale, sell, market, import, export, distribute,Commercialize in any manner whatsoever, and enforce (even against PMII and itsAffiliates) the Licensed IP in the Field of Use, as set forth in Section 10of this Agreement.

###  

### (b)                                 Thelicense granted under Section 2.1(a) shall not be sublicensable byISRG except as set forth in Section 2.3.

###  

### (c)                                  Uponreceipt by PMII of the Irrevocable License Fee, the license granted under Section2.1(a) shall become irrevocable.

###  

### (d)                                 PMIIagrees that it will not, and will ensure that its Affiliates do not, during theLicense Term assign, transfer, convey, or otherwise dispose of any Licensed IPthat has application in the Field of Use (an “IP Transfer”) unless suchIP Transfer shall have been made subject to the license grant and exclusivityrequirements set forth in this Section 2.1 and to the other express termsof this Agreement, including, in particular, Section 16.11.

###  

### (e)                                  PMIIagrees that it shall not, and will ensure that its Affiliates do not, utilizeor practice, or grant any rights to any third party with respect to, theLicensed IP in the Field of Use that are in any way inconsistent with therights granted to ISRG under this Agreement.

###  

### (f)                                    Thelicense granted under Section 2.1(a) shall not prevent PMII or itsAffiliates or third-party licensees from Commercializing and selling powered orunpowered hand positioned instruments, and components thereof, for cutting andstapling (excluding Reloads manufactured for the Device) to customers inhospitals where ISRG’s Robotic Systems are deployed.

 

### (g)                                 ISRGwill, where reasonably practical, mark all stapling, cutting, or combinedstapling and cutting instruments (including the Device), or packaging thereof,with a notice of the applicable Licensed Patent Rights, as reasonablydetermined by PMII, and PMII’s ownership thereof, in the form reasonablynotified by PMII to ISRG from time to time.

 

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### (h)                                 Forany Licensed IP Controlled by PMII or its Affiliates that is sublicensed toISRG under Section 2.1(a), ISRG agrees to pay, if applicable and necessaryfor ISRG to benefit from such sublicensed Patent Rights, a pass-through royaltyobligation for any royalty obligation in the original license grant to PMII ofsuch sublicensed Patent Rights.

###  

### (i)                                     PMIIshall disclose to ISRG a listing of all worldwide patent applications andpatents owned, Controlled by, or otherwise licensed by PMII or its Affiliateson the Agreement Date.  For any suchpatent applications or patents licensed by PMII or its Affiliates, PMII shalldisclose to ISRG the associated license grant so that ISRG may determine theextent of Control of such patent applications or patents by PMII or itsAffiliates.  This listing of patentapplications and patents, and associated license terms if applicable, shallinclude at least those referred to in PMII’s most recent Form 10-K filingwith the United States Securities and Exchange Commission.

###  

2.2.                             Non-ExclusiveLicense to Use Technical Information. PMII hereby grants to ISRG and its Affiliates a non-exclusive worldwide,transferable, royalty-free right and license to utilize PMII’s (or an Affiliateof PMII’s) test data and any other technical data and information relating tothe development or manufacture of staplers, cutters, drive or controlcomponents associated with staplers or cutters, or Reloads (“TechnicalInformation”) as may be reasonably required by ISRG or a ISRG Affiliate tosupport regulatory submissions dealing with the Device or any purposes related to the Commercialization of the Device.  The license granted under this Section 2.2shall not be sublicensable by ISRG except as set forth in Section 2.3.  PMII shall disclose and provide such TechnicalInformation (including any updated Technical Information) to ISRG at any timeon request.

 

2.3.                             Sublicenses.  ISRG shall not sublicense, in whole or inpart, the rights granted herein to the Licensed IP and Technical Informationwithout PMII’s prior written consent, which shall not be unreasonably withheld,except that, without PMII’s prior consent, ISRG may sublicense its rights tothe Licensed IP, within the Field of Use, (i) to any wholly ownedsubsidiary, or (ii) as part of the settlement of any patent infringementsuit, action, or proceeding between ISRG or any ISRG Affiliate and any thirdparty, subject to the following:

 

### (a)                                  SublicenseAgreement.  ISRG shall execute awritten sublicense with each Sublicensee which shall be subject to ISRG’s rightsand obligations under the terms of this Agreement.  ISRG shall report the granting of all suchsublicenses to PMII within thirty (30) days of the granting of the same, andalong with such notification shall provide a copy of the sublicense agreement.  ISRG shall cause any such sublicenseagreement contains terms that are at least as protective of the Licensed IP andConfidential Information as the terms set forth in this Agreement, and thatalso include no provisions that would be in violation of the license grant setforth in this Agreement.  ISRG shall beobligated to use Commercially Reasonable Efforts in monitoring the performanceof its Sublicensees and shall indemnify PMII for any material violation by aSublicensee of its obligations related to the Licensed IP under a sublicenseagreement.  For avoidance of doubt, ISRGdoes not have any obligation to report any sublicense under Section 2.3(i).

###  

### (b)                                 Performanceof Other Obligations by Sublicensees. ISRG shall, and by this Agreement hereby does, agree to cause anySublicensee to assume and agree to

 

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### perform all of thecovenants and obligations of ISRG to PMII contained in this Agreement as fullyand to the same extent as if such person were ISRG under this Agreement butwith such modifications as may be appropriate to reflect the extent, if any, towhich the sublicense is narrower in scope than the license grant contained thisAgreement.

 

### (c)                                  Termination.  Unless the Irrevocable License Fee has been previouslypaid to PMII, upon termination of this Agreement as provided in this Agreement,any sublicense agreement shall thereupon automatically terminate (subject tothe sublicensee’s right to sell any inventory in stock, and to complete andsell any products in process at the time of termination), and ISRG shall causeall sublicense agreements to provide for the same.

 

2.4.                              ThirdParty Manufacturers.  Except forReloads, which are addressed in Section 2.9 of the Supply Agreement, ISRGmay have any component or assembly associated with the Licensed IP within theField of Use made by a contract manufacturer of its selection, provided thatsuch contract manufacturer enters into a written agreement that complies withSections 2.3(a), (b), and (c).

 

2.5.                              Distributors.  ISRG may exercise its rights and obligationsunder this Agreement through its distributors and sub-distributors throughmultiple tiers.  Such exercise shall notconstitute a sublicense.

 

2.6.                              TrademarkLicense.  PMII hereby grants to ISRGan non-exclusive, non-transferable, worldwide, royalty-free license to use theLicensed Mark in connection with ISRG’s marketing and sale of Reloads for usewith the Device.  All goodwill associatedwith the foregoing license shall inure to the benefit of PMII, and PMII shallhave sole control of, and responsibility for, any applications andregistrations for the Licensed Mark. ISRG shall use the Licensed Mark in accordance with PMII’s reasonableguidelines with respect to trademark usage of the Licensed Mark, as provided toISRG upon reasonable prior notice.  PMIIacknowledges that ISRG shall be under no obligation to Commercialize the Reloadunder the Licensed Mark.  ISRG shallprovide reasonable attribution of PMII’s role as the developer and/ormanufacturer of the Reload (as applicable) in any Device that includes theReload.  The Parties agree that theLicensed Mark may appear as practical on any packaging for a Reload, but theLicensed Mark will not appear on the Reload itself or on the Device.

 

3.                                       DevelopmentActivities.

 

3.1.                              General.  ISRG shall be responsible for, and control,the development of the Device.  TheParties recognize that in order for ISRG successfully to develop the Device andintegrate the Device with a Robotic System, ISRG will require the assistancefrom PMII as expressly specified in the Statement of Work attached to thisAgreement.  Each Party shall timely performthe obligations allocated to it in the Statement of Work.  PMII shall provide such assistance to ISRG atno additional cost, provided that the maximum number of man-hours in assistanceto be provided at no additional cost shall not exceed 3,900 hours.  PMII shall be under no obligation to provideany additional assistance, information, or Technology to ISRG except asexpressly set forth herein.  If ISRGrequires any additional assistance beyond such limit, then PMII shall providesuch additional assistance and ISRG shall pay PMII for its time and materials

 

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at reasonable rates to beagreed upon in good faith by the Parties prior to the provision of suchadditional assistance.

 

3.2.                             FurtherDevelopment Proposals.  In additionto the Statement of Work, ISRG may propose to PMII a series of additionaldevelopment projects relating to the Device (each, a “Development Proposal”)from time to time. ISRG shall submit each Development Proposal to PMII inwriting and shall include a description of the proposed developmentspecifications in detail sufficient to permit PMII to evaluate and makerecommendations as to the feasibility of developing the features orenhancements described in such proposed development specifications.  PMII shall consider each such DevelopmentProposal in good faith and inform ISRG of the feasibility of such DevelopmentProposal and the likely cost and timetable for providing the requested supportand assistance for such Development Proposal. If ISRG notifies PMII in writing that it is prepared to proceed with aparticular Development Proposal, then the Parties shall negotiate in good faithto (i) agree upon the applicable specifications and (ii) develop abudget for the relevant Development, setting forth the man hours andcorresponding costs, but only to the extent that such costs are actually andreasonably incurred by PMII.  PMII shallperform additional Development Proposals only as agreed in writing by theParties.

 

4.                                       RegulatoryMatters.

 

4.1.                             RegulatoryApprovals.  ISRG shall be responsiblefor preparing, submitting, and obtaining all applications necessary forRegulatory Approvals for the Device (“Regulatory Applications”), andwill undertake all clinical studies necessary to obtain Regulatory Approval forthe Device.  ISRG shall keep PMII fullyinformed with respect to the progress of its Regulatory Applications.  PMII shall cooperate with ISRG relating toall material issues, amendments, supplements, and other matters respecting allRegulatory Applications and Regulatory Approvals for the Device.  ISRG shall provide to PMII, upon request,copies of all Regulatory Applications, Regulatory Approvals, and otherregulatory filings, submissions, and communications for the Device.  Regulatory Approvals for the Reloads will bedone by PMII in accordance with the Supply Agreement.

 

4.2.                             RegulatoryInformation and Notification with respect to the Device.  Each Party agrees to share and provide to theother Party all information related to Regulatory Approvals for the Device (orany Technology of PMII incorporated into the Device), and without limitationagrees to:

 

### (a)                                  priorto the First Commercial Sale of the Device or such Technology, report to theother Party within ten (10) days of the initial receipt of a reportof any unexpected or serious experience with the Device or the Technology usedin the Device that could adversely impact obtaining all necessary RegulatoryApprovals; and

###  

### (b)                                 afterthe First Commercial Sale of the Device or such Technology, report to the otherParty within ten (10) days of the initial receipt of a report, orsooner if required for the other Party to comply with any and all legal andregulatory requirements, of (i) any adverse experience with the Device orany such Technology that is serious and unexpected, or (ii) malfunctions ofthe Device that did not cause a serious adverse

 

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### experience, but would likely cause a serious adverseexperience if the malfunction were to recur. Serious adverse experiences mean any experience that suggests asignificant hazard, contraindication, side effect, or precaution, or anyexperience that is fatal or life threatening, is permanently disabling, orrequires or prolongs inpatient hospitalization. An unexpected adverse experience is one not identified in nature,specificity, severity, or frequency in the then-current U.S. labeling for theapplicable product.

###  

### (c)                                  EachParty shall maintain a reasonable record of all material Complaints it receiveswith respect to the Device or PMII Technology incorporated therein.  Each Party shall notify the other of anymaterial Complaint received by it in sufficient detail and withinthirty (30) days after the end of the calendar quarter in which the eventoccurred, and in any event in sufficient time to allow the responsible Party tocomply with any and all legal and regulatory requirements.

 

4.3.                             Recalls.  ISRG shall have the exclusive right (subjectto applicable law) to initiate voluntary Device recalls, and shall manage andbe responsible (including bearing all costs and expense) for all Device Recalls.  Each of the Parties hereto agrees to notifywithin seventy two (72) hours the other in writing in the event either sees aneed for a Device recall.

 

5.                                       ReloadSupply.  PMII shall supply ISRG withISRG’s requirements for Reloads pursuant to, and subject to the terms and conditionsof, the Supply Agreement.

 

6.                                       ISRGRequirements.

 

6.1.                             PreliminaryDesign Review.  ISRG shall complete itsPreliminary Design Review on or before February 28, 2009, *provided*, however, that this deadline shall be extended fora reasonable period of time if PMII fails to perform its obligations in theStatement of Work in a timely fashion.

 

6.2.                             CriticalDesign Review.  ISRG shall completeits Critical Design Review on or before December 31, 2009, *provided*, however, that this deadline shall be extended fora reasonable period of time if PMII fails to perform its obligations in theStatement of Work in a timely fashion.

 

6.3.                             FirstCommercial Sale.  ISRG shall makeCommercially Reasonable Efforts to make a First Commercial Sale of the Deviceby the third anniversary of the Agreement Date.

 

7.                                       LicensePayments.

 

7.1.                             LicenseIssuance Fee.  ISRG shall pay to PMIIan initial, one-time, license fee of Twelve Million Five Hundred ThousandDollars (US$12,500,000) (“License Fee”) not later than five (5) businessdays after the execution of this Agreement by both Parties.  The payment of the License Fee shall be acondition precedent to the effectiveness of this Agreement.  If the License Fee is not paid within five (5) businessdays after execution of this Agreement, this Agreement shall lapse and bedeemed null, void, and of no effect.

 

7.2.                             MilestonePayments.  ISRG will make thefollowing one-time payments to PMII (each a “Milestone Payment”):

 

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### (a)                                  Completionof Preliminary Design Review.  ISRGwill pay Two Million Five Hundred Thousand Dollars (US$2,500,000) to PMII notlater than ten (10) days following successful completion of thePreliminary Design Review for the Device in accordance with the Statement of Work;

###  

### (b)                                 Completionof Critical Design Review.  ISRG willpay Two Million Dollars (US$2,000,000) to PMII not later than ten (10) daysfollowing successful completion of the Critical Design Review in accordancewith the Statement of Work; and

 

### (c)                                  FirstCommercial Sale.  ISRG will pay ThreeMillion Dollars (US$3,000,000) to PMII not later than ten (10) daysfollowing the First Commercial Sale of the Device.

 

### (d)                                 Accelerationof Milestone Payments.  For theavoidance of doubt, ISRG has the right to accelerate payment of each MilestonePayment, and thereby pay the Irrevocable License Fee, for any reason, and underany circumstances, at any time prior to earlier of (i) the due date ofsuch Milestone Payment, and (ii) the effective date of the termination ofthis Agreement.

 

7.3.                             PaymentTerms.  ISRG shall notify PMII inwriting on the occurrence of any of the milestones described in Section 7.2.  All payments due from ISRG to PMII shall bemade by wire transfer of immediately available funds to an account designed byPMII.  All payments shall be made in U.S.dollars.  If ISRG is required by law towithhold any tax to the tax or revenue authorities in any country regarding anypayments or royalties, such amount shall be deducted from the amounts to bepaid by ISRG, and ISRG shall notify PMII and promptly furnish PMII with copiesof any tax certificate or other documentation evidencing such withholding.

 

8.                                       IntellectualProperty.

 

8.1.                             Ownershipof IP.  The Parties agree that eachParty owns and retains all right, title, and interest in all Technology andIntellectual Property owned, Developed, or in-licensed by such Party (i) priorto the Agreement Date or (ii) that is unrelated to this Agreement.

 

8.2.                             Ownershipof PMII Property.  Without limitationof Section 8.1, and except as otherwise provided for in this Agreement,PMII shall own and retain all right, title, and interest, including allTechnology and Intellectual Property, in the PMII Property.

 

8.3.                             Ownershipof Device.  Subject to PMII’sownership of the PMII Property, ISRG shall own all right, title, and interest,including all Technology and Intellectual Property, in the Device.  To the extent that PMII Develops anycontribution to the Device, whether alone or jointly with ISRG, and suchcontribution does not constitute PMII Property, such Technology andIntellectual Property shall be owned by ISRG.

 

8.4.                             Ownershipof New PMII IP.  PMII shall own allTechnology, and all Intellectual Property therein, that is Developed by eitherParty, whether alone or jointly with the other Party, in performance of thedevelopmentactivities described in Section 3 of this

 

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Agreement, in the field ofpower stapling and cutting mechanisms, including their associated drive or controlcomponents (the “New PMII IP”).

 

8.5.                             Ownershipof New ISRG IP.  ISRG shall own allTechnology, and all Intellectual Property therein, that is Developed by eitherParty, whether alone or jointly with the other Party, in performance of thedevelopment activities described in Section 3 of this Agreement, outsidethe field of power stapling and cutting mechanisms, including their associateddrive or control components (the “New ISRG IP”).

 

8.6.                             Assignmentof Intellectual Property.

 

### (a)                                  EachParty represents and covenants that all its employees, consultants, and agents,and all third parties acting on behalf of such Party in performing itsobligations under this Agreement, shall be obligated under a binding writtenagreement to assign to such Party all Technology and Intellectual PropertyDeveloped by such employees, consultants, agents, and third parties inconnection with this Agreement.

 

### (b)                                 Subjectto the licenses and other rights specifically provided in this Agreement, tothe extent either Party obtains any title or similar interest in anyTechnology, or any Intellectual Property therein, that is to be owned by theother Party in accordance with Section 8 of this Agreement, such firstParty hereby assigns and, to the extent such assignment cannot be made atpresent, agrees promptly to assign, to such second Party all of the first Party’stitle and other interest in and to such Technology and Intellectual Propertythroughout the world.  The first Partyshall execute and procure such documents, including short-form assignments andassignments of patent applications and patents, and take such other actions asmay be reasonably requested from time to time by the second Party to obtain forits own benefit appropriate protections for Intellectual Property in any andall countries with respect to such Technology, or otherwise to transfer orconfirm the transfer of such Technology and the related Intellectual Propertyfor the benefit of the second Party.

 

9.                                       Prosecutionof Patent Rights.

 

9.1.                             Prosecutionand Maintenance of Patent Rights. For countries or regions that grant Patent Rights (“DesignatedJurisdictions”), PMII shall use Commercially Reasonable Efforts to prepare,file, prosecute, obtain, and maintain:

 

### (a)                                  allLicensed Patent Rights existing as of the Agreement Date; and

 

### (b)                                 allLicensed Patent Rights that come into existence after the Agreement Date in anyDesignated Jurisdiction selected at PMII’s discretion.

 

### (c)                                  Withreference to Sections 9.1(a) and (b), PMII shall otherwise take all PatentProsecution Actions as it shall deem to be commercially reasonable, in itsdiscretion, in order to protect and enhance the value of such Licensed PatentRights, and shall pay all Patent Costs incurred by PMII in connection with theforegoing activities.

 

9.2.                             Cooperationwith Respect to Licensed Patent Rights. PMII shall regularly provide ISRG with copies of all patent applicationsthat, upon filing, would be included in the

 

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definition of Licensed PatentRights that are proposed to be filed by PMII or any Affiliate, and PMII shallalso provide ISRG with copies of all other related material submissions andcorrespondence with any patent authorities dealing with actual or potentialLicensed Patent Rights, in sufficient time to allow for review and comment byISRG.  In addition, PMII shall provideISRG and its counsel with an opportunity to consult with PMII and its counselregarding Patent Prosecution Actions relating to the Licensed Patent Rights andany decisions by PMII not to take any Patent Prosecution Actions, and PMIIshall take into consideration the reasonable requests of ISRG regarding thesame.  ISRG shall cooperate fully withPMII, at PMII’s reasonable request and ISRG’s sole expense for its own actions,in connection with the preparation, filing, prosecution, obtaining andmaintenance of, all Patent Prosecution Actions concerning the applicableLicensed Patent Rights by PMII under this Section 9.2 (and in any otherproceedings before a patent official or office with respect thereto).

 

9.3.                             ElectionNot to Prosecute; Licensed Patent Rights; Right to Step In.  If PMII elects not to:

 

### (a)                                  takeany Patent Prosecution Action for any applicable Licensed Patent Rightsnecessary to establish (e.g., prepare and file a patent application) ormaintain such Licensed Patent Rights in a particular Designated Jurisdiction;

 

### (b)                                 takeany other action to prevent the forfeiture of commercially valuable rights withrespect to any applicable Licensed Patent Rights in a Designated Jurisdictionthat is reasonably necessary to establish or preserve such commerciallyvaluable rights in such Designated Jurisdiction; or

 

### (c)                                  paythe Patent Costs associated with any such Patent Prosecution Action or suchother action in any particular Designated Jurisdiction (in each case relatingto Licensed Patent Rights), (each of the foregoing a “Requested ProsecutionAction”), then in each such case PMII shall so notify (“Non-ProsecutionNotice”) ISRG promptly in writing that it has made such an election. PMIIshall provide such Non-Prosecution Notice to ISRG on or before a date that itreasonably believes would provide ISRG with sufficient time to enable ISRG tomeet any deadlines known to PMII by which the Requested Prosecution Action mustbe taken to establish or preserve commercially valuable rights in theDesignated Jurisdiction to which such Requested Prosecution Actionrelates.  On receipt of anyNon-Prosecution Notice, ISRG shall have the right but not the obligation totake the Requested Prosecution Action at its own expense, and to take overProsecution of the Patent Rights that were subject to the Non-ProsecutionNotice, and PMII shall cooperate fully with ISRG with respect to any suchaction.  ISRG shall be deemed to havereceived a Non-Prosecution Notice with respect to any Requested ProsecutionAction if PMII shall not have taken the Requested Prosecution Action within ten(10) days of a written request by ISRG that PMII take such action.

 

9.4.                             NewISRG IP.  ISRG shall control thepatent prosecution of the New ISRG IP, and shall take all Patent ProsecutionActions therewith, at its expense.

 

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10.                                 Enforcementof Licensed IP.

 

10.1.                       Rightsto Enforce.

 

### (a)                                  Withrespect to the enforcement and defense of the Licensed IP, PMII and ISRG shallinform each other promptly in writing of any knowledge of any allegedinfringement, misuse, or misappropriation by any person of the Licensed IP thathas application in the Field of Use (such infringement, misuse, ormisappropriation, the “Infringement”) and shall provide a summary of anyevidence indicating such Infringement. PMII and ISRG shall meet to discuss and agree upon a strategy to resolvethe alleged Infringement.

 

### (b)                                 ISRGshall have the sole right but not the obligation to prosecute or seek to end atits own expense any Infringement of the Licensed IP, to the extent that suchInfringement occurs in the Field of Use.

 

### (c)                                  PMIIshall have the sole right but not the obligation to prosecute or seek to end atits own expense any Infringement of IP that is owned or Controlled by PMII or aPMII Affiliate and that is not licensed to ISRG in the Field of Use.

 

### (d)                                 TheParty exercising its sole right of enforcement with respect to a particularInfringement is defined as “Primary Enforcement Party”.

 

10.2.                       Enforcementby Primary Enforcement Party.

 

### (a)                                  Whenthe Primary Enforcement Party takes action to prosecute any Infringement, itshall:

 

#### (i)                                     beresponsible for all costs of prosecuting such Infringement, except as provided inSection 10.2(d);

 

#### (ii)                                  providethe other Party with copies of all pleadings and other documents proposed to beinitially filed or served by the Primary Enforcement Party in sufficient timeto allow for review and comment by the other Party

 

#### (iii)                               asreasonably requested by the other Party, regularly provide the other Party withcopies of all pleadings and other documents proposed to be filed or served bythe Primary Enforcement Party and other material submissions and correspondencein any way related to such prosecution of such Infringement, as applicable, insufficient time to allow for review and comment by the other Party; and

 

#### (iv)                              providethe other Party and its counsel with a reasonable opportunity to consult withthe Primary Enforcement Party and its counsel regarding the filing, service ofprocess, and contents of any documents proposed to be filed or served by thePrimary Enforcement Party and other material submissions and correspondence inany way related to such prosecution of such Infringement or in connectiontherewith, and the Primary Enforcement Party shall give consideration to thereasonable requests of the other Party regarding the same.

 

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### (b)                                 Tothe extent that the other Party is deemed an indispensable party in the PrimaryEnforcement Party’s litigation involving the Licensed IP, the other Partyagrees to join the Primary Enforcement Party in such action.  The Primary Enforcement Party shall reimburseall of the other Party’s reasonable expenses, including attorney fees, and paya reasonable hourly consulting fee for use of the other Party’s personnel, inconnection with litigation involving the Licensed IP that the other Party isrequired to join as an indispensable party.

###  

### (c)                                  Theother Party agrees to cooperate with the Primary Enforcement Party in anylawsuit that the Primary Enforcement Party brings against a third party toenforce the Primary Enforcement Party’s rights in the Licensed IP and to jointhe Primary Enforcement Party as a party to such lawsuit if (i) requestedby the Primary Enforcement Party and (ii) if the Primary Enforcement Partyagrees to (A) reimburse all of the other Party’s reasonable litigationexpenses, including attorney fees, in such lawsuit, and (B) pay areasonable hourly consulting fee for use of the other Party’s personnel inconnection with such lawsuit.

###  

### (d)                                 Tothe extent permissible under the Federal Rules of Civil Procedure, eachParty shall have the right, with counsel of its own choosing and at its ownexpense, to join in any of the other Party’s litigation involving the LicensedIP.

###  

10.3.                       EnforcementAction by Third Party.

 

### (a)                                  Inthe event that a declaratory judgment or other court or administrative actionis brought by a third party alleging invalidity, unenforceability,non-infringement, misuse, or misappropriation of any Licensed IP, PMII shallhave the obligation to take over the sole defense of the action at its ownexpense. The provisions of this Section 10.3 shall be in addition to, andnot in lieu of, the Parties’ indemnification obligations contained in Section 13,and in the event of any conflict between the provisions of this Section 10.3and the indemnification obligations contained in Section 13, theindemnification obligations contained in Section 13 shall be controlling.

 

### (b)                                 Allactions taken by PMII pursuant to this Section 10.3 shall be subject tothe following conditions:

#### (i)                                     PMIIshall be responsible for all costs of prosecuting and defending against suchaction;

####  

#### (ii)                                  asreasonably requested by ISRG, PMII shall regularly provide ISRG with copies ofall pleadings and other documents proposed to be filed or served by PMII andother material submissions and correspondence in any way related to suchdefense, as applicable, in sufficient time to allow review and comment by ISRG;and

####  

#### (iii)                               PMIIshall provide ISRG and its counsel with a reasonable opportunity to consultwith PMII and its counsel regarding the filing, service of process, and contentsof any documents proposed to be filed or served by PMII and other materialsubmissions and correspondence in any way related to such defense or inconnection therewith, and PMII shall give consideration to ISRG’s reasonablerequests regarding the same.

 

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10.4.                       AmountsRecovered.  Any amounts recovered byeither Party for past Infringement in connection with a suit pursuant to this Section 10,whether by settlement or judgment, shall be used to reimburse the Parties fortheir reasonable out-of-pocket costs and expenses in making such recovery(which amounts shall be allocated first to the party acting as PrimaryEnforcement Party if such amounts are insufficient to cover such costs andexpenses in full).  Any remainder thatrelates to an Infringement of Licensed IP occurring in the Field of Use shallbelong in full to ISRG and/or an Affiliate of ISRG (as applicable), and anyremainder that relates to an Infringement occurring outside the Field of Use ofIP that is owned or Controlled by PMII or a PMII Affiliate and that is notlicensed to ISRG shall belong to PMII.

 

10.5.                       Limitationon Settlements.  The Parties agreethat the primary goal in litigating validity and enforceability issuesassociated with the Licensed IP shall be the preservation of maximum claimbreadth and enforcement rights, and the Parties shall cooperate with each otherin good faith to achieve this mutual goal. Except with the prior written consent of the other Party, neither Partyshall consent to entry of any judgment or enter into any settlement withrespect to any infringement or other action identified in this Section 10that (i) would result in monetary, injunctive, or other relief beingimposed against the other Party, (ii) would constitute or require anyadmission of liability or wrongdoing on the part of the other Party that doesnot provide a full release of liability for the other Party, or (iii) wouldotherwise materially diminish the claim scope of the applicable Licensed IP oraffect its validity or enforceability.

 

11.                                 Confidentiality.

 

11.1.                        LimitedDisclosure and Use.  Each of ISRG andPMII shall hold in confidence any Confidential Information (including tradesecrets) disclosed by the other or otherwise obtained by such Party from theother Party as a result of this Agreement or the Supply Agreement, and each ofISRG and PMII shall protect the confidentiality thereof with the same degree ofcare that it exercises with respect to its own information of a like nature,but in no event less than reasonable care. ISRG shall have the right to provideConfidential Information to its Affiliates and Sublicensees, subject to theconfidentiality obligations imposed by this Section 11.1.  Without the prior written consent of thedisclosing Party, a receiving Party shall not use, disclose, or distribute anyConfidential Information, in whole or in part, except as required to performsuch Party’s obligations under this Agreement or the Supply Agreement or inexercise or furtherance of its rights under this Agreement or the SupplyAgreement.  Access to the disclosingParty’s Confidential Information shall be restricted to the receiving Party’semployees, agents, and consultants, who, in each case, need to have access tocarry out a permitted use and are bound in writing to maintain the use andconfidentiality restrictions of such Confidential Information.  The obligations set forth in this Section 11.1shall survive any termination or expiration of this Agreement in perpetuity(with respect to trade secrets and confidential financial information) and fora period of five (5) years (with respect to all other ConfidentialInformation).

 

11.2.                        Exceptions.  Each receiving Party may discloseConfidential Information, without prior approval from the other Party, to theextent such disclosure is reasonably necessary to protect intellectual propertyrights to which such Party has a right or license under this Agreement, toprosecute or defend litigation, to comply with applicable law or regulations(e.g.,

 

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Unites States Securities andExchange Commission filings), to obtain necessary or desirable Regulatory Approvalsor concurrences, or to respond to a valid order of a Governmental Authority, *provided that*, other than with respect to disclosure forprotecting intellectual property rights in connection with a Patent ProsecutionAction in which such disclosure is required by applicable law, the receivingParty shall (a) use reasonable efforts to secure confidential treatment ofsuch Confidential Information required to be disclosed, (b) use reasonableefforts to protect the financial terms of this Agreement, and (c) unlessprecluded by applicable law from doing so, give advance written notice to thedisclosing Party sufficiently in advance of the proposed disclosure so as topermit the disclosing Party to have the opportunity to object to suchdisclosure or otherwise protect its Confidential Information.

 

11.3.                        Use ofName; Disclosure of Terms of the Agreement. Except as required by applicable law or regulation, neither Party shalluse the name of the other Party or any Affiliate of the other Party in anyadvertising without the prior written approval of the other Party. Except asmay be required by applicable law or regulation, neither Party shall discloseany terms or conditions of this Agreement without the prior written consent ofthe other, *provided that* (a) either Party maydisclose such terms and conditions in order to comply with law or the rules ofany stock exchange on which its securities are listed; and (b) eitherParty may disclose such terms and conditions to existing and potential lenders,material investors, and buyers who have agreed in writing to keep suchinformation confidential in accordance with provisions at least as protectiveas those contained herein.

 

11.4.                        Termination.  Each receiving Party shall, upon terminationof this Agreement, immediately discontinue use of the other’s ConfidentialInformation (except to the extent that such receiving Party retains a right orlicense to use such Confidential Information, or requires such ConfidentialInformation in order to complete the transactions and purposes of thisAgreement).  Within thirty (30) daysafter termination of this Agreement, or upon receipt of written request by thedisclosing Party, if earlier, all materials containing such ConfidentialInformation shall be returned by the receiving Party or (with the disclosingParty’s prior written consent) destroyed, *provided, however,*that each Party may retain copies of Confidential Information in which suchParty has a proprietary or licensed interest that survives termination, and thereceiving Party shall be entitled to retain a file copy of the ConfidentialInformation under the control of its general counsel or its outside counsel forarchival purposes and for monitoring its obligations under this Agreement orthe Supply Agreement, and in connection with any related obligations under law,Device Regulation, or Regulatory Approvals.

 

11.5.                        PermittedDisclosure to Related Persons. Notwithstanding the preceding provisions of this Section 11, this Section 11allows, without prior approval of the other Party, disclosure of ConfidentialInformation or the terms and conditions of this Agreement: (i) by ISRG, toany ISRG Affiliate, or to the respective auditors and business, financial, andlegal advisers of ISRG or any ISRG Affiliate who need to understand theproposed or existing business relationship between PMII and ISRG, and (ii) byPMII, to any PMII Affiliate, and to the respective auditors and business,financial, and legal advisers who need to understand the proposed or existing businessrelationship between PMII and ISRG.

 

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12.                                 Representationsand Warranties.

 

12.1.                       MutualRepresentations and Warranties.  EachParty hereby represents and warrants to the other Party as follows:

 

### (a)                                  Itis a corporation duly organized, validly existing, and in good standing underthe laws of the jurisdiction in which it is incorporated.  It has corporate power to own its propertiesand to conduct its business as currently owned and conducted.

 

### (b)                                 Ithas the full legal right and power to enter into and perform the transactionscontemplated by this Agreement, without need for any consent, approval,authorization, license or order of, or notice to or filing with, anyGovernmental Authority or other person. The execution, delivery, and performance by such Party of this Agreementand the consummation by it of the transactions contemplated hereby have beenduly and validly authorized and approved by all necessary corporate action ofsuch Party.  This Agreement evidences thelegal, valid, and binding obligations of such Party, enforceable against it inaccordance with its terms, subject to bankruptcy, insolvency, reorganization,fraudulent conveyance, moratorium, or similar laws relating to or affecting therights and remedies of creditors generally.  This Agreement has been duly executed anddelivered by such Party.

 

### (c)                                  Theexecution, delivery, and performance by it of this Agreement does not and willnot violate any applicable law or regulation, nor any agreement to which it isa party or by which it is bound.

 

### (d)                                 Theexecution, delivery, and performance by it of this Agreement does not requirethe approval of any Governmental Authority nor the application for or filing ofor for any license, permit, approval, waiver, no-action, or similar permissionfrom any Governmental Authority (excluding the Regulatory Approvals expresslydescribed in this Agreement).

 

12.2.                       Representationsand Warranties of PMII.  PMII herebyrepresents and warrants, as at the Agreement Date, as follows:

 

### (a)                                  IssuedPatents and Patent Applications.  Exhibit 1.1(v) providesa true, complete, and correct list as of the Agreement Date of (i) all issuedpatents included within the Licensed Patent Rights, and the filing date, issuedate, and patent numbers of each such patent; and (ii) all applicationsfor patents included within the Licensed Patent Rights, including the title,filing date, and application number of each such application.

 

### (b)                                 Titleand Transfer.  PMII (i) owns andholds, free and clear of all Liens, all right, title, and interest in theLicensed IP; (ii) has the exclusive right to use and license the LicensedIP in the Field of Use on a worldwide basis; and (iii) has the exclusiveright to bring actions for the infringement of the Licensed IP in the Field ofUse.  Pursuant to this Agreement, PMIIwill license to ISRG all of its right, title, and interest in and to allLicensed IP in the Field of Use to the extent set forth in Section 2.1 ofthis Agreement, free and clear of all Liens.  PMII has not granted (and is not obligated togrant) to any other person any license, option, or other rights with respect tothe Licensed IP in the Field of Use.

 

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### (c)                                  Confidentiality.  PMII has taken reasonable efforts to protectthe confidentiality of any Know-How or confidential or proprietary informationrelating to any Licensed IP.

 

### (d)                                 NoContest of Validity or Patentability. Except as set forth in Exhibit 12.2(d), there is no pendingor, to the knowledge of PMII, threatened Litigation Matter (and PMII hasreceived no notice) (i) contesting the patentability, validity,enforceability, ownership, or right to use, assign, license, sublicense, ordispose of any Intellectual Property included in the Licensed IP that hasapplication in the Field of Use, or (ii) asserting that any Licensed IP thathas application in the Field of Use (or the design, manufacture, use,importation, marketing, offer for sale, or sale of any PMII Product or Reload)conflicts or will conflict with the Intellectual Property of any other person.

 

### (e)                                  Misappropriation;Notice of Infringement.  PMII has notmisappropriated from any person any Technical Information, nor any of theTechnology covered by any Licensed IP that has application in the Field of Useor that relates in any way to the Reload or the Device.  PMII has received no notice of anyinfringement or alleged infringement by any third party of the Licensed IP thathas application in the Field of Use.

 

### (f)                                    NoIn-Licensed IP.  As at the AgreementDate, all of the Licensed IP is owned by PMII.

 

### (g)                                 Know-How.  PMII is the sole owner of all PMII FieldKnow-How, free and clear of all Liens. PMII has taken reasonable steps to protect the confidentiality of allPMII Field Know-How.

 

### (h)                                 LicensedMarks.  PMII is the sole andexclusive owner of the Licensed Marks, free and clear of all Liens.  To PMII’s knowledge, (i) use by PMII ofthe Licensed Marks has not infringed and does not infringe any trademarks,service marks or trade names belonging to any other person, (ii) no personhas infringed any of the Licensed Marks, and (iii) use by ISRG and itsAffiliates of the Licensed Marks will not infringe any trademarks, servicemarks or trade names belonging to any other person.

 

12.3.                       Disclaimer.  EXCEPT AS EXPRESSLY SET FORTH IN THISAGREEMENT, NO PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS ORIMPLIED, INCLUDING WITHOUT LIMITATION ANY REPRESENTATIONS OR WARRANTIES OFMERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT.  NO PARTY WARRANTS THAT THE OTHER PARTY WILLRECEIVE ANY PARTICULAR AMOUNT, OR ANY, REVENUES OR PROFITS AS A RESULT OFENTERING INTO THE BUSINESS ARRANGEMENTS DESCRIBED IN THIS AGREEMENT.

 

13.                                 Indemnification;Limitation of Liability.

 

13.1.                       PMII’sIndemnification Obligations.

 

### (a)                                  PMIIhereby agrees to indemnify, defend, and hold harmless ISRG, each of itsAffiliates, and their respective Sublicensees, directors, representatives,officers,

 

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### employees, agents, attorneys, successors, andassignees (collectively, the “ISRG Indemnified Parties”), from andagainst, and in respect of, any liability, injury, damage, loss (including, butnot limited to, direct economic loss), or expense (including, but not limitedto, reasonable attorney fees and reasonable litigation expenses), as and when incurredby or imposed upon the ISRG Indemnified Parties in connection with any thirdparty claims, suits, actions, proceedings, demands, or judgments worldwide (“ThirdParty Claims”) arising out of or resulting from:

 

#### (i)                                     anyproduct liability claim of any kind, including for death, bodily injury, ortangible property damage, relating to the Reload, any component of the Reload,or any component of the Device that is also included in any product soldcommercially by PMII (each a “PMII Product”);

 

#### (ii)                                  anyinfringement or alleged infringement of third party Intellectual Propertyarising from ISRG’s use or Commercialization of the PMII Product; and

 

#### (iii)                               anyviolation of law or regulation (including any such claims by the FDA orGovernmental Authorities), negligent or willful misconduct, or misleading,fraudulent, unfair, or deceptive business practices, by PMII in connection withthe sale or distribution of PMII Products by ISRG to third parties.

 

### (b)                                 PMII’sindemnification obligations set forth in this Section 13.1 shall not applyto the extent that any Third Party Claim arises due to: (i) anymodification not authorized by PMII to any PMII Product by ISRG, includingwhere the modification causes an otherwise non-infringing PMII Product toinfringe; or (ii) the interoperation of any PMII Product with (A) anycomponents of the Device that do not constitute PMII Product where theinfringement would not occur but for the interoperation; or (B) any otherproduct not manufactured or designed by PMII.

 

13.2.                       ISRG’sIndemnification Obligations.

 

### (a)                                  ISRGhereby agrees to indemnify, defend, and hold harmless PMII, each of itsAffiliates, and their respective directors, representatives, officers,employees, agents, attorneys, successors, and assignees (collectively, the “PMIIIndemnified Parties”), from and against, and in respect of, any liability,injury, damage, loss (including, but not limited to, direct economic loss), orexpense (including, but not limited to, reasonable attorney fees and reasonablelitigation expenses), as and when incurred by or imposed upon the PMIIIndemnified Parties in connection with any Third Party Claims arising out of orresulting from:

 

#### (i)                                     anyproduct liability claim of any kind, including for death, bodily injury, ortangible property damage, relating to (i) those portions of the Devicethat do not constitute PMII Product, (ii) a Robotic System, or anycomponent thereof, (iii) modification not authorized by PMII to PMIIProducts made by or on behalf of ISRG; or (iv) inter-operation of PMIIProduct and the components of the Device or Robotic System that do notconstitute PMII Product;

 

#### (ii)                                  anyinfringement or alleged infringement of third party Intellectual Propertyarising from (i) those portions of the Device that do not constitute PMII Product,(ii) a Robotic System, or any component thereof, (iii) modificationto PMII Products

 

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#### made by or onbehalf of ISRG; or (iv) inter-operation of PMII Product and the componentsof the Device or Robotic System that do not constitute PMII Product; and

 

#### (iii)                               anyviolation of law or regulation (including any such claims by the FDA orGovernmental Authorities), negligent or willful misconduct, or misleading,fraudulent, unfair, or deceptive business practices, in connection with thesale or distribution of the Device by ISRG.

 

13.3.                        Noticeof Claims.  Within thirty (30) daysafter a Person seeking indemnification hereunder (hereinafter the “Indemnified Party”) has receivednotice of or has acquired knowledge of any Third Party Claim, the IndemnifiedParty shall, if such claim is indemnifiable by the other Party pursuant hereto(hereinafter the “Indemnifying Party”),give the Indemnifying Party written notice of such claim and the commencementor threatened commencement of such Third Party Claim.  Such notice shall state the nature and basisof such Third Party Claim, and, if ascertainable, the amount thereof.  Notwithstanding the foregoing, the failure ofthe Indemnified Party to give such notice shall not excuse the IndemnifyingParty’s obligation to indemnify and defend the Indemnified Party, except to theextent the Indemnifying Party has suffered damage or prejudice by reason of theIndemnified Party’s failure to give or delay in giving such notice.  Within ten (10) business days of receiptof any notice issued by the Indemnified Party pursuant to this Section 13.3,the Indemnifying Party shall notify the Indemnified Party whether theIndemnifying Party acknowledges its indemnification and defense obligation withrespect to the Third Party Claim which was the subject of the Indemnified Party’snotice or whether it disclaims such obligations.  In the event the Indemnifying Party disclaimsor fails to timely acknowledge its obligations with respect to any Third Part Claim,the Indemnified Party shall have the right to defend such Third Party Claim,with counsel of its own selection, and compromise such Third Party Claimwithout prejudice to its right to indemnification hereunder.  In the event the Indemnifying Party timelyacknowledges its obligations hereunder with respect to any Third Party Claim,the Indemnifying Party shall defend the same with counsel in accordance withthis Section.  Where the IndemnifyingParty shall have acknowledged in writing its obligations hereunder with respectto any Third Party Claim, the Indemnified Party may, at its expense,participate in the defense of such Third Party Claim and no such Third PartyClaim shall be settled by the Indemnified Party without the prior written consentof the Indemnifying Party which consent shall not be unreasonably withheld ordelayed.  At any time after theIndemnifying Party acknowledges its obligations hereunder with respect to anyThird Party Claim, the Indemnifying Party may request the Indemnified Party toagree in writing to the payment or compromise of such Third Party Claim(provided such payment or compromise has been previously approved in writing bythe third party claimant), and, in the event the Indemnifying Party does so,the Indemnified Party shall promptly agree in writing to such settlement,unless such settlement would involve a remedy or remedies, other than thepayment of money damages by the Indemnifying Party, to which the IndemnifiedParty reasonably objects.

 

13.4.                        ThirdParty Beneficiaries.  The ISRGIndemnified Parties and PMII Indemnified Parties are intended to be third partybeneficiaries of the rights granted under this Section 13 and to have theright to enforce such rights directly against the Indemnifying Party.  There shall be no other third partybeneficiaries of this Agreement.

 

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13.5.                        Limitationof Liability.  IN NO EVENT SHALLEITHER PARTY BE LIABLE FOR ANY INDIRECT, EXEMPLARY, INCIDENTAL, PUNITIVE, ORCONSEQUENTIAL DAMAGES ARISING IN CONNECTION WITH THIS AGREEMENT, INCLUDINGWITHOUT LIMITATION LOSS OF PROFITS OR REVENUES, WHETHER OR NOT SUCH DAMAGESWERE WITHIN THE CONTEMPLATION OF THE PARTIES. This paragraph shall not apply to any violation or infringement by aParty or its Affiliates of the Intellectual Property of the other Party or itsAffiliates, to any violation of the exclusive license grant provisions of Section 2.1,or to any breach of Section 11.

 

13.6.                        Insurance.  No later than the time that the Device isfirst sold or used with human subjects, each Party shall obtain and carry infull force and effect commercial general liability insurance, with productliability coverage, in amounts of at least $1 million per occurrence and $5million annual aggregate.  Such insurancewill be written by a reputable insurance company reasonably acceptable to theother Party.  On reasonable request froma Party (“Requesting Party”) to the other Party, the other Party willprovide the Requesting Party with appropriate certificates of insurancereflecting the obligations of the other Party pursuant to this subsection.

 

14.                                 DisputeResolution; Arbitration

 

14.1.                        Arbitrationas Exclusive Remedy.  Inthe event of any dispute or disagreement between PMII and ISRG as to the interpretationof any provision of this Agreement (or the performance of any obligations underthis Agreement), the matter, upon written request of either Party, shall bereferred to negotiation and (if applicable) arbitration in accordance with theterms of Exhibit 14.  Except asspecifically provided in Section 14.2 with respect to interim relief, theParties agree and understand that arbitration pursuant to the procedures setforth in Exhibit 14 is the exclusive remedy available to the Parties withrespect to any dispute, disagreement, claim, or controversy arising out of orrelating to this Agreement, or the transactions contemplated hereby or thereby,that cannot be resolved through negotiation between the Parties.

 

14.2.                        InterimRelief; Injunctions.  The arbitrationprovisions specifically provide that a Party may initiate an action in a courtof competent jurisdiction in either the State of California or the Commonwealthof Pennsylvania and may seek interim measures (including temporary restrainingorders and preliminary injunctions) necessary to protect the interests of suchParty pending the arbitration. The Parties recognize that money damages alonewould not adequately compensate ISRG in the event of breach by PMII of itsobligations under this Agreement, and PMII therefore agrees that, in additionto all other remedies available to ISRG, ISRG shall be entitled to injunctiverelief to restrain any such breach and to enforce the provisions of thisAgreement, without showing or proving any actual damage to ISRG.

 

14.3.                        ApplicableLaw.  The substantive law governingthis Agreement (which shall be applied in the arbitration) shall be (i) withrespect to disputes involving general contract matters, the internal laws ofthe State of New York without reference to conflict of laws principles, and (ii) withrespect to disputes involving Patent Rights in any jurisdiction, the patentlaws of the applicable jurisdiction.

 

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15.                                 Termand Termination.

 

15.1.                        LicenseTerm.  The “License Term” andthe license grants set forth in this Agreement shall take effect at theAgreement Date and shall continue until the expiration of the last to expire ofthe Licensed Patent Rights, including any extensions thereof.

 

15.2.                        Terminationby ISRG.  ISRG may terminate thisAgreement at any time by giving at least one hundred eighty (180) days’ writtennotice of such termination to PMII.

 

15.3.                        MaterialBreach by PMII.  If PMII:

 

#### (i)                                     materiallybreaches this Agreement and such breach remains uncured for thirty (30) daysfollowing written notice of breach by ISRG, or

 

#### (ii)                                  issubject to a petition for relief under any bankruptcy legislation, or makes anassignment for the benefit of creditors, or is subject to the appointment of areceiver for all or a substantial part of PMII’s assets, and such petition,assignment, or appointment prevents PMII (as a legal or as a practical matter)from performing its obligations under this Agreement or the Supply Agreement,or such petition, assignment, or appointment is not otherwise dismissed orvacated within ninety (90) days, 

####  

#### then, on eachsuch occasion, ISRG shall have the right (i) to seek monetary damages forsuch material breach and/or equitable relief to prevent such material breachfrom continuing or occurring again in the future, or (ii) to terminatethis Agreement and the Supply Agreement for cause.

 

15.4.                        MaterialBreach by ISRG.  If ISRG:

 

#### (i)                                     materiallybreaches this Agreement or the Supply Agreement and such breach remains uncuredfor thirty (30) days following written notice of breach, or

 

#### (ii)                                  issubject to a petition for relief under any bankruptcy legislation, or makes anassignment for the benefit of creditors, or is subject to the appointment of areceiver for all or a substantial part of ISRG’s assets, and such petition,assignment, or appointment prevents ISRG (as a legal or as a practical matter)from performing its obligations under this Agreement or the Supply Agreement,or such petition, assignment, or appointment is not otherwise dismissed orvacated within ninety (90) days, 

####  

#### then on eachsuch occasion, PMII shall have the right to (i) seek monetary damages forsuch material breach and/or equitable relief to prevent such material breachfrom continuing or occurring again in the future, or (ii) terminate thisAgreement (including, subject to Sections 2.1(c) and 7.2(d), the licensesgranted hereunder) and the Supply Agreement for cause; *provided*,however, that if the Irrevocable License Fee has been paid on or before suchoccasion, then the termination of this Agreement shall not terminate Section 2(License) of this Agreement.

 

15.5.                        AfterTermination.  After termination ofthis Agreement for any reason:

 

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### (a)                                  Sections4.3, 8,  11,  13,  14, 15.3, 15.4,  15.5, 15.6, and 16 shall survive;

 

### (b)                                 thelicense granted in Section 2.1(a) shall automatically terminate,unless ISRG has paid the Irrevocable License Fee, in which case (i) suchlicense shall be irrevocable and shall continue despite termination, and (ii) theprovisions of Sections 2.2 – 2.6, 9, and 10, shall survive in addition to theprovisions of the Sections listed in Section 15.5(a); and

 

### (c)                                  iftermination of this Agreement also terminates the license granted in Section 2(because the license has not become irrevocable), ISRG shall nevertheless havethe right to sell any inventory of Devices or Reloads then in its possession,or then under irrevocable order, subject always to payment of any amounts dueunder Section 7 of this Agreement.

 

15.6.                       Section 365(n).  All rights and licenses granted under orpursuant to this Agreement are, and shall otherwise be deemed to be, forpurposes of Section 365(n) of Title 11, U.S. Code (the “BankruptcyCode”), licenses of rights to “intellectual property” as defined in theBankruptcy Code.  The Parties agree thatISRG (as licensee under Section 2.1) shall retain and may fully exerciseall of their respective rights and elections under the Bankruptcy Code.  Each applicable licensor agrees during theLicense Term to create and maintain current copies or, if not amenable tocopying, detailed descriptions or other appropriate embodiments, of all suchIntellectual Property.  All rights,powers, and remedies of each licensee provided under this Section 15.6 arein addition to and not in substitution for any and all other rights, powers,and remedies now or hereafter existing at law or in equity in the event of anysuch commencement of a bankruptcy proceeding by or against the applicablelicensor.

 

16.                                 General.

 

16.1.                       Waiversand Amendments.

 

### (a)                                  ThisAgreement may be amended, modified, or supplemented only by a writteninstrument executed by the Parties to this Agreement.

 

### (b)                                 Nowaiver of any provision of this Agreement, or consent to any departure from theterms of this Agreement, shall be effective unless the same shall be in writingand signed by the Party waiving or consenting thereto.  No failure on the part of any Party toexercise, and no delay in exercising, any right or remedy under this Agreementshall operate as a waiver thereof, nor shall any single or partial exercise ofany such right or remedy by such Party preclude any other or further exercisethereof or the exercise of any other right or remedy.  The waiver by any Party to this Agreement ofa breach of any provision of this Agreement shall not operate as a waiver ofany subsequent breach.  All rights andremedies under this Agreement are cumulative and are in addition to, and notexclusive of, any other rights and remedies provided by law.

 

16.2.                       EntireAgreement.  This Agreement and theSupply Agreement constitute the entire agreement between the Parties to thisAgreement with respect to the subject matter of this Agreement and supersedeall prior agreements and understandings, whether written or oral, between theParties, or any of the Parties, in connection with such subject matter.

 

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16.3.    Severability.  If any provision of this Agreement is foundinvalid or unenforceable by an arbitrator or court of competent jurisdiction,such provision shall be enforced to the maximum extent permissible by law andthe other provisions of this Agreement shall remain in full force and effect.

 

16.4.    Relationshipof the Parties.  This Agreement shallnot constitute either Party the agent or legal representative of the otherParty for any purpose whatsoever, and neither Party shall hold itself out as anagent of the other Party.  This Agreementcreates no relationship of joint venturers, partners, associates, employment,or principal and agent between the Parties, and both Parties are acting asindependent contractors.  Neither PMIInor ISRG is granted in this Agreement any right or authority to, and shall notattempt to, assume or create any obligation or responsibility for or on behalfof the other.  Neither PMII nor ISRGshall have any authority to bind the other to any contract, whether ofemployment or otherwise, and PMII and ISRG shall bear all of their respectiveexpenses for their operations, including the compensation of their employeesand the maintenance of their offices and service facilities.  PMII and ISRG shall each be solelyresponsible for their own employees and salespeople and for their acts and thethings done by them.

 

16.5.    NoElection of Remedies.  Except asotherwise specifically provided in this Agreement, the rights and remediesaccorded in this Agreement and the Supply Agreement to PMII and ISRG arecumulative and in addition to those provided by law, and may be exercisedseparately, concurrently, or successively.

 

16.6.    Costsand Expenses.  Except as expresslystated otherwise in this Agreement, each Party shall bear its own costs andexpenses of performance of this Agreement.

 

16.7.    ForceMajeure.  No Party shall be liablefor failure to perform any of its obligations under this Agreement when suchfailure is due to fire, flood, strikes, labor troubles or other industrialdisturbances, legal restriction, riot, insurrection, or any other cause beyondthe reasonable ability of the Party affected thereby to control, and withoutsuch Party’s fault or negligence (“Force Majeure”), provided that anyParty claiming the existence of Force Majeure shall give notice to the otherParty not more than seven (7) days after the commencement of the event ofForce Majeure, and shall use prompt and diligent efforts to mitigate theeffects of Force Majeure.  In the eventthat any event of Force Majeure prevents performance by a Party for sixty (60)days or more, the other Party may terminate this Agreement for cause uponwritten notice to the non-performing Party.

 

16.8.    Notices.  All notices, requests, demands, claims, andother communications under this Agreement shall be in writing. Any notice,request, demand, claim or other communication under this Agreement with respectto any alleged breach of this Agreement or the Supply Agreement or the allegedtermination of this Agreement or the Supply Agreement shall be deemed dulydelivered (a) four (4) business days after it is sent by registeredor certified mail, return receipt requested, postage prepaid, or (b) one (1) businessday after it is sent for next business day delivery via a reputable nationwideovernight courier service, in each case addressed to the intended recipient asset forth below.  Any other form ofnotice, request, demand, or other communication between the Parties shall bedeemed duly delivered one (1) business day after it is sent (i) fornext business day delivery via a reputable nationwide

 

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overnight courier service, (ii) via electronic facsimiletransmission, with confirmation of delivery, or (iii) via electronic mailcommunications, with electronic verification of delivery requested, in eachcase addressed to the intended recipient as set forth below:

 

### (a)           ifto PMII, to:

###  

Power Medical Interventions, Inc.

2021 Cabot Boulevard

Langhorne, PA 19047

Attention:              President

Facsimile No.: (267) 775-8121

E-mail: mwhitman@pmi2.com

 

with a required copy to:

 

Foley Hoag LLP

155 Seaport Boulevard

Boston, MA 02210

Attention:              Jeffrey L. Quillen, Esq.

Facsimile No.:  (617) 832-7000

E-mail: jquillen@foleyhoag.com

 

### (b)           ifto ISRG, to:

###  

Intuitive Surgical, Inc.

1266 Kifer Road

Building 101

Sunnyvale, CA 94086-5304

Attention: General Counsel—Legal Dept.

Facsimile No.: (408) 523-1390

E-mail: mark.meltzer@intusurg.com

 

or at suchother address for a Party as shall be specified by like notice.

 

16.9.    Waiverof Jury Trial.  PMII AND ISRG EACHHEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANYLEGAL ACTION, PROCEEDING, OR COUNTERCLAIM WITH RESPECT TO ANY MATTER WHATSOEVERARISING OUT OF OR IN CONNECTION WITH OR RELATED TO THIS AGREEMENT OR THEENFORCEMENT HEREOF.

 

16.10.  Counterpartsand Facsimile Signatures.  ThisAgreement and all Exhibits, Schedules and Appendices may be executed in two ormore counterparts, all of which shall be considered one and the same agreementand shall become effective when two or more counterparts have been signed byeach Party and delivered to the other Party, it being understood that allParties need not sign the same counterpart. Facsimile execution and delivery ofthis Agreement and any Exhibits, Schedules, and Appendices by any of theParties shall be legal, valid, and binding execution and delivery of suchdocument for all purposes.

 

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16.11.  Benefitsand Burdens; Assignments.  ThisAgreement shall be binding upon and shall inure to the benefit of each of theParties as well as their respective legal representatives, successors, andpermitted assigns.  In addition, therights to indemnification set forth in Section 13 shall inure to thebenefit of each of the PMII Indemnified Parties and ISRG IndemnifiedParties.  Except for such IndemnifiedParties, there shall be no third party beneficiaries to this Agreement, and nothird party may enforce any provision against any Party to this Agreement.  This Agreement shall not be assignable ortransferable, by operation of law or otherwise, by either Party without theother Party’s written consent, which consent shall not be unreasonablywithheld, conditioned, or delayed, and with the exceptions that either Party orits permitted assignee(s) may assign this Agreement (i) in whole orin part to an Affiliate of the assigning Party so long as the assigning Partyagrees in writing to remain liable for the Affiliate’s performance of itsobligations under this Agreement; or (ii) in whole to a third party whoacquires all or substantially all of the assets of the assigning Party or ofthe assets of the business of the assigning Party to which this Agreementrelates; or (iii) in whole to any successor to the assigning Party bymerger or consolidation; *provided* ineach case the assignee agrees in writing to assume the assigning Party’sobligations under this Agreement.  Anyattempt to assign or transfer this Agreement or any portion thereof inviolation of this Section 16.11 shall be void.

 

16.12.  Interpretation.  When a reference is made in this Agreement toSections or Exhibits, such reference shall be to a Section of or Exhibit tothis Agreement unless otherwise indicated. References to Sections include subsections, which are part of therelated Section (e.g., a section numbered “Section 5.1(a)” would bepart of “Section 5.1”, and references to “Section 5.1” would alsorefer to material contained in the subsection described as “Section 5.1(a)”).  The recitals to this Agreement constitute anintegral part of this Agreement.  TheTable of Contents, Table of Defined Terms and headings contained in thisAgreement are for convenience of reference only and shall not affect in any waythe meaning or interpretation of this Agreement. The language used in thisAgreement shall be deemed to be the language chosen by the Parties to thisAgreement to express their mutual intent, and no rule of strictconstruction shall be applied against any Party (e.g., ambiguities, if any, inthis Agreement shall not be construed by default against either Party simplybecause one or the other Party is deemed to have drafted the provision atissue). Whenever the context may require, any pronouns used in this Agreementshall include the corresponding masculine, feminine, or neuter forms, and thesingular form of nouns and pronouns shall include the plural, and vice versa.Any reference to any federal, state, local, or foreign statute or law shall bedeemed also to refer to all rules and regulations promulgated thereunder,unless the context requires otherwise. Whenever the words “include,” “includes”or “including” are used in this Agreement, they shall be deemed to be followedby the words “but not limited to”.  Nosummary of this Agreement prepared by any Party shall affect the meaning orinterpretation of this Agreement. All references to dollars in this Agreementshall be to United States Dollars.

 

16.13.  LicenseRegistration and Recordal.  Subjectto the confidentiality provisions of Section 11, each Party shall have theright, at its sole cost and expense, to register, record, and otherwisedocument the license granted in Section 2.1 in any country where there areany pending or issued Licensed Patent Rights. To effect such registration, recordal, or other documentation, the Partymay file the form attached to this Agreement as Exhibit 16.13, orsuch other form upon which the Parties may mutually agree.  In addition, either Party may require thatthe other Party execute a “short form” license in order to effect the foregoingregistration,

 

29

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recordal, or other documentation in any such country, and may recordsuch short form license, but no short form license shall in any way alter orotherwise affect the rights and obligations of the Parties under thisAgreement.  Each Party shall have theright, at its sole cost and expense, to register, record, and otherwisedocument any assignments of Licensed Patent Rights provided for by thisAgreement.

 

16.14.  Non-Solicitation.  Each Party acknowledges that the other Party’semployees who are engaged in performance of development activities hereunder orotherwise involved with performance of this Agreement are valuable andindispensable assets of such Party.  EachParty agrees that, during the term of this Agreement and for a period of one (1) yearfrom the date of termination of this Agreement, it shall not, either directlyor indirectly, solicit for hire, or cause to leave his or her employment any ofthe other Party’s or its Affiliates’ employees or subcontractors utilized inthe performance of this Agreement to accept employment with the other Party orany of its Affiliates.  Generalemployment solicitation by a Party or its Affiliates directed at the generalpublic, and any employment resulting from such general employment solicitation,shall not be a breach of this provision. Both Parties further acknowledge that the damages to either Partyresulting from a breach of this provision are irreparable and immeasurable andthat the only effective remedy for a breach is injunctive relief.

 

[REMAINDER OFTHIS PAGE INTENTIONALLY LEFT BLANK]

 

30

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**IN WITNESS WHEREOF,**the Parties have executed, or caused their duly authorized representatives toexecute, this License and Development Agreement under seal as of the date firstwritten above.

 
| ** ** | **POWER MEDICAL INTERVENTIONS, INC.** |
|------------|---------------------------------------|
|       |                                  | ** ** |
|       | By:                                   | /s/ John P. Gandolfo |
|       |                                  | Name: |  John P. Gandolfo |
|       |                                  | Title: |  Chief Financial Officer |
| ** ** | ** **                            |   |
| ** ** | ** **                            |
| ** ** | **INTUITIVE SURGICAL, INC.**          |
|       |                                  | ** ** |
|       | By:                                   |  /s/ Lonnie M. Smith |
|       |                                  | Name: | Lonnie M. Smith |
|       |                                  | Title: |  CEO |
|            |                                       |  |  |  |  |  |

 

31

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**RELOADSUPPLY AGREEMENT**

** **

**DATED ASOF**

** **

**SEPTEMBER9, 2008**

** **

**BETWEEN**

** **

**INTUITIVESURGICAL, INC.**

** **

**AND**

** **

**POWERMEDICAL INTERVENTIONS, INC.**

** **

----

 

TABLE OFCONTENTS

 
| ** ** | ** **                                     | ** **                                                          | **Page** |
|------------|------------------------------------------------|---------------------------------------------------------------------|----------|
| ** ** | ** **                                     | ** **                                                          |     |
| **1.**     | **DEFINITIONS**                                | ** **                                                          | **1**    |
| ** ** | ** **                                     | ** **                                                          |     |
| ** ** | 1.1.                                           | CERTAIN  DEFINITIONS                                                |     | 1 |
| ** ** | 1.2.                                           | OTHER  DEFINED TERMS                                                |     | 5 |
|       |                                           |                                                                |     |   |
| **2.**     | **MANUFACTURE, SALE, AND PURCHASE OF RELOADS** | ** **                                                          | **6**    |
| ** ** | ** **                                     | ** **                                                          |     |
|       | 2.1.                                           | RELOADS                                                             |     | 6 |
|       | 2.2.                                           | EXCLUSIVITY                                                         |     | 6 |
|       | 2.3.                                           | MANUFACTURING  STANDARDS AND PROCEDURES                             |     | 6 |
|       | 2.4.                                           | INSPECTION  RIGHT                                                   |     | 6 |
|       | 2.5.                                           | MANUFACTURING  RECORDS                                              |     | 7 |
|       | 2.6.                                           | ALTERATION  IN RELOAD OR DOCUMENTATION                              |     | 7 |
|       | 2.7.                                           | CHANGE  REQUIRED TO BE MADE TO CORRECT DEFECTS                      |     | 7 |
|       | 2.8.                                           | RELOAD  MANUFACTURING DATA                                          |     | 7 |
|       | 2.9.                                           | ISRG’S  CONTINGENT RIGHT TO MAKE RELOADS                       |     | 7 |
|       |                                           |                                                                |     |   |
| **3.**     | **ORDERS AND DELIVERY**                        | ** **                                                          | **8**    |
| ** ** | ** **                                     | ** **                                                          |     |
|       | 3.1.                                           | TERMS AND  CONDITIONS                                               |     | 8 |
|       | 3.2.                                           | MINIMUM  PURCHASE OBLIGATION                                        |     | 8 |
|       | 3.3.                                           | FORECASTS  AND PURCHASE ORDERS                                      |     | 9 |
|       | 3.4.                                           | CONTENTS OF  PURCHASE ORDERS                                        |     | 9 |
|       | 3.5.                                           | SHIPPING AND  DELIVERY                                              |     | 9 |
|       | 3.6.                                           | PRICE                                                               |     | 10 |
|       | 3.7.                                           | PAYMENT                                                             |     | 10 |
|       |                                           |                                                                |     |   |
| **4.**     | **WARRANTIES**                                 | ** **                                                          | **10**   |
| ** ** | ** **                                     | ** **                                                          |     |
|       | 4.1.                                           | MUTUAL  REPRESENTATIONS AND WARRANTIES                              |     | 10 |
|       | 4.2.                                           | WARRANTIES  REGARDING RELOADS                                       |     | 11 |
|       |                                           |                                                                |     |   |
| **5.**     | **REGULATORY AND RECALLS**                     | ** **                                                          | **12**   |
| ** ** | ** **                                     | ** **                                                          |     |
|       | 5.1.                                           | REGULATORY  MATTERS                                                 |     | 12 |
|       | 5.2.                                           | REGULATORY  INFORMATION AND NOTIFICATION WITH RESPECT TO THE RELOAD |     | 12 |
|       | 5.3.                                           | RECALLS                                                             |     | 12 |
|       |                                           |                                                                |     |   |
| **6.**     | **USE OF TRADEMARKS**                          | ** **                                                          | **13**   |
| ** ** | ** **                                     | ** **                                                          |     |
| **7.**     | **RELOAD DOCUMENTATION**                       | ** **                                                          | **13**   |
| ** ** | ** **                                     | ** **                                                          |     |
|       | 7.1.                                           | REPRESENTATION  REGARDING RELOAD DOCUMENTATION                      |     | 13 |
|       | 7.2.                                           | UPDATES                                                             |     | 13 |
|       |                                           |                                                                |     |   |
| **8.**     | **TERM AND TERMINATION**                       | ** **                                                          | **13**   |
| ** ** | ** **                                     | ** **                                                          |     |
|       | 8.1.                                           | TERM                                                                |     | 13 |
|       | 8.2.                                           | METHODS OF  TERMINATION                                             |     | 14 |
|       | 8.3.                                           | EFFECT OF  TERMINATION                                              |     | 14 |

 

i

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| **9.**     | **DISPUTE RESOLUTION; ARBITRATION**          | ** **                                         | **15** |
|------------|----------------------------------------------|----------------------------------------------------|--------|
| ** ** | ** **                                   | ** **                                         |   |
|       | 9.1.                                         | PROCEDURES                                         |   | 15 |
|       | 9.2.                                         | INTERIM  RELIEF; INJUNCTIONS                       |   | 15 |
|       | 9.3.                                         | APPLICABLE  LAW                                    |   | 15 |
|       |                                         |                                               |   |   |
| **10.**    | **INDEMNIFICATION; LIMITATION OF LIABILITY** | ** **                                         | **15** |
| ** ** | ** **                                   | ** **                                         |   |
|       | 10.1.                                        | PMII’S  INDEMNIFICATION OBLIGATIONS           |   | 15 |
|       | 10.2.                                        | EXCEPTIONS                                         |   | 16 |
|       | 10.3.                                        | INFRINGEMENT  REMEDIES                             |   | 16 |
|       | 10.4.                                        | ISRG’S  INDEMNIFICATION OBLIGATIONS           |   | 16 |
|       | 10.5.                                        | NOTICE OF  CLAIMS                                  |   | 17 |
|       | 10.6.                                        | THIRD PARTY  BENEFICIARIES                         |   | 18 |
|       | 10.7.                                        | EXCLUSIVE  INFRINGEMENT REMEDIES                   |   | 18 |
|       | 10.8.                                        | NO  CONSEQUENTIAL DAMAGES                          |   | 18 |
|       | 10.9.                                        | LIMITATION  ON AGGREGATE DAMAGES                   |   | 18 |
|       |                                         |                                               |   |   |
| **11.**    | **CONFIDENTIALITY**                          | ** **                                         | **18** |
| ** ** | ** **                                   | ** **                                         |   |
|       | 11.1.                                        | LIMITED  DISCLOSURE AND USE                        |   | 18 |
|       | 11.2.                                        | EXCEPTIONS                                         |   | 19 |
|       | 11.3.                                        | USE OF NAME;  DISCLOSURE OF TERMS OF THE AGREEMENT |   | 19 |
|       | 11.4.                                        | TERMINATION                                        |   | 19 |
|       | 11.5.                                        | PERMITTED  DISCLOSURE TO RELATED PERSONS           |   | 20 |
|       |                                         |                                               |   |   |
| **12.**    | **MISCELLANEOUS**                            | ** **                                         | **20** |
| ** ** | ** **                                   | ** **                                         |   |
|       | 12.1.                                        | WAIVERS AND  AMENDMENTS                            |   | 20 |
|       | 12.2.                                        | ENTIRE  AGREEMENT                                  |   | 20 |
|       | 12.3.                                        | SEVERABILITY                                       |   | 20 |
|       | 12.4.                                        | RELATIONSHIP  OF THE PARTIES                       |   | 20 |
|       | 12.5.                                        | ASSIGNMENT                                         |   | 21 |
|       | 12.6.                                        | GOVERNING  LAW                                     |   | 21 |
|       | 12.7.                                        | NO ELECTION  OF REMEDIES                           |   | 21 |
|       | 12.8.                                        | COSTS AND  EXPENSES                                |   | 21 |
|       | 12.9.                                        | COUNTERPARTS  AND FACSIMILE SIGNATURES             |   | 21 |
|       | 12.10.                                       | INTERPRETATION                                     |   | 21 |
|       | 12.11.                                       | FORCE  MAJEURE                                     |   | 22 |
|       | 12.12.                                       | WAIVER OF  JURY TRIAL                              |   | 22 |
|       | 12.13.                                       | NOTICES                                            |   | 22 |
|            |                                              |                                                    |        |  |  |

 

ii

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**RELOAD SUPPLY AGREEMENT**

** **

This Reload SupplyAgreement (this “Agreement”) made as of the 9th day ofSeptember, 2008 (the “Agreement Date”), by and between Power MedicalInterventions, Inc., a Delaware corporation having its principal place ofbusiness at 2021 Cabot Boulevard, Langhorne, Pennsylvania 19047 (“PMII”),and Intuitive Surgical, Inc., a Delaware corporation having its principalplace of business at 1266 Kifer Road, Sunnyvale, California 94086  (“ISRG”).  Capitalized terms that are used but notdefined in this page of this Agreement shall have the meanings set forthin Section 1.

 

BACKGROUND

 

A.                                   PMIIis in the business of, among other things, developing and commercializingautomated cutting and stapling devices and disposable staple cartridges forthose devices;

 

B.                                     ISRGis in the business of, among other things, developing and commercializingrobotic surgical systems;

 

C.                                     Contemporaneouslywith execution of this Agreement, PMII and ISRG are entering into a License andDevelopment Agreement (“License Agreement”) pursuant to which ISRG willdevelop and commercialize a new cutting and stapling Device to be installed onISRG’s Robotic Systems and license from PMII certain rights that may relate tothe Device;

 

D.                                    ISRGdesires that PMII develop, manufacture, and supply to ISRG disposable Reloadsfor the Device; and

 

E.                                      PMIIdesires to supply disposable Reloads to PMII, subject to the terms andconditions set forth herein.

 

In view of theforegoing and for other good and valuable consideration, receipt andsufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.                                       Definitions.

 

1.1.                              CertainDefinitions.  For purposes of thisAgreement, in addition to the terms that are defined on first use in thisAgreement, the following terms shall have the following meanings:

 

(a)                                  “Affiliate”shall mean a person that directly or indirectly, through one or moreintermediaries, controls, or is controlled by, or is under common control with,the person specified.  For purposes ofthis definition, the terms “control”, “controlled by”, and “under commoncontrol with” shall mean the possession, directly or indirectly, of the powerto direct or cause the direction of the management or policies of such personand, in the case of an entity, shall require (a) in the case of acorporate entity, direct or indirect ownership of more than 50 percent of thesecurities having the right to vote for the election of directors, and (b) inthe case of a non-corporate entity, direct or indirect ownership of more than50 percent of the equity interests with the power to direct the management andpolicies of such non-corporate entity.

 

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(b)                                 “Commercialize”or “Commercialization” shall mean efforts to sell, offer for sale,import, export, transport, register, distribute, promote, and market, togetherwith other activities typically associated with commercialization of a medicalproduct.

 

(c)                                  “CommerciallyReasonable Efforts” means timely application of efforts and resources,consistent with the exercise of prudent business judgment by a company withsimilar financial resources which intends to exploit a medical product ofsimilar market potential with a view to making a profit, taking into accountsuch matters as product efficacy and safety, size of market, anticipatedlabeling, competitiveness of alternative products, strength of patent or tradesecret protection, likelihood of obtaining Regulatory Approval, andcommercially appropriate prioritization with respect to other company projectsand products.

 

(d)                                 “Complaint”shall mean any written, electronic, or oral communication that allegesdeficiencies related to the identity, quality, durability, reliability, safety,effectiveness, or performance of a product or device after it is released fordistribution in the marketplace.

 

(e)                                  “ConfidentialInformation” shall mean all ideas and information of any kind that are heldin confidence by one person and transferred, disclosed, or made available bysuch person to a receiving person and are identified at the time of disclosureas being proprietary or confidential, or would reasonably be regarded asproprietary or confidential by a reasonable business person in likecircumstances. The obligations in this Agreement with respect to ConfidentialInformation shall not apply to any portion of the Confidential Information thatthe receiving person can demonstrate by legally sufficient evidence (i) nowor hereafter, through no act or failure to act on the part of the receivingperson, is or becomes public; (ii) is known to the receiving person or oneof its Affiliates at the time such person receives such ConfidentialInformation from the disclosing person; (iii) is hereafter furnished tothe receiving person by an unrelated third person without violating anyagreement with the disclosing person; or (iv) is independently developedby the receiving person or one of its Affiliates without use of anyConfidential Information received from the other person.

 

(f)                                    “Device”shall mean the cutting and stapling device developed under the LicenseAgreement to be installed on ISRG’s Robotic System.

 

(g)                                 “DeviceRegulation” shall mean any national, state, local or foreign statute,regulation, judicial or administrative interpretation, guideline,recommendation or standard international guidance of any Governmental Authorityto the extent applicable to the manufacture, use or sale of the Reloadincluding, without limitation, to the extent applicable, Canadian MedicalDevice Conformity Assessment Scheme, the European Medical Device Directive93/42/EEC, FDA Act, and QSR/GMP.

 

(h)                                 “FDA”shall mean the United States Food and Drug Administration.

 

(i)                                     “FDAAct” shall mean the United States Food, Drug and Cosmetic Act of 1938, asamended, and all regulations promulgated thereunder.

 

2

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(j)                                     “First Commercial Sale” shall mean the first sale by ISRG or anAffiliate of ISRG to an end user for use in the United States, Canada, Japan,or a country of the European Union, other than in connection with anyinvestigational research, clinical study, or design or process validation.

 

(k)                                  “GovernmentalAuthority” shall mean any nation, territory, or government (or unionthereof), foreign, domestic, or multinational, any state, local, or otherpolitical subdivision thereof, and any bureau, court, tribunal, board, commission,department, agency, or other entity exercising executive, legislative,judicial, regulatory, or administrative functions of government, including alltaxing authorities and all European notified bodies, including notified bodieswithin the sense of Article 16 of the European Union Medical DeviceDirective 93/42/EEC, and all other entities exercising regulatory authorityover medical products or devices.

 

(l)                                     “IntellectualProperty” or “IP” shall mean: (i) Patent Rights; (ii) trademarks,service marks, trade names, brand names, certification marks, designs, logosand slogans, commercial symbols, business name registrations, domain names,trade dress and other indications of origin and general intangibles of likenature, the goodwill associated with the foregoing, and registrations in anydomestic or foreign jurisdiction of, and applications in any such jurisdictionto register, the foregoing, including any extension, modification, or renewalof any such registration or application; (iii) research and developmentdata, formulae, ideas, know-how, research, analysis, experiments, proprietaryprocesses and procedures, algorithms, models and methodologies, technicalinformation, technologies, techniques, innovations, creations, concepts,designs, industrial designs, procedures, trade secrets and confidentialinformation, and rights in any domestic or foreign jurisdiction to limit theuse or disclosure thereof by any person; (iv) writings and other works ofauthorship of any type (including patterns, drawings, data, the contentcontained on any web site), whether copyrightable or not, in any suchjurisdiction, and any copyrights and moral rights therein (“Copyrights”);(v) computer software (whether in source code or object code form),databases, compilations, and data; and (vi) registrations or applicationsfor registration of copyrights in any domestic or foreign jurisdiction, and anyrenewals or extensions thereof; and (vii) any similar intellectualproperty or proprietary rights.

 

(m)                               “IrrevocableLicense Fee” means the total amount of Twenty Million Dollars(US$20,000,000; i.e., the sum of the License Fee and the three MilestonePayments, as each is defined in the License Agreement), paid to PMII pursuantto Section 7 of the License Agreement.

 

(n)                                 “ISRGAffiliate” shall mean an Affiliate of ISRG.

 

(o)                                 “Party”shall mean each of PMII and ISRG (but not their respective Affiliates), whotogether are sometimes referred to as the “Parties.” As used in thisAgreement, references to “third parties” do not include either Party or theirrespective Affiliates.

 

(p)                                 “PatentRights” means (i) any and all written, oral, and visual ideas,concepts, and inventions, whether or not any such idea, concept, or inventionhas been filed as a patent application or submitted by the inventor(s) toany attorney or other person for evaluation as to patentability, (ii) anypatents, patent applications, any patents issuing therefrom 

 

3

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worldwide, and all provisionalrights with respect to patent applications, (iii) any improvements,substitutions, divisionals, patents of addition, continuations,continuations-in-part, reissues, renewals, registrations, confirmations,re-examinations, extensions, supplementary protection certificates, term extensions(under applicable patent law or regulation or other law or regulation), andcertificates of invention of any patents or patent applications, and (iv) allrights to exploit any of the foregoing.

 

(q)                                 Theterm “person” shall mean an individual, corporation, partnership,limited partnership, limited liability company, unincorporated association,trust, joint venture, union or other organization or entity, including aGovernmental Authority.

 

(r)                                    “PurchaseOrders” shall mean orders transmitted by ISRG (in written or electronicform), conforming to the requirements of this Agreement, and authorizing anddirecting PMII to manufacture and deliver specified Reloads on specifieddelivery dates.

 

(s)                                  “QSR/GMP”shall mean Quality Systems Regulations and Good Manufacturing Practices formedical devices, as promulgated or otherwise established by any GovernmentalAuthority with authority over the Reload, including those set forth in the FDA’sQuality System Regulations in 21 C.F.R. Part 820 and the European CouncilDirective concerning Medical Devices, 93/42/EEC, as in effect from time totime.

 

(t)                                    “RegulatoryApplication” shall mean preparation and submission of any applicationnecessary for Regulatory Approvals for the Device.

 

(u)                                 “RegulatoryApproval” shall mean any and all approvals (including any necessarygovernmental price or reimbursement approvals), licenses, registrations, orauthorizations of the applicable Governmental Authority necessary for the use,storage, import, promotion, marketing, and Commercialization of the Device orReload.

 

(v)                                  “Reload”shall mean a disposable cartridge containing staples that can be attached tothe Device.  Initial specifications forthe Reload are set forth in the Statement of Work in the License Agreement.  Such initial specifications will be refinedas mutually agreed by the Parties to include detailed manufacturingspecifications for the Reloads to be supplied by PMII to ISRG under thisAgreement.

 

(w)                                “ReloadDocumentation” shall mean (i) the specifications for the Reloadattached to the License Agreement, as such specifications may be amended byagreement of the Parties from time to time; (ii) any documentationrelating to the Reload, its manufacturing or use, submitted by the Parties toany Governmental Authority in connection with any Regulatory Application; and (iii) thelabeling for the Reload.

 

(x)                                   “RoboticSystem” shall mean an integrated system of one or more computer-controlledmanipulators and mechanical arms that operates autonomously or is operatedremotely (e.g., teleoperated) by a human, including attachable components orassemblies that operate as part of (and not separately from) such a systemduring any medical or surgical diagnosis, treatment, or procedure.

 

4

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#### (i)                                     Forthe avoidance of doubt, Robotic Systems shall include: (A) ISRG’sda Vinci® surgical systems, (B) detachable surgical instruments thatoperate as part of (and not separately from) such da Vinci® surgical systemsduring any medical or surgical diagnosis, treatment, or procedure, (C) componentsand assemblies that make up such da Vinci® surgical systems; and (D) improvementsto the foregoing that are not inconsistent with the first sentence of this Section 1.1(x).

####  

#### (ii)                                  Forthe avoidance of doubt, Robotic Systems do not include: (A) powered orunpowered instruments that are hand positioned for tissue manipulation duringopen or endoscopic surgical procedures, such as PMII’s powered endoscopiclinear cutter instruments (*e.g.*, i60Articulating Endoscopic Linear Cutter and other powered stapling instrumentsCommercialized prior to the Agreement Date), (B) conventional manuallaparoscopic instruments; and (C) improvements to the foregoing that areconsistent with this clause 1.1(x)(ii)(A) above.

####  

1.2.                              OtherDefined Terms.  Definitions of thedefined terms listed below are contained in the Section set forth oppositethe defined term in the table below:

 
| **Defined Term**              | ** ** | **Section of Agreement**     |
|------------------------------------|------------|----------------------------------------|
| ** **                         | ** ** | ** **                             |
| Agreement                          |       | Preamble                               |
| Agreement  Date                    |       | Preamble                               |
| Annual Sales  Period               |       | Section 3.6(b)                    |
| Change                             |       | Section 2.6(a)                    |
| Copyrights                         |       | Section 1.1(l)                    |
| First Sales Period                 |       | Section 3.2                       |
| Force  Majeure                     |       | Section 12.11                     |
| Indemnified Party                  |       | Section 10.5                      |
| Indemnifying Party                 |       | Section 10.5                      |
| ISRG                               |       | Preamble                               |
| ISRG Indemnified Parties           |       | Section 10.1                      |
| License  Agreement                 |       | Preamble                               |
| Licensed IP                        |       | Section 1.1  of License Agreement |
| PMII                               |       | Preamble                               |
| PMII Indemnified Parties           |       | Section 10.4                      |
| PMII Product                       |       | Section 10.1(a)                   |
| PMII Recall                        |       | Section 5.3(b)                    |
| QA Procedures                      |       | Section 2.3                       |
| Reload Defect                      |       | Section 2.7                       |
| Reload Manufacturing Data          |       | Section 2.8                       |
| Reload Manufacturing Period        |       | Section 2.9(a)                    |
| Reload Manufacturing Period Notice |       | Section 2.9(a)                    |
| Reload Manufacturing Trigger       |       | Section 2.9(a)                    |
| Third Party Claims                 |       | Section 10.1                      |
| Trademark                          |       | Section 6                         |

 

5

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2.                                       Manufacture,Sale, and Purchase of Reloads.

 

2.1.                              Reloads.  During the term of this Agreement, (i) PMIIshall manufacture, in accordance with the applicable Reload Documentation,Regulatory Approvals, and other Device Regulation, and shall sell to ISRGReloads, as ordered from time to time by delivery to PMII of Purchase Orders,and (ii) ISRG shall purchase Reloads from PMII in accordance with theapplicable Purchase Order and this Agreement.

 

2.2.                              Exclusivity.

 

(a)                                  PMIIshall not supply Reloads to any Person except ISRG; provided, however,that ISRG acknowledges that the Reloads are identical to other staple reloadproducts sold by PMII except for the addition of a key feature to make theReload compatible only with the Device. PMII’s exclusivity obligations hereunder shall not prevent PMII fromselling its other staple reload products (i.e., excluding the Reloads) to thirdparties.

 

(b)                                 ISRGshall not purchase Reloads from any Person except PMII.  ISRG shall not make Reloads, or have theReloads made by third parties, unless the Reload Manufacturing Period istriggered, in which case ISRG shall have the right to make the Reloads itself,or have the Reloads made by third parties, in accordance with Section 2.9.  For the purposes of this Section 2.2(b),the term “Reloads” includes any other staple reload product that is compatiblewith the Device.

 

2.3.                              ManufacturingStandards and Procedures.  PMII shalladopt and maintain quality assurance procedures and perform periodic qualitycontrol tests adequate to ensure that Reloads manufactured under this Agreementconform to Device Regulation (collectively the “QA Procedures”).  At the request of ISRG, PMII shall promptlysubmit to ISRG in writing a description of its QA Procedures and will in goodfaith consider for incorporation any reasonable suggestions ISRG might make tothe QA Procedures.  PMII represents andwarrants that the manufacturing facilities in which the Reloads aremanufactured are (and during the term of this Agreement will be) registeredwith the FDA.

 

2.4.                              InspectionRight.  At any time during the termof this Agreement, on not less than fourteen (14) days notice to PMII, ISRG andits Affiliates may conduct an inspection and audit of PMII’s and its Affiliates’(and its contract manufacturer’s) manufacturing facilities and operations tothe extent used in the manufacturing receiving, sampling, analyzing, storing,handling, packaging, and shipping of the Reloads for ISRG for the purpose ofquality control and to assure compliance with applicable Device Regulation andthe terms and conditions of this Agreement. ISRG may conduct such audit using its own personnel, the personnel of anISRG Affiliate, or a third party auditor or inspector.  Any inspection conducted pursuant to thisparagraph shall be conducted during regular business hours and in a manner thatminimizes disruption to PMII’s operations, and shall be subject to theconfidentiality provisions of this Agreement. PMII shall provide ISRG with access to any relevant personnel duringsuch inspection, and shall provide ISRG with a written response to any writtenaudit observations provided by ISRG within thirty (30) days after PMII’sreceipt thereof.  If required inconnection with any Regulatory Approval for the Device, such inspection mayalso include personnel of any Governmental Authority.

 

6

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2.5.                              ManufacturingRecords.  PMII shall keep complete,accurate and detailed original records pertaining to the manufacture of theReloads hereunder, including quality control of each lot.  Records shall be maintained for the longer of(i) any period required under applicable law; and (ii) a period oftwo (2) years after expiry of the expiration dating of such lot.  For validation batches, PMII shall keep therecords until PMII or ISRG (or its nominee) ceases manufacturing theReload.  PMII shall make available toISRG such records without unreasonable delay to the extent reasonably requestedand required by ISRG to comply with its regulatory and other legal and businessrequirements.

 

2.6.                              Alterationin Reload or Documentation.

 

(a)                                  General.PMII reserves the right to modify the specifications for the Reload, or theReload Documentation, subject to prior written notice to ISRG, provided thatPMII shall not make any material change or alteration in the design ormanufacture of the Reload (or any part or component thereof) that affects theform, fit, or function of the Reload (each a “Change”) without first consulting with ISRG and obtaining ISRG’sprior written consent.

 

(b)                                 ChangesRequested by ISRG. If ISRG requests a Change in a Reload (other than aChange that is required to correct a Reload defect, which is covered by Section 2.7), PMIIshall use Commercially Reasonable Efforts to accommodate such Change aspromptly as practicable.  If any Changewould result in an increase in PMII’s costs, PMII shall be entitled to increasethe price for the Reload, in an amount to be negotiated and agreed to by theparties.  PMII will inform ISRG inadvance of the amount of any increase in costs and will provide appropriateevidence of such increase.  If ISRG andPMII shall agree in writing upon the cost of a Change, PMII shall make suchChange.

 

2.7.                              ChangeRequired to be Made to Correct Defects. If a Change is required in order to correct any failure of the Reload tocomply with the standards set forth in this Agreement (a “Reload Defect”)(whether such defect is discovered by ISRG, PMII, or a third party), thensubject to compliance with Section 2.6(a), PMII shall make such Change andshall bear any design, engineering, materials, or manufacturing costs incurredin making such Change, and ISRG shall be entitled to a replacement, credit, orreimbursement, at its option, of the Reload purchase price for each Reloaddelivered to ISRG that suffers from any Reload Defect.

 

2.8.                              ReloadManufacturing Data.  During the timebeginning from when PMII first begins shipment of the Reloads to ISRG, PMIIshall maintain a set of “Reload Manufacturing Data,” meaning all data andinformation that is proprietary to PMII or that is included within the LicensedIP and would be useful to permit a person with expertise in surgical staplingto (i) manufacture the Reload; (ii) to understand, diagnose andremedy problems or defects in the manufacturing of the Reload; or (iii) touse the Reload in connection with the Device. PMII shall keep Reload Manufacturing Data current.  The Reload Manufacturing Data shallconstitute Confidential Information of PMII.

 

2.9.                              ISRG’sContingent Right to Make Reloads.

 

(a)                                  ReloadManufacturing Period.  In the eventof (i) default by PMII in timely delivery of Reloads conforming to therequirements of this Agreement, which default 

 

7

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or breach shall not have beencured by PMII or such designated supplier within ninety (90) days after writtennotice thereof shall have been given by ISRG or its Affiliate; or (ii) aForce Majeure situation that prevents PMII from performing its obligations hereunder;or (iii) PMII is subject to a petition for relief under any bankruptcylegislation, or makes an assignment for the benefit of creditors, or is subjectto the appointment of a receiver for all or a substantial part of PMII’sassets, and such petition, assignment or appointment prevents PMII (as a legalor as a practical matter) from performing its obligations under this Agreement,or such petition, assignment or appointment is not otherwise dismissed orvacated within ninety (90) days (each a “Reload Manufacturing Trigger”),then ISRG shall be entitled to make Reloads itself, or have the Reloads made bya third party, until such time that PMII is capable of resuming itsmanufacturing duties (the “Reload Manufacturing Period”).  If a Reload Manufacturing Trigger occurs,ISRG may begin the Reload Manufacturing Period by delivery of written notice toPMII (the “Reload Manufacturing Period Notice”).

 

(b)                                   Reload Manufacturing Data.  Promptly after receipt of the ReloadManufacturing Period Notice, PMII shall deliver a copy of the ReloadManufacturing Data to ISRG.  At ISRG’srequest, during the Reload Manufacturing Period, PMII shall provide reasonableconsultation, advice and technical assistance to ISRG or any ISRG Affiliate(without payment of any additional fee or charge, but in consideration of ISRGor such Affiliate reimbursing PMII for its reasonable out-of-pocket costs) asmay be useful or necessary to permit ISRG or its designees to understand andutilize the Reload Manufacturing Data to manufacture Reloads.

 

(c)                                  Non-ExclusiveLicense.  During the ReloadManufacturing Period and the period ISRG will manufacture or have Reloadmanufactured for it pursuant to Section 8.3(c), ISRG shall have anon-exclusive, worldwide, royalty-free license, under the Licensed IP, to make,have made, offer for sale, sell, market, distribute, import, export, andCommercialize the Reloads solely for use in the Device.  Such license shall not be sub-licenseable,except that ISRG may have the Reloads made by a contract manufacturer of itsselection, provided that such contract manufacturer enters into a writtenagreement that complies with Section 2.3 (a), (b) and (c) of theLicense Agreement and that requires the contract manufacturer to protect theReload Manufacturing Data and Licensed IP to the extent ISRG is required to doso by this Agreement.

 

3.                                       Ordersand Delivery.

 

3.1.                              Termsand Conditions.  The terms andconditions of this Agreement shall govern all orders for and sales of Reloadsby PMII to ISRG hereunder, and any different, conflicting, or additional terms(other than terms as to quantities, required delivery dates, and shippinginstructions) in a Purchase Order, invoice, or other writing or communicationshall be of no force or effect unless they shall be contained in a writteninstrument specifically providing that it is intended to be an amendment tothis Agreement and describing this Agreement with particularity signed by bothparties.

 

3.2.                              MinimumPurchase Obligation.  During the 18month period beginning on the First Commercial Sale of the Device (“FirstSales Period”), ISRG shall purchase at least **[confidential treatment requested pursuant to Rule 24b-2]**from PMII.  If ISRG has not placedPurchase Orders for **[confidential treatmentrequested pursuant to Rule 24b-2]**

 

8

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Reloads by the end of the FirstSales Period, then PMII may notify ISRG that it is in breach of this Agreementand require ISRG to cure the breach, and exercise its termination remedies ifISRG fails to do so, all in accordance with Section 8.2.

 

3.3.                              Forecastsand Purchase Orders.  Not later thanninety (90) days before the First Commercial Sale, ISRG shall deliver to PMIIits initial Purchase Order for Reloads. ISRG shall place Purchase Orders with PMII in such a manner that willprovide PMII with a minimum ninety (90) days of visibility of ISRG’s deliveryrequirements, each of such Purchase Orders to be placed at least thirty (30)days following the preceding Purchase Order. ISRG shall provide PMII with a non-binding twelve (12) month rollingforecast of ISRG’s delivery requirements, updated each calendar quarter.  By prior written notice to PMII, ISRG maymake changes to shipping instructions, quantities, or requested delivery datesspecified in any Purchase Order, but in conformance with the table below,unless otherwise mutually agreed upon in writing by the parties.

 

| **Days from Notice** | ** ** | **%**** Change** | ** ** |
|--------------------------------|------------|-----------------------|------------|
| 0 - 30                         |       | 0                     |       |
| 31 - 60                        |       | +/- 25                |       |
| 61 - 90                        |       | +/- 50                |       |

 

PMII shall useCommercially Reasonable Efforts to manufacture and deliver to ISRG quantitiesof Reloads in excess of those it is required to deliver pursuant to this Section 3.3,if so requested in writing by ISRG.

 

3.4.                              Contentsof Purchase Orders.  All PurchaseOrders shall contain the following information:

 

(a)                                  Thequantities of Reloads ordered;

 

(b)                                 Therequired delivery dates; and

 

(c)                                  Shippinginstructions, including place of delivery.

 

3.5.                              Shippingand Delivery.

 

(a)                                  AllReloads shall be shipped by PMII by a carrier designated by ISRG, and PMIIshall invoice ISRG for reasonable freight and shipping costs associated withthe delivery of the Reloads.  PMII shalldeliver Reloads F.C.A. (Incoterms 2000) ISRG’s receiving dock, and title andrisk of loss shall pass to ISRG or its designee upon delivery to ISRG’s or itsdesignee’s receiving dock.

 

(b)                                 PMIIshall pack each Reload in its standard packing and shall mark each Reload withsuch labeling as shall be agreed by the Parties.

 

(c)                                  PMIIshall include a packing list with each shipment of Reloads which shall providethe following information: (i) ISRG purchase order number; (ii) quantity;and (iii) PMII lot number.

 

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3.6.                              Price.

 

(a)                                  Theprice of Reloads ordered by ISRG for delivery during the First Sales Periodshall be **[confidential treatment requestedpursuant to Rule 24b-2]**.

 

(b)                                 Notlater than three (3) months before the end of the First Sales Period andeach twelve-month period thereafter (each an “Annual Sales Period”),ISRG and PMII shall meet to negotiate the price at which PMII shall sell, andISRG shall purchase, Reloads for delivery during the next Annual Sales Period,provided, however, that the price from the First Sales Period to the firstAnnual Sales Period, and from one Annual Sales Period to the next, **[confidential treatment requested pursuant to Rule 24b-2]**.

 

3.7.                              Payment.

 

(a)                                  PMIIshall invoice ISRG for Reloads within thirty (30) days of the applicableshipment, and ISRG shall remit payment within forty (45) days of the receipt byISRG of the related invoice.

 

(b)                                 IfISRG fails to pay PMII the price due for Reloads or any other amount duehereunder, promptly and when due, PMII may recover, in addition to such priceor amount, interest thereon at a rate equal to the lesser of one percent (1.0%)per month or the maximum lawful monthly interest rate.  All payments by ISRG shall be made in UnitedStates dollars.

###  

### (c)                                  Allamounts due and payable to PMII hereunder shall be exclusive of applicablesales and similar taxes, and any applicable import or export duties.  As between the Parties, ISRG shall beresponsible for the payment of all such taxes and duties (excluding taxes basedupon PMII’s income), or if applicable shall provide PMII with appropriatecertification of exemption.  Notwithstandingthe foregoing, if ISRG is required by law to withhold any tax to the tax orrevenue authorities in any country regarding any payments or royalties, suchamount shall be deducted from the amounts to be paid by ISRG, and ISRG shallnotify PMII and promptly furnish PMII with copies of any tax certificate orother documentation evidencing such withholding.

###  

### (d)                                 ISRGhereby grants PMII a purchase money security interest in each of the Reloadssold to ISRG hereunder to secure due and punctual payment.  PMII may prepare and file all financingstatements and other documents, and take all other actions, reasonablynecessary to perfect, protect, continue, or maintain such security interests.

###  

4.                                       Warranties.

 

4.1.                              MutualRepresentations and Warranties.  EachParty hereby represents and warrants to the other Party as follows:

 

### (a)                                  Itis a corporation duly organized, validly existing, and in good standing underthe laws of the jurisdiction in which it is incorporated.  It has corporate power to own its propertiesand to conduct its business as currently owned and conducted.

 

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### (b)           Ithas the full legal right and power to enter into and perform the transactionscontemplated by this Agreement, without need for any consent, approval,authorization, license or order of, or notice to or filing with, anyGovernmental Authority or other person. The execution, delivery and performance by such party of this Agreementand the consummation by it of the transactions contemplated hereby have beenduly and validly authorized and approved by all necessary corporate action ofsuch Party.  This Agreement evidences thelegal, valid and binding obligations of such Party, enforceable against it inaccordance with its terms, subject to bankruptcy, insolvency, reorganization,fraudulent conveyance, moratorium, or similar laws relating to or affecting therights and remedies of creditors generally. This Agreement has been duly executed and delivered by such Party.

###  

### (c)           Theexecution, delivery, and performance by it of this Agreement does not and willnot violate any applicable law or regulation, nor any agreement to which it isa party or by which it is bound.

###  

### (d)           Theexecution, delivery, and performance by it of this Agreement does not requirethe approval of any Governmental Authority nor the application for or filing ofor for any license, permit, approval, waiver, no-action, or similar permissionfrom any Governmental Authority (excluding the Regulatory Approvals expresslydescribed in this Agreement).

###  

4.2.          WarrantiesRegarding Reloads.

###  

### (a)           Warranty Statement.  PMII warrants that all Reloads shall (i) bemanufactured in accordance with, and conform to, the applicable ReloadDocumentation and all applicable Device Regulation, (ii) be free ofdefects in materials and workmanship under normal use and service, and (iii) notbe adulterated or misbranded within the meaning of the FDA Act, nor be anarticle which may not be introduced into interstate commerce pursuant torequirements of the FDA Act (it being agreed that any Reloads that do notcomply with this Section 4.2(a) shall be deemed to be non-conformingand defective).  PMII shall have noliability for breach of the foregoing warranties to the extent arising from: (i) anyalteration or modification to the Reload not made by or with the approval ofPMII; or (ii) storage, handling, or use of the Reloads otherwise than inaccordance with the Reload Documentation or PMII’s published instructions.

###  

### (b)           Inspection; Right to Reject.  Within thirty (30) days after receipt of anyReload, ISRG shall inspect the Reload and, in its discretion, test the Reload todetermine whether the Reload conforms in all material respects to therequirements of this Agreement. Notwithstanding the foregoing, each Reload shall be deemed accepted byISRG on the thirty-first (31st) day after receipt of the respective Reload,unless PMII has received notification from ISRG within such time of therespective Reload’s failure to conform in all material respects to therequirements of this Agreement.

###  

### (c)           Remedy for Non-Conforming andDefective Reloads.  ISRG’s sole andexclusive remedy, and PMII’s sole and exclusive liability, with respect tobreach of the warranties set forth in this Section 4.2shall be that ISRG shall be entitledto replacement Reloads, or credit, or reimbursement, at its option, if Reloadsare non-conforming and defective. 

###  

### 11

### 

###  

### PMII shall make any such replacement, credit, orreimbursement within thirty (30) days after notice by ISRG that such Reloadsare non-conforming and defective.

###  

(d)           THE EXPRESS WARRANTIES CONTAINED INTHIS SECTION 4.2 ARE IN LIEU OF, AND PMII HEREBY EXPRESSLY DISCLAIMS, ALL OTHERWARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING ANYWARRANTY OF NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS FOR A PARTICULARPURPOSE, AND ANY WARRANTY ARISING FROM COURSE OF PERFORMANCE OR USAGE OF TRADE.

###  

5.             Regulatoryand Recalls.

 

5.1.          RegulatoryMatters.  PMII shall be responsiblefor preparing, submitting and obtaining all applications necessary forRegulatory Approvals for the Reload, and shall keep ISRG informed as to thestatus of all applicable Regulatory Approvals. ISRG shall cooperate with PMII relating to all material issues,amendments, supplements, and other matters respecting all Regulatory Approvalsfor the Device.  PMII shall provide ISRG,upon request, a true and complete copy of all Regulatory Approvals and otherregulatory filings, submissions and communications for the Device or Reload.

 

5.2.          RegulatoryInformation and Notification with Respect to the Reload.  Each Party agrees to share and provide to theother Party all information related to Regulatory Approvals for the Reload, andwithout limitation agrees to:

 

### (a)           report to the other Party withinten (10) days of the initial receipt of a report, or sooner ifrequired for the other Party to comply with any and all legal and regulatoryrequirements, of (i) any adverse experience with the Reload that isserious and unexpected, or (ii) malfunctions of a Device that did notcause a serious adverse experience, but would likely cause a serious adverseexperience if the malfunction were to recur. Serious adverse experiences mean any experience that suggests asignificant hazard, contraindication, side effect, or precaution, or anyexperience that is fatal or life threatening, is permanently disabling, orrequires or prolongs inpatient hospitalization. An unexpected adverse experience is one not identified in nature,specificity, severity, or frequency in the then-current U.S. labeling for theapplicable product.

###  

### (b)           Each Party shall maintain areasonable record of all material Complaints it receives with respect to theReload.  Each Party shall notify theother of any material Complaint received by it in sufficient detail and withinthirty (30) days after the end of the calendar quarter in which the eventoccurred, and in any event in sufficient time to allow the responsible Party tocomply with any and all legal and regulatory requirements.

###  

5.3.          Recalls.

###  

### (a)           General.  PMII shall have the exclusive right (subjectto applicable law) to initiate voluntary Reload recalls, and shall manage andbe responsible (including bearing all costs and expense) for all Reloadrecalls. Each of the Parties hereto agrees to notify the other in writingwithin seventy (72) hours in the event either sees a need for a Reload recall.

###  

### 12

### 

###  

### (b)           PMIIRecall.  In the event of any recallof any Reload (whether voluntary, required by the FDA or any other GovernmentalAuthority in any jurisdiction in which ISRG, any Affiliate of ISRG or anydistributor of either has sold any Reloads, or resulting from any devicenotification or safety alert) due to design defect, workmanship or failure tomanufacture in conformance with applicable Reload Documentation or Device Regulationstandards, or due to any other defect or non-conformity in the Reload(collectively, “PMII Recall”), PMII shall (i) if requested by ISRG,provide ISRG with a credit or reimbursement, as provided in Section 4.2(c),in lieu of replacement, refurbishment or repair of defective or non-conformingReloads; and (ii) reimburse ISRG for reasonable costs and expensesincurred by ISRG associated with (a) the initial shipments of the recalledReloads, and (b) customers’ return of the recalled Reloads and shipment ofreplacement Reloads to customers.  PMIIshall use its reasonable efforts to correct, as promptly as is practicable,problems or other issues which result in PMII Recalls.  If any recall results solely from an act oromission of ISRG or its agents or employees, ISRG shall reimburse PMII for itsreasonable out-of-pocket costs and expenses incident to such recall.

###  

### 6.             Useof Trademarks.  All Reloads orderedby ISRG under this Agreement shall bear solely such trademarks, service marks,trade names, and logo identifications owned by or licensed to ISRG (“Trademarks”)as ISRG shall specify, and no others, except to the extent required by DeviceRegulation or required or permitted by the License Agreement.  PMII shall have no right or license to useany such Trademark (other than to affix it to the packaging and labeling of theReloads sold to ISRG under this Agreement) and shall not use any such Trademarkon or with respect to any Reload or service provided to any person other thanISRG.  All goodwill relating to ordeveloped with respect to any such Trademark shall belong exclusively to ISRGor its Affiliates.  PMII will notchallenge the validity of any such Trademark or use a mark that is deceptivelysimilar to any of the Trademarks used from time to time by ISRG or any ISRGAffiliate in connection with any Reloads.

###  

### 7.             ReloadDocumentation.

###  

### 7.1.          RepresentationRegarding Reload Documentation.  PMIIhereby represents and warrants to ISRG that the Reload Documentation: (i) is,as of the date of this Agreement, current, accurate in all material respects,and sufficient in detail and content to identify and describe the Reload; and(ii) will be updated by PMII, as required by Section 7.2 below, so that itremains current, accurate in all material respects, and sufficient in detailand content to identify and describe the Reload.

###  

### 7.2.          Updates.  PMII will update the Reload Documentationfrom time to time to reflect all any material changes to all Reloads, suchupdates to be completed by PMII as promptly as practicable after such changesare made.  PMII will deliver a completecopy of the Reload Documentation to ISRG, as ISRG may request from time totime.

###  

### 8.             Termand Termination.

###  

### 8.1.          Term.  This Agreement shall take effect on theAgreement Date and, unless otherwise terminated pursuant to Section 8.2, shallremain in effect for an initial term ending six (6) years after the FirstCommercial Sale of the Device (“Initial Term”).  After the

 

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Initial Term, this Agreementshall automatically renew for further twelve (12) month terms, unless (a) theAgreement terminated by either party giving written notice not later than onehundred and twenty (120) days before the end of the Initial Term or any annualrenewal thereof; or (b) ISRG permanently ceases sale of the Device and giveswritten notice thereof to PMII.

 

8.2.          Methodsof Termination.  This Agreement maybe terminated:

###  

### (a)           by mutual agreement of both Partieshereto;

###  

### (b)           by PMII, if ISRG is in materialbreach of any provision of this Agreement and has failed to cure such breachwithin ninety (90) days after receipt of written notice thereof from PMIIalleging the breach; provided, however, that the cure period for abreach of Section 3.7 (payment) shall be thirty (30) days;

###  

### (c)           by ISRG, if PMII is in materialbreach of any provision of this Agreement and has failed to cure such breachwithin ninety (90) days after receipt of written notice thereof from ISRGalleging the breach; or.

###  

### (d)           by ISRG, if during the Initial Term,PMII material breaches or Reload Manufacturing Triggers last for a cumulativeperiod of one hundred and eighty (180) days or more.

###  

### In addition, this Agreement shall terminateautomatically upon termination of the License Agreement.

###  

8.3.          Effectof Termination.

###  

### (a)           Ifthis Agreement is terminated by PMII pursuant to Section 8.2(b) andprovided the Irrevocable License Fee has not been paid under the LicenseAgreement, PMII may, in addition to any other rights and remedies, and onwritten notice to ISRG terminate any licenses to the Licensed IP to the extentrelevant to the Reloads. For the avoidance of doubt, to the extent theIrrevocable License Fee has been paid under the License Agreement, any licensesto the Licensed IP shall not be terminated even if PMII terminates thisAgreement pursuant to Section 8.2(b). However, in the event PMII terminates this Agreement pursuant to Section 8.2(b) andthe Irrevocable License Fee has been paid under the License Agreement (thus,all licenses to the Licensed IP can neither be revoked nor terminated), ISRGshall pay PMII a royalty of **[confidentialtreatment requested pursuant to Rule 24b-2]** on ISRG’s Reloadsales (net of credits and returns) to ISRG’s customers during the remainder ofthe Initial Term.  ISRG shall pay anysuch royalties to PMII quarterly in arrears.

###  

### (b)           Ifthis Agreement is terminated by ISRG pursuant to Section 8.2(c), ISRG may,in addition to any other rights and remedies, trigger the Reload ManufacturingPeriod.

###  

### (c)           Ifthis Agreement is terminated by ISRG pursuant to Section 8.2(d), ISRGshall, in addition to any other rights and remedies, be entitled to startmaking Reloads itself, or to start having the Reloads made for it by a thirdparty, and ISRG will have 

###  

### 14

### 

###  

### sole discretion in deciding whether PMII is permittedto resume manufacturing Reloads for ISRG.

###  

### (d)           Inthe event of any termination of this Agreement, (i) each Party shall pay,within thirty (30) days after termination of this Agreement (subject to theprovisions of Section 9), all amounts owing under this Agreement withrespect to the period prior to the termination, (ii) the provisions ofSections 2.5, 3.7(b)- (d), 4.2, 5, 8.3, 9, 10, 11, and 12 and all otheragreements or covenants contained in this Agreement that, by their terms, areto be performed after the termination or expiration of this Agreement, shallsurvive such termination of this Agreement and remain in full force and effect;and (iii) notwithstanding anything to the contrary contained in thisAgreement, each Party shall remain liable (in an action at law or otherwise)for any liabilities or damages arising out of a material breach of any of itsrepresentations, warranties, covenants, or agreements set forth in thisAgreement.

###  

9.             DisputeResolution; Arbitration.

 

9.1.          Procedures.  In the event of any dispute or disagreementbetween PMII and ISRG as to the interpretation of any provision of thisAgreement (or the performance of any obligations under this Agreement), thematter, upon written request of either Party, shall be referred to negotiation,mediation, and (if applicable) arbitration in accordance with the terms ofExhibit 9.1. Except as specifically provided in Section 9.2 of this Agreementwith respect to interim relief, the Parties agree and understand that mediationand arbitration pursuant to the procedures set forth in Exhibit 9.1 are theexclusive remedies available to the Parties with respect to any dispute,disagreement, claim, or controversy arising out of or relating to thisAgreement, or the transactions contemplated hereby or thereby, that cannot beresolved through negotiation between the Parties.

 

9.2.          Interim Relief; Injunctions.  The arbitration provisions specificallyprovide that a Party may initiate an action in a court of competentjurisdiction in the State of California or Commonwealth of Pennsylvania and mayseek interim measures (including temporary restraining orders and preliminaryinjunctions) necessary to protect the interests of such Party pending thearbitration.  Accordingly, the Partiesrecognize that money damages alone may not adequately compensate ISRG in theevent of breach by PMII of its obligations to manufacture and deliver Reloadson a timely basis under this Agreement, and PMII therefore agrees that, inaddition to all other remedies available to ISRG, ISRG may be entitled toinjunctive relief to restrain any such breach and to enforce the provisions ofthis Agreement.

 

9.3.          Applicable Law.  The substantive law governing this Agreement(which shall be applied in the arbitration) shall be (i) with respect todisputes involving general contract matters, the internal laws of the State ofNew York without reference to conflict of laws principles, and (ii) withrespect to disputes involving Patent Rights in any jurisdiction, the patentlaws of the applicable jurisdiction.

 

10.           Indemnification;Limitation of Liability.

 

10.1.        PMII’s Indemnification Obligations.  PMII hereby agrees to indemnify, defend, andhold harmless ISRG, each of its Affiliates, and their respective Sublicensees, 

 

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directors, representatives,officers, employees, agents, attorneys, successors, and assignees(collectively, the “ISRG Indemnified Parties”), from and against, and inrespect of, any liability, injury, damage, loss (including, but not limited to,direct economic loss), or expense (including, but not limited to, reasonableattorney fees and reasonable litigation expenses), as and when incurred by orimposed upon the ISRG Indemnified Parties in connection with any third partyclaims, suits, actions, proceedings, demands, or judgments worldwide (“ThirdParty Claims”) arising out of or resulting from:

###  

### (a)           anyproduct liability claim of any kind, including for death, bodily injury, ortangible property damage, relating to the Reload, any component of the Reload,or any component of the Device that is also included in any product soldcommercially by PMII (each a “PMII Product”);

###  

### (b)           anyinfringement or alleged infringement of third party Intellectual Propertyarising from ISRG’s use or Commercialization of the PMII Product; and

###  

### (c)           anyviolation of law or regulation (including any such claims by the FDA orGovernmental Authorities), negligent or willful misconduct, or misleading,fraudulent, unfair, or deceptive business practices, by PMII in connection withthe sale or distribution of PMII Products by ISRG to third parties.

###  

### 10.2.        Exceptions.  PMII’s indemnification obligations set forthin Section 10.1 shall not apply to the extent that any Third Party Claim arisesdue to: (i) any modification not authorized by PMII to any PMII Product byISRG, including where the modification causes an otherwise non-infringing PMIIProduct to infringe; or (ii) the interoperation of any PMII Product with (A)any components of the Device that do not constitute PMII Product where theinfringement would not occur but for the interoperation; or (B) any otherproduct not manufactured or designed by PMII.

###  

### 10.3.        InfringementRemedies.  In the event that PMIIbelieves that any claim may be made that the Reload infringes third partyIntellectual Property, PMII shall have the right to (a) modify the Reload toavoid the claim but still perform substantially in accordance with Reload Documentation;(b) seek to obtain a license from the third party permitting PMII to continueto sell the Reload to ISRG; or (c) if neither of the foregoing are available oncommercially reasonable terms, terminate this Agreement on one hundred twenty(120) days’ notice to ISRG.

###  

### 10.4.        ISRG’sIndemnification Obligations.  ISRGhereby agrees to indemnify, defend, and hold harmless PMII, each of itsAffiliates, and their respective directors, representatives, officers,employees, agents, attorneys, successors, and assignees (collectively, the “PMIIIndemnified Parties”), from and against, and in respect of, any liability,injury, damage, loss (including, but not limited to, direct economic loss), orexpense (including, but not limited to, reasonable attorney fees and reasonablelitigation expenses), as and when incurred by or imposed upon the PMIIIndemnified Parties in connection with any Third Party Claims arising out of orresulting from:

 

 

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### (a)                                  anyproduct liability claim of any kind, including for death, bodily injury, ortangible property damage, relating to (i) those portions of the Devicethat do not constitute PMII Product, (ii) a Robotic System, or anycomponent thereof, (iii) modification to PMII Products made by or onbehalf of ISRG by a party other than PMII; or (iv) inter-operation of PMIIProduct and the components of the Device or Robotic System that do notconstitute PMII Product;

###  

### (b)                                 anyinfringement or alleged infringement of third party Intellectual Propertyarising from (i) those portions of the Device that do not constitute PMIIProduct, (ii) the Surgical Robotic System, or any component thereof, (iii) modificationnot authorized by PMII to PMII Products made by or on behalf of ISRG by a partyother than PMII; or (iv) inter-operation of PMII Product and thecomponents of the Device or Robotic System that do not constitute PMII Product;and

###  

### (c)                                  anyviolation of law or regulation (including any such claims by the FDA or GovernmentalAuthorities), negligent or willful misconduct, or misleading, fraudulent,unfair or deceptive business practices, in connection with the sale ordistribution of the Device by ISRG.

###  

10.5.                        Noticeof Claims.  Within thirty (30) daysafter a Person seeking indemnification hereunder (hereinafter the “IndemnifiedParty”) has received notice of or has acquired knowledge of any Third PartyClaim, the Indemnified Party shall, if such claim is indemnifiable by the otherParty pursuant hereto (hereinafter the “Indemnifying Party”), give theIndemnifying Party written notice of such claim and the commencement orthreatened commencement of such Third Party Claim.  Such notice shall state the nature and basisof such Third Party Claim, and, if ascertainable, the amount thereof.  Notwithstanding the foregoing, the failure ofthe Indemnified Party to give such notice shall not excuse the IndemnifyingParty’s obligation to indemnify and defend the Indemnified Party, except to theextent the Indemnifying Party has suffered damage or prejudice by reason of theIndemnified Party’s failure to give or delay in giving such notice.  Within ten (10) business days of receiptof any notice issued by the Indemnified Party pursuant to this Section 10.5,the Indemnifying Party shall notify the Indemnified Party whether theIndemnifying Party acknowledges its indemnification and defense obligation withrespect to the Third Party Claim which was the subject of the Indemnified Party’snotice or whether it disclaims such obligations.  In the event the Indemnifying Party disclaimsor fails to timely acknowledge its obligations with respect to any Third PartyClaim, the Indemnified Party shall have the right to defend such Third PartyClaim, with counsel of its own selection, and compromise such Third Party Claimwithout prejudice to its right to indemnification hereunder.  In the event the Indemnifying Party timelyacknowledges its obligations hereunder with respect to any Third Party Claim,the Indemnifying Party shall defend the same with counsel in accordance withthis Section.  Where the IndemnifyingParty shall have acknowledged in writing its obligations hereunder with respectto any Third Party Claim, the Indemnified Party may, at its expense, participatein the defense of such Third Party Claim and no such Third Party Claim shall besettled by the Indemnified Party without the prior written consent of theIndemnifying Party which consent shall not be unreasonably withheld ordelayed.  At any time after theIndemnifying Party acknowledges its obligations hereunder with respect to anyThird Party Claim, the Indemnifying Party may request the Indemnified Party toagree in writing to the payment or compromise of such Third Party Claim(provided such payment or

 

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compromise has been previously approved in writing by the third partyclaimant), and, in the event the Indemnifying Party does so, the IndemnifiedParty shall promptly agree in writing to such settlement, unless suchsettlement would involve a remedy or remedies, other than the payment of moneydamages by the Indemnifying Party, to which the Indemnified Party reasonablyobjects.

 

10.6.                        ThirdParty Beneficiaries.  The ISRGIndemnified Parties and PMII Indemnified Parties are intended to be third partybeneficiaries of the rights granted under this Section 10 and to have theright to enforce such rights directly against the Indemnifying Party.  There shall be no other third partybeneficiaries of this Agreement.

 

10.7.                        ExclusiveInfringement Remedies.  This Section 10sets forth ISRG’s sole and exclusive remedies, and PMII’s sole and exclusiveliability, with respect to any claims of infringement of third partyIntellectual Property by the Reload.

 

10.8.                        NoConsequential Damages.  EXCEPT WITHRESPECT TO BREACH OF CONFIDENTIALITY OR INFRINGEMENT OF THE OTHER PARTY’SINTELLECTUAL PROPERTY RIGHTS, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FORANY INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGESARISING HEREUNDER, INCLUDING, WITHOUT LIMITATION, LOS S OF USE, LOSS OF REVENUEOR LOST PROFITS, EVEN IF SUCH PARTY HAS BEEN ADVISED IN ADVANCE OF THEPOSSIBILITY OF SUCH DAMAGES.  THISPARAGRAPH SHALL NOT LIMIT EITHER PARTY’S INDEMNIFICATION OBLIGATIONS SET FORTHIN THIS SECTION 10.

 

10.9.                        Limitationon Aggregate Damages.  EXCEPT WITHRESPECT TO BREACH OF CONFIDENTIALITY OR PURSUANT TO THE INDEMNIFICATIONOBLIGATIONS SET FORTH IN THIS SECTION 10, IN NO EVENT SHALL EITHER PARTYBE LIABLE TO THE OTHER FOR ANY DAMAGES ARISING UNDER OR IN CONNECTION WITH THISAGREEMENT OR SUPPLY OF THE PRODUCTS, WHETHER SUCH DAMAGES ARISE BY CONTRACT,TORT (INCLUDING NEGLIGENCE), UNDER STATUTE, OR OTHERWISE, IN EXCESS OF THEAMOUNTS PAID TO PMII BY ISRG HEREUNDER IN THE TWELVE-MONTH PERIOD IN WHICH THELIABILITY IS PRINCIPALLY ALLEGED TO HAVE ARISEN.

 

11.           Confidentiality.

 

11.1.                        LimitedDisclosure and Use.  Each of ISRG andPMII shall hold in confidence any Confidential Information (including tradesecrets) disclosed by the other or otherwise obtained by such Party from theother Party as a result of this Agreement or the License Agreement, and each ofISRG and PMII shall protect the confidentiality thereof with the same degree ofcare that it exercises with respect to its own information of a like nature,but in no event less than reasonable care. ISRG shall have the right to provideConfidential Information to its Affiliates and Sublicensees, subject to theconfidentiality obligations imposed by this Section 11.1.  Without the prior written consent of thedisclosing Party, a receiving Party shall not use, disclose, or distribute anyConfidential Information, in whole or in part, except as required to performsuch Party’s obligations under this Agreement or

 

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the License Agreement or in exercise or furtherance of its rights underthis Agreement or the License Agreement. Access to the disclosing Party’s Confidential Information shall berestricted to the receiving Party’s employees, agents, and consultants, who, ineach case, need to have access to carry out a permitted use and are bound inwriting to maintain the use and confidentiality restrictions of suchConfidential Information.  Theobligations set forth in this Section 11.1 shall survive any terminationor expiration of this Agreement in perpetuity (with respect to trade secretsand confidential financial information) and for a period of five (5) years(with respect to all other Confidential Information).

 

11.2.                        Exceptions.  Each receiving Party may discloseConfidential Information, without prior approval from the other Party, to theextent such disclosure is reasonably necessary to protect intellectual propertyrights to which such Party has a right or license under this Agreement, to prosecuteor defend litigation, to comply with applicable law or regulations (*e.g.*, United States Securities and Exchange Commissionfilings), to obtain necessary or desirable Regulatory Approvals or concurrencesor to respond to a valid order of a Governmental Authority, *provided that*, other than with respect to disclosure forprotecting intellectual property rights in connection with a patent prosecutionaction in which such disclosure is required by applicable law, the receivingParty shall (i) use reasonable efforts to secure confidential treatment ofsuch Confidential Information required to be disclosed, (ii) usereasonable efforts to protect the financial terms of this Agreement, and (iii) unlessprecluded by applicable law from doing so, give advance written notice to thedisclosing Party sufficiently in advance of the proposed disclosure so as topermit the disclosing Party to have the opportunity to object to suchdisclosure or otherwise protect its Confidential Information.

 

11.3.                        Useof Name; Disclosure of Terms of the Agreement.  Except as required by applicable law orregulation, neither Party shall use the name of the other Party or anyAffiliate of the other Party in any advertising without the prior writtenapproval of the other Party. Except as may be required by applicable law orregulation, neither Party shall disclose any terms or conditions of thisAgreement without the prior written consent of the other, *providedthat* (a) either Party may disclose such terms and conditions inorder to comply with law or the rules of any stock exchange on which itssecurities are listed; and (b) either Party may disclose such terms andconditions to existing and potential lenders, material investors, and buyerswho have agreed in writing to keep such information confidential in accordancewith provisions at least as protective as those contained herein.

 

11.4.                        Termination.  Each receiving Party shall, upon terminationof this Agreement, immediately discontinue use of the other’s ConfidentialInformation (except to the extent that such receiving Party retains a right orlicense to use such Confidential Information, or requires such ConfidentialInformation in order to complete the transactions and purposes of thisAgreement).  Within thirty (30) daysafter termination of this Agreement, or upon receipt of written request by thedisclosing Party, if earlier, all materials containing such ConfidentialInformation shall be returned by the receiving Party or (with the disclosingParty’s prior written consent) destroyed, *provided, however,*that each Party may retain copies of Confidential Information in which suchParty has a proprietary or licensed interest that survives termination, and thereceiving Party shall be entitled to retain a file copy of the Confidential Informationunder the control of its General Counsel or its outside counsel for archivalpurposes and for

 

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monitoring its obligations under this Agreement or the LicenseAgreement, and in connection with any related obligations under law, DeviceRegulation, or Regulatory Approvals.

 

11.5.                        PermittedDisclosure to Related Persons. Notwithstanding the preceding provisions of this Section 11, this Section 11allows, without prior approval of the other Party, disclosure of ConfidentialInformation or the terms and conditions of this Agreement: (i) by ISRG, toany ISRG Affiliate, or to the respective auditors and business, financial, andlegal advisers of ISRG or any ISRG Affiliate who need to understand the proposedor existing business relationship between PMII and ISRG, and (ii) by PMII,to any PMII Affiliate, and to the respective auditors and business, financialand legal advisers who need to understand the proposed or existing businessrelationship between PMII and ISRG.

 

12.                                 Miscellaneous.

 

12.1.                        Waiversand Amendments.  This Agreement maybe amended, modified, or supplemented only by a written instrument executed bythe Parties hereto.  No waiver of anyprovision of this Agreement, or consent to any departure from the terms of thisAgreement, shall be effective unless the same shall be in writing and signed bythe Party waiving or consenting thereto. No failure on the part of any Party to exercise, and no delay in exercising,any right or remedy under this Agreement shall operate as a waiver thereof, norshall any single or partial exercise of any such right or remedy by such Partypreclude any other or further exercise thereof or the exercise of any otherright or remedy.  The waiver by any Partyhereto of a breach of any provision of this Agreement shall not operate as awaiver of any subsequent breach.  Allrights and remedies under this Agreement are cumulative and are in addition to,and not exclusive of, any other rights and remedies provided by law.

 

12.2.                        EntireAgreement.  This Agreement and theLicense Agreement constitute the entire agreement between the Parties to thisAgreement with respect to the subject matter of this Agreement and supersedeall prior agreements and understandings, whether written or oral, between theParties, or any of the Parties, in connection with such subject matter.

 

12.3.                        Severability.  If any provision of this Agreement is foundinvalid or unenforceable by an arbitrator or court of competent jurisdiction,such provision shall be enforced to the maximum extent permissible by law andthe other provisions of this Agreement shall remain in full force and effect.

 

12.4.                        Relationshipof the Parties.  This Agreement shallnot constitute either Party as the agent or legal representative of the otherParty for any purpose whatsoever, and neither Party shall hold itself out as anagent of the other Party.  This Agreementcreates no relationship of joint venturers, partners, associates, employment,or principal and agent between the Parties, and both Parties are acting asindependent contractors.  Neither PMIInor ISRG is granted in this Agreement any right or authority to, and shall notattempt to, assume or create any obligation or responsibility for or on behalfof the other.  Neither PMII nor ISRGshall have any authority to bind the other to any contract, whether ofemployment or otherwise, and PMII and ISRG shall bear all of their respectiveexpenses for their operations, including the compensation of their employeesand the maintenance of their offices and service facilities.  PMII and ISRG

 

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shall each be solely responsible for their own employees andsalespeople and for their acts and the things done by them.

 

12.5.                        Assignment.  This Agreement shall be binding upon andshall inure to the benefit of each of the Parties as well as their respectivelegal representatives, successors, and permitted assigns.  In addition, the rights to indemnificationset forth in Section 10 shall inure to the benefit of each of the PMIIIndemnified Parties and ISRG Indemnified Parties.  Except for such Indemnified Parties, thereshall be no third party beneficiaries to this Agreement, and no third party mayenforce any provision against any Party to this Agreement.  This Agreement shall not be assignable ortransferable, by operation of law or otherwise, by either Party without theother Party’s written consent, which consent shall not be unreasonablywithheld, conditioned, or delayed, and with the exceptions that either Party orits permitted assignee(s) may assign this Agreement (i) in whole orin part to an Affiliate of the assigning Party so long as the assigning Partyagrees in writing to remain liable for the Affiliate’s performance of itsobligations under this Agreement; or (ii) in whole to a third party whoacquires all or substantially all of the assets of the assigning Party or ofthe assets of the business of the assigning Party to which this Agreementrelates; or (iii) in whole to any successor to the assigning Party bymerger or consolidation; *provided* ineach case the assignee agrees in writing to assume the assigning Party’sobligations under this Agreement.  Anyattempt to assign or transfer this Agreement or any portion thereof inviolation of this Section 12.5 shall be void.

 

12.6.                        GoverningLaw.  This Agreement shall begoverned by, and construed and enforced in accordance with, the substantivelaws of the State of New York (without giving effect to its conflict of lawsrules).

 

12.7.                        NoElection of Remedies.  Except asotherwise provided in this Agreement, the rights and remedies accorded in thisAgreement to PMII and ISRG are cumulative and in addition to those provided bylaw, and may be exercised separately, concurrently or successively.

 

12.8.                        Costsand Expenses.  Except as expresslystated otherwise in this Agreement, each Party shall bear its own costs andexpenses of performance of this Agreement.

 

12.9.                        Counterpartsand Facsimile Signatures.  ThisAgreement and the exhibits hereto may be executed in one or more counterparts,all of which shall be considered one and the same agreement and shall becomeeffective when one or more counterparts have been signed by each of the Partiesand delivered to the other Parties, it being understood that all Parties neednot sign the same counterpart. Facsimileexecution and delivery of this Agreement and the exhibits hereto by any of the Parties shall be legal, valid andbinding execution and delivery of such document for all purposes.

 

12.10.                  Interpretation.  When reference is made in this Agreement to aSection, such reference shall be to a Section of this Agreement, unlessotherwise indicated.  References to Sections include subsections, which are part ofthe related Section (*e.g*., a sectionnumbered “Section 5.1(a)” would be part of “Section 5.1” andreferences to “Section 5.1” would also refer to material contained in thesubsection described as “Section 5.1(a)”). The recitals hereto constitute an integral part of thisAgreement.  The Table of Contents, Tableof Defined Terms,

 

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and headings contained in this Agreement are for convenience ofreference only and shall not affect in any way the meaning or interpretation ofthis Agreement. The language used in this Agreement shall be deemed to be thelanguage chosen by the Parties hereto to express their mutual intent, and no rule ofstrict construction shall be applied against any Party. Whenever the contextmay require, any pronouns used in this Agreement shall include thecorresponding masculine, feminine, or neuter forms, and the singular form ofnouns and pronouns shall include the plural, and vice versa.  Any reference to any federal, state, local orforeign statute or law shall be deemed also to refer to all rules andregulations promulgated thereunder, unless the context requires otherwise.Whenever the words “include,” “includes” or “including” are used in thisAgreement, they shall be deemed to be followed by the words “withoutlimitation.”  No summary of thisAgreement prepared by any Party shall affect the meaning or interpretation ofthis Agreement.  Ambiguities, if any, inthis Agreement shall not be construed by default against either Party simply becauseone or the other Party is deemed to have drafted the provision at issue.

 

12.11.                  ForceMajeure.  No Party shall be liablefor failure to perform any of its obligations under this Agreement when suchfailure is due to fire, flood, strikes, labor troubles or other industrialdisturbances, legal restriction, riot, insurrection, earth quake, acts ofnature, or any other cause beyond the reasonable ability of the Party affectedthereby to control, and without such Party’s fault or negligence (“ForceMajeure”), provided that any Party claiming the existence of Force Majeureshall give notice to the other parties not more than seven (7) days afterthe commencement of the event of Force Majeure, and shall use prompt anddiligent efforts to mitigate the effects of Force Majeure.  In the event that any event of Force Majeureprevents performance for sixty (60) days or more, ISRG shall have the right totrigger the Reload Manufacturing Period, provided, however, that the ReloadManufacturing Period shall terminate when PMII is able to resume supply of theReloads.

 

12.12.                  Waiverof Jury Trial.  PMII AND ISRG EACH HEREBY IRREVOCABLY AND UNCONDITIONALLYWAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL ACTION, PROCEEDING, ORCOUNTERCLAIM WITH RESPECT TO ANY MATTER WHATSOEVER ARISING OUT OF OR INCONNECTION WITH OR RELATED TO THIS AGREEMENT OR THE ENFORCEMENT HEREOF.

 

12.13.                  Notices.  All notices, requests, demands, claims andother communications under this Agreement shall be in writing. Any notice,request, demand, claim or other communication under this Agreement with respectto any alleged breach of this Agreement, or the alleged termination of thisAgreement, shall be deemed duly delivered (i) four (4) business daysafter it is sent by registered or certified mail, return receipt requested,postage prepaid, or (ii) one (1) business day after it is sent fornext business day delivery via a reputable nationwide overnight courierservice, in each case addressed to the intended recipient as set forthbelow.  Any other form of notice, request,demand or other communication between the Parties shall be deemed dulydelivered one (1) business day after it is sent (x) for next businessday delivery via a reputable nationwide overnight courier service, (y) viaelectronic facsimile transmission, with confirmation of delivery, or (z) viaelectronic mail communications, with electronic verification of deliveryrequested, in each case addressed to the intended recipient as set forth below:

 

### (a)                                  ifto PMII, to:

 

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Power Medical Interventions, Inc.

2021 Cabot Boulevard

Langhorne, PA 19047

Attention:                               President

Facsimile No.:  267-775-8121 E-mail: mwhitman@pmi2.com

 

with a required copy to:

 

Foley Hoag LLP

155 Seaport Boulevard

Boston, MA 02210

Attention:                               Jeffrey L. Quillen, Esq.

Facsimile No.:  (617) 832 7000E-mail: jlq@foleyhoag.com

 

### (b)                                 ifto ISRG, to:

 

Intuitive Surgical, Inc.

1266 Kifer Road

Building 101

Sunnyvale, CA 94086-5304

Attention: Materials Management

Facsimile No.: 408-523-1390

E-mail: john.hill@intusurg.com

 

with required copies to each of thefollowing:

 

General Counsel - Legal Department

 

or at such other address for a Party as shallbe specified by like notice.

 

* * * * *

 

[Remainderof page intentionally left blank]

 

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IN WITNESS WHEREOF, the Parties hereto havecaused this Reload Supply Agreement to be executed in their names by theirproperly and duly authorized officers or representatives as of the date firstabove written.

 
|   | POWER MEDICAL INTERVENTIONS, INC. |
|--------|-----------------------------------|
|   |                              |
|   |                              |
|   | By:                               |  /s/ John P. Gandolfo |
|   |                              |   |   |
|   |                              | Name: |  John P. Gandolfo |
|   |                              |   |   |
|   |                              | Title: |  Chief Financial Officer |
|   |                              |
|   |                              |
|   | INTUITIVE SURGICAL, INC.          |
|   |                              |
|   |                              |
|   | By:                               |  /s/ Lonnie M. Smith |
|   |                              |   |   |
|   |                              | Name: |  Lonnie M. Smith |
|   |                              |   |   |
|   |                              | Title: |  CEO |
|        |                                   |  |  |  |  |

 

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