Document:

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                                                                    EXHIBIT 10.3

                            INTUITIVE SURGICAL, INC.

                 2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                             ADOPTED MARCH 17, 2000
                    APPROVED BY STOCKHOLDERS APRIL 26, 2000

                         EFFECTIVE DATE: ________, 2000
                             TERMINATION DATE: NONE

1.      PURPOSES.

        (a) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive Options
are the Non-Employee Directors of the Company.

        (b) AVAILABLE OPTIONS. The purpose of the Plan is to provide a means by
which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.

        (c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of its Non-Employee Directors, to secure and retain the services of
new Non-Employee Directors and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.

2.      DEFINITIONS.

        (a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

        (b) "ANNUAL GRANT" means an Option granted annually to all Non-Employee
Directors who meet the specified criteria pursuant to subsection 6(b) of the
Plan.

        (c) "ANNUAL MEETING" means the annual meeting of the stockholders of the
Company.

        (d) "BOARD" means the Board of Directors of the Company.

        (e) "CODE" means the Internal Revenue Code of 1986, as amended.

        (f) "COMMON STOCK" means the common stock of the Company.

        (g) "COMPANY" means Intuitive Surgical, Inc., a Delaware corporation.

        (h) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the

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term "Consultant" shall not include either Directors of the Company who are not
compensated by the Company for their services as Directors or Directors of the
Company who are merely paid a director's fee by the Company for their services
as Directors.

        (i) "CONTINUOUS SERVICE" means that the Optionholder's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Optionholder's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder's Continuous Service. For example, a change in status from a
Non-Employee Director of the Company to a Consultant of an Affiliate or an
Employee of the Company will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.

        (j) "DIRECTOR" means a member of the Board of Directors of the Company.

        (k) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

        (l) "EMPLOYEE" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.

        (m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

        (n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:

               (i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.

               (ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.

        (o) "INITIAL GRANT" means an Option granted to a Non-Employee Director
who meets the specified criteria pursuant to subsection 6(a) of the Plan.

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        (p) "IPO DATE" means the effective date of the initial public offering
of the Common Stock.

        (q) "NON-EMPLOYEE DIRECTOR" means a Director who is not an Employee.

        (r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.

        (s) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

        (t) "OPTION" means a Nonstatutory Stock Option granted pursuant to the
Plan.

        (u) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

        (v) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.

        (w) "PLAN" means this Intuitive Surgical, Inc. 2000 Non-Employee
Directors' Stock Option Plan.

        (x) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.

        (y) "SECURITIES ACT" means the Securities Act of 1933, as amended.

3.      ADMINISTRATION.

        (a) ADMINISTRATION BY BOARD. The Board shall administer the Plan. The
Board may not delegate administration of the Plan to a committee.

        (b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

               (i) To determine the provisions of each Option to the extent not
specified in the Plan.

               (ii) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

               (iii) To amend the Plan or an Option as provided in Section 12.

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               (iv) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company that are not in conflict with the provisions of the Plan.

        (c) EFFECT OF BOARD'S DECISION. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.

4.      SHARES SUBJECT TO THE PLAN.

        (a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in the Common Stock, the Common Stock that may be
issued pursuant to Options shall not exceed in the aggregate Three Hundred
Thousand (300,000) shares of Common Stock.

        (b) EVERGREEN SHARE RESERVE INCREASE.

               (i) Notwithstanding subsection 4(a) hereof, on the day after each
Annual Meeting (the "Calculation Date") for a period of ten (10) years,
commencing with the Annual Meeting in 2001, the aggregate number of shares of
Common Stock that is available for issuance under the Plan shall automatically
be increased by that number of shares equal to the greater of (1) three-tenths
of one percent (0.3%) of the Diluted Shares Outstanding or (2) the number of
shares of Common Stock subject to Options granted during the prior 12-month
period; provided, however, that the Board, from time to time, may provide for a
lesser increase in the aggregate number of shares of Common Stock that is
available for issuance under the Plan

               (ii) "Diluted Shares Outstanding" shall mean, as of any date, (1)
the number of outstanding shares of Common Stock of the Company on such
Calculation Date, plus (2) the number of shares of Common Stock issuable upon
such Calculation Date assuming the conversion of all outstanding Preferred Stock
and convertible notes, plus (3) the additional number of dilutive Common Stock
equivalent shares outstanding as the result of any options or warrants
outstanding during the fiscal year, calculated using the treasury stock method.

        (c) REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such
Option shall revert to and again become available for issuance under the Plan.

        (d) SOURCE OF SHARES. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.

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5.      ELIGIBILITY.

        The Options as set forth in section 6 automatically shall be granted
under the Plan to all Non-Employee Directors.

6.      NON-DISCRETIONARY GRANTS.

        (a) INITIAL GRANTS. Without any further action of the Board, each person
who is elected or appointed for the first time to be a Non-Employee Director
automatically shall, upon the date of his or her initial election or appointment
to be a Non-Employee Director, be granted an Initial Grant to purchase Twenty
Thousand (20,000) shares of Common Stock on the terms and conditions set forth
herein.

        (b) ANNUAL GRANTS. Without any further action of the Board, on the day
following each Annual Meeting, commencing with the Annual Meeting in 2001, each
person who is then a Non-Employee Director, and has been a Non-Employee Director
for at least six (6) months, automatically shall be granted an Annual Grant to
purchase Five Thousand (5,000) shares of Common Stock on the terms and
conditions set forth herein.

7.      OPTION PROVISIONS.

        Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate. Each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:

        (a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

        (b) EXERCISE PRICE. The exercise price of each Option shall be one
hundred percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.

        (c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option may be paid, to the extent permitted by applicable statutes and
regulations, in any combination of (i) cash or check, (ii) delivery to the
Company of other Common Stock or (iii) pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board that, prior to the
issuance of Common Stock, results in either the receipt of cash (or check) by
the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds. The purchase price of
Common Stock acquired pursuant to an Option that is paid by delivery to the
Company of other Common Stock acquired, directly or indirectly from the Company,
shall be paid only by shares of the Common Stock of the Company that have been

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held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes).

        (d) TRANSFERABILITY. An Option is transferable by will or by the laws of
descent and distribution. An Option also is transferable if, at the time of
transfer, a Form S-8 registration statement under the Securities Act is
available for the exercise of the Option and the subsequent resale of the
underlying securities.1 In addition, Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.

        (e) VESTING. Options shall vest as follows:

               (i) Initial Grants shall provide for vesting of 1/36th of the
shares subject to the Option each month for three (3) years after the date of
the grant.

               (ii) Annual Grants shall provide for vesting of 1/12th of the
shares subject to the Option each month for one (1) year after the date of the
grant.

        (f) EXERCISE. Options shall be exercisable in full immediately upon
grant.

        (g) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service, or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionholder does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate.

        (h) EXTENSION OF TERMINATION DATE. If the exercise of the Option
following the termination of the Optionholder's Continuous Service (other than
upon the Optionholder's death or Disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in subsection
7(a) or (ii) the

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(1) See the General Instructions to the Form S-8 Registration Statement, Rule
A.1.(5). Currently a Form S-8 is available for the exercise of the Option and
the subsequent resale of the underlying securities by the Optionholder's family
member who has acquired the Option from the Optionholder through a gift or a
domestic relations order. For purposes of Form S-8, "family member" currently
includes any child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, any person sharing the Optionholder's household (other
than a tenant or employee), a trust in which these persons have more than fifty
percent (50%) of the beneficial interest, a foundation in which these persons
(or the Optionholder) control the management of assets, and any other entity in
which these persons (or the Optionholder) own more than fifty percent (50%) of
the voting interests. Form S-8 currently is not available for the exercise of an
Option transferred for value. The following transactions currently are not
prohibited transfers for value: (i) a transfer under a domestic relations order
in settlement of marital property rights; and (ii) a transfer to an entity in
which more than fifty percent (50%) of the voting interests are owned by family
members (or the Optionholder) in exchange for an interest in that entity.

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expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.

        (i) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the Optionholder does
not exercise his or her Option within the time specified herein, the Option
shall terminate.

        (j) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the three-month period after the termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise the
Option as of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the Option upon the Optionholder's death, but only
within the period ending on the earlier of (1) the date eighteen (18) months
following the date of death or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.

8.      COVENANTS OF THE COMPANY.

        (a) AVAILABILITY OF SHARES. During the terms of the Options, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Options.

        (b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Options and to issue and sell shares of
Common Stock upon exercise of the Options; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Option or any stock issued or issuable pursuant to any such
Option. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Options unless and until such authority is obtained.

9.      USE OF PROCEEDS FROM STOCK.

        Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.

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10.     MISCELLANEOUS.

        (a) STOCKHOLDER RIGHTS. No Optionholder shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such Optionholder has satisfied all requirements
for exercise of the Option pursuant to its terms.

        (b) NO SERVICE RIGHTS. Nothing in the Plan or any instrument executed or
Option granted pursuant thereto shall confer upon any Optionholder any right to
continue to serve the Company as a Non-Employee Director or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.

        (c) INVESTMENT ASSURANCES. The Company may require an Optionholder, as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to the Optionholder's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that the Optionholder is acquiring the stock subject to
the Option for the Optionholder's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if
(iii) the issuance of the shares upon the exercise or acquisition of stock under
the Option has been registered under a then currently effective registration
statement under the Securities Act or (iv) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.

        (d) WITHHOLDING OBLIGATIONS. The Optionholder may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under an Option by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Optionholder by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition of stock under the Option, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.

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11.     ADJUSTMENTS UPON CHANGES IN STOCK.

        (a) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock
subject to the Plan, or subject to any Option, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject both to the
Plan pursuant to subsection 4(a) and to the nondiscretionary Options specified
in Section 5, and the outstanding Options will be appropriately adjusted in the
class(es) and number of securities and price per share of stock subject to such
outstanding Options. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)

        (b) DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Company, then all outstanding Options shall terminate
immediately prior to such event.

        (c) ASSET SALE, MERGER, CONSOLIDATION OR REVERSE MERGER.

               (i) In the event of (i) a sale, lease or other disposition of all
or substantially all of the assets of the Company, (ii) a merger or
consolidation in which the Company is not the surviving corporation or (iii) a
reverse merger in which the Company is the surviving corporation but the shares
of Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise (collectively, a "change in control"), then any surviving
corporation or acquiring corporation shall assume any Options outstanding under
the Plan or shall substitute similar Options (including an option to acquire the
same consideration paid to the stockholders in the change in control transaction
for those outstanding under the Plan).

               (ii) In the event any surviving corporation or acquiring
corporation refuses to assume such Options or to substitute similar Options for
those outstanding under the Plan, then the vesting of such Options and the
vesting of any shares of Common Stock acquired pursuant to such Options shall be
accelerated in full, and the Options shall terminate if not exercised at or
prior to the change in control.

               (iii) In the event any surviving corporation or acquiring
corporation assumes such Options or substitutes similar Options for those
outstanding under the Plan but the Optionholder is not elected or appointed to
the board of directors of the surviving corporation or acquiring corporation at
the first meeting of such board of directors after the change in control, then
the vesting of such Options and the vesting of any shares of Common Stock
acquired pursuant to such Options shall be accelerated by eighteen (18) months
on the day after the first meeting of the board of directors of the surviving
corporation or acquiring corporation.

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               (iv) In the event any surviving corporation or acquiring
corporation assumes such Options or substitutes similar Options for those
outstanding under the Plan and the Optionholder is elected or appointed to the
board of directors of the surviving corporation or acquiring corporation at the
first meeting of such board of directors after the change in control, then the
vesting of such Options and the vesting of any shares of Common Stock acquired
pursuant to such Options shall not be accelerated.

12.     AMENDMENT OF THE PLAN AND OPTIONS.

        (a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.

        (b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval.

        (c) NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.

        (d) AMENDMENT OF OPTIONS. The Board at any time, and from time to time,
may amend the terms of any one or more Options; provided, however, that the
rights under any Option shall not be impaired by any such amendment unless (i)
the Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.

13.     TERMINATION OR SUSPENSION OF THE PLAN.

        (a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
No Options may be granted under the Plan while the Plan is suspended or after it
is terminated.

        (b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Option granted while the Plan is in
effect except with the written consent of the Optionholder.

14.     EFFECTIVE DATE OF PLAN.

        The Plan shall become effective on the IPO Date, but no Option shall be
exercised unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.

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15.     CHOICE OF LAW.

All questions concerning the construction, validity and interpretation of this
Plan shall be governed by the law of the State of Delaware, without regard to
such state's conflict of laws rules.

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                            INTUITIVE SURGICAL, INC.
                 2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                             STOCK OPTION AGREEMENT
                           (NONSTATUTORY STOCK OPTION)

      Pursuant to your Stock Option Grant Notice ("Grant Notice") and this Stock
Option Agreement, Intuitive Surgical, Inc. (the "Company") has granted you an
option under its 2000 Non-Employee Directors' Stock Option Plan (the "Plan") to
purchase the number of shares of the Company's Common Stock indicated in your
Grant Notice at the exercise price indicated in your Grant Notice. Defined terms
not explicitly defined in this Stock Option Agreement but defined in the Plan
shall have the same definitions as in the Plan.

      The details of your option are as follows:

      1. VESTING. Subject to the limitations contained herein, your option will
vest as provided in your Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.

      2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.

      3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). As permitted in your
Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of
your option is permitted) and subject to the provisions of your option, you may
elect at any time that is both (i) during the period of your Continuous Service
and (ii) during the term of your option, to exercise all or part of your option,
including the nonvested portion of your option; provided, however, that:

            (a) a partial exercise of your option shall be deemed to cover first
vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;

            (b) any shares of Common Stock so purchased from installments that
have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement; and

            (c) you shall enter into the Company's form of Early Exercise Stock
Purchase Agreement with a vesting schedule that will result in the same vesting
as if no early exercise had occurred.

      4. METHOD OF PAYMENT. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the
exercise price in cash or by check or by one or more of the following:

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            (a) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
that, prior to the issuance of Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to pay
the aggregate exercise price to the Company from the sales proceeds.

            (b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.

      5. WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.

      6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also comply
with other applicable laws and regulations governing your option, and you may
not exercise your option if the Company determines that such exercise would not
be in material compliance with such laws and regulations.

      7. TERM. The term of your option commences on the Date of Grant and
expires upon the EARLIEST of the following:

            (a) three (3) months after the termination of your Continuous
Service for any reason other than your Disability or death, provided that if
during any part of such three- (3-) month period your option is not exercisable
solely because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;

            (b) twelve (12) months after the termination of your Continuous
Service due to your Disability;

                                       2
<PAGE>   14
            (c) eighteen (18) months after your death if you die either during
your Continuous Service or within three (3) months after your Continuous Service
terminates; or

            (d) the Expiration Date indicated in your Grant Notice; or

            (e) the day before the tenth (10th) anniversary of the Date of
Grant.

      8. EXERCISE.

            (a) You may exercise your option during its term by delivering a
Notice of Exercise (in a form designated by the Company) together with the
exercise price to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with such
additional documents as the Company may then require.

            (b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of the exercise of your
option.

      9. TRANSFERABILITY. Your option is not transferable, except (i) by will or
by the laws of descent and distribution, or (ii) as permitted under the Form S-8
registration statement regulations in effect at the time of the transfer.(1)
Your option is exercisable during your life only by you or a transferee
satisfying the above-stated conditions. The right of a transferee to exercise
the transferred portion of your option after termination of your Continuous
Service shall terminate in accordance with your right to exercise your option as
specified in your option. In the event that your Continuous Service terminates
due to your death, your transferee will be treated as a person who acquired the
right to exercise your option by bequest or inheritance. In addition to the
foregoing, the Company may require, as a condition of the transfer of your
option to a trust or by gift, that your transferee enter into an option transfer
agreement provided by, or acceptable to, the Company. The terms of your option
shall be binding upon your transferees, executors, administrators, heirs,
successors, and assigns. Notwithstanding the foregoing, by delivering written
notice to the Company, in a form satisfactory to the Company, you may designate
a third party who, in the event of your death, shall thereafter be entitled to
exercise your option.

--------
(1) See the General Instructions to the Form S-8 Registration Statement, Rule
A.1.(5). Currently a Form S-8 is available for the exercise of your option and
the subsequent resale of the underlying securities by your family member who has
acquired your option from you through a gift or a domestic relations order. For
purposes of Form S-8, "family member" currently includes any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing your household (other than a tenant or employee), a trust in which these
persons have more than fifty percent (50%) of the beneficial interest, a
foundation in which these persons (or you) control the management of assets, and
any other entity in which these persons (or you) own more than fifty percent
(50%) of the voting interests. Form S-8 currently is not available for the
exercise of an option transferred for value. The following transactions
currently are not prohibited transfers for value: (i) a transfer under a
domestic relations order in settlement of marital property rights; and (ii) a
transfer to an entity in which more than fifty percent (50%) of the voting
interests are owned by family members (or you) in exchange for an interest in
that entity.

                                       3
<PAGE>   15
      10. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective stockholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.

      11. NOTICES. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.

      12. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and
is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.

                                       4<PAGE>   1
[SATMEX LOGO]                                                       EXHIBIT 10.5

                                                          CONTRACT NUMBER: 266-1

CONTRACT FOR RENDERING OF THE INTERNATIONAL SERVICE OF SIGNAL CONDUCTION VIA
SATELLITE THROUGH THE MEXICAN SATELLITE SYSTEM ("SISTEMA DE SATELITES
MEXICANOS"), ENTERED INTO BY AND BETWEEN SATELITES MEXICANOS, S.A. DE C.V.,
WHICH SHALL HEREINAFTER BE NAMED "SATMEX", REPRESENTED IN THIS ACT BY MR. LAURO
ANDRES GONZALEZ MORENO, IN HIS CAPACITY AS CHIEF EXECUTIVE OFFICER (C.E.O.),
AND AS THE OTHER PARTY BY AMERICAN MULTIPLEXER CORPORATION, WHICH SHALL
HEREINAFTER BE NAMED "THE CLIENT", REPRESENTED BY MR. EDWARD SC TAN, IN HIS
CAPACITY AS PRESIDENT AND CHIEF EXECUTIVE OFFICER, PURSUANT TO THE FOLLOWING
DECLARATIONS AND CLAUSES:

                                  DECLARATIONS

I.-    "SATMEX" DECLARES:

I.1    That it is a Variable Capital Stock Corporation ("Sociedad Anonima de
       Capital Variable"), duly incorporated in accordance with Mexican law.

I.2    That according to the provisions of the Mexican Federal
       Telecommunications Law ("Ley Federal de Telecomunicaciones"), and in the
       Mexican Regulations of Communication Via Satellite ("Reglamento de
       Comunicacion Via Satelite"), occupation of the 109.2 degrees, 113.0
       degrees and 116.8 degrees West longitude geostationary orbit positions
       was concessioned on behalf of "SATMEX" for exclusive exploitation of the
       "C" and "Ku" frequency bands and the rights of transmission and reception
       of signals.

I.3    That Mr. Lauro Andres Gonzalez Moreno, in his capacity as C.E.O., has
       faculties to subscribe this Contract.

I.4    That it meets the technical and economic conditions to take on commitment
       of the provision of the service covered by this Contract.

I.5    That its Federal Taxpayer Registration Number is: SME-970626 MK5.

I.6    That for the exercise and fulfillment of the rights and obligations under
       its care, derived from entering into this Contract, it indicates as its
       address that located on Boulevard Manuel Avila Camacho No. 40, piso 23,
       Colonia Lomas de Chapultepec, C.P. 11000, Mexico Distrito Federal.

II.-   "THE CLIENT" DECLARES:

II.1   That it is a Corporation, duly Incorporated under the laws of the State
       of North Carolina, United States of America.

II.2   That Mr. Edward SC Tan, in his capacity as President and Chief Executive
       Officer, has faculties to subscribe this Contract.

II.3   That it is presenting a certified and a simple copy of the documentation
       indicated in the foregoing declarations.

                                       1

<PAGE>   2
[SATMEX LOGO]

II.4    That any modification on its firm name and/or the power of attorney
        granted to Its President and Chief Executive Officer shall be
        communicated in a timely manner and in writing to "SATMEX."

II.5    That it complies with the applicable legislation in the countries
        comprised within the NAFTA, Ku1 region of the Satmex 5 satellite where
        the service shall operate, and that it has obtained the necessary
        authorization(s) from the corresponding regulating institutions, to
        install, operate or exploit the transmitting and/or receiving ground
        station or stations.

II.6    That it accepts the "General Provision Conditions of the Satellite
        Signal Carrying Permanent Service through the Mexican Satellite System",
        issued by "SATMEX" (Annex I), as well as the Technical Annex (Annex
        II), which, duly signed by the parties, are added to this Contract, to
        form an integral part of same.

II.7    That is acquainted with the established legal framework, in the
        Mexican and international settings, to which rendering of the service
        subject matter of this Contract is subject, and is bound to use the
        service rendered by "SATMEX" to cover its communication needs within
        that legal framework.

II.8    That it indicates as its address, for all effects of this Contract,
        that located on: 575 North Pastoria Avenue, Sunnyvale, California
        94086, United States of America.

After having effected the foregoing declarations, the parties agree to enter
into this Contract and bind themselves pursuant to the following:

                                 C L A U S E S

FIRST. - According to the terms, conditions, and technical, legal and tariff
modalities contained in this Contract and its Annexes, "SATMEX" is bound to
provide to "THE CLIENT" the international service of signal conduction via
satellite, through the Mexican Satellite System, by means of the space segment
assignation in the category of Non-Preemptible service, on the Ku band, of the
NAFTA Ku1 region, of the Satmex 5 satellite, with a total bandwidth of 72.00
MHz, according to the following calendar.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
                                        BANDWIDTH            TRANSPONDER
-----------------------------------------------------------------------------
<S>                                      <C>                     <C>
From September 1st, 1999 to              36 MHz                  2 K
  December 31st, 1999
-----------------------------------------------------------------------------
From January 1st, 2000 to                72 MHz                  4 K
  December 31st, 2004
-----------------------------------------------------------------------------
</TABLE>

Should "THE CLIENT" wish to increase its capacity in a third, fourth and/or
fifth transponder, "THE CLIENT" shall give written notice to "SATMEX" sixty
(60) days prior to the start of service. All capacity in subject to
availability.

If "THE CLIENT" notifies "SATMEX" of such increments before November 15th,
1999, "THE CLIENT" shall have the following payment conditions:

Transponder 3: USD$ 148,400.00, for which service shall start no later than
June 1st, 2000.
Transponder 4: USD$ 145,040.00, for which service shall start no later than
September 1st, 2000.
Transponder 5: USD$ 141,600.00, for which service shall start no later than
December 1st, 2000.

                                       2

<PAGE>   3
[SATMEX LOGO]

These increments shall be added via amendments to this contract.

If "THE CLIENT" decides to increase its capacity but subsequently such
transponder(s) is(are) not taken on specified date(s),  "THE CLIENT" shall pay
"SATMEX" a penalty equal to five (5) monthly payments for each transponder at
the monthly transponder rate for said transponder, which shall be payable within
the following thirty (30) calendar days in which service would have begun.

SECOND.- "SATMEX" shall assign to "THE CLIENT" the satellite access
frequencies and their respective operation parameters, on the basis of the link
calculations previously presented by "THE CLIENT" to "SATMEX" for each
transmission and/or reception carrier on which the ground stations that form
part of its network shall access.

"SATMEX" may modify the frequencies assigned to "THE CLIENT" for justified
reasons or optimization movements of the space segments on the corresponding
satellite, for which it shall give "THE CLIENT" timely written notice of the
respective modifications. "THE CLIENT" is bound to carry out location changes
and release the preceding frequencies within the term jointly agreed.

The satellite, band, coverage region, transponder, polarization, link points,
satellite frequencies, operation parameters, location of the ground stations,
antenna diameters, are described in Annex II, which shall be updated as  "THE
CLIENT" requests from "SATMEX" modifications or enlargements on the service
Contracted; in such case, the parties shall subscribe the respective Agreement.

THIRD.- "THE CLIENT" is bound to notify "SATMEX" in writing the name(s),
position(s), address(es), telephone number(s) and fax number(s) of the
technically responsible person(s) in charge of its company's satellite network,
at the latest within the first five (5) working days following the signature
hereof, or when said responsible persons are changed.

FOURTH.- "SATMEX" shall deliver the satellite access frequencies and its
operation parameters to "THE CLIENT", in writing, at the time this Contract is
signed.

FIFTH.- The ground station(s) through which the service is provided shall
satisfy the technical specifications and features set forth by "SATMEX" to
operate with the Mexican Satellite System, and shall fulfill among others,
recommendation ITU-R. S.580-5 and operate with agile and fractionary step
frequency synthesizers. The above shall be described in the technical memory of
the network delivered by "THE CLIENT" to "SATMEX."

SIXTH.- The invoicing of the service shall begin as of September 1st, 1999.

SEVENTH.- "SATMEX" shall send to the address declared by "THE CLIENT" the
monthly invoice of the service contracted, within the first five (5) working
days of each month, which shall be sent per month in advance.

In the event "THE CLIENT" does not receive the invoice at its address in a
timely manner, the latter shall notify this to the "SATMEX" collection area and
effect the corresponding payment.

EIGHTH.- If "THE CLIENT" is not in agreement with any invoice, it shall
immediately present its application for clarification and/or adjustment, in
writing, to "SATMEX", explaining the reasons and grounds for its disagreement.
Such event does not exempt "THE CLIENT" of its payment obligation.

                                       3

<PAGE>   4

[SATMEX LOGO]

NINTH.- "THE CLIENT" shall guarantee to "SATMEX" fulfillment of this Contract,
for an amount equivalent to two (2) times the monthly payment of the service,
by means of a Letter of Credit issued by Bank of America, on behalf of "SATMEX"
(Satelites Mexicanos, S.A. de C.V.), for a total amount of USD$310,800.00
(three hundred and ten thousand eight hundred 00/100 U.S. Dollars), and which
shall be given in a term not to exceed five (5) working days following the
signature of this Contract.

The Letter of Credit shall be given under the terms of this Contract.

The term in force for the Letter of Credit shall be from the signing date of
the Contract and until sixty (60) calendar days following the expiration date
of this Contract and shall be an irrevocable documentary at sight.

The description of the service shall state: obligations assumed by "American
Multiplexer Corporation" on behalf of "Satelites Mexicanos, S.A. de C.V.",
proceeding from satellite services, as stated on Contract number: 266-I,
dated: October 1st, 1999.

Should "THE CLIENT" wish to increase its capacity in a third, fourth and/or
fifth transponder, as stated on Clause First, "THE CLIENT" shall increase its
guaranty payment for an amount equal to two times the monthly payment of the
third transponder: (USD$ 148,400.00), no longer than five (5) days after the
correspondent amendment is signed.

TENTH.- "THE CLIENT" is bound to pay to "SATMEX" for the service subject
matter of this Contract, in monthly payments in advance, the total amount of
USD$ 19,059,600.00 (nineteen million fifty-nine thousand and sixty hundred U.S.
Dollars), in accordance with the following calendar:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                    BANDWIDTH        ADVANCE MONTHLY PAYMENT
--------------------------------------------------------------------------------
<S>                                 <C>              <C>
From September 1st, 1999 to          36 MHz              USD$ 155,400.00
  December 31st, 1999
--------------------------------------------------------------------------------
From January 1st, 2000 to            72 MHz              USD$ 307,300.00
  December 31st, 2004
--------------------------------------------------------------------------------
</TABLE>

"THE CLIENT" is bound to make payments in a timely manner, at the latest on the
fifteenth (15th) day of each month, on the Citibank account established on
Section 16 of Annex I. "SATMEX" agrees to establish a Bank of America account
where "THE CLIENT" may make all payments for services from October 1999 through
expiration of this Contract. "THE CLIENT" will make payments through a wire
transfer by Bank of America to Citibank as established on Section 16 of Annex I
for September 1999 services.

If "THE CLIENT" ceases to cover one (1) monthly payment, the service shall be
suspended. As the case may be, for reactivation, "THE CLIENT" shall cover
previously the indebtedness, moratory interest and reconnection charges.

The parties agree that each of them shall pay the taxes and tariffs generated
under their care, according to the legal ordinances in force in their
respective countries.

When "THE CLIENT" ceases to cover more than one (1) monthly payment, "SATMEX"
may assign the capacity to another interested party.

ELEVENTH.- Moratory Interest shall be calculated on the basis of the rate
resulting from adding two (2) times the Prime Rate, issued by the New York
Citibank, proportionately to the days of delay in payment, divided into twelve
(12) months, on unpaid balances of the amounts owed monthly.

                                       4
<PAGE>   5
[SATMEX LOGO]

Said interest shall be applied as of the day following the payment expiration
date and until the same is received by "SATMEX."

TWELFTH.- "SATMEX" shall only be liable, for compensation effects, for dolus,
for service interruptions in the part corresponding to the space segment,
facilities or equipment owned by it, but in no case for acts of god or force
majeure. "SATMEX's" responsibility, shall in no case, exceed the amount of the
guarantee given by "THE CLIENT".

In case of service supply interruption, "THE CLIENT" shall inform this
immediately to the "SATMEX" Satellite Control Center ("Centro de Control
Satelital") in order for the reason to be determined, the failure corrected,
and the service reestablished. Likewise, it shall notify "SATMEX" in writing so
that, as the case may be and on the basis of the Control Center's technical
report, the corresponding compensation is made to it, in accordance with the
stipulations of Section 18 of Annex I.

When it is necessary to provide maintenance to its facilities or equipment,
among others, "SATMEX" may interrupt the service, in coordination with "THE
CLIENT", and the latter shall not be entitled to any compensation. In any case,
"SATMEX" shall make its best efforts so that said interruptions cause the least
possible damage to "THE CLIENT".

If service interruptions arises, derived from operation of the ground stations
through which the service is provided, which stations are not authorized  or
technically approved and are causing interference, "SATMEX" shall not be bound
to grant compensations.

THIRTEENTH.- The term of this Contract shall be five (5) years and three
months counted from the date it is signed.

FOURTEENTH.- "THE CLIENT" may cancel part of the capacity contracted or
terminate this Contract, notifying this to "SATMEX", in writing, at least
thirty (30) working days in advance. In such case, the cancellation or
termination date shall be referred to a calendar month (last day of the month).

In the event "THE CLIENT" cancels part of the capacity contracted or terminates
this Contract before the end of the term in force indicated in CLAUSE
THIRTEENTH, the latter shall pay to "SATMEX", in one single payment and before
the date notified by "THE CLIENT" has elapsed, the amount resulting from the
tariff corresponding on a monthly basis to Contracts at one (1) year, for each
month remaining to conclude the time period originally agreed upon, not to
exceed twelve (12) months.

In the assumption of partial cancellation, the aforementioned payment shall be
applied to the capacity affected.

Advance cancellation or termination of a service does not release "THE CLIENT"
from previous indebtedness or moratory interest.

"SATMEX" reserves the right to assign the satellite capacity released due to
advance cancellation or termination to another interested party, as of the day
following the termination or cancellation date.

                                       5
<PAGE>   6
[SATMEX LOGO]

FIFTEENTH.-  "SATMEX" may rescind this Contract for any of the following
             reasons:

    I.-     For any type of transmission of the rights and/or obligations
            derived from this Contract, made by "THE CLIENT" to third parties,
            without having prior written authorization from "SATMEX."

    II.-    If "THE CLIENT" stops paying more than one (1) monthly invoice of
            the service or for three (3) suspensions of same in the term of one
            (1) year.

    III.-   If "THE CLIENT" does not adjust to satellite access parameters
            indicated by "SATMEX."

    IV.-    If "THE CLIENT" does not attend approximately and/or carry out the
            necessary adjustments on the generated signals on their equipment
            that cause or may cause affectations to third parties.

    V.-     If "THE CLIENT" does not grant or maintain the guarantee mentioned
            in CLAUSE NINTH in time and form.

    VI.-    For dissolution or liquidation of "THE CLIENT", or if it is
            declared in bankruptcy or suspension of payments, or if it is in
            any of the cases stipulated in Article 2nd of the Mexican Law of
            Bankruptcy and Suspension of Payments ("Ley de Quiebras y
            Suspension de Pagos").

    VII.-   If "THE CLIENT" decides not to accept the relocation assigned to it
            by "SATMEX" in its satellites.

    VIII.-  In general, because "THE CLIENT" does not fulfill any of the
            obligations derived from this Contract, as well as its Annexes.

SIXTEENTH.- If "THE CLIENT" incurres in any of the causes of rescission
indicated in the preceding clause, "SATMEX" shall communicate this in writing so
that in a maximum term of fifteen (15) calendar days, "THE CLIENT" amends the
breach of its obligation. If after said term has elapsed "THE CLIENT" has not
amend the breach of its obligation, "SATMEX" may rescind this Contract, without
a court order.

In the event "SATMEX" rescinds this Contract, "THE CLIENT" is bound to perform
the payment referred to in CLAUSE FOURTEENTH and release the satellite capacity
mentioned in CLAUSE FIRST; in such case, "SATMEX" shall have the possibility
to relocate such capacity immediately.

SEVENTEENTH.- "SATMEX" shall not incur any liability whatsoever for damages
suffered by "THE CLIENT" or third  parties, in a specific but not limiting
manner, for delay in delivery, deficient functioning or failures that might
appear in the space segment subject matter of this Contract, as well as service
interruptions in the part corresponding to the space segment or equipment owned
by it, derived from acts of God or force majeure.

EIGHTEENTH.- Both parties are bound to maintain all of the information and
documentation exchanged between them, by virtue of the fulfillment and execution
of this Contract, as strictly confidential, except: (i) if same is requested by
a judicial or administrative authority and/or (ii) if said information is
deemed to be of public knowledge.

The parties may use the confidential information only by means of prior written
consent from the other party.

NINETEENTH.- This contract only covers the service provided by "SATMEX", "THE
CLIENT" being committed to obtain the authorization of permit/license, whose
granting is a faculty of the corresponding governing bodies at the site of the
ground station(s), on its own behalf.

                                       6

<PAGE>   7
[SATMEX LOGO]

TWENTIETH.- IN case of controversy regarding the fulfillment, contents,
construction and scope of the obligations in this Contract, the parties submit
to the indications of the ordinance in force for the Federal District and the
jurisdiction and competence of the Courts of Mexico City, thus waiving their
right to the jurisdiction that might correspond to them due to their present or
future address or for any other reason. The official language for these
purposes is Spanish.

This Contract is signed in counterparts, one copy remaining in possession of
either party, in Mexico City, as of October 1st, 1999.

            FOR "SATMEX"                        FOR "THE CLIENT"

    /s/ LAURO GONZALEZ MORENO                   /s/ EDWARD SC TAN
    MR. LAURO GONZALEZ MORENO                   MR. EDWARD SC TAN
     CHIEF EXECUTIVE OFFICER.              PRESIDENT AND CHIEF EXECUTIVE
                                                    OFFICER

                                       7
<PAGE>   8
[SATMEX LOGO]

                                                                         ANNEX 1

                                        CLIENT: AMERICAN MULTIPLEXER CORPORATION
                                                          CONTRACT NUMBER: 266-I

              GENERAL PROVISION CONDITIONS OF THE SATELLITE SIGNAL

        CARRYING PERMANENT SERVICE THROUGH THE MEXICAN SATELLITE SYSTEM

GENERAL PROVISIONS.

     1.   The service to be provided by SATMEX consists of the carrying of
          signals by satellite on the C and Ku bands of the Mexican Satellite
          System, abiding by the provisions of the Concession Title, the Mexican
          Federal Law on Telecommunications, the Satellite Communication
          Regulations, the Mexican Federal Law on Radio and Television and its
          Regulations, the Constitution and Agreement of the UTI, the
          International Telecommunications Regulations, International Treaties
          and Agreements on the matter approved by the Senate of the Republic
          and any other administrative provisions on the matter.

     2.   The definitions of the technical terms used in the contracts and/or
          agreements, should be understood according to the documents already
          indicated in the above paragraph, the definitions that may be issued
          by the Telecommunications, Radio communications and Development
          Standardization Sectors of the UTI, as well as the correspondent
          Glossary of Terms of the Federal Telecommunications Commission and/or
          of Telecomunicaciones de Mexico.

     3.   THE CLIENT shall be responsible for obtaining and possessing the
          necessary concessions, permits, licenses or authorizations from the
          Mexican Federal Government or from the authorities on the matter in
          each country to be linked.

PROVISION.

     4.   The permanent service shall be provided based two categories,
          according to their continuity priority in case of contingency or
          partial or total failure of the assigned satellite, these being:

          NON-PREEMPTIBLE SERVICE - Is the one whose transponder has back-up
          amplifiers and is not interrupted to give priority to a protected
          service, but does not possess, in the case of fault, immediate
          protection in another transponder or satellite.

          INTERRUPTIBLE SERVICE - Is the one subject to be required at any time
          due to being used to provide immediate protection to a protected
          service and even to a Non-Preemptible service, due to the latter
          being considered as priorities. During normal operation, the
          transponder possesses backup transponders.

          Protected Service shall be provided only for the State satellite
          capacity; and it is used for national security and social benefit
          services, and has maximum priority over any service category, in case
          of contingency.

          Each category of the permanent service has a different tariff, which
          is defined in Annex II of the respective contract.

     5.   The space segment by which the service is provided shall be assigned
          based on the carriers of information and transmission for
          standardized integrated velocities, for complete transponders or
          fractions of band widths and/or transponder power, measured in
          Megahertz (MHz) and decibel Watts (dBw), respectively.

                                       8
<PAGE>   9
[SATMEX LOGO]

6.   THE CLIENT, when contracting the service, must deliver a technical
     specifications sheet describing the network, its topology, the ground
     stations and their equipment, the satellite access technique, the required
     capacity and link calculation for each carrier, according to the format
     which shall be previously given thereto by SAMTEX.

7.   The frequency synthesizers of THE CLIENT's ground stations must be
     efficient and stepped in Kilohertz. The operation of equipment for
     crystal-syntonized frequencies or with tuning limitations are not
     acceptable, as this prevents the relocation of the service in case of
     interference and may also lead to greater consumption of band width,
     charged to THE CLIENT.

8.   The responsible technicians appointed by THE CLIENT to operate the ground
     stations of its satellite network, must not exceed the nominal satellite
     access parameters assigned to each carrier. The personnel of the Primary or
     Alternate Satellite Control Center of SATMEX, when detecting excesses,
     shall immediately coordinate the necessary rectifications with the manager
     of the ground station or the network. In the case that THE CLIENT does not
     make the necessary rectifications or deactivation of the carriers that
     operate out of the parameters, it shall be charged economic penalties for
     the use of excess power or bandwidth, or for the damages caused to other
     clients.

     The economic penalty shall be for the amount resulting from applying the
     highest tariff for the affected bandwidth and/or power, and also, in such
     case, the economic compensations amounts that SATMEX gives to an affected
     client(s). The payment of such penalties does not imply authorization to
     continue operating the service out of the assigned access parameters.

     If THE CLIENT, for reliability in its link(s), requires operation with a
     higher satellite power level, it may request (with link calculations) that
     SATMEX authorize it, if such possibility exists, apply the corresponding
     adjustments in the bill.

9.   THE CLIENT, prior to accessing the satellite, must coordinate the necessary
     technical testing of their ground stations with the Primary or Alternate
     Satellite Control Center, according to the procedure and protocol
     established by SATMEX.

10.  The ground stations which do not meet the insulation tests, radiation
     pattern or other parameter which affects or may affect other signals or
     satellites, may not be authorized to operate with the satellites until they
     have been corrected, without this implying any responsibility for SATMEX.

     Additionally, if an already tested ground station starts to produce
     interference with other signals during its operation, it must suspend its
     access to the satellite until the complete rectification of such
     interference. In this case, THE CLIENT must provide every facility, so that
     jointly with the Primary or Alternate Control Center, do whatever proceeds
     to help it to eliminate the interference.

     In the case that the manager(s) of the ground station(s) through which the
     services is run does/do not comply with the indications of the Primary or
     Alternate Satellite Control Center of SATMEX in a timely fashion, to
     correct or deactivate the ground station which is producing the
     interference, THE CLIENT shall pay SATMEX a fine equivalent to one percent
     (1%) of the monthly tariff for each hour or fraction for the delay plus the
     equivalent of the compensations SATMEX would have to pay to other clients
     as a consequence of said interference.

     THE CLIENT is committed to supervise the operating status of the ground
     stations and to make sure that these do not produce interference to their
     own signals, other clients signals or other satellites.

11.  When a client's signals are affected by interference whose origin is
     unknown or undetermined which does not allow its immediate rectification,
     THE CLIENT shall have the option to be relocated, as soon as possible, to a
     free space so as to provide its communications with continuity.

                                       9
<PAGE>   10
[SATMEX LOGO]

          This must be immediately reported to the monitoring areas of the
          Primary or Alternate Satellite Control Center of SATMEX, so that in
          coordination with the assignations area, it may attend and aid in the
          relocation activities. As the case may be, SATMEX shall notify THE
          CLIENT of the new frequencies and operating parameters, be they
          temporary or definitive.

          The costs incurred as a result of relocating the frequencies to the
          ground stations shall be paid by THE CLIENT.

     12.  Any modification to the service or change of location of the ground
          stations must be requested from SATMEX at least thirty (30) working
          days in advance, including the complement to the technical
          specifications sheet and the link calculations for the modified
          carriers or new sites.

          THE CLIENT must not make modifications to the service without prior
          coordination with SATMEX.

CONTRACTING.

     13.  To contract the service, THE CLIENT must possess a public network
          concession or permit, of the type envisaged in Articles 24 and 31 of
          the Mexican Federal Law on Telecommunications, respectively and
          pursuant to the provisions of the Satellite Communication Regulations.
          The obtention of such permits shall be the responsibility of and at
          the cost of THE CLIENT. A copy of this document must be presented to
          SATMEX.

BILLING.

     14.  When the magnitude of any of the concepts used as the basis for the
          application of the tariff results in fractions greater than those
          established in the same, these shall be converted into unit, decimal
          or centesimal values, rounded up to the nearest higher number, as
          corresponds.

     15.  The invoices for the concept of the provision of permanent services
          shall be formulated for periods that correspond to one calendar month,
          except when the start of the service is on a day in the middle of the
          month, in which case the initial invoice shall be formulated for the
          amount corresponding to the number of days remaining for the
          conclusion of such month in which the service is provided.

     16.  THE CLIENT shall pay the invoices under its charge, at the latest in
          the date established in the correspondent invoice and in the same
          currency as shown in such documents. THE CLIENT shall have the option
          to pay in the banking institutions authorized by SATMEX or by an
          electronic bank transfer at SATMEX account at:

          Bank:                    Citibank, N.A.
          Domicile:                111 Wall Street, 10043, New York, N.Y.,
          Account number:          36184091,
          ABA number:              021000089.
          Beneficiary:             Satelites Mexicanos, S.A. de C.V.

COMPENSATIONS.

     17.  SATMEX shall in no case bear economic responsibility for damages and
          injuries caused by the interruptions in the service to THE CLIENT or
          third parties.

          SATMEX shall not grant compensation for the interruptions in the
          service derived from the operation of the ground station(s) which are
          not technically authorized or approved and which cause interference,
          or for the total or partial suspension of an interruptible service due
          to providing immediate protection to a protected or uninterruptible
          service, which have priority thereover.

                                       10

<PAGE>   11
[SATMEX LOGO]

          The compensations shall be taken into account starting from the date
          on which the Satellite Control Center of SATMEX issues the report
          confirming the causes that led to the interruption.

     18.  The interruptions in the provision of the service, imputable to
          SATMEX, shall be compensated in the following way:

          I.-    Only shall be compensated continuous interruptions of three (3)
          hours. The compensation shall be equal to one eighth of the billing
          corresponding to one (1) day. A fraction of one hour shall be
          calculated as a complete hour.

          II.-   SATMEX shall not take into consideration requests for
          compensation when the interruption is due to THE CLIENT's negligence,
          or a failure of the apparatus and equipment which are not the property
          of SATMEX and whose conservation and operation does not pertain
          thereto.

          III.-  The compensations, when applicable, shall be credited to THE
          CLIENT in the due account for the second and third months following
          the month in which the interruption occured.

          IV.-   Devolutions shall only be made in those cases in which it is
          impossible to apply the compensations to other periods or services
          contracted by THE CLIENT.

This Annex is signed in counterparts, one copy remaining in possession of each
party, in Mexico City, as of October 1st, 1999.

      FOR "SATMEX"                              FOR "THE CLIENT"

/s/ LAURO A. GONZALEZ MORENO                    /s/ EDWARD SC TAN
  MR. LAURO GONZALEZ MORENO                     MR. EDWARD SC TAN
          C.E.O.                         PRESIDENT AND CHIEF EXECUTIVE OFFICER

                                       11

<PAGE>   12
[SATMEX LOGO]

                                    ANNEX II
                                   SECTION 1

-------------------------------------------------------------------------------
CLIENT:                 AMERICAN MULTIPLEXER CORPORATION
-------------------------------------------------------------------------------
ADDRESS:              575 NORTH PASTORIA AVENUE, SUNNYVALE
-------------------------------------------------------------------------------
CITY:          LOS ANGELES, CALIFORNIA, UNITED STATES OF             94086
                             AMERICA
-------------------------------------------------------------------------------
CONTRACT:      266-1     DATE: OCTOBER 1st, 1999     PERIOD IN USE: 5 YEARS AND
                                                     3 MONTHS
-------------------------------------------------------------------------------
REPRESENTED:                   MR. EDWARD SC TAN
-------------------------------------------------------------------------------

                             TECHNICAL INFORMATION

-------------------------------------------------------------------------------
NETWORK:       POINT-POINT    BANDWIDTH:
                              FROM SEPT 1st, 1999 TO DEC 31st, 1999:  36MHz
                              FROM JAN 1st, 2000 TO DEC 31st, 2004:   72MHz
-------------------------------------------------------------------------------
EXPLOTATION:   PRIVATE NETWORK
-------------------------------------------------------------------------------
SATELLITE:     SATMEX 5    BAND:  Ku     SERVICE CATEGORY:   NON PREEMPTIBLE
-------------------------------------------------------------------------------
ORBITAL         116.8W     TRANSPONDER:  2K
POSITION:                                4K
-------------------------------------------------------------------------------
REGION:        NAFTA, Ku1
-------------------------------------------------------------------------------
TELEPORT(S):  UNITED STATES OF AMERICA
-------------------------------------------------------------------------------

                                      COST

-------------------------------------------------------------------------------
TOTAL AMOUNT USD $19,059,600.00

MONTHLY COST USD:

FROM SEPTEMBER 1st, 1999 TO DECEMBER 31st, 1999 THE AMOUNT OF $155,400.00.
FROM JANUARY 1st, 2000 TO DECEMBER 31st, 2004, THE AMOUNT OF $307,300.00.
-------------------------------------------------------------------------------

                                       12
<PAGE>   13

[SATMEX LOGO]

                                TECHNICAL ANNEX
                                   SECTION 2

SERVICE OF SIGNAL CONDUCTION
OPERATION PARAMETERS

<TABLE>
<S>              <C>                   <C>
                                                 CARRIERS
-----------      -------------         ----------------------------
SATELLITE:          SATMEX 5            TRANSP:              2K
-----------      -------------         ----------------------------
BAND:                 Ku                POL.:                H/V
-----------      -------------         ----------------------------
REGION:           NAFTA, Ku1            ACCESS TECHNIQUE: FDMA/SCPC
-----------      -------------         ----------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                CENTER               EIRP           INF.
                   LINK                       FREQUENCY                             RATE     MOD      FEC    AVAIL   POWER     BW
     --------------------------------------------------------------------------------------  TYPE    RATIO     %       %      (MHz)
     TRANSMIT    ANT    RECEIVE    ANT     UP/L      DOWN/L      UP/L      DOWN/L    (Kbps)
                                          (MHz)      (MHz)      (dBw)     (dBw)
------------------------------------------------------------------------------------------------------------------------------------
<S>   <C>      <C>     <C>        <C>    <C>        <C>        <C>       <C>       <C>       <C>     <C>     <C>      <C>     <C>
       SAN     4.5    CHICAGO,    0.8    14040.0    11740.0    78.88     51.53     30000     QPSK     0.67   99.80    100.00  38.00
 1  FRANCISCO           ILL.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

A)   THE TOTAL BANDWIDTH ASSIGNED IS:                               36 MHz
     PERCENTAGE EQUIVALENT:                                         100%

B)   PERCENTAGE OF TOTAL POWER ASSIGNED:                            100%

C)   ALL THE MASTER (HUB) AND REMOTES DISHES MUST COMPLY WITH RECOMMENDATION
     ITU-R.S.580-5, FOR WHICH THEY ARE OBLIGATED TO PRESENT THE PATTERN
     RADIATION TESTS THAT SATMEX'S CONTROL CENTER CONSIDERS CONVENIENT TO THAT
     EFFECT.

D)   SATMEX IS NOT RESPONSIBLE FOR ADJACENT SATELLITE INTERFERENCES DUE TO THE
     USE OF 0.8 M ANTENNAS DECLARED.

E)   THE TECHNICAL PARAMETERS FOR 4K TRANSPONDER SHALL BE ASSIGNED BEFORE
     SERVICE STARTS.

THIS ANNEX IS SIGNED IN COUNTERPARTS, EACH COPY REMAINING IN POSSESSION OF EACH
PARTY IN MEXICO CITY, AS OF OCTOBER 1ST, 1999.

       FOR "SATMEX"                                 FOR "THE CLIENT"

/s/ LAURO GONZALEZ MORENO                          /s/ EDWARD SC TAN

MR. LAURO GONZALEZ MORENO                         MR. EDWARD SC TAN
          C.E.O.                             PRESIDENT AND CHIEF EXECUTIVE
                                                       OFFICER

                                       13

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