Document:

Exhibit 10.9

 

LICENSE
AND DEVELOPMENT AGREEMENT

 

DATED AS
OF

 

SEPTEMBER
9, 2008

 

BETWEEN

 

POWER
MEDICAL INTERVENTIONS, INC.

 

AND

 

INTUITIVE
SURGICAL, INC.

 

 

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

  

 

i

 

	
  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

  

 

ii

 

	
  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

  

 

iii

 

LICENSE AND DEVELOPMENT AGREEMENT

 

This License and Development Agreement (this “Agreement”)
is made as of September 9, 2008 (“Agreement Date”), by and between
Power Medical Interventions, Inc., a Delaware corporation having its
principal place of business at 2021 Cabot Boulevard, Langhorne, Pennsylvania
19047 (“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 of
this Agreement shall have the meanings set forth in Section 1.

 

BACKGROUND

 

A.                                 PMII is in the business
of, among other things, developing and manufacturing automated surgical
devices;

 

B.                                   ISRG is in the
business of, among other things, developing, marketing, and selling robotic
surgical systems;

 

C.                                   ISRG desires to
co-develop with PMII, market, and sell a new cutting and stapling Device to be
installed on ISRG’s Robotic Systems and desires to license from PMII certain
rights that may relate to the Device;

 

D.                                    PMII desires
license such rights to ISRG, subject to the terms and conditions set forth
herein;

 

E.                                    In connection with
such license, and contemporaneously with execution of this Agreement, PMII and
ISRG 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 good
and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:

 

1.                                       Definitions.

 

1.1.                              Certain
Definitions.  For purposes of this
Agreement, in addition to the terms that are defined on first use in this
Agreement, the following terms shall have the following meanings:

 

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

 

 

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

 

(b)                                 “Change
of Control” shall mean, with respect to either Party, the sale of all or
substantially all of assets or issued and outstanding capital stock of such
Party, or merger or consolidation involving such Party in which stockholders of
such Party immediately before such merger or consolidation do not own immediately
after such merger or consolidation capital stock or other equity interests of
the surviving corporation or entity representing more than fifty percent in
voting power of capital stock or other equity interests of such surviving
corporation or entity outstanding immediately after such merger or
consolidation.

 

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

 

(d)                                 “Commercially
Reasonable Efforts” means timely application of efforts and resources,
consistent with the exercise of prudent business judgment by a company with
similar financial resources which intends to exploit a medical product of
similar market potential with a view to making a profit, taking into account
such matters as product efficacy and safety, size of market, anticipated
labeling, competitiveness of alternative products, strength of patent or trade
secret protection, likelihood of obtaining Regulatory Approval, and
commercially appropriate prioritization with respect to other company projects
and products.

 

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

 

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

 

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

 

2

 

independently developed by the receiving person or one
of its Affiliates without use of any Confidential Information received from the
other person.

 

(h)                                 “Control”
or “Controlled” shall mean the ability of a person to grant a license or
sublicense under Intellectual Property, other than as a result of this
Agreement and without violating the terms of any agreement or other arrangement
with any third party.

 

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

 

(j)                                     The
terms “Developed” and “Develops” shall mean (i) with respect
to patentable subject matter, conceived and reduced to practice; (ii) with
respect to copyrightable subject matter, reduced to a tangible medium of
expression; and (iii) with respect to Know-How, created or discovered.

 

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

 

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

 

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

 

(n)                                 “First
Commercial Sale” shall mean the first sale by ISRG or an Affiliate 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 any investigational research,
clinical study, or design or process validation.

 

(o)                                 “Governmental
Authority” shall mean any nation, territory, or government (or union
thereof), foreign, domestic, or multinational, any state, local, or other
political 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, including
notified bodies within the sense of Article 16 of the European Union
Medical Device Directive 93/42/EEC, and all other entities exercising
regulatory authority over medical products or devices.

 

(p)                                 The
phrase “has application in the Field of Use” or “have application in
the Field of Use” shall mean that a reasonable person, skilled in the Field
of Use and the technology related to the relevant Licensed IP, could reasonably
conclude that the technology, enhancement, or other item in question might well
have commercial value if utilized (with or without further enhancement or
development) in the Field of Use.

 

3

 

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

 

(r)                                    “Improvement
Period Patent Rights” shall mean any Patent Rights conceived or applied for
by PMII during the Improvement Period.

 

(s)                                  “Intellectual
Property” or “IP” shall mean: (i) Patent Rights; (ii) trademarks,
service marks, trade names, brand names, certification marks, designs, logos
and slogans, commercial symbols, business name registrations, domain names,
trade dress and other indications of origin and general intangibles of like
nature, the goodwill associated with the foregoing, and registrations in any
domestic or foreign jurisdiction of, and applications in any such jurisdiction
to register, the foregoing, including any extension, modification, or renewal
of any such registration or application; (iii) research and development
data, formulae, ideas, know-how, research, analysis, experiments, proprietary
processes and procedures, algorithms, models and methodologies, technical
information, technologies, techniques, innovations, creations, concepts,
designs, industrial designs, procedures, trade secrets and confidential
information, and rights in any domestic or foreign jurisdiction to limit the
use or disclosure thereof by any person; (iv) writings and other works of
authorship of any type (including patterns, drawings, data, the content
contained on any web site), whether copyrightable or not, in any such
jurisdiction, 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 applications
for registration of copyrights in any domestic or foreign jurisdiction, and any
renewals or extensions thereof; and (vii) any similar intellectual
property or proprietary rights.

 

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

 

(u)                                 “Know-How” shall mean all data and
information owned by, used by, or held for use by or on behalf of or licensed
to (or otherwise Controlled by) PMII or a PMII Affiliate and maintained in
confidence 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 other
scientific or technical data or information conceived, memorialized, developed,
and/or reduced to practice, in each case whether or not patentable in any
jurisdiction.  Until such time as any
particular patent has been published in accordance with the terms of a patent
application or such patent application has been published, the term “Know-How” shall be deemed to include
all inventions disclosed in such patent application.

 

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

 

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

 

4

 

PMII
Affiliate; and (c) Patent Rights to New PMII IP (subject to the limitation
set forth in clause (v) above, such rights are hereinafter collectively
referred to as “Licensed Patent Rights”);

 

(ii)                                  PMII
Field Know-How;

 

(iii)                               New
PMII IP (as defined in Section 8.4); and

 

(iv)                              Intellectual
Property 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 Date
or during the Improvement Period.

 

(w)                               “Licensed Marks” shall mean the
trade 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 nature
whatsoever.

 

(y)                                 “Litigation Matter” shall mean any
claim, investigation, arbitration, grievance, litigation, action, suit, or
proceeding, administrative or judicial, to which a Party is (or, to such Party’s
knowledge, is threatened in writing to be made) a party, or relating to the
Licensed IP, the Reload, the Device, or this Agreement (whether such Party is a
plaintiff, defendant, or otherwise), at law or in equity or otherwise, or
before any Governmental Authority.

 

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

 

(aa)                            “Patent
Costs” shall mean the costs and expenses paid to outside legal counsel,
Governmental Authorities, and other third parties incurred in connection with
preparing, filing, prosecuting, obtaining, and maintaining Licensed IP, or
taking any Patent Prosecution Action, including costs and expenses of patent
interference, re-examination, reissue, protest, opposition, nullification, and
similar proceedings (and any appeal thereof in any court or administrative
agency).

 

(bb)                          “Patent
Prosecution Action” shall mean any and all actions that may be taken in
connection with preparing, filing, prosecuting, obtaining, and maintaining
throughout the world patent protection for Licensed IP, including patent
applications and other related material submissions and correspondence with any
patent authorities, and including with regard to any patent interference,
re-examination, reissue, protest, opposition, nullification, and similar
proceedings (and any appeal thereof in any court or administrative agency).

 

(cc)                            “Patent
Rights” means (i) any and all written, oral, and visual ideas,
concepts, and inventions, whether or not any such idea, concept, or invention
has been filed as a patent application or submitted by the inventor(s) to
any attorney or other person for evaluation as to patentability, (ii) any
patents, patent applications, any patents issuing therefrom worldwide, and all
provisional rights with respect to patent applications, (iii) any
improvements, 

 

5

 

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), and certificates of invention of any patents or
patent applications, and (iv) all rights to exploit any of the foregoing.

 

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

 

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

 

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

 

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

 

(hh)                          “Regulatory
Approval” shall mean any and all approvals (including any necessary
governmental price or reimbursement approvals), licenses, registrations, or
authorizations of the applicable Governmental Authority necessary for the use,
storage, import, promotion, marketing, and Commercialization of the Device or
Reload.

 

(ii)                                  “Reload”
shall mean a disposable cartridge containing staples that can be attached to
the Device.  Initial specifications for
the Reload are set forth in Exhibit 1.1(ii) and in the Statement of
Work.  Such initial specifications will
be refined as mutually agreed by the Parties to include detailed manufacturing
specifications for the Reloads to be supplied by PMII to ISRG under the Supply
Agreement.

 

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

 

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

 

6

 

(ii)                                 For
the avoidance of doubt, Robotic Systems do not include: (A) powered or
unpowered instruments that are hand positioned for tissue manipulation during
open or endoscopic surgical procedures, such as PMII’s powered endoscopic
linear cutter instruments (e.g., i60
Articulating Endoscopic Linear Cutter and other powered stapling instruments
Commercialized prior to the Agreement Date), (B) conventional manual
laparoscopic instruments; and (C) improvements to the foregoing that are
consistent with clause 1.1(jj)(ii)(A) above.

 

(kk)                            “Statement
of 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 Agreement
in the manner provided in Section 2.3, but the term “Sublicensee” shall
not include any person who manufactures a Reload for ISRG or an Affiliate of
ISRG 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, trade
secret, development, know-how, method, technique, formula, process, or other
technology, whether or not patentable, copyrightable, or protectable as a trade
secret, confidential information, or know-how, or any other form of intellectual
property.

 

1.2.                              Other
Defined Terms.  Definitions of the
defined terms listed below are contained in the Section set forth opposite
the 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

  

 

7

 

	
  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.                              License
Grants to ISRG.

 

(a)                                  Subject
to the terms and conditions of this Agreement, PMII hereby grants to ISRG a
worldwide, perpetual, non-transferable (except as set forth in Section 16.11),
royalty-free, exclusive license under any and all Licensed IP in the Field of
Use, 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 its
Affiliates) the Licensed IP in the Field of Use, as set forth in Section 10
of this Agreement.

 

(b)                                 The
license granted under Section 2.1(a) shall not be sublicensable by
ISRG except as set forth in Section 2.3.

 

(c)                                  Upon
receipt by PMII of the Irrevocable License Fee, the license granted under Section
2.1(a) shall become irrevocable.

 

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

 

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

 

(f)                                    The
license granted under Section 2.1(a) shall not prevent PMII or its
Affiliates or third-party licensees from Commercializing and selling powered or
unpowered hand positioned instruments, and components thereof, for cutting and
stapling (excluding Reloads manufactured for the Device) to customers in
hospitals where ISRG’s Robotic Systems are deployed.

 

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

 

8

 

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

 

(i)                                     PMII
shall disclose to ISRG a listing of all worldwide patent applications and
patents owned, Controlled by, or otherwise licensed by PMII or its Affiliates
on the Agreement Date.  For any such
patent applications or patents licensed by PMII or its Affiliates, PMII shall
disclose to ISRG the associated license grant so that ISRG may determine the
extent of Control of such patent applications or patents by PMII or its
Affiliates.  This listing of patent
applications and patents, and associated license terms if applicable, shall
include at least those referred to in PMII’s most recent Form 10-K filing
with the United States Securities and Exchange Commission.

 

2.2.                             Non-Exclusive
License 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 Affiliate
of PMII’s) test data and any other technical data and information relating to
the development or manufacture of staplers, cutters, drive or control
components associated with staplers or cutters, or Reloads (“Technical
Information”) as may be reasonably required by ISRG or a ISRG Affiliate to
support regulatory submissions dealing with the Device or any purposes related to the Commercialization of the Device.  The license granted under this Section 2.2
shall not be sublicensable by ISRG except as set forth in Section 2.3.  PMII shall disclose and provide such Technical
Information (including any updated Technical Information) to ISRG at any time
on request.

 

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

 

(a)                                  Sublicense
Agreement.  ISRG shall execute a
written sublicense with each Sublicensee which shall be subject to ISRG’s rights
and obligations under the terms of this Agreement.  ISRG shall report the granting of all such
sublicenses to PMII within thirty (30) days of the granting of the same, and
along with such notification shall provide a copy of the sublicense agreement.  ISRG shall cause any such sublicense
agreement contains terms that are at least as protective of the Licensed IP and
Confidential Information as the terms set forth in this Agreement, and that
also include no provisions that would be in violation of the license grant set
forth in this Agreement.  ISRG shall be
obligated to use Commercially Reasonable Efforts in monitoring the performance
of its Sublicensees and shall indemnify PMII for any material violation by a
Sublicensee of its obligations related to the Licensed IP under a sublicense
agreement.  For avoidance of doubt, ISRG
does not have any obligation to report any sublicense under Section 2.3(i).

 

(b)                                 Performance
of Other Obligations by Sublicensees. 
ISRG shall, and by this Agreement hereby does, agree to cause any
Sublicensee to assume and agree to

 

9

 

perform all of the
covenants and obligations of ISRG to PMII contained in this Agreement as fully
and to the same extent as if such person were ISRG under this Agreement but
with such modifications as may be appropriate to reflect the extent, if any, to
which the sublicense is narrower in scope than the license grant contained this
Agreement.

 

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

 

2.4.                              Third
Party Manufacturers.  Except for
Reloads, which are addressed in Section 2.9 of the Supply Agreement, ISRG
may have any component or assembly associated with the Licensed IP within the
Field of Use made by a contract manufacturer of its selection, provided that
such contract manufacturer enters into a written agreement that complies with
Sections 2.3(a), (b), and (c).

 

2.5.                              Distributors.  ISRG may exercise its rights and obligations
under this Agreement through its distributors and sub-distributors through
multiple tiers.  Such exercise shall not
constitute a sublicense.

 

2.6.                              Trademark
License.  PMII hereby grants to ISRG
an non-exclusive, non-transferable, worldwide, royalty-free license to use the
Licensed Mark in connection with ISRG’s marketing and sale of Reloads for use
with the Device.  All goodwill associated
with the foregoing license shall inure to the benefit of PMII, and PMII shall
have sole control of, and responsibility for, any applications and
registrations for the Licensed Mark. 
ISRG shall use the Licensed Mark in accordance with PMII’s reasonable
guidelines with respect to trademark usage of the Licensed Mark, as provided to
ISRG upon reasonable prior notice.  PMII
acknowledges that ISRG shall be under no obligation to Commercialize the Reload
under the Licensed Mark.  ISRG shall
provide reasonable attribution of PMII’s role as the developer and/or
manufacturer of the Reload (as applicable) in any Device that includes the
Reload.  The Parties agree that the
Licensed Mark may appear as practical on any packaging for a Reload, but the
Licensed Mark will not appear on the Reload itself or on the Device.

 

3.                                       Development
Activities.

 

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

 

10

 

at reasonable rates to be
agreed upon in good faith by the Parties prior to the provision of such
additional assistance.

 

3.2.                             Further
Development Proposals.  In addition
to the Statement of Work, ISRG may propose to PMII a series of additional
development projects relating to the Device (each, a “Development Proposal”)
from time to time. ISRG shall submit each Development Proposal to PMII in
writing and shall include a description of the proposed development
specifications in detail sufficient to permit PMII to evaluate and make
recommendations as to the feasibility of developing the features or
enhancements described in such proposed development specifications.  PMII shall consider each such Development
Proposal in good faith and inform ISRG of the feasibility of such Development
Proposal and the likely cost and timetable for providing the requested support
and assistance for such Development Proposal. 
If ISRG notifies PMII in writing that it is prepared to proceed with a
particular Development Proposal, then the Parties shall negotiate in good faith
to (i) agree upon the applicable specifications and (ii) develop a
budget for the relevant Development, setting forth the man hours and
corresponding costs, but only to the extent that such costs are actually and
reasonably incurred by PMII.  PMII shall
perform additional Development Proposals only as agreed in writing by the
Parties.

 

4.                                       Regulatory
Matters.

 

4.1.                             Regulatory
Approvals.  ISRG shall be responsible
for preparing, submitting, and obtaining all applications necessary for
Regulatory Approvals for the Device (“Regulatory Applications”), and
will undertake all clinical studies necessary to obtain Regulatory Approval for
the Device.  ISRG shall keep PMII fully
informed with respect to the progress of its Regulatory Applications.  PMII shall cooperate with ISRG relating to
all material issues, amendments, supplements, and other matters respecting all
Regulatory Applications and Regulatory Approvals for the Device.  ISRG shall provide to PMII, upon request,
copies of all Regulatory Applications, Regulatory Approvals, and other
regulatory filings, submissions, and communications for the Device.  Regulatory Approvals for the Reloads will be
done by PMII in accordance with the Supply Agreement.

 

4.2.                             Regulatory
Information and Notification with respect to the Device.  Each Party agrees to share and provide to the
other Party all information related to Regulatory Approvals for the Device (or
any Technology of PMII incorporated into the Device), and without limitation
agrees to:

 

(a)                                  prior
to the First Commercial Sale of the Device or such Technology, report to the
other Party within ten (10) days of the initial receipt of a report
of any unexpected or serious experience with the Device or the Technology used
in the Device that could adversely impact obtaining all necessary Regulatory
Approvals; and

 

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

 

11

 

experience, but would likely cause a serious adverse
experience if the malfunction were to recur. 
Serious adverse experiences mean any experience that suggests a
significant hazard, contraindication, side effect, or precaution, or any
experience that is fatal or life threatening, is permanently disabling, or
requires 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 the
applicable product.

 

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

 

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

 

5.                                       Reload
Supply.  PMII shall supply ISRG with
ISRG’s requirements for Reloads pursuant to, and subject to the terms and conditions
of, the Supply Agreement.

 

6.                                       ISRG
Requirements.

 

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

 

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

 

6.3.                             First
Commercial Sale.  ISRG shall make
Commercially Reasonable Efforts to make a First Commercial Sale of the Device
by the third anniversary of the Agreement Date.

 

7.                                       License
Payments.

 

7.1.                             License
Issuance Fee.  ISRG shall pay to PMII
an initial, one-time, license fee of Twelve Million Five Hundred Thousand
Dollars (US$12,500,000) (“License Fee”) not later than five (5) business
days after the execution of this Agreement by both Parties.  The payment of the License Fee shall be a
condition precedent to the effectiveness of this Agreement.  If the License Fee is not paid within five (5) business
days after execution of this Agreement, this Agreement shall lapse and be
deemed null, void, and of no effect.

 

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

 

12

 

(a)                                  Completion
of Preliminary Design Review.  ISRG
will pay Two Million Five Hundred Thousand Dollars (US$2,500,000) to PMII not
later than ten (10) days following successful completion of the
Preliminary Design Review for the Device in accordance with the Statement of Work;

 

(b)                                 Completion
of Critical Design Review.  ISRG will
pay Two Million Dollars (US$2,000,000) to PMII not later than ten (10) days
following successful completion of the Critical Design Review in accordance
with the Statement of Work; and

 

(c)                                  First
Commercial Sale.  ISRG will pay Three
Million Dollars (US$3,000,000) to PMII not later than ten (10) days
following the First Commercial Sale of the Device.

 

(d)                                 Acceleration
of Milestone Payments.  For the
avoidance of doubt, ISRG has the right to accelerate payment of each Milestone
Payment, and thereby pay the Irrevocable License Fee, for any reason, and under
any circumstances, at any time prior to earlier of (i) the due date of
such Milestone Payment, and (ii) the effective date of the termination of
this Agreement.

 

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

 

8.                                       Intellectual
Property.

 

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

 

8.2.                             Ownership
of PMII Property.  Without limitation
of Section 8.1, and except as otherwise provided for in this Agreement,
PMII shall own and retain all right, title, and interest, including all
Technology and Intellectual Property, in the PMII Property.

 

8.3.                             Ownership
of Device.  Subject to PMII’s
ownership 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 any
contribution to the Device, whether alone or jointly with ISRG, and such
contribution does not constitute PMII Property, such Technology and
Intellectual Property shall be owned by ISRG.

 

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

 

13

 

Agreement, in the field of
power stapling and cutting mechanisms, including their associated drive or control
components (the “New PMII IP”).

 

8.5.                             Ownership
of New ISRG IP.  ISRG shall own all
Technology, and all Intellectual Property therein, that is Developed by either
Party, whether alone or jointly with the other Party, in performance of the
development activities described in Section 3 of this Agreement, outside
the field of power stapling and cutting mechanisms, including their associated
drive or control components (the “New ISRG IP”).

 

8.6.                             Assignment
of Intellectual Property.

 

(a)                                  Each
Party represents and covenants that all its employees, consultants, and agents,
and all third parties acting on behalf of such Party in performing its
obligations under this Agreement, shall be obligated under a binding written
agreement to assign to such Party all Technology and Intellectual Property
Developed by such employees, consultants, agents, and third parties in
connection with this Agreement.

 

(b)                                 Subject
to the licenses and other rights specifically provided in this Agreement, to
the extent either Party obtains any title or similar interest in any
Technology, or any Intellectual Property therein, that is to be owned by the
other Party in accordance with Section 8 of this Agreement, such first
Party hereby assigns and, to the extent such assignment cannot be made at
present, agrees promptly to assign, to such second Party all of the first Party’s
title and other interest in and to such Technology and Intellectual Property
throughout the world.  The first Party
shall execute and procure such documents, including short-form assignments and
assignments of patent applications and patents, and take such other actions as
may be reasonably requested from time to time by the second Party to obtain for
its own benefit appropriate protections for Intellectual Property in any and
all countries with respect to such Technology, or otherwise to transfer or
confirm the transfer of such Technology and the related Intellectual Property
for the benefit of the second Party.

 

9.                                       Prosecution
of Patent Rights.

 

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

 

(a)                                  all
Licensed Patent Rights existing as of the Agreement Date; and

 

(b)                                 all
Licensed Patent Rights that come into existence after the Agreement Date in any
Designated Jurisdiction selected at PMII’s discretion.

 

(c)                                  With
reference to Sections 9.1(a) and (b), PMII shall otherwise take all Patent
Prosecution Actions as it shall deem to be commercially reasonable, in its
discretion, in order to protect and enhance the value of such Licensed Patent
Rights, and shall pay all Patent Costs incurred by PMII in connection with the
foregoing activities.

 

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

 

14

 

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

 

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

 

(a)                                  take
any Patent Prosecution Action for any applicable Licensed Patent Rights
necessary to establish (e.g., prepare and file a patent application) or
maintain such Licensed Patent Rights in a particular Designated Jurisdiction;

 

(b)                                 take
any other action to prevent the forfeiture of commercially valuable rights with
respect to any applicable Licensed Patent Rights in a Designated Jurisdiction
that is reasonably necessary to establish or preserve such commercially
valuable rights in such Designated Jurisdiction; or

 

(c)                                  pay
the Patent Costs associated with any such Patent Prosecution Action or such
other action in any particular Designated Jurisdiction (in each case relating
to Licensed Patent Rights), (each of the foregoing a “Requested Prosecution
Action”), then in each such case PMII shall so notify (“Non-Prosecution
Notice”) ISRG promptly in writing that it has made such an election. PMII
shall provide such Non-Prosecution Notice to ISRG on or before a date that it
reasonably believes would provide ISRG with sufficient time to enable ISRG to
meet any deadlines known to PMII by which the Requested Prosecution Action must
be taken to establish or preserve commercially valuable rights in the
Designated Jurisdiction to which such Requested Prosecution Action
relates.  On receipt of any
Non-Prosecution Notice, ISRG shall have the right but not the obligation to
take the Requested Prosecution Action at its own expense, and to take over
Prosecution of the Patent Rights that were subject to the Non-Prosecution
Notice, and PMII shall cooperate fully with ISRG with respect to any such
action.  ISRG shall be deemed to have
received a Non-Prosecution Notice with respect to any Requested Prosecution
Action 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.                             New
ISRG IP.  ISRG shall control the
patent prosecution of the New ISRG IP, and shall take all Patent Prosecution
Actions therewith, at its expense.

 

15

 

10.                                 Enforcement
of Licensed IP.

 

10.1.                       Rights
to Enforce.

 

(a)                                  With
respect to the enforcement and defense of the Licensed IP, PMII and ISRG shall
inform each other promptly in writing of any knowledge of any alleged
infringement, misuse, or misappropriation by any person of the Licensed IP that
has application in the Field of Use (such infringement, misuse, or
misappropriation, the “Infringement”) and shall provide a summary of any
evidence indicating such Infringement. 
PMII and ISRG shall meet to discuss and agree upon a strategy to resolve
the alleged Infringement.

 

(b)                                 ISRG
shall have the sole right but not the obligation to prosecute or seek to end at
its own expense any Infringement of the Licensed IP, to the extent that such
Infringement occurs in the Field of Use.

 

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

 

(d)                                 The
Party exercising its sole right of enforcement with respect to a particular
Infringement is defined as “Primary Enforcement Party”.

 

10.2.                       Enforcement
by Primary Enforcement Party.

 

(a)                                  When
the Primary Enforcement Party takes action to prosecute any Infringement, it
shall:

 

(i)                                     be
responsible for all costs of prosecuting such Infringement, except as provided in
Section 10.2(d);

 

(ii)                                  provide
the other Party with copies of all pleadings and other documents proposed to be
initially filed or served by the Primary Enforcement Party in sufficient time
to allow for review and comment by the other Party

 

(iii)                               as
reasonably requested by the other Party, regularly provide the other Party with
copies of all pleadings and other documents proposed to be filed or served by
the Primary Enforcement Party and other material submissions and correspondence
in any way related to such prosecution of such Infringement, as applicable, in
sufficient time to allow for review and comment by the other Party; and

 

(iv)                              provide
the other Party and its counsel with a reasonable opportunity to consult with
the Primary Enforcement Party and its counsel regarding the filing, service of
process, and contents of any documents proposed to be filed or served by the
Primary Enforcement Party and other material submissions and correspondence in
any way related to such prosecution of such Infringement or in connection
therewith, and the Primary Enforcement Party shall give consideration to the
reasonable requests of the other Party regarding the same.

 

16

 

(b)                                 To
the extent that the other Party is deemed an indispensable party in the Primary
Enforcement Party’s litigation involving the Licensed IP, the other Party
agrees to join the Primary Enforcement Party in such action.  The Primary Enforcement Party shall reimburse
all of the other Party’s reasonable expenses, including attorney fees, and pay
a reasonable hourly consulting fee for use of the other Party’s personnel, in
connection with litigation involving the Licensed IP that the other Party is
required to join as an indispensable party.

 

(c)                                  The
other Party agrees to cooperate with the Primary Enforcement Party in any
lawsuit that the Primary Enforcement Party brings against a third party to
enforce the Primary Enforcement Party’s rights in the Licensed IP and to join
the Primary Enforcement Party as a party to such lawsuit if (i) requested
by the Primary Enforcement Party and (ii) if the Primary Enforcement Party
agrees to (A) reimburse all of the other Party’s reasonable litigation
expenses, including attorney fees, in such lawsuit, and (B) pay a
reasonable hourly consulting fee for use of the other Party’s personnel in
connection with such lawsuit.

 

(d)                                 To
the extent permissible under the Federal Rules of Civil Procedure, each
Party shall have the right, with counsel of its own choosing and at its own
expense, to join in any of the other Party’s litigation involving the Licensed
IP.

 

10.3.                       Enforcement
Action by Third Party.

 

(a)                                  In
the event that a declaratory judgment or other court or administrative action
is brought by a third party alleging invalidity, unenforceability,
non-infringement, misuse, or misappropriation of any Licensed IP, PMII shall
have the obligation to take over the sole defense of the action at its own
expense. The provisions of this Section 10.3 shall be in addition to, and
not in lieu of, the Parties’ indemnification obligations contained in Section 13,
and in the event of any conflict between the provisions of this Section 10.3
and the indemnification obligations contained in Section 13, the
indemnification obligations contained in Section 13 shall be controlling.

 

(b)                                 All
actions taken by PMII pursuant to this Section 10.3 shall be subject to
the following conditions:

(i)                                     PMII
shall be responsible for all costs of prosecuting and defending against such
action;

 

(ii)                                  as
reasonably requested by ISRG, PMII shall regularly provide ISRG with copies of
all pleadings and other documents proposed to be filed or served by PMII and
other material submissions and correspondence in any way related to such
defense, as applicable, in sufficient time to allow review and comment by ISRG;
and

 

(iii)                               PMII
shall provide ISRG and its counsel with a reasonable opportunity to consult
with PMII and its counsel regarding the filing, service of process, and contents
of any documents proposed to be filed or served by PMII and other material
submissions and correspondence in any way related to such defense or in
connection therewith, and PMII shall give consideration to ISRG’s reasonable
requests regarding the same.

 

17

 

10.4.                       Amounts
Recovered.  Any amounts recovered by
either 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 for
their reasonable out-of-pocket costs and expenses in making such recovery
(which amounts shall be allocated first to the party acting as Primary
Enforcement Party if such amounts are insufficient to cover such costs and
expenses in full).  Any remainder that
relates to an Infringement of Licensed IP occurring in the Field of Use shall
belong in full to ISRG and/or an Affiliate of ISRG (as applicable), and any
remainder that relates to an Infringement occurring outside the Field of Use of
IP that is owned or Controlled by PMII or a PMII Affiliate and that is not
licensed to ISRG shall belong to PMII.

 

10.5.                       Limitation
on Settlements.  The Parties agree
that the primary goal in litigating validity and enforceability issues
associated with the Licensed IP shall be the preservation of maximum claim
breadth and enforcement rights, and the Parties shall cooperate with each other
in good faith to achieve this mutual goal. 
Except with the prior written consent of the other Party, neither Party
shall consent to entry of any judgment or enter into any settlement with
respect to any infringement or other action identified in this Section 10
that (i) would result in monetary, injunctive, or other relief being
imposed against the other Party, (ii) would constitute or require any
admission of liability or wrongdoing on the part of the other Party that does
not provide a full release of liability for the other Party, or (iii) would
otherwise materially diminish the claim scope of the applicable Licensed IP or
affect its validity or enforceability.

 

11.                                 Confidentiality.

 

11.1.                        Limited
Disclosure and Use.  Each of ISRG and
PMII shall hold in confidence any Confidential Information (including trade
secrets) disclosed by the other or otherwise obtained by such Party from the
other Party as a result of this Agreement or the Supply Agreement, and each of
ISRG and PMII shall protect the confidentiality thereof with the same degree of
care 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 provide
Confidential Information to its Affiliates and Sublicensees, subject to the
confidentiality obligations imposed by this Section 11.1.  Without the prior written consent of the
disclosing Party, a receiving Party shall not use, disclose, or distribute any
Confidential Information, in whole or in part, except as required to perform
such Party’s obligations under this Agreement or the Supply Agreement or in
exercise or furtherance of its rights under this Agreement or the Supply
Agreement.  Access to the disclosing
Party’s Confidential Information shall be restricted to the receiving Party’s
employees, agents, and consultants, who, in each case, need to have access to
carry out a permitted use and are bound in writing to maintain the use and
confidentiality restrictions of such Confidential Information.  The obligations set forth in this Section 11.1
shall survive any termination or expiration of this Agreement in perpetuity
(with respect to trade secrets and 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 disclose
Confidential Information, without prior approval from the other Party, to the
extent such disclosure is reasonably necessary to protect intellectual property
rights to which such Party has a right or license under this Agreement, to
prosecute or defend litigation, to comply with applicable law or regulations
(e.g.,

 

18

 

Unites States Securities and
Exchange Commission filings), to obtain necessary or desirable Regulatory Approvals
or concurrences, or to respond to a valid order of a Governmental Authority, provided that, other than with respect to disclosure for
protecting intellectual property rights in connection with a Patent Prosecution
Action in which such disclosure is required by applicable law, the receiving
Party shall (a) use reasonable efforts to secure confidential treatment of
such Confidential Information required to be disclosed, (b) use reasonable
efforts to protect the financial terms of this Agreement, and (c) unless
precluded by applicable law from doing so, give advance written notice to the
disclosing Party sufficiently in advance of the proposed disclosure so as to
permit the disclosing Party to have the opportunity to object to such
disclosure or otherwise protect its Confidential Information.

 

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

 

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

 

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

 

19

 

12.                                 Representations
and Warranties.

 

12.1.                       Mutual
Representations and Warranties.  Each
Party hereby represents and warrants to the other Party as follows:

 

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

 

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

 

(c)                                  The
execution, delivery, and performance by it of this Agreement does not and will
not violate any applicable law or regulation, nor any agreement to which it is
a party or by which it is bound.

 

(d)                                 The
execution, delivery, and performance by it of this Agreement does not require
the approval of any Governmental Authority nor the application for or filing of
or for any license, permit, approval, waiver, no-action, or similar permission
from any Governmental Authority (excluding the Regulatory Approvals expressly
described in this Agreement).

 

12.2.                       Representations
and Warranties of PMII.  PMII hereby
represents and warrants, as at the Agreement Date, as follows:

 

(a)                                  Issued
Patents and Patent Applications.  Exhibit 1.1(v) provides
a true, complete, and correct list as of the Agreement Date of (i) all issued
patents included within the Licensed Patent Rights, and the filing date, issue
date, and patent numbers of each such patent; and (ii) all applications
for patents included within the Licensed Patent Rights, including the title,
filing date, and application number of each such application.

 

(b)                                 Title
and Transfer.  PMII (i) owns and
holds, free and clear of all Liens, all right, title, and interest in the
Licensed IP; (ii) has the exclusive right to use and license the Licensed
IP in the Field of Use on a worldwide basis; and (iii) has the exclusive
right to bring actions for the infringement of the Licensed IP in the Field of
Use.  Pursuant to this Agreement, PMII
will license to ISRG all of its right, title, and interest in and to all
Licensed IP in the Field of Use to the extent set forth in Section 2.1 of
this Agreement, free and clear of all Liens.  PMII has not granted (and is not obligated to
grant) to any other person any license, option, or other rights with respect to
the Licensed IP in the Field of Use.

 

20

 

(c)                                  Confidentiality.  PMII has taken reasonable efforts to protect
the confidentiality of any Know-How or confidential or proprietary information
relating to any Licensed IP.

 

(d)                                 No
Contest of Validity or Patentability. 
Except as set forth in Exhibit 12.2(d), there is no pending
or, to the knowledge of PMII, threatened Litigation Matter (and PMII has
received no notice) (i) contesting the patentability, validity,
enforceability, ownership, or right to use, assign, license, sublicense, or
dispose of any Intellectual Property included in the Licensed IP that has
application in the Field of Use, or (ii) asserting that any Licensed IP that
has 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 not
misappropriated from any person any Technical Information, nor any of the
Technology covered by any Licensed IP that has application in the Field of Use
or that relates in any way to the Reload or the Device.  PMII has received no notice of any
infringement or alleged infringement by any third party of the Licensed IP that
has application in the Field of Use.

 

(f)                                    No
In-Licensed IP.  As at the Agreement
Date, all of the Licensed IP is owned by PMII.

 

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

 

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

 

12.3.                       Disclaimer.  EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NO PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION ANY REPRESENTATIONS OR WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT.  NO PARTY WARRANTS THAT THE OTHER PARTY WILL
RECEIVE ANY PARTICULAR AMOUNT, OR ANY, REVENUES OR PROFITS AS A RESULT OF
ENTERING INTO THE BUSINESS ARRANGEMENTS DESCRIBED IN THIS AGREEMENT.

 

13.                                 Indemnification;
Limitation of Liability.

 

13.1.                       PMII’s
Indemnification Obligations.

 

(a)                                  PMII
hereby agrees to indemnify, defend, and hold harmless ISRG, each of its
Affiliates, and their respective Sublicensees, directors, representatives,
officers,

 

21

 

employees, agents, attorneys, successors, and
assignees (collectively, the “ISRG Indemnified Parties”), from and
against, and in respect of, any liability, injury, damage, loss (including, but
not limited to, direct economic loss), or expense (including, but not limited
to, reasonable attorney fees and reasonable litigation expenses), as and when incurred
by or imposed upon the ISRG Indemnified Parties in connection with any third
party claims, suits, actions, proceedings, demands, or judgments worldwide (“Third
Party Claims”) arising out of or resulting from:

 

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

 

(ii)                                  any
infringement or alleged infringement of third party Intellectual Property
arising from ISRG’s use or Commercialization of the PMII Product; and

 

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

 

(b)                                 PMII’s
indemnification obligations set forth in this Section 13.1 shall not apply
to the extent that any Third Party Claim arises due to: (i) any
modification not authorized by PMII to any PMII Product by ISRG, including
where the modification causes an otherwise non-infringing PMII Product to
infringe; or (ii) the interoperation of any PMII Product with (A) any
components of the Device that do not constitute PMII Product where the
infringement would not occur but for the interoperation; or (B) any other
product not manufactured or designed by PMII.

 

13.2.                       ISRG’s
Indemnification Obligations.

 

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

 

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

 

(ii)                                  any
infringement or alleged infringement of third party Intellectual Property
arising from (i) those portions of the Device that do not constitute PMII Product,
(ii) a Robotic System, or any component thereof, (iii) modification
to PMII Products

 

22

 

made by or on
behalf of ISRG; or (iv) inter-operation of PMII Product and the components
of the Device or Robotic System that do not constitute PMII Product; and

 

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

 

13.3.                        Notice
of Claims.  Within thirty (30) days
after a Person seeking indemnification hereunder (hereinafter the “Indemnified Party”) has received
notice of or has acquired knowledge of any Third Party Claim, the Indemnified
Party 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 commencement
or threatened commencement of such Third Party Claim.  Such notice shall state the nature and basis
of such Third Party Claim, and, if ascertainable, the amount thereof.  Notwithstanding the foregoing, the failure of
the Indemnified Party to give such notice shall not excuse the Indemnifying
Party’s obligation to indemnify and defend the Indemnified Party, except to the
extent the Indemnifying Party has suffered damage or prejudice by reason of the
Indemnified Party’s failure to give or delay in giving such notice.  Within ten (10) business days of receipt
of any notice issued by the Indemnified Party pursuant to this Section 13.3,
the Indemnifying Party shall notify the Indemnified Party whether the
Indemnifying Party acknowledges its indemnification and defense obligation with
respect to the Third Party Claim which was the subject of the Indemnified Party’s
notice or whether it disclaims such obligations.  In the event the Indemnifying Party disclaims
or 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 Claim
without prejudice to its right to indemnification hereunder.  In the event the Indemnifying Party timely
acknowledges its obligations hereunder with respect to any Third Party Claim,
the Indemnifying Party shall defend the same with counsel in accordance with
this Section.  Where the Indemnifying
Party shall have acknowledged in writing its obligations hereunder with respect
to any Third Party Claim, the Indemnified Party may, at its expense,
participate in the defense of such Third Party Claim and no such Third Party
Claim shall be settled by the Indemnified Party without the prior written consent
of the Indemnifying Party which consent shall not be unreasonably withheld or
delayed.  At any time after the
Indemnifying Party acknowledges its obligations hereunder with respect to any
Third Party Claim, the Indemnifying Party may request the Indemnified Party to
agree in writing to the payment or compromise of such Third Party Claim
(provided such payment or compromise has been previously approved in writing by
the 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 the
payment of money damages by the Indemnifying Party, to which the Indemnified
Party reasonably objects.

 

13.4.                        Third
Party Beneficiaries.  The ISRG
Indemnified Parties and PMII Indemnified Parties are intended to be third party
beneficiaries of the rights granted under this Section 13 and to have the
right to enforce such rights directly against the Indemnifying Party.  There shall be no other third party
beneficiaries of this Agreement.

 

23

 

13.5.                        Limitation
of Liability.  IN NO EVENT SHALL
EITHER PARTY BE LIABLE FOR ANY INDIRECT, EXEMPLARY, INCIDENTAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES ARISING IN CONNECTION WITH THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION LOSS OF PROFITS OR REVENUES, WHETHER OR NOT SUCH DAMAGES
WERE WITHIN THE CONTEMPLATION OF THE PARTIES. 
This paragraph shall not apply to any violation or infringement by a
Party or its Affiliates of the Intellectual Property of the other Party or its
Affiliates, 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 is
first sold or used with human subjects, each Party shall obtain and carry in
full force and effect commercial general liability insurance, with product
liability coverage, in amounts of at least $1 million per occurrence and $5
million annual aggregate.  Such insurance
will be written by a reputable insurance company reasonably acceptable to the
other Party.  On reasonable request from
a Party (“Requesting Party”) to the other Party, the other Party will
provide the Requesting Party with appropriate certificates of insurance
reflecting the obligations of the other Party pursuant to this subsection.

 

14.                                 Dispute
Resolution; Arbitration

 

14.1.                        Arbitration
as Exclusive Remedy.  In
the event of any dispute or disagreement between PMII and ISRG as to the interpretation
of any provision of this Agreement (or the performance of any obligations under
this Agreement), the matter, upon written request of either Party, shall be
referred to negotiation and (if applicable) arbitration in accordance with the
terms of Exhibit 14.  Except as
specifically provided in Section 14.2 with respect to interim relief, the
Parties agree and understand that arbitration pursuant to the procedures set
forth in Exhibit 14 is the exclusive remedy available to the Parties with
respect to any dispute, disagreement, claim, or controversy arising out of or
relating to this Agreement, or the transactions contemplated hereby or thereby,
that cannot be resolved through negotiation between the Parties.

 

14.2.                        Interim
Relief; Injunctions.  The arbitration
provisions specifically provide that a Party may initiate an action in a court
of competent jurisdiction in either the State of California or the Commonwealth
of Pennsylvania and may seek interim measures (including temporary restraining
orders and preliminary injunctions) necessary to protect the interests of such
Party pending the arbitration. The Parties recognize that money damages alone
would not adequately compensate ISRG in the event of breach by PMII of its
obligations under this Agreement, and PMII therefore agrees that, in addition
to all other remedies available to ISRG, ISRG shall be entitled to injunctive
relief to restrain any such breach and to enforce the provisions of this
Agreement, without showing or proving any actual damage to ISRG.

 

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

 

24

 

15.                                 Term
and Termination.

 

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

 

15.2.                        Termination
by ISRG.  ISRG may terminate this
Agreement at any time by giving at least one hundred eighty (180) days’ written
notice of such termination to PMII.

 

15.3.                        Material
Breach by PMII.  If PMII:

 

(i)                                     materially
breaches this Agreement and such breach remains uncured for thirty (30) days
following written notice of breach by ISRG, or

 

(ii)                                  is
subject to a petition for relief under any bankruptcy legislation, or makes an
assignment for the benefit of creditors, or is subject to the appointment of a
receiver 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 or
vacated within ninety (90) days, 

 

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

 

15.4.                        Material
Breach by ISRG.  If ISRG:

 

(i)                                     materially
breaches this Agreement or the Supply Agreement and such breach remains uncured
for thirty (30) days following written notice of breach, or

 

(ii)                                  is
subject to a petition for relief under any bankruptcy legislation, or makes an
assignment for the benefit of creditors, or is subject to the appointment of a
receiver 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 or
vacated within ninety (90) days, 

 

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

 

15.5.                        After
Termination.  After termination of
this Agreement for any reason:

 

25

 

(a)                                  Sections
4.3, 8,  11,  13,  14,
 15.3, 15.4,  15.5, 15.6, and 16 shall survive;

 

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

 

(c)                                  if
termination of this Agreement also terminates the license granted in Section 2
(because the license has not become irrevocable), ISRG shall nevertheless have
the 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 due
under Section 7 of this Agreement.

 

15.6.                       Section 365(n).  All rights and licenses granted under or
pursuant to this Agreement are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of Title 11, U.S. Code (the “Bankruptcy
Code”), licenses of rights to “intellectual property” as defined in the
Bankruptcy Code.  The Parties agree that
ISRG (as licensee under Section 2.1) shall retain and may fully exercise
all of their respective rights and elections under the Bankruptcy Code.  Each applicable licensor agrees during the
License Term to create and maintain current copies or, if not amenable to
copying, detailed descriptions or other appropriate embodiments, of all such
Intellectual Property.  All rights,
powers, and remedies of each licensee provided under this Section 15.6 are
in 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 any
such commencement of a bankruptcy proceeding by or against the applicable
licensor.

 

16.                                 General.

 

16.1.                       Waivers
and Amendments.

 

(a)                                  This
Agreement may be amended, modified, or supplemented only by a written
instrument executed by the Parties to this Agreement.

 

(b)                                 No
waiver of any provision of this Agreement, or consent to any departure from the
terms of this Agreement, shall be effective unless the same shall be in writing
and signed by the 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, nor shall any single or partial exercise of
any such right or remedy by such Party preclude any other or further exercise
thereof or the exercise of any other right or remedy.  The waiver by any Party to this Agreement of
a breach of any provision of this Agreement shall not operate as a waiver of
any subsequent breach.  All rights and
remedies under this Agreement are cumulative and are in addition to, and not
exclusive of, any other rights and remedies provided by law.

 

16.2.                       Entire
Agreement.  This Agreement and the
Supply Agreement constitute the entire agreement between the Parties to this
Agreement with respect to the subject matter of this Agreement and supersede
all prior agreements and understandings, whether written or oral, between the
Parties, or any of the Parties, in connection with such subject matter.

 

26

 

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

 

16.4.    Relationship
of the Parties.  This Agreement shall
not constitute either Party the agent or legal representative of the other
Party for any purpose whatsoever, and neither Party shall hold itself out as an
agent of the other Party.  This Agreement
creates no relationship of joint venturers, partners, associates, employment,
or principal and agent between the Parties, and both Parties are acting as
independent contractors.  Neither PMII
nor ISRG is granted in this Agreement any right or authority to, and shall not
attempt to, assume or create any obligation or responsibility for or on behalf
of the other.  Neither PMII nor ISRG
shall have any authority to bind the other to any contract, whether of
employment or otherwise, and PMII and ISRG shall bear all of their respective
expenses for their operations, including the compensation of their employees
and the maintenance of their offices and service facilities.  PMII and ISRG shall each be solely
responsible for their own employees and salespeople and for their acts and the
things done by them.

 

16.5.    No
Election of Remedies.  Except as
otherwise specifically provided in this Agreement, the rights and remedies
accorded in this Agreement and the Supply Agreement to PMII and ISRG are
cumulative and in addition to those provided by law, and may be exercised
separately, concurrently, or successively.

 

16.6.    Costs
and Expenses.  Except as expressly
stated otherwise in this Agreement, each Party shall bear its own costs and
expenses of performance of this Agreement.

 

16.7.    Force
Majeure.  No Party shall be liable
for failure to perform any of its obligations under this Agreement when such
failure is due to fire, flood, strikes, labor troubles or other industrial
disturbances, legal restriction, riot, insurrection, or any other cause beyond
the reasonable ability of the Party affected thereby to control, and without
such Party’s fault or negligence (“Force Majeure”), provided that any
Party claiming the existence of Force Majeure shall give notice to the other
Party not more than seven (7) days after the commencement of the event of
Force Majeure, and shall use prompt and diligent efforts to mitigate the
effects of Force Majeure.  In the event
that 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 upon
written notice to the non-performing Party.

 

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

 

27

 

overnight courier service, (ii) via electronic facsimile
transmission, with confirmation of delivery, or (iii) via electronic mail
communications, with electronic verification of delivery requested, in each
case addressed to the intended recipient as set forth below:

 

(a)           if
to 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)           if
to 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 such
other address for a Party as shall be specified by like notice.

 

16.9.    Waiver
of Jury Trial.  PMII AND ISRG EACH
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
LEGAL ACTION, PROCEEDING, OR COUNTERCLAIM WITH RESPECT TO ANY MATTER WHATSOEVER
ARISING OUT OF OR IN CONNECTION WITH OR RELATED TO THIS AGREEMENT OR THE
ENFORCEMENT HEREOF.

 

16.10.  Counterparts
and Facsimile Signatures.  This
Agreement and all Exhibits, Schedules and Appendices may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each Party and delivered to the other Party, it being understood that all
Parties need not sign the same counterpart. Facsimile execution and delivery of
this Agreement and any Exhibits, Schedules, and Appendices by any of the
Parties shall be legal, valid, and binding execution and delivery of such
document for all purposes.

 

28

 

16.11.  Benefits
and Burdens; Assignments.  This
Agreement shall be binding upon and shall inure to the benefit of each of the
Parties as well as their respective legal representatives, successors, and
permitted assigns.  In addition, the
rights to indemnification set forth in Section 13 shall inure to the
benefit of each of the PMII Indemnified Parties and ISRG Indemnified
Parties.  Except for such Indemnified
Parties, there shall be no third party beneficiaries to this Agreement, and no
third party may enforce any provision against any Party to this Agreement.  This Agreement shall not be assignable or
transferable, by operation of law or otherwise, by either Party without the
other Party’s written consent, which consent shall not be unreasonably
withheld, conditioned, or delayed, and with the exceptions that either Party or
its permitted assignee(s) may assign this Agreement (i) in whole or
in part to an Affiliate of the assigning Party so long as the assigning Party
agrees in writing to remain liable for the Affiliate’s performance of its
obligations under this Agreement; or (ii) in whole to a third party who
acquires all or substantially all of the assets of the assigning Party or of
the assets of the business of the assigning Party to which this Agreement
relates; or (iii) in whole to any successor to the assigning Party by
merger or consolidation; provided in
each case the assignee agrees in writing to assume the assigning Party’s
obligations under this Agreement.  Any
attempt to assign or transfer this Agreement or any portion thereof in
violation of this Section 16.11 shall be void.

 

16.12.  Interpretation.  When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section of or Exhibit to
this Agreement unless otherwise indicated. 
References to Sections include subsections, which are part of the
related Section (e.g., a section numbered “Section 5.1(a)” would be
part of “Section 5.1”, and references to “Section 5.1” would also
refer to material contained in the subsection described as “Section 5.1(a)”).  The recitals to this Agreement constitute an
integral part of this Agreement.  The
Table of Contents, Table of Defined Terms and headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement. The language used in this
Agreement shall be deemed to be the language chosen by the Parties to this
Agreement to express their mutual intent, and no rule of strict
construction shall be applied against any Party (e.g., ambiguities, if any, in
this Agreement shall not be construed by default against either Party simply
because one or the other Party is deemed to have drafted the provision at
issue). Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine, or neuter forms, and the
singular 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 be
deemed 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 followed
by the words “but not limited to”.  No
summary of this Agreement prepared by any Party shall affect the meaning or
interpretation of this Agreement. All references to dollars in this Agreement
shall be to United States Dollars.

 

16.13.  License
Registration and Recordal.  Subject
to the confidentiality provisions of Section 11, each Party shall have the
right, at its sole cost and expense, to register, record, and otherwise
document the license granted in Section 2.1 in any country where there are
any pending or issued Licensed Patent Rights. 
To effect such registration, recordal, or other documentation, the Party
may file the form attached to this Agreement as Exhibit 16.13, or
such other form upon which the Parties may mutually agree.  In addition, either Party may require that
the other Party execute a “short form” license in order to effect the foregoing
registration,

 

29

 

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

 

16.14.  Non-Solicitation.  Each Party acknowledges that the other Party’s
employees who are engaged in performance of development activities hereunder or
otherwise involved with performance of this Agreement are valuable and
indispensable assets of such Party.  Each
Party agrees that, during the term of this Agreement and for a period of one (1) year
from the date of termination of this Agreement, it shall not, either directly
or indirectly, solicit for hire, or cause to leave his or her employment any of
the other Party’s or its Affiliates’ employees or subcontractors utilized in
the performance of this Agreement to accept employment with the other Party or
any of its Affiliates.  General
employment solicitation by a Party or its Affiliates directed at the general
public, 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 Party
resulting from a breach of this provision are irreparable and immeasurable and
that the only effective remedy for a breach is injunctive relief.

 

[REMAINDER OF
THIS PAGE INTENTIONALLY LEFT BLANK]

 

30

 

IN WITNESS WHEREOF,
the Parties have executed, or caused their duly authorized representatives to
execute, this License and Development Agreement under seal as of the date first
written 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

 

RELOAD
SUPPLY AGREEMENT

 

DATED AS
OF

 

SEPTEMBER
9, 2008

 

BETWEEN

 

INTUITIVE
SURGICAL, INC.

 

AND

 

POWER
MEDICAL INTERVENTIONS, INC.

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
   

  	
  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

 

	
  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

 

RELOAD SUPPLY AGREEMENT

 

This Reload Supply
Agreement (this “Agreement”) made as of the 9th day of
September, 2008 (the “Agreement Date”), by and between Power Medical
Interventions, Inc., a Delaware corporation having its principal place of
business at 2021 Cabot Boulevard, Langhorne, Pennsylvania 19047 (“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 in this page of this Agreement shall have the meanings set forth
in Section 1.

 

BACKGROUND

 

A.                                   PMII
is in the business of, among other things, developing and commercializing
automated cutting and stapling devices and disposable staple cartridges for
those devices;

 

B.                                     ISRG
is in the business of, among other things, developing and commercializing
robotic surgical systems;

 

C.                                     Contemporaneously
with execution of this Agreement, PMII and ISRG are entering into a License and
Development Agreement (“License Agreement”) pursuant to which ISRG will
develop and commercialize a new cutting and stapling Device to be installed on
ISRG’s Robotic Systems and license from PMII certain rights that may relate to
the Device;

 

D.                                    ISRG
desires that PMII develop, manufacture, and supply to ISRG disposable Reloads
for the Device; and

 

E.                                      PMII
desires to supply disposable Reloads to PMII, subject to the terms and
conditions set forth herein.

 

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

 

1.                                       Definitions.

 

1.1.                              Certain
Definitions.  For purposes of this
Agreement, in addition to the terms that are defined on first use in this
Agreement, the following terms shall have the following meanings:

 

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

 

 

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

 

(c)                                  “Commercially
Reasonable Efforts” means timely application of efforts and resources,
consistent with the exercise of prudent business judgment by a company with
similar financial resources which intends to exploit a medical product of
similar market potential with a view to making a profit, taking into account
such matters as product efficacy and safety, size of market, anticipated
labeling, competitiveness of alternative products, strength of patent or trade
secret protection, likelihood of obtaining Regulatory Approval, and
commercially appropriate prioritization with respect to other company projects
and products.

 

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

 

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

 

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

 

(g)                                 “Device
Regulation” shall mean any national, state, local or foreign statute,
regulation, judicial or administrative interpretation, guideline,
recommendation or standard international guidance of any Governmental Authority
to the extent applicable to the manufacture, use or sale of the Reload
including, without limitation, to the extent applicable, Canadian Medical
Device Conformity Assessment Scheme, the European Medical Device Directive
93/42/EEC, FDA Act, and QSR/GMP.

 

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

 

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

 

2

 

(j)                                     
“First Commercial Sale” shall mean the first sale by ISRG or an
Affiliate 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 any
investigational research, clinical study, or design or process validation.

 

(k)                                  “Governmental
Authority” shall mean any nation, territory, or government (or union
thereof), foreign, domestic, or multinational, any state, local, or other
political 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, including notified bodies
within the sense of Article 16 of the European Union Medical Device
Directive 93/42/EEC, and all other entities exercising regulatory authority
over medical products or devices.

 

(l)                                     “Intellectual
Property” or “IP” shall mean: (i) Patent Rights; (ii) trademarks,
service marks, trade names, brand names, certification marks, designs, logos
and slogans, commercial symbols, business name registrations, domain names,
trade dress and other indications of origin and general intangibles of like
nature, the goodwill associated with the foregoing, and registrations in any
domestic or foreign jurisdiction of, and applications in any such jurisdiction
to register, the foregoing, including any extension, modification, or renewal
of any such registration or application; (iii) research and development
data, formulae, ideas, know-how, research, analysis, experiments, proprietary
processes and procedures, algorithms, models and methodologies, technical
information, technologies, techniques, innovations, creations, concepts,
designs, industrial designs, procedures, trade secrets and confidential
information, and rights in any domestic or foreign jurisdiction to limit the
use or disclosure thereof by any person; (iv) writings and other works of
authorship of any type (including patterns, drawings, data, the content
contained on any web site), whether copyrightable or not, in any such
jurisdiction, 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 applications
for registration of copyrights in any domestic or foreign jurisdiction, and any
renewals or extensions thereof; and (vii) any similar intellectual
property or proprietary rights.

 

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

 

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

 

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

 

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

 

3

 

worldwide, and all provisional
rights 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), and
certificates of invention of any patents or patent applications, and (iv) all
rights to exploit any of the foregoing.

 

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

 

(r)                                    “Purchase
Orders” shall mean orders transmitted by ISRG (in written or electronic
form), conforming to the requirements of this Agreement, and authorizing and
directing PMII to manufacture and deliver specified Reloads on specified
delivery dates.

 

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

 

(t)                                    “Regulatory
Application” shall mean preparation and submission of any application
necessary for Regulatory Approvals for the Device.

 

(u)                                 “Regulatory
Approval” shall mean any and all approvals (including any necessary
governmental price or reimbursement approvals), licenses, registrations, or
authorizations of the applicable Governmental Authority necessary for the use,
storage, import, promotion, marketing, and Commercialization of the Device or
Reload.

 

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

 

(w)                                “Reload
Documentation” shall mean (i) the specifications for the Reload
attached to the License Agreement, as such specifications may be amended by
agreement of the Parties from time to time; (ii) any documentation
relating to the Reload, its manufacturing or use, submitted by the Parties to
any Governmental Authority in connection with any Regulatory Application; and (iii) the
labeling for the Reload.

 

(x)                                   “Robotic
System” shall mean an integrated system of one or more computer-controlled
manipulators and mechanical arms that operates autonomously or is operated
remotely (e.g., teleoperated) by a human, including attachable components or
assemblies that operate as part of (and not separately from) such a system
during any medical or surgical diagnosis, treatment, or procedure.

 

4

 

(i)                                     For
the avoidance of doubt, Robotic Systems shall include: (A) ISRG’s
da Vinci® surgical systems, (B) detachable surgical instruments that
operate as part of (and not separately from) such da Vinci® surgical systems
during any medical or surgical diagnosis, treatment, or procedure, (C) components
and assemblies that make up such da Vinci® surgical systems; and (D) improvements
to the foregoing that are not inconsistent with the first sentence of this Section 1.1(x).

 

(ii)                                  For
the avoidance of doubt, Robotic Systems do not include: (A) powered or
unpowered instruments that are hand positioned for tissue manipulation during
open or endoscopic surgical procedures, such as PMII’s powered endoscopic
linear cutter instruments (e.g., i60
Articulating Endoscopic Linear Cutter and other powered stapling instruments
Commercialized prior to the Agreement Date), (B) conventional manual
laparoscopic instruments; and (C) improvements to the foregoing that are
consistent with this clause 1.1(x)(ii)(A) above.

 

1.2.                              Other
Defined Terms.  Definitions of the
defined terms listed below are contained in the Section set forth opposite
the 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

 

2.                                       Manufacture,
Sale, and Purchase of Reloads.

 

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

 

2.2.                              Exclusivity.

 

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

 

(b)                                 ISRG
shall not purchase Reloads from any Person except PMII.  ISRG shall not make Reloads, or have the
Reloads made by third parties, unless the Reload Manufacturing Period is
triggered, 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 compatible
with the Device.

 

2.3.                              Manufacturing
Standards and Procedures.  PMII shall
adopt and maintain quality assurance procedures and perform periodic quality
control tests adequate to ensure that Reloads manufactured under this Agreement
conform to Device Regulation (collectively the “QA Procedures”).  At the request of ISRG, PMII shall promptly
submit to ISRG in writing a description of its QA Procedures and will in good
faith consider for incorporation any reasonable suggestions ISRG might make to
the QA Procedures.  PMII represents and
warrants that the manufacturing facilities in which the Reloads are
manufactured are (and during the term of this Agreement will be) registered
with the FDA.

 

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

 

6

 

2.5.                              Manufacturing
Records.  PMII shall keep complete,
accurate and detailed original records pertaining to the manufacture of the
Reloads 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 of
two (2) years after expiry of the expiration dating of such lot.  For validation batches, PMII shall keep the
records until PMII or ISRG (or its nominee) ceases manufacturing the
Reload.  PMII shall make available to
ISRG such records without unreasonable delay to the extent reasonably requested
and required by ISRG to comply with its regulatory and other legal and business
requirements.

 

2.6.                              Alteration
in Reload or Documentation.

 

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

 

(b)                                 Changes
Requested by ISRG. If ISRG requests a Change in a Reload (other than a
Change that is required to correct a Reload defect, which is covered by Section 2.7), PMII
shall use Commercially Reasonable Efforts to accommodate such Change as
promptly as practicable.  If any Change
would result in an increase in PMII’s costs, PMII shall be entitled to increase
the price for the Reload, in an amount to be negotiated and agreed to by the
parties.  PMII will inform ISRG in
advance of the amount of any increase in costs and will provide appropriate
evidence of such increase.  If ISRG and
PMII shall agree in writing upon the cost of a Change, PMII shall make such
Change.

 

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

 

2.8.                              Reload
Manufacturing Data.  During the time
beginning from when PMII first begins shipment of the Reloads to ISRG, PMII
shall maintain a set of “Reload Manufacturing Data,” meaning all data and
information that is proprietary to PMII or that is included within the Licensed
IP and would be useful to permit a person with expertise in surgical stapling
to (i) manufacture the Reload; (ii) to understand, diagnose and
remedy problems or defects in the manufacturing of the Reload; or (iii) to
use the Reload in connection with the Device. 
PMII shall keep Reload Manufacturing Data current.  The Reload Manufacturing Data shall
constitute Confidential Information of PMII.

 

2.9.                              ISRG’s
Contingent Right to Make Reloads.

 

(a)                                  Reload
Manufacturing Period.  In the event
of (i) default by PMII in timely delivery of Reloads conforming to the
requirements of this Agreement, which default 

 

7

 

or breach shall not have been
cured by PMII or such designated supplier within ninety (90) days after written
notice thereof shall have been given by ISRG or its Affiliate; or (ii) a
Force Majeure situation that prevents PMII from performing its obligations hereunder;
or (iii) PMII is subject to a petition for relief under any bankruptcy
legislation, or makes an assignment for the benefit of creditors, or is subject
to the appointment of a receiver 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 such petition, assignment or appointment is not otherwise dismissed or
vacated within ninety (90) days (each a “Reload Manufacturing Trigger”),
then ISRG shall be entitled to make Reloads itself, or have the Reloads made by
a third party, until such time that PMII is capable of resuming its
manufacturing duties (the “Reload Manufacturing Period”).  If a Reload Manufacturing Trigger occurs,
ISRG may begin the Reload Manufacturing Period by delivery of written notice to
PMII (the “Reload Manufacturing Period Notice”).

 

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

 

(c)                                  Non-Exclusive
License.  During the Reload
Manufacturing Period and the period ISRG will manufacture or have Reload
manufactured for it pursuant to Section 8.3(c), ISRG shall have a
non-exclusive, worldwide, royalty-free license, under the Licensed IP, to make,
have made, offer for sale, sell, market, distribute, import, export, and
Commercialize 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 its
selection, provided that such contract manufacturer enters into a written
agreement that complies with Section 2.3 (a), (b) and (c) of the
License Agreement and that requires the contract manufacturer to protect the
Reload Manufacturing Data and Licensed IP to the extent ISRG is required to do
so by this Agreement.

 

3.                                       Orders
and Delivery.

 

3.1.                              Terms
and Conditions.  The terms and
conditions of this Agreement shall govern all orders for and sales of Reloads
by PMII to ISRG hereunder, and any different, conflicting, or additional terms
(other than terms as to quantities, required delivery dates, and shipping
instructions) in a Purchase Order, invoice, or other writing or communication
shall be of no force or effect unless they shall be contained in a written
instrument specifically providing that it is intended to be an amendment to
this Agreement and describing this Agreement with particularity signed by both
parties.

 

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

 

8

 

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

 

3.3.                              Forecasts
and Purchase Orders.  Not later than
ninety (90) days before the First Commercial Sale, ISRG shall deliver to PMII
its initial Purchase Order for Reloads. 
ISRG shall place Purchase Orders with PMII in such a manner that will
provide PMII with a minimum ninety (90) days of visibility of ISRG’s delivery
requirements, 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 rolling
forecast of ISRG’s delivery requirements, updated each calendar quarter.  By prior written notice to PMII, ISRG may
make changes to shipping instructions, quantities, or requested delivery dates
specified 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 use
Commercially Reasonable Efforts to manufacture and deliver to ISRG quantities
of 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.                              Contents
of Purchase Orders.  All Purchase
Orders shall contain the following information:

 

(a)                                  The
quantities of Reloads ordered;

 

(b)                                 The
required delivery dates; and

 

(c)                                  Shipping
instructions, including place of delivery.

 

3.5.                              Shipping
and Delivery.

 

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

 

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

 

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

 

9

 

3.6.                              Price.

 

(a)                                  The
price of Reloads ordered by ISRG for delivery during the First Sales Period
shall be [confidential treatment requested
pursuant to Rule 24b-2].

 

(b)                                 Not
later than three (3) months before the end of the First Sales Period and
each twelve-month period thereafter (each an “Annual Sales Period”),
ISRG and PMII shall meet to negotiate the price at which PMII shall sell, and
ISRG shall purchase, Reloads for delivery during the next Annual Sales Period,
provided, however, that the price from the First Sales Period to the first
Annual Sales Period, and from one Annual Sales Period to the next, [confidential treatment requested pursuant to Rule 24b-2].

 

3.7.                              Payment.

 

(a)                                  PMII
shall invoice ISRG for Reloads within thirty (30) days of the applicable
shipment, and ISRG shall remit payment within forty (45) days of the receipt by
ISRG of the related invoice.

 

(b)                                 If
ISRG fails to pay PMII the price due for Reloads or any other amount due
hereunder, promptly and when due, PMII may recover, in addition to such price
or 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 United
States dollars.

 

(c)                                  All
amounts due and payable to PMII hereunder shall be exclusive of applicable
sales and similar taxes, and any applicable import or export duties.  As between the Parties, ISRG shall be
responsible for the payment of all such taxes and duties (excluding taxes based
upon PMII’s income), or if applicable shall provide PMII with appropriate
certification of exemption.  Notwithstanding
the foregoing, if ISRG is required by law to withhold any tax to the tax or
revenue authorities in any country regarding any payments or royalties, such
amount shall be deducted from the amounts to be paid by ISRG, and ISRG shall
notify PMII and promptly furnish PMII with copies of any tax certificate or
other documentation evidencing such withholding.

 

(d)                                 ISRG
hereby grants PMII a purchase money security interest in each of the Reloads
sold to ISRG hereunder to secure due and punctual payment.  PMII may prepare and file all financing
statements and other documents, and take all other actions, reasonably
necessary to perfect, protect, continue, or maintain such security interests.

 

4.                                       Warranties.

 

4.1.                              Mutual
Representations and Warranties.  Each
Party hereby represents and warrants to the other Party as follows:

 

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

 

10

 

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

 

(c)           The
execution, delivery, and performance by it of this Agreement does not and will
not violate any applicable law or regulation, nor any agreement to which it is
a party or by which it is bound.

 

(d)           The
execution, delivery, and performance by it of this Agreement does not require
the approval of any Governmental Authority nor the application for or filing of
or for any license, permit, approval, waiver, no-action, or similar permission
from any Governmental Authority (excluding the Regulatory Approvals expressly
described in this Agreement).

 

4.2.          Warranties
Regarding Reloads.

 

(a)           Warranty Statement.  PMII warrants that all Reloads shall (i) be
manufactured in accordance with, and conform to, the applicable Reload
Documentation and all applicable Device Regulation, (ii) be free of
defects in materials and workmanship under normal use and service, and (iii) not
be adulterated or misbranded within the meaning of the FDA Act, nor be an
article which may not be introduced into interstate commerce pursuant to
requirements of the FDA Act (it being agreed that any Reloads that do not
comply with this Section 4.2(a) shall be deemed to be non-conforming
and defective).  PMII shall have no
liability for breach of the foregoing warranties to the extent arising from: (i) any
alteration or modification to the Reload not made by or with the approval of
PMII; or (ii) storage, handling, or use of the Reloads otherwise than in
accordance with the Reload Documentation or PMII’s published instructions.

 

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

 

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

 

11

 

PMII shall make any such replacement, credit, or
reimbursement within thirty (30) days after notice by ISRG that such Reloads
are non-conforming and defective.

 

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

 

5.             Regulatory
and Recalls.

 

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

 

5.2.          Regulatory
Information and Notification with Respect to the Reload.  Each Party agrees to share and provide to the
other Party all information related to Regulatory Approvals for the Reload, and
without limitation agrees to:

 

(a)           report to the other Party within
ten (10) days of the initial receipt of a report, or sooner if
required for the other Party to comply with any and all legal and regulatory
requirements, of (i) any adverse experience with the Reload that is
serious and unexpected, or (ii) malfunctions of a Device that did not
cause a serious adverse experience, but would likely cause a serious adverse
experience if the malfunction were to recur. 
Serious adverse experiences mean any experience that suggests a
significant hazard, contraindication, side effect, or precaution, or any
experience that is fatal or life threatening, is permanently disabling, or
requires 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 the
applicable product.

 

(b)           Each Party shall maintain a
reasonable record of all material Complaints it receives with respect to the
Reload.  Each Party shall notify the
other of any material Complaint received by it in sufficient detail and within
thirty (30) days after the end of the calendar quarter in which the event
occurred, and in any event in sufficient time to allow the responsible Party to
comply with any and all legal and regulatory requirements.

 

5.3.          Recalls.

 

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

 

12

 

(b)           PMII
Recall.  In the event of any recall
of any Reload (whether voluntary, required by the FDA or any other Governmental
Authority in any jurisdiction in which ISRG, any Affiliate of ISRG or any
distributor of either has sold any Reloads, or resulting from any device
notification or safety alert) due to design defect, workmanship or failure to
manufacture in conformance with applicable Reload Documentation or Device Regulation
standards, 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-conforming
Reloads; and (ii) reimburse ISRG for reasonable costs and expenses
incurred by ISRG associated with (a) the initial shipments of the recalled
Reloads, and (b) customers’ return of the recalled Reloads and shipment of
replacement Reloads to customers.  PMII
shall 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 or
omission of ISRG or its agents or employees, ISRG shall reimburse PMII for its
reasonable out-of-pocket costs and expenses incident to such recall.

 

6.             Use
of Trademarks.  All Reloads ordered
by 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 Device
Regulation or required or permitted by the License Agreement.  PMII shall have no right or license to use
any such Trademark (other than to affix it to the packaging and labeling of the
Reloads sold to ISRG under this Agreement) and shall not use any such Trademark
on or with respect to any Reload or service provided to any person other than
ISRG.  All goodwill relating to or
developed with respect to any such Trademark shall belong exclusively to ISRG
or its Affiliates.  PMII will not
challenge the validity of any such Trademark or use a mark that is deceptively
similar to any of the Trademarks used from time to time by ISRG or any ISRG
Affiliate in connection with any Reloads.

 

7.             Reload
Documentation.

 

7.1.          Representation
Regarding Reload Documentation.  PMII
hereby 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 it
remains current, accurate in all material respects, and sufficient in detail
and content to identify and describe the Reload.

 

7.2.          Updates.  PMII will update the Reload Documentation
from time to time to reflect all any material changes to all Reloads, such
updates to be completed by PMII as promptly as practicable after such changes
are made.  PMII will deliver a complete
copy of the Reload Documentation to ISRG, as ISRG may request from time to
time.

 

8.             Term
and Termination.

 

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

 

13

 

Initial Term, this Agreement
shall automatically renew for further twelve (12) month terms, unless (a) the
Agreement terminated by either party giving written notice not later than one
hundred and twenty (120) days before the end of the Initial Term or any annual
renewal thereof; or (b) ISRG permanently ceases sale of the Device and gives
written notice thereof to PMII.

 

8.2.          Methods
of Termination.  This Agreement may
be terminated:

 

(a)           by mutual agreement of both Parties
hereto;

 

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

 

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

 

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

 

In addition, this Agreement shall terminate
automatically upon termination of the License Agreement.

 

8.3.          Effect
of Termination.

 

(a)           If
this Agreement is terminated by PMII pursuant to Section 8.2(b) and
provided the Irrevocable License Fee has not been paid under the License
Agreement, PMII may, in addition to any other rights and remedies, and on
written notice to ISRG terminate any licenses to the Licensed IP to the extent
relevant to the Reloads. For the avoidance of doubt, to the extent the
Irrevocable License Fee has been paid under the License Agreement, any licenses
to the Licensed IP shall not be terminated even if PMII terminates this
Agreement pursuant to Section 8.2(b). 
However, in the event PMII terminates this Agreement pursuant to Section 8.2(b) and
the Irrevocable License Fee has been paid under the License Agreement (thus,
all licenses to the Licensed IP can neither be revoked nor terminated), ISRG
shall pay PMII a royalty of [confidential
treatment requested pursuant to Rule 24b-2] on ISRG’s Reload
sales (net of credits and returns) to ISRG’s customers during the remainder of
the Initial Term.  ISRG shall pay any
such royalties to PMII quarterly in arrears.

 

(b)           If
this Agreement is terminated by ISRG pursuant to Section 8.2(c), ISRG may,
in addition to any other rights and remedies, trigger the Reload Manufacturing
Period.

 

(c)           If
this Agreement is terminated by ISRG pursuant to Section 8.2(d), ISRG
shall, in addition to any other rights and remedies, be entitled to start
making Reloads itself, or to start having the Reloads made for it by a third
party, and ISRG will have 

 

14

 

sole discretion in deciding whether PMII is permitted
to resume manufacturing Reloads for ISRG.

 

(d)           In
the event of any termination of this Agreement, (i) each Party shall pay,
within thirty (30) days after termination of this Agreement (subject to the
provisions of Section 9), all amounts owing under this Agreement with
respect to the period prior to the termination, (ii) the provisions of
Sections 2.5, 3.7(b)- (d), 4.2, 5, 8.3, 9, 10, 11, and 12 and all other
agreements or covenants contained in this Agreement that, by their terms, are
to be performed after the termination or expiration of this Agreement, shall
survive such termination of this Agreement and remain in full force and effect;
and (iii) notwithstanding anything to the contrary contained in this
Agreement, 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 its
representations, warranties, covenants, or agreements set forth in this
Agreement.

 

9.             Dispute
Resolution; Arbitration.

 

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

 

9.2.          Interim Relief; Injunctions.  The arbitration provisions specifically
provide that a Party may initiate an action in a court of competent
jurisdiction in the State of California or Commonwealth of Pennsylvania and may
seek interim measures (including temporary restraining orders and preliminary
injunctions) necessary to protect the interests of such Party pending the
arbitration.  Accordingly, the Parties
recognize that money damages alone may not adequately compensate ISRG in the
event of breach by PMII of its obligations to manufacture and deliver Reloads
on a timely basis under this Agreement, and PMII therefore agrees that, in
addition to all other remedies available to ISRG, ISRG may be entitled to
injunctive relief to restrain any such breach and to enforce the provisions of
this Agreement.

 

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

 

10.           Indemnification;
Limitation of Liability.

 

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

 

15

 

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

 

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

 

(b)           any
infringement or alleged infringement of third party Intellectual Property
arising from ISRG’s use or Commercialization of the PMII Product; and

 

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

 

10.2.        Exceptions.  PMII’s indemnification obligations set forth
in Section 10.1 shall not apply to the extent that any Third Party Claim arises
due to: (i) any modification not authorized by PMII to any PMII Product by
ISRG, including where the modification causes an otherwise non-infringing PMII
Product to infringe; or (ii) the interoperation of any PMII Product with (A)
any components of the Device that do not constitute PMII Product where the
infringement would not occur but for the interoperation; or (B) any other
product not manufactured or designed by PMII.

 

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

 

10.4.        ISRG’s
Indemnification Obligations.  ISRG
hereby agrees to indemnify, defend, and hold harmless PMII, each of its
Affiliates, and their respective directors, representatives, officers,
employees, agents, attorneys, successors, and assignees (collectively, the “PMII
Indemnified Parties”), from and against, and in respect of, any liability,
injury, damage, loss (including, but not limited to, direct economic loss), or
expense (including, but not limited to, reasonable attorney fees and reasonable
litigation expenses), as and when incurred by or imposed upon the PMII
Indemnified Parties in connection with any Third Party Claims arising out of or
resulting from:

 

 

16

 

(a)                                  any
product liability claim of any kind, including for death, bodily injury, or
tangible property damage, relating to (i) those portions of the Device
that do not constitute PMII Product, (ii) a Robotic System, or any
component thereof, (iii) modification to PMII Products made by or on
behalf of ISRG by a party other than PMII; or (iv) inter-operation of PMII
Product and the components of the Device or Robotic System that do not
constitute PMII Product;

 

(b)                                 any
infringement or alleged infringement of third party Intellectual Property
arising from (i) those portions of the Device that do not constitute PMII
Product, (ii) the Surgical Robotic System, or any component thereof, (iii) modification
not authorized by PMII to PMII Products made by or on behalf of ISRG by a party
other than PMII; or (iv) inter-operation of PMII Product and the
components of the Device or Robotic System that do not constitute PMII Product;
and

 

(c)                                  any
violation of law or regulation (including any such claims by the FDA or Governmental
Authorities), negligent or willful misconduct, or misleading, fraudulent,
unfair or deceptive business practices, in connection with the sale or
distribution of the Device by ISRG.

 

10.5.                        Notice
of Claims.  Within thirty (30) days
after a Person seeking indemnification hereunder (hereinafter the “Indemnified
Party”) has received notice of or has acquired knowledge of any Third Party
Claim, the Indemnified Party 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 commencement or
threatened commencement of such Third Party Claim.  Such notice shall state the nature and basis
of such Third Party Claim, and, if ascertainable, the amount thereof.  Notwithstanding the foregoing, the failure of
the Indemnified Party to give such notice shall not excuse the Indemnifying
Party’s obligation to indemnify and defend the Indemnified Party, except to the
extent the Indemnifying Party has suffered damage or prejudice by reason of the
Indemnified Party’s failure to give or delay in giving such notice.  Within ten (10) business days of receipt
of any notice issued by the Indemnified Party pursuant to this Section 10.5,
the Indemnifying Party shall notify the Indemnified Party whether the
Indemnifying Party acknowledges its indemnification and defense obligation with
respect to the Third Party Claim which was the subject of the Indemnified Party’s
notice or whether it disclaims such obligations.  In the event the Indemnifying Party disclaims
or fails to timely acknowledge its obligations with respect to any Third Party
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 Claim
without prejudice to its right to indemnification hereunder.  In the event the Indemnifying Party timely
acknowledges its obligations hereunder with respect to any Third Party Claim,
the Indemnifying Party shall defend the same with counsel in accordance with
this Section.  Where the Indemnifying
Party shall have acknowledged in writing its obligations hereunder with respect
to any Third Party Claim, the Indemnified Party may, at its expense, participate
in the defense of such Third Party Claim and no such Third Party Claim shall be
settled by the Indemnified Party without the prior written consent of the
Indemnifying Party which consent shall not be unreasonably withheld or
delayed.  At any time after the
Indemnifying Party acknowledges its obligations hereunder with respect to any
Third Party Claim, the Indemnifying Party may request the Indemnified Party to
agree in writing to the payment or compromise of such Third Party Claim
(provided such payment or

 

17

 

compromise has been previously approved in writing by the 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 the payment of money
damages by the Indemnifying Party, to which the Indemnified Party reasonably
objects.

 

10.6.                        Third
Party Beneficiaries.  The ISRG
Indemnified Parties and PMII Indemnified Parties are intended to be third party
beneficiaries of the rights granted under this Section 10 and to have the
right to enforce such rights directly against the Indemnifying Party.  There shall be no other third party
beneficiaries of this Agreement.

 

10.7.                        Exclusive
Infringement Remedies.  This Section 10
sets forth ISRG’s sole and exclusive remedies, and PMII’s sole and exclusive
liability, with respect to any claims of infringement of third party
Intellectual Property by the Reload.

 

10.8.                        No
Consequential Damages.  EXCEPT WITH
RESPECT TO BREACH OF CONFIDENTIALITY OR INFRINGEMENT OF THE OTHER PARTY’S
INTELLECTUAL PROPERTY RIGHTS, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
ANY INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
ARISING HEREUNDER, INCLUDING, WITHOUT LIMITATION, LOS S OF USE, LOSS OF REVENUE
OR LOST PROFITS, EVEN IF SUCH PARTY HAS BEEN ADVISED IN ADVANCE OF THE
POSSIBILITY OF SUCH DAMAGES.  THIS
PARAGRAPH SHALL NOT LIMIT EITHER PARTY’S INDEMNIFICATION OBLIGATIONS SET FORTH
IN THIS SECTION 10.

 

10.9.                        Limitation
on Aggregate Damages.  EXCEPT WITH
RESPECT TO BREACH OF CONFIDENTIALITY OR PURSUANT TO THE INDEMNIFICATION
OBLIGATIONS SET FORTH IN THIS SECTION 10, IN NO EVENT SHALL EITHER PARTY
BE LIABLE TO THE OTHER FOR ANY DAMAGES ARISING UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR SUPPLY OF THE PRODUCTS, WHETHER SUCH DAMAGES ARISE BY CONTRACT,
TORT (INCLUDING NEGLIGENCE), UNDER STATUTE, OR OTHERWISE, IN EXCESS OF THE
AMOUNTS PAID TO PMII BY ISRG HEREUNDER IN THE TWELVE-MONTH PERIOD IN WHICH THE
LIABILITY IS PRINCIPALLY ALLEGED TO HAVE ARISEN.

 

11.           Confidentiality.

 

11.1.                        Limited
Disclosure and Use.  Each of ISRG and
PMII shall hold in confidence any Confidential Information (including trade
secrets) disclosed by the other or otherwise obtained by such Party from the
other Party as a result of this Agreement or the License Agreement, and each of
ISRG and PMII shall protect the confidentiality thereof with the same degree of
care 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 provide
Confidential Information to its Affiliates and Sublicensees, subject to the
confidentiality obligations imposed by this Section 11.1.  Without the prior written consent of the
disclosing Party, a receiving Party shall not use, disclose, or distribute any
Confidential Information, in whole or in part, except as required to perform
such Party’s obligations under this Agreement or

 

18

 

the License Agreement or in exercise or furtherance of its rights under
this Agreement or the License Agreement. 
Access to the disclosing Party’s Confidential Information shall be
restricted to the receiving Party’s employees, agents, and consultants, who, in
each case, need to have access to carry out a permitted use and are bound in
writing to maintain the use and confidentiality restrictions of such
Confidential Information.  The
obligations set forth in this Section 11.1 shall survive any termination
or expiration of this Agreement in perpetuity (with respect to trade secrets
and 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 disclose
Confidential Information, without prior approval from the other Party, to the
extent such disclosure is reasonably necessary to protect intellectual property
rights to which such Party has a right or license under this Agreement, to prosecute
or defend litigation, to comply with applicable law or regulations (e.g., United States Securities and Exchange Commission
filings), to obtain necessary or desirable Regulatory Approvals or concurrences
or to respond to a valid order of a Governmental Authority, provided that, other than with respect to disclosure for
protecting intellectual property rights in connection with a patent prosecution
action in which such disclosure is required by applicable law, the receiving
Party shall (i) use reasonable efforts to secure confidential treatment of
such Confidential Information required to be disclosed, (ii) use
reasonable efforts to protect the financial terms of this Agreement, and (iii) unless
precluded by applicable law from doing so, give advance written notice to the
disclosing Party sufficiently in advance of the proposed disclosure so as to
permit the disclosing Party to have the opportunity to object to such
disclosure or otherwise protect its Confidential Information.

 

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

 

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

 

19

 

monitoring its obligations under this Agreement or the License
Agreement, and in connection with any related obligations under law, Device
Regulation, or Regulatory Approvals.

 

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

 

12.                                 Miscellaneous.

 

12.1.                        Waivers
and Amendments.  This Agreement may
be amended, modified, or supplemented only by a written instrument executed by
the Parties hereto.  No waiver of any
provision of this Agreement, or consent to any departure from the terms of this
Agreement, shall be effective unless the same shall be in writing and signed by
the 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, nor
shall any single or partial exercise of any such right or remedy by such Party
preclude any other or further exercise thereof or the exercise of any other
right or remedy.  The waiver by any Party
hereto of a breach of any provision of this Agreement shall not operate as a
waiver of any subsequent breach.  All
rights 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.                        Entire
Agreement.  This Agreement and the
License Agreement constitute the entire agreement between the Parties to this
Agreement with respect to the subject matter of this Agreement and supersede
all prior agreements and understandings, whether written or oral, between the
Parties, or any of the Parties, in connection with such subject matter.

 

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

 

12.4.                        Relationship
of the Parties.  This Agreement shall
not constitute either Party as the agent or legal representative of the other
Party for any purpose whatsoever, and neither Party shall hold itself out as an
agent of the other Party.  This Agreement
creates no relationship of joint venturers, partners, associates, employment,
or principal and agent between the Parties, and both Parties are acting as
independent contractors.  Neither PMII
nor ISRG is granted in this Agreement any right or authority to, and shall not
attempt to, assume or create any obligation or responsibility for or on behalf
of the other.  Neither PMII nor ISRG
shall have any authority to bind the other to any contract, whether of
employment or otherwise, and PMII and ISRG shall bear all of their respective
expenses for their operations, including the compensation of their employees
and the maintenance of their offices and service facilities.  PMII and ISRG

 

20

 

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

 

12.5.                        Assignment.  This Agreement shall be binding upon and
shall inure to the benefit of each of the Parties as well as their respective
legal representatives, successors, and permitted assigns.  In addition, the rights to indemnification
set forth in Section 10 shall inure to the benefit of each of the PMII
Indemnified Parties and ISRG Indemnified Parties.  Except for such Indemnified Parties, there
shall be no third party beneficiaries to this Agreement, and no third party may
enforce any provision against any Party to this Agreement.  This Agreement shall not be assignable or
transferable, by operation of law or otherwise, by either Party without the
other Party’s written consent, which consent shall not be unreasonably
withheld, conditioned, or delayed, and with the exceptions that either Party or
its permitted assignee(s) may assign this Agreement (i) in whole or
in part to an Affiliate of the assigning Party so long as the assigning Party
agrees in writing to remain liable for the Affiliate’s performance of its
obligations under this Agreement; or (ii) in whole to a third party who
acquires all or substantially all of the assets of the assigning Party or of
the assets of the business of the assigning Party to which this Agreement
relates; or (iii) in whole to any successor to the assigning Party by
merger or consolidation; provided in
each case the assignee agrees in writing to assume the assigning Party’s
obligations under this Agreement.  Any
attempt to assign or transfer this Agreement or any portion thereof in
violation of this Section 12.5 shall be void.

 

12.6.                        Governing
Law.  This Agreement shall be
governed by, and construed and enforced in accordance with, the substantive
laws of the State of New York (without giving effect to its conflict of laws
rules).

 

12.7.                        No
Election of Remedies.  Except as
otherwise provided in this Agreement, the rights and remedies accorded in this
Agreement to PMII and ISRG are cumulative and in addition to those provided by
law, and may be exercised separately, concurrently or successively.

 

12.8.                        Costs
and Expenses.  Except as expressly
stated otherwise in this Agreement, each Party shall bear its own costs and
expenses of performance of this Agreement.

 

12.9.                        Counterparts
and Facsimile Signatures.  This
Agreement 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 become
effective when one or more counterparts have been signed by each of the Parties
and delivered to the other Parties, it being understood that all Parties need
not sign the same counterpart. Facsimile
execution and delivery of this Agreement and the exhibits hereto by any of the Parties shall be legal, valid and
binding execution and delivery of such document for all purposes.

 

12.10.                  Interpretation.  When reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement, unless
otherwise indicated.  References to Sections include subsections, which are part of
the related Section (e.g., a section
numbered “Section 5.1(a)” would be part of “Section 5.1” and
references to “Section 5.1” would also refer to material contained in the
subsection described as “Section 5.1(a)”). 
The recitals hereto constitute an integral part of this
Agreement.  The Table of Contents, Table
of Defined Terms,

 

21

 

and headings contained in this Agreement are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement. The language used in this Agreement shall be deemed to be the
language chosen by the Parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any Party. Whenever the context
may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine, or neuter forms, and the singular 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 be deemed 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 followed by the words “without
limitation.”  No summary of this
Agreement prepared by any Party shall affect the meaning or interpretation of
this Agreement.  Ambiguities, if any, in
this Agreement shall not be construed by default against either Party simply because
one or the other Party is deemed to have drafted the provision at issue.

 

12.11.                  Force
Majeure.  No Party shall be liable
for failure to perform any of its obligations under this Agreement when such
failure is due to fire, flood, strikes, labor troubles or other industrial
disturbances, legal restriction, riot, insurrection, earth quake, acts of
nature, or any other cause beyond the reasonable ability of the Party affected
thereby to control, and without such Party’s fault or negligence (“Force
Majeure”), provided that any Party claiming the existence of Force Majeure
shall give notice to the other parties not more than seven (7) days after
the commencement of the event of Force Majeure, and shall use prompt and
diligent efforts to mitigate the effects of Force Majeure.  In the event that any event of Force Majeure
prevents performance for sixty (60) days or more, ISRG shall have the right to
trigger the Reload Manufacturing Period, provided, however, that the Reload
Manufacturing Period shall terminate when PMII is able to resume supply of the
Reloads.

 

12.12.                  Waiver
of Jury Trial.  PMII AND ISRG EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL ACTION, PROCEEDING, OR
COUNTERCLAIM WITH RESPECT TO ANY MATTER WHATSOEVER ARISING OUT OF OR IN
CONNECTION WITH OR RELATED TO THIS AGREEMENT OR THE ENFORCEMENT HEREOF.

 

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

 

(a)                                  if
to PMII, to:

 

22

 

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: jlq@foleyhoag.com

 

(b)                                 if
to 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 the
following:

 

General Counsel - Legal Department

 

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

 

* * * * *

 

[Remainder
of page intentionally left blank]

 

23

 

IN WITNESS WHEREOF, the Parties hereto have
caused this Reload Supply Agreement to be executed in their names by their
properly and duly authorized officers or representatives as of the date first
above 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

  
						

 

24Exhibit
4.1

 

	
  

  	
  INCORPORATED
  UNDER THE LAWS OF CANADA WORLD HEART TECHNOLOGY for LIFE This certifies that
  NUMBER WNC2335596 SHARES Is the Registered Holder of ISIN: CA9809054005
  CUSIP: 980905400 FULLY PAID AND NON-ASSESSABLE COMMON SHARES, WITHOUT NOMINAL
  OR PAR VALUE, OF WORLD HEART CORPORATION transferable only on the books of
  the corporation by the registered holder hereof in person or by Attorney duly
  authorized in writing upon surrender of this certificate properly endorsed. This
  certificate is not valid until countersigned and registered by the Registrar
  and Transfer Agent duly authorized by the Corporation. IN WITNESS WHEREOF the
  corporation has caused this Certificate to be signed by the facsimile
  signature of its duly authorized officers. /s/ Jal S. Jassawalla President
  and CEO /s/ Virginia Schweitzer Secretary DATED: OCTOBER 29, 2008 COUNTERSIGNED
  AND REGISTERED CIBC MELLON TRUST COMPANY REGISTRAR AND TRANSFER AGENT OR MELLON
  INVESTOR SERVICES LLC CO-TRANSFER AGENT AND CO-REGISTRAR By: Authorized Signature
  The shares represented by this certificate are transferable at the office of
  CIBC Mellon Trust Company in Toronto, Ontario and Mellon Investor Services,
  LLC in Jersey City, NJ, USA. 84740150 G PROOF – 0053116 SECURITY INSTRUCTIONS
  ON REVERSE VOIR LES INSTRUCTIONS DE SECURITE AU VERSO 999999999 G3499520

  

 

	
  

  	
  SECURITY
  INSTRUCTIONS - INSTRUCTIONS DE SECURITE THIS IS WATERMARKED PAPER, DO NOT
  ACCEPT WITHOUT NOTING WATERMARK. HOLD TO LIGHT TO VERIFY WATERMARK. PAPIER
  FILIGRANE, NE PAS ACCEPTER SANS VERIFIER LA PRESENCE DU FILIGRANE POUR CE
  FAIRE, PLACER A LA LUMIERE. For value received, the undersigned hereby
  sell(s), assign(s) and transfer(s) unto (Print name(s) of person(s) to whom
  the securities are being transferred and the address for the register) shares
  (number of shares if blank, deemed to be all) of the Company represented by
  this certificate, and hereby irrevocably constitutes and appoints the
  attorney of the undersigned to transfer the said securities with full power
  of substitution in this matter. Dated Signature Guarantee(s)* (the transfer
  cannot be processed without acceptable guarantees of all signatures) Transferor(s)
  Signature(s)* * For transfers signed by the registered holder(s), their
  signature(s) must correspond with the name(s) on the certificate in every
  particular, without any changes. In addition, every signature must be
  Signature Guaranteed by a Canadian Schedule 1 chartered bank, a major trust
  company in Canada, or a member of one of the recognized medallion programs -
  Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges
  Medallion Program (SEMP) or New York Stock Exchange, Inc. Medallion Signature
  Program (MSP). THE CLASS OF SHARES THAT THIS CERTIFICATE REPRESENTS HAS
  RIGHTS, PREVILEGES, RESTRICTIONS AND CONDITIONS ATTACHED THERETO AND THE
  CORPORATION WILL FURNISH TO A SHARHOLDER, ON DEMAND AND WITHOUT CHARGE, A
  FULL COPY OF THE TEXT OF (i) THE RIGHTS, PRIVELEGES, RESTRICTIONS AND
  CONDITIONS ATTACHED TO EACH CLASS AUTHORIZED TO BE ISSUED AND TO EACH SERIES
  INSOFAR AS THE SAME HAVE BEEN FIXED BY THE DIRECTORS, AND (ii) THE AUTHORITY
  OF THE DIRECTORS TO FIX THE RIGHTS, PRIVELEGES, RESTRICTIONS AND CONDITIONS
  OF SUBSEQUENT SERIES.

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