Document:

Exhibit 10.5

 

[*] = Certain
confidential information contained in this document, marked with brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment made pursuant to Rule 24b-2
under the Securities Exchange Act of 1934, as amended.

 

MANUFACTURING,
SUPPLY, AND LICENSE AGREEMENT

 

This Manufacturing,
Supply, and License Agreement (the “Agreement”) is made on this 30th day of March 2009,
(the “Effective Date”) by and between INTUITIVE SURGICAL INC.,
(hereinafter, “Intuitive”) a Delaware corporation with its principal place of
business located at 1266 Kifer Road, Sunnyvale, California 94086, and ENCISION, INC. (hereinafter, “Encision”), a
Colorado corporation with its
principal place of business located at 6797 Winchester Circle, Boulder, CO
80301.  Intuitive and Encision hereby agree to the
following terms and conditions for the performance of this Agreement.

 

1.             General Scope.

 

1.1           This Agreement contains the terms and
conditions which shall apply to any and all transactions for the manufacturing,
supply, and license by Encision, and purchase and use by Intuitive of goods for
use in or with Intuitive’s present and future lines of robotic surgical
systems, during the term hereof.

 

2.             Definitions.

 

2.1           “Adverse Event” shall mean an event or incident that
led to a death, serious injury, or serious deterioration in the state of health
of a patient, user, or other person; if the incident was wholly or partially
caused by the Product or by shortcomings in the information supplied with the
Product.

 

2.2           “Bill of Materials” or “BOM” refers to the list of
Components necessary to manufacture the Product or Products.

 

2.3           “Certificate of Conformance” shall be written
certification by Encision, that the supplied Product meets the Specifications.

 

2.4           “Complaint” shall mean any written, electronic, or
verbal feedback directed to Intuitive and/or Encision, related to the use of a
medical device/Product/accessory manufactured or distributed by Intuitive, or
distributed by a third party on behalf of Intuitive, that alleges deficiencies
related to the identity, quality, durability, reliability, safety,
effectiveness, or performance of a Product after it is released for
distribution.

 

2.5           “Components” shall mean any components and other
materials listed in the Bill of Materials for any Product.

 

2.6           “Field” shall mean the diagnosis and/or treatment of a
human or an animal using Robotic Systems.

 

2.7           “Kanban Signal” shall mean a signal, electronic or otherwise,
used to trigger delivery of a set (Kanban) quantity against the quantity
specified in the Scheduling Agreement.
Intuitive will provide Kanban size to Encision.

 

2.8           “Product(s)” shall mean the item or items set forth in
Exhibit A to be purchased by Intuitive from Encision during the term of
this Agreement, including future revisions and enhancements and any additions
to the items set forth in Exhibit A that may be agreed upon by the
parties.  For clarity, Products do not
include Intuitive Instruments.

 

1

 

2.9           “Robotic Systems” shall mean computer-controlled
manipulators used to diagnose and/or perform a medical or surgical procedure in
a patient’s body, controlled from a location external to the patient’s body.
Robotic Systems shall only include Intuitive’s present and future lines of da
Vinci Surgical Systems, instruments and accessories.

 

2.10         “Scheduling Agreement” shall mean an order by
Intuitive, communicated via electronic data transfer, email or other means , to
purchase Products, Components, or other materials, at a stated unit price, for
a total quantity to be delivered within a delivery date range.  Delivery due date will be determined based
upon Kanban Signal and the
Replenishment Lead Time.

 

2.11         “Specifications” are as set
forth in Exhibit B.

 

2.12         “Sterilization” shall refer
to both EtO (ethylene oxide) and Gamma (radiation isotope) sterilization
methods.

 

2.13         “Replenishment Lead Time” is the agreed
upon time to delivery from the Kanban Signal. Intuitive will provide the
Replenishment Lead Time.

 

2.14         “Licensed Patents” shall mean all worldwide patents
issued as of the date of this Agreement (including any and all patents issuing
or claiming priority from the above patents and patent applications, including
non-provisionals, continuations, continuations in part, divisionals,
re-examinations, reissues, and foreign counterparts thereof), owned or licensed
by Encision, necessary to develop, use, make, have made, promote, offer for
sale, sell, import, export, and otherwise commercialize Intuitive Instruments
that are enabled to function with Products, within the Field.

 

2.15         “Encision’s Intellectual Property” shall mean the
Licensed Patents and any and all now known or hereafter existing (a) copyrights,
moral rights, and mask works, (b) trade secret rights, (c) designs,
algorithms, and other industrial property rights, (d) trademark and trade name
rights, (e) other intellectual and industrial property and proprietary
rights, whether arising by operation of law, by contract or license, or
otherwise, and (f) all registrations, applications, renewals, extensions,
combinations, divisions, or reissues of the foregoing.

 

2.16         “Encision Inventions” shall mean Encision ́s
inventions, whether patentable or not, patents, patent applications, know-how,
technical information, test results, and other intellectual property rights
conceived or reduced to practice solely by representatives of Encision in the
performance of this Agreement.

 

2.17         “Intuitive Inventions” shall mean Intuitive ́s
inventions, whether patentable or not, patents, patent applications, know-how,
technical information, test results, and other intellectual property rights
conceived or reduced to practice solely by representatives of Intuitive in the
performance of this Agreement.

 

2.18         “Joint Inventions” shall mean any inventions whether
patentable or not, patents, patent applications, know-how, technical information, test results and any other intellectual
property rights conceived or reduced to practice jointly by representatives of
Encision and Intuitive in the performance of this Agreement.

 

2.19         “Purpose” shall mean the supply, design, installation,
adaptation, and certification of Products and Intuitive Instruments for use in
or with Robotic Systems solely within the Field.

 

2.20         “Intuitive Instruments” shall mean any instrument that is used,
in connection with Products, in or with a Robotic System.

 

2

 

3.             Forecast.

 

3.1           Intuitive shall provide Encision with a non-binding
nine (9) to twelve (12) month rolling forecast of Intuitive’s delivery
requirements.

 

3.2           This Agreement is not an authorization for Encision to
perform manufacturing services or to manufacture the Products. Intuitive will
place Scheduling Agreements or purchase orders with Encision in such a manner
that will provide Encision with Intuitive’s delivery requirements.

 

3.3           Intuitive may issue Scheduling Agreements or purchase
orders for a minimum of the first 90 days of the
required deliveries. Each Scheduling Agreement or purchase order shall include
a description of the Product(s) to be purchased, quantity, routing
instructions, requested delivery date, destination and price. Thereafter,
Intuitive will place Scheduling Agreements or purchase orders with Encision
based on agreed upon lead times and needed delivery dates.

 

4.             Purchasing, Pricing and Payment Terms.

 

4.1           Purchase Order or Scheduling Agreement Acknowledgement.  Encision shall acknowledge in writing purchase orders or
Scheduling Agreements submitted by Intuitive within seven (7) calendar
days from Encision receipt. In the event an acknowledgment is not received
within (7) calendar days, Intuitive may, at is option, cancel such
purchase orders or Scheduling Agreements with zero (0) financial liability to
Intuitive. Encision must submit in writing to Intuitive at the time of
Scheduling Agreement or purchase order acknowledgment any minimum order
quantity purchases or non-cancelable non-returnable’s (NCNR’s) that will result
in excess inventory.

 

4.2           Material Liability.  Encision is
financially liable for any item on order, including NCNR’s, unless Encision has
received Intuitive’s written pre-approval.

 

Intuitive shall be liable
for the following:

 

(i)           Finished goods: thirty (30) calendar days of demand*.

 

4.3           Flexibility. Intuitive may make changes to shipping instructions,
quantities or requested delivery dates/schedules specified in any Scheduling
Agreement or purchase order, as needed throughout the duration of this
Agreement, in conformance with Table 1.0 below, unless otherwise mutually
agreed upon in writing by the parties.

 

Table 1.0

 

	
  Calendar days from

  notice

  	
   

  	
  % change

  
	
  0 - 30

  	
   

  	
  +/- 0

  
	
  31 - 60

  	
   

  	
  +/- 10

  
	
  61 - 120

  	
   

  	
  +/- 25

  
	
  121+

  	
   

  	
  +/- 50

  

 

4.5           Product Price and License Fees.

 

4.5.1        Price of Products.  The intent of
the parties is for Encision to make [*] ([*]%) gross margin on the sale of
Products to Intuitive, plus a license fee as defined below in Section 4.5.2.  The prices set forth in Exhibit A, which
shall be the prices as of the Effective Date of this Agreement, reflect a [*]%
gross margin for Encision. The parties agree to negotiate a commercially
reasonable annual price adjustment (up or down), bearing in mind the agreed
intention to maintain a [*]% gross margin for Encision. Failure to agree on the
pricing for the Products shall be deemed an event of mutual default, and shall
give either Party the right to 

 

3

 

terminate this Agreement
as provided in the Term and Termination Section of this Agreement. Given
the intention for a [*]% gross margin, the annual price shall be computed as
Encision’s Cost of Goods Sold for the Product divided by [*]%.  “Cost of Goods Sold” or COGS” shall mean the
sum of (i) direct materials cost (per the bill of materials), (ii) direct
labor cost (for the time to build the Product), (iii) burden cost (applied
at standard burden rate), and (iv) subcontract cost (if applicable, from
bill of materials on Products sent out for an outside operation), all to be
determined consistent with current US Generally Accepted Accounting Principles
and consistent with Encision’s practice for products of similar complexity with
Products.

 

4.5.2        License Fee.  In addition to the Price of Products set
forth in Exhibit A and as defined in Section 4.5.1, Intuitive shall
pay a one time up front License Fee to Encision of [*] within 45 days of
signing this Agreement.

 

4.5.3        Cord Development Costs.  Intuitive
shall also reimburse Encision for the following costs associated (to the extent
there are any and in an amount not to exceed [*]) with the Intuitive branded 12
foot cord product.

 

(a)           Sterilization Validation

(b)           Package Validation

(c)           Shipping Tests

(d)           Additional Dose Audits

(e)           Validation for three (3) years

 

4.6           Price of Products purchased hereunder shall include,
without limitation, the following:

 

(i)            Inspection of all components.

 

(ii)           Packing and crating, as required.

 

(iii)          Pre-shipment
testing.

 

(iv)          Complete Device History Record (“DHR”)
paperwork to be maintained by Encision.

 

(v)           CE or other regulatory labeling as
required.  The cost of any translation
requested by Intuitive will be paid by Intuitive, provided the cost is
pre-approved by Intuitive.

 

4.7           Payment. Intuitive will make payment upon receipt of a valid and
undisputed invoice. Payment for Products received shall be due net forty-five
(45) days from the date of Encision’s invoice.

 

4.8           Kanban Replenishment.  Intuitive’s Kanban replenishment program requires the
Encision to ship an exact quantity of items to Intuitive within a specified
number of days after Kanban Signal to Encision. 
Encision will be provided access to an internet portal that shows all
open Kanban Signals to be delivered to Intuitive. This portal will display
all parts that are to be shipped by Kanban scan number, Kanban quantity, and
due date. Encision is required to deliver in full Kanban quantities only,
unless otherwise approved in advance by Intuitive.

 

As feasible and
consistent with Encision infrastructure and business processes, Encision will
drive lean manufacturing concepts and best practices with Encision’s vendors to
maximize the effectiveness of the Kanban replenishment program for
Intuitive.   Encision will also maximize its internal quality
assurance efforts to ensure that full Kanban stocking levels can be built and
shipped to Intuitive, with zero defect quality levels.

 

Encision and Intuitive
will define and agree on finished goods, work in process and raw material
liabilities to enable the Kanban replenishment program to be successful
and supportive of Intuitive needs.  At a 

 

4

 

minimum, Encision shall
always have a minimum of one (1) Kanban bin in ready to ship, finished
goods status.

 

4.9           Certificate of Conformance.  At Intuitive’s request, Encision shall
provide a Certificate of Conformance to Intuitive.

 

4.10         Audit.  Encision
agrees to make and maintain complete and accurate records of its manufacturing
costs underlying its accounting statements provided to Intuitive, and shall
allow Intuitive, or its representative, a certified public accountant mutually
acceptable to Encision and Intuitive, during office hours and at reasonable
intervals, no more than once a year, to inspect and make extracts or copies of
such records solely for the purpose of ascertaining the correctness of such
statements, COGS and Product per unit prices. If any such examination and audit
shall disclose an overpayment of five percent (5%) or more, Encision shall pay,
in addition to such overpayment, the reasonable costs of such examination and
audit.  All books of account and records
with respect to Products shall be kept available for at least five (5) years
after end of the Term.

 

5.             Branding and Training.

 

5.1           Active Electrode Monitor (AEM) Branding. 
Product may be Encision branded, provided Intuitive shall have the right
to determine the size and placement of the Encision branding, with input from
Encision.  Intuitive approves the current
Encision branding of the AEM. Any changes to the branding of the AEM Product
shall require Intuitive’s approval.

 

5.2           Cord Branding.  The cord
Product shall be Intuitive branded, with attribution provided to Encision.  Intuitive will determine the messaging, size
and placement of the branding and attribution, with input from Encision
consistent with the parties’ respective intellectual property rights.  Intuitive will pay for the cost of branding
the cord Intuitive.

 

5.3           Training.  Encision
shall provide training to Intuitive personnel on use and operation of Products
and attendant safety measures as reasonably required and upon request of
Intuitive

 

5.4           No Other Purpose.  Encision
shall not nor shall Encision enable or cause any other person to use or utilize
the Products for any purpose other than for Robotic Systems used within the
Field for which Intuitive would have sold the Products.  For the avoidance of doubt, nothing in this Section or
Agreement shall be construed to preclude Encision from selling any of its
products, other than the Intuitive branded cord Product, to other parties.

 

6.             Product Changes.

 

6.1           Product Changes.  Intuitive may,
upon advance written notice to Encision, submit Engineering Changes for
incorporation into the Product(s). It is important that this notification
include documentation of the change to effectively support an investigation of
the Engineering Change (EC) impact. Encision shall, within a period not to
exceed twenty-five (25) calendar days from EC notification from Intuitive,
evaluate the feasibility of the EC and respond completely to Intuitive in
writing with the potential impact of the EC, including but not limited to,
current on-hand or on-order inventory, work-in-progress, the delivery schedule,
price, Product quality performance, and any other information with respect to
the EC requested by Intuitive. Encision’s response will be considered by
Intuitive to complete and release the EC and Encision will be notified of
actual EC through a change in Scheduling Agreement or purchase order for the
given Product(s) incorporating the EC change based upon a mutually agreed
upon switch-over date..

 

Encision shall not make
any changes to any Component (including manufacturing process), or to the
Product Specification process that may affect the performance of the Product or
the Product’s compatibility with Intuitive’s Robotic Systems unless approved by
Intuitive in writing before implementation.

 

5

 

Encision will provide
Intuitive with detailed information of any proposed change in Product labels and
instructions for use that affect any sale or use of Products prior to its
implementation. Any proposed changes to Product labels and instructions for use
are subject to Intuitive’s review and approval.

 

6.2           Discontinued Products and Components. Should Encision or any authorized
supplier provide notice that a Component used in the manufacturing of the
Products is to be discontinued, Encision will promptly notify Intuitive in
writing of the Products or Component being discontinued, the last date available
for placement of orders, the effective date the Product or Component will be
discontinued, and any last buy instructions or other applicable information or
documentation necessary for Intuitive to make an informed decision regarding
any end of life purchases for Products. Notwithstanding the above, no Product
or Component shall be discontinued without providing a minimum six (6) month
notice period in order to allow Intuitive the time to source replacement
products and/or components.

 

6.3           Obsolescence.  
Encision agrees to provide sustaining engineering support, repair and
Component replacement of Product for a period of seven (7) years from the
date of Product obsolescence or discontinuation.  Field replacement units (FRU’s) shall be of
either new or like new product.

 

7.             Taxes.

 

7.1           Encision agrees to cooperate in a reasonable manner
with Intuitive in order to minimize all taxes that are to be paid directly or
indirectly by Intuitive. Encision agrees to use reasonable efforts to notify
Intuitive’s tax department of notice of any audit or assessment which may
affect the sales, use, excise, or property taxes which may be assessed on a
Product or Products, within fifteen (15) calendar days of receiving such
notice.

 

7.2           Intuitive has provided to Encision and Encision hereby
acknowledges having received Intuitive’s resale license/certificate.

 

8.             Delivery.

 

8.1           Encision shall deliver Products in accordance with
Intuitive’s instructions as specified in each purchase order or Scheduling
Agreement. Delivery will be FCA Encision’s dock (Incoterms 2000). All Products
will be shipped to Intuitive with freight and insurance to be paid by
Intuitive.

 

8.2           Title and risk of loss will pass to Intuitive upon
shipment from Encision’s  dock.

 

8.3           A complete packing list must accompany all shipments.
The following information shall be included in each packing list: Scheduling
Agreement or purchase order number, Intuitive’s part number and revision level,
the Kanban scan number,  quantity, delivery date, and lot or serial number. This information
shall also be entered on the packing list in human readable barcodes.

 

8.4           If Encision uses transportation agents other than its
own resources, Encision is fully responsible and liable to ensure these
transportation agents support on time delivery requirements for the Kanban
replenishment program in accordance with Section 4.8 of this Agreement.

 

8.5           Intuitive shall have the right to approve packaging
and labeling.

 

8.6           In the event special transportation and storage
conditions are required for Products, Encision will provide Intuitive with
appropriate instructions in advance.

 

8.7           In the event Intuitive’s account number will be used
for freight, Encision will be subject to freight invoice audits on an ongoing
basis. Encision shall reimburse Intuitive for freight charges not related to
Intuitive’s shipping.

 

6

 

9.             Acceptance.

 

9.1           Intuitive shall have thirty (30) days from the date of
delivery to perform acceptance testing on Products received from Encision and,
shall have the right to return to Encision, for replacement, any Product  that fails such acceptance testing. Intuitive
agrees to comply with Encision’s reasonable return material authorization (“RMA”)
procedures, including the procurement of RMA numbers applicable to each Product
return to Encision.

 

10.           Delays.

 

10.1         Time is of the essence for Products ordered pursuant
to this Agreement and delivery shall be strictly in accordance with the
schedule set forth within the relevant Scheduling Agreement or purchase order.
Encision shall use its best efforts to minimize any delay that may prevent its
timely compliance with one or more requirements of this Agreement. Whenever the
delivery of Products shall be delayed for any reason, including any delays
caused by circumstances as set forth in Section 20 entitled “Force Majeure”,
Encision shall promptly notify Intuitive of Encision’s plan to remedy the
delay, including the anticipated length of the delay, the cause of the delay,
any measures proposed or taken to prevent or minimize the delay, and the
timetable for implementation of such measures. Should any delay continue for a
period more than eighteen (18) days, Intuitive shall be entitled, with written
notice to Encision, to terminate this Agreement without further obligation,
excluding payment for Products already delivered or in transit as of the date
of termination.

 

11.           Reserved for future use.

 

12.           Incoming Inspection and Process Control.

 

12.1         Incoming Inspections. Encision shall perform incoming quality control
inspections on all Components and will keep sufficient records such that the
source and raw material specification of such Components may be readily
determined. All records required under this Section 12.1, shall be
maintained by Encision for a period of five (5) years and/or provided to
Intuitive following termination of this Agreement.

 

12.2         Process Control. Encision shall follow documented processes during
assembly of the Products and keep written records of all assembly and tests performed
as determined by Encision’s Quality Systems Procedures.

 

13.          Quality/Regulatory.

 

13.1         Encision agrees to maintain a quality system that is
in substantial compliance with USA FDA Quality System Regulations, Canadian
Medical Device Regulations, European Union Medical Devices Directives, ISO
13485: 2003 and Japan GQP (Good Quality Practices).  Intuitive understands that Japan GQP is
currently in process but not completed.

 

13.2         Encision agrees to share with Intuitive any FDA 483
observations or notified body non-conformities that affect Intuitive and to
allow Intuitive to participate in the resolution of the citation.

 

13.3         Encision agrees to notify Intuitive of any potential
changes to the device license or registration that could affect availability of
the Product.

 

13.4         Encision agrees to manufacture Product in compliance
with the device master record established by Intuitive and Encision.

 

7

 

13.5         Each party will notify the other party of any FDA regulatory
actions, any FDA 483 observations or Warning Letters that were issued, in
addition to any pending or ongoing FDA investigations or inspections that may
involve the Encision or Intuitive six (6) months prior to the Effective
Date of this Agreement, and during the term of this Agreement. Encision’s
obligation is limited to Products as listed on Exhibit A.

 

13.6         Encision shall place the Product on hold and notify
Intuitive within two (2) business days if:

 

(i)            A Product does not meet Intuitive quality
requirements and has been either certified for shipment via DHR review and
release (still held at Encision) or has already shipped.

 

(ii)           A finished device meets Intuitive quality
requirements, but an identified quality issue exists which is not currently defined
by Intuitive.

 

(iii)          Encision
is notified of any supplier-related quality issue that may affect the
form-fit-or-function of finished products.

 

13.7         All Products provided to Intuitive under this
Agreement shall be manufactured in accordance with the Specifications, and
applicable to the relevant clauses of quality system regulations including: FDA
21 CFR 820, ISO 13485: 2003, and Japan GQP.

 

Encision will
exercise its appropriate control over the quality of the output from its
subcontractors, when applicable, and will maintain its own QMS covering such
control.

 

13.8         Inspection Rights/Subcontracting. Intuitive shall have the right to have
its representatives present at the Encision plants and production facilities
relating to or used in connection with the manufacture of the Products during
normal business hours to conduct an initial inspection and periodic inspections
of such plants and facilities and the manufacturing procedures, the Product
Specifications and Intuitive quality assurance requirements and to inspect
Encision’s inventory of Products, work-in-process, raw materials to be used for
the Products, production records and such other matters or records as may be
necessary to proper quality assurance of the Products to be delivered
hereunder. Intuitive agrees to give Encision a minimum of two (2) business
days’ prior notice of any such inspection, whenever possible.

 

Encision shall promptly use its best efforts to take such action as is required to correct any deficiencies identified by Intuitive relating to the production of any Product listed in Exhibit A.
 

13.9         Regulatory Matters.  Encision
shall maintain all regulatory approvals it has for the Product and shall keep
Intuitive informed as to the status of all applicable regulatory approvals. Encision
shall provide Intuitive, upon request, a true and complete copy of all
regulatory approvals and other regulatory filings, submissions and
communications for the Product(s) subject to reasonable redaction of
proprietary information.   Encision shall
provide support, assistance and guidance to Intuitive with respect to Intuitive’s
efforts to obtain other regulatory approvals Intuitive may need for the
Products or for Intuitive’s products into which Product(s) are
incorporated

 

13.10       Regulatory information and notification
with respect to the Product(s).  Each party agrees to share and provide to
the other party all information related to regulatory approvals for the
Product(s), and without limitation agrees to maintain a reasonable record of
all material Complaints it receives with respect to the Product(s).

 

13.11       Regulatory information, notification and
investigation with respect to the Product(s). Each party agrees without
limitation to:

 

(i)            Maintain a Complaint handling process.

 

8

 

(ii)           Notify the other party of any material Complaint
received in sufficient detail and within thirty (30) days after the end of
the calendar quarter in which the event occurred.

 

(iii)          Perform a complete investigation within sixty (60)
days, in response to any Complaint, including a root cause analysis and
formulate corrective action recommendations to address the issues raised by
such complaint. Results of the investigation shall also be provided to the
other party.

 

(iv)         In the event a Complaint is received by either party
and the information reasonably suggests that (a) a death has occurred, (b) the
event resulted in a life-threatening illness or injury (c) the event
resulted in a permanent impairment of a body function or permanent damage to a
body structure, or (d) the event required medical or surgical intervention
to preclude permanent impairment of a body function (including a clinically
relevant increase in the duration of a surgical procedure), or (e) remedial
action was required to prevent an unreasonable risk of substantial harm to
public health, each party shall notify the other party of the Complaint within
two (2) business days of the receipt of the Complaint to allow both
parties sufficient time to comply with any and all legal and regulatory
requirements.

 

(v)           In the event a Complaint is received by either party
involving a malfunction (i.e. failed to meet its performance specifications as
intended) for the Product(s), that if it were to recur would likely cause or
contribute to a death or serious injury either party shall notify the other
party of the Complaint within seven (7) days of the receipt of the
Complaint, to allow both parties sufficient time to comply with any and all
legal and regulatory requirements.

 

13.12       Each party shall notify the other party within two (2) calendar
days of becoming aware of any Adverse Event that has taken place and any
safety-related issue with respect to the Product(s). In such an event, each
party will, with the least practicable delay, provide the other party with
copies of advisory notices issued by related regulatory authorities to enable
both parties to take necessary actions in accordance with regulatory
requirements.

 

13.13   Records.

 

(i)            Upon reasonable request from Intuitive, Encision shall
forward to Intuitive either a) copies of the completed device history records
or b) access to the completed device history records.

 

(ii)           Encision agrees to maintain inspection and production batch
records for a period no less than five (5) years from the date the last
Product is manufactured for Products purchased by Intuitive.

 

(For finished goods suppliers shipping to Japan, record
requirement is fifteen (15) years.)

 

(iii)          Upon request from either party, Complaint investigation reports
shall be provided to the other party for Products purchased by Intuitive.

 

13.14   Recalls.

 

General.  Encision shall have the exclusive
right (subject to applicable law) to initiate voluntary Product recalls, and
shall manage and be responsible (including bearing all costs and expense) for
all Product recalls. Each of the Parties hereto agrees to notify the other in
writing within forty eight (48) hours in the event either sees a need for a
potential Product recall.

 

9

 

Encision
Recall.  In
the event of any recall of any Product (whether voluntary, required by the FDA
or any other Governmental Authority in any jurisdiction in which Intuitive, any
Affiliate of Intuitive or any distributor of either has sold any Products, or
resulting from any device notification or safety alert) due to design defect,
workmanship or failure to manufacture in conformance with applicable Product
(or Device) Documentation or Device Regulation standards, or due to any other defect
or non-conformity in the Product (collectively, “Encision Recall”),
Encision shall (i) if requested by Intuitive, provide Intuitive with a
credit or reimbursement, or (ii) ) replace, refurbish or repair of
defective or non-conforming Products; and (ii) reimburse Intuitive for
reasonable costs and expenses incurred by Intuitive associated with (a) the
initial shipments of the recalled Products, and (b) customers’ return of
the recalled Products and shipment of replacement Products to customers. 
Encision shall use its reasonable efforts to correct, as promptly as is
practicable, problems or other issues which result in Encision Recalls. 
If any recall results solely from an act or omission of Intuitive or its agents
or employees, Intuitive shall reimburse Encision for its reasonable
out-of-pocket costs and expenses incident to such recall. Encision’s requested
out-of pocket costs for reimbursement are subject to Intuitive’s review and
approval.

 

13.16       Encision agrees to maintain required manufacturing facility
licenses as required by state and federal regulations.

 

13.17       Access to Technical Materials. 
All Technical Materials owned by Intuitive shall remain the property of
Intuitive and all Technical Materials owned by Encision shall remain the
property of Encision.  Encision shall use
commercially reasonable efforts to assist Intuitive with registration and
regulatory requirements

 

13.18       Encision agrees not to modify the device master record
for the 12 foot cord, i.e;

 

(i)           Device specifications including appropriate drawings,
composition, formulation, component specifications, and software
Specifications;

 

(ii)          Production process specifications including the
appropriate equipment specifications, production methods, production
procedures, and production environment specifications;

 

(iii)         Quality assurance procedures and specifications
including acceptance criteria and the quality assurance equipment to be used;

 

(iv)         Packaging and labeling specifications, including
methods and processes used; and

 

(v)          Installation, maintenance, and servicing procedures
and methods, in a manner that would result in changing device safety,
performance or appearance without prior consent from Intuitive.

 

13.19       Encision shall assemble, test, and package the product
in accordance with a mutually approved device master record for the 12 foot
cord.

 

13.20       Encision shall ensure all required manufacturing and
inspection steps have been successfully completed, prior to delivering the
finished Product to Intuitive.

 

13.21       Encision shall be responsible for creating and
documenting manufacturing methods, inspections and processes to meet Product
Specifications.

 

13.22       Encision shall disclose and obtain prior consent from
Intuitive to use subcontract manufacturers. Encision agrees to notify Intuitive
of any significant changes to the facility, quality system, organization and
change of QMS certification status.

 

10

 

13.23       Encision shall maintain ISO 13485:2003 certification.
At Intuitive’s request, Encision shall provide copies of ISO 13485:2003
certification and copies at every renewal of such certification.

 

14.           Representations and Warranties.

 

14.1         Encision warrants that all Products delivered
hereunder will: (a) conform strictly to the design specifications,
drawings, process documents, samples or other descriptions provided, (b) conform
strictly to the requirements of the relevant Scheduling Agreement or purchase
order, and (c) be free from defects in material and workmanship. Encision’s
warranty shall be in effect: (i) in the case of AEM Products, for a period
of one (1) year from date of acceptance from Intuitive; and (ii) in
the case of cord Product, until the label expiry date, or one use, whichever
occurs first.

 

14.2         If a Product or any Component is found by Intuitive,
after appropriate tests and inspections, to have any defect, including any
patent or latent defect, Intuitive will notify Encision in writing of such
defect and Encision will, at Encision’s election and at no cost to Intuitive,
either (1) repair or replace the defective Component or Product or (2) arrange
for the removal and replacement of the defective Product; provided however,
that if the Product has been incorporated by Intuitive into a larger product
assembly prior to the discovery of such defect, the parties shall confer as to
the means of effecting the repair or replacement most convenient for Intuitive
which is not unduly burdensome to Encision, and proceed accordingly. Encision
will retain any Components removed from the Product for replacement.  Components or Component parts furnished in
warranty service shall be new or rebuilt parts, at the option of Encision, but
in either case shall be of the same quality and subject to the same warranty as
new parts. In any case, the warranty period of any parts furnished under
warranty service shall not exceed the warranty period of the original parts or
ninety (90) days from the date of delivery of any repair, reconditioned, or
replacement thereof, whichever is longer.

 

14.3         Warranty Exclusions. 
The warranty set forth above excludes and does not apply to defects (i) caused
through not fault of the Encision during shipment to or from Intuitive, (ii) caused
by modifications or alterations made to Products by Intuitive or a third party
not approved by Encision, (iii) caused by unauthorized repair or
maintenance of Products by Intuitive or any third party not approved by
Encision, (iv) caused by the failure of Intuitive to comply with the
return procedures specified herein, or (v) damaged by excessive current,
temperature, physical stress or other deviation from the applicable
environmental specifications.

 

14.4         Warranty Procedures. 
Intuitive shall request authorization from Encision prior to the return
of each defective Product for repair or replacement by Encision.  Upon such request, Encision shall provide the
address of the facility to which such Product shall be returned, together with
Return Material Authorization (RMA) tracer number.

 

14.5         Warranty Disclaimer. 
THE EXPRESS WARRANTY SET FORTH IN THIS AGREEMENT ARE IN LIEU OF ALL
OTHER GUARANTIES AND WARRANTIES OF ANY KIND, WHETHER EXPRESS, IMPLIED OR
STATUTORY, INCLUDING WITHOUT LIMITATION, MERCHANTABILITY, FITNESS FOR
PARTICULAR PURPOSE, NON-INFRINGEMENT. 
ALL SUCH OTHER WARRANTIES ARE HEREBY DISCLAIMED AND EXCLUDED BY
ENCISION.

 

14.6         Mutual Representations and Warranties.  Each party represents and warrants that it
has full right, power, and authority to enter into this Agreement and to
perform its obligations and duties under this Agreement, and that the
performance of such obligations and duties does not and will not conflict with
or result in a breach of any other agreements of such party or any judgment,
order, or decree by which such party is bound.

 

14.7         Specific Disclaimer. 
Other than as specifically set forth herein, nothing in this Agreement
will be construed as giving rise to: (a) a warranty or representation by
Encision as to the validity, enforceability, or scope of the Licensed Patents; (b) a
warranty or representation that using, making, selling, or importing a Licensed
Product as permitted under this Agreement will not infringe,

 

11

 

directly or indirectly,
any patent or other intellectual property right of a third party under the laws
of the United States or any other jurisdiction; (c) an obligation by
Encision to file, register, prosecute, maintain, or enforce any Licensed
Patent; or (d) an obligation by Encision to deliver any technical or
proprietary information or know-how or to provide any training or technical
support other than as provided for in Section 5.3 or as mutually agreed
upon by the Parties.

 

15.           Intellectual Property and License.

 

15.1         Encision hereby grants Intuitive:

 

(i)    a non-exclusive (without the right to sub-license),
royalty-free, worldwide license under Encision’s Intellectual Property to, use,
promote, offer for sale, sell, import, and export Products within the Field,
and

 

(ii)   a non-exclusive (without the right to sub-license),
royalty-free, worldwide, perpetual license under Licensed Patents to develop,
use, make, have made, promote, offer for sale, sell, import, export, and
otherwise commercialize Intuitive Instruments within the Field.

 

15.2       Encision hereby agrees not to use any technology or
intellectual property rights that are owned or controlled by any third party in
the course of manufacturing the Product, unless Encision has the right to use
such technology and/or intellectual property in the manufacture of the Product
and Encision notifies Intuitive of such intended use in advance and Intuitive
approves such use. Any additional terms or licenses required for the use of
such intellectual property shall be provided to Intuitive for review and
approval in writing, before acceptance of such Product

 

15.3         Upon the execution of this Agreement, Encision shall
provide to Intuitive the drawings, specifications and CAD drawings for the AEM®
connector so that Intuitive can configure the Intuitive Instruments to be
compatible and interconnect with Encision’s cord.

 

15.4         Ownership of Intellectual Property.

 

15.4.1      Intuitive Inventions shall be owned exclusively by
Intuitive.

 

15.4.2      Encision Inventions shall be owned exclusively by
Encision, with Intuitive having a non-exclusive, royalty free license to the
Encision Inventions solely within the Field.

 

15.4.3      Joint Inventions shall be owned by Intuitive with
Encision having an exclusive, royalty free license under the Joint Inventions
outside of the Field.

 

15.5         Except as set forth in this Section 15, nothing
in this Agreement is intended to convey any rights to any intellectual property
owned by either party as of the Effective Date or developed during the term of
the Agreement.

 

15.6         Restrictions on Use.  Intuitive
acknowledges that the Encision Intellectual Property including any structure,
organization, manufacturing methods, and Source Code, contain valuable trade
secrets of Encision.  Accordingly, other
than in connection with the Purpose and Intuitive’s rights and obligations
under the terms of this Agreement, Intuitive agrees not to (a) modify,
adapt, alter, translate, or create derivative works from the Encision
Intellectual Property; (b) sublicense, lease, rent, loan, or otherwise
transfer the Encision Intellectual Property to any third party, (c) reverse
engineer, decompile, or disassemble the Encision Intellectual Property; or (d) otherwise
use or copy the Encision Intellectual Property except as expressly allowed
under the terms of this Agreement.

 

15.7         Patent Marking.  Intuitive
shall mark all Intuitive Instrument packages using Licensed Patents in
accordance with 35 U.S.C. § 287 with the number of each of the issued patents
included in the Licensed Patents and indicate that the Product has been made
under a license from Encision.  Intuitive
shall

 

12

 

provide a sample of each
patent marking label to Encision for inspection and approval, which approval
shall not be unreasonably withheld.

 

16.           General Indemnification.

 

16.1         Indemnification by Encision. To the extent allowable by law, Encision
hereby assumes all liability for, and agrees to indemnify, defend and hold
harmless Intuitive and its successors, permitted assigns, agents and employees
from and against, any and all liabilities, losses, damages, claims and expenses
(including attorneys’ fees, expert witness fees, and court costs) to the extent
that they arise from third party claims, actions or demands including without
limitation, claims arising in contract or tort (including negligence), strict
liability or otherwise (collectively, “Claims”) in any way relating to or
arising from (a) Encision’s breach of any of its representations or
warranties or any other obligation hereunder, (b) Encision’s negligence or
willful misconduct, or (c) infringement by Encision’s Product of a third
party intellectual property right; provided that Encision’s indemnification
obligations under this Section 16.1 shall not apply to the extent that
such Claims arise from (i) Intuitive’s negligence or willful misconduct; (ii) Intuitive’s
breach of any of its obligations hereunder; or (iii) Intuitive’s use of
Product outside of the Field.

 

16.2         Indemnification by Intuitive. To the extent allowable by law,
Intuitive hereby assumes all liability for, and agrees to indemnify, defend and
hold harmless Encision and its successors, permitted assigns, agents and
employees from and against, any and all liabilities, losses, damages, claims and
expenses (including attorneys’ fees, expert witness fees, and court costs) to
the extent that they arise from third party claims, actions or demands
including without limitation, claims arising in contract or tort (including
negligence), strict liability or otherwise (collectively, “Claims”) in any way
relating to or arising from (a) Intuitive’s breach of any of its
representations or warranties or any other obligation hereunder, (b) Intuitive’s
negligence or willful misconduct, or (c) any activities of Intuitive
beyond or outside of the Purpose; provided that Intuitive’s indemnification
obligations under this Section 16.2 shall not apply to the extent that
such Claims arise from Encision’s negligence or willful misconduct or breach of
any of its obligations hereunder.

 

16.3         Claim Notification Requirement.  An indemnifying party will use reasonable
efforts to notify the indemnified party promptly of the claim as soon as the
indemnified party becomes aware of it. 
However, an indemnified party’s failure to provide such notice or delay
in providing such notice will relieve the indemnifying party of its obligations
under this Section only if and to the extent that such delay or failure
materially prejudices the indemnifying party’s ability to defend such claim.
The indemnified party will have the right to participate in the defense of such
claim with its own counsel and at its own expense.  The indemnified party will cooperate with the
indemnifying party, at indemnifying party’s reasonable request and at the indemnifying
party’s expense, in the defense of such claim. 
No settlement of a claim will be binding on indemnified party without
the indemnified party’s prior written consent, which shall not be unreasonably
withheld or delayed.

 

17.           Limitation of Liability.

 

17.1         EXCEPT FOR THE BREACH OF THE CONFIDENTIALITY
OBLIGATIONS SET FORTH IN SECTION 23 AND THE INDEMNITY OBLIGATIONS OF SECTION 16,
IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY, OR OTHERWISE, SHALL EITHER PARTY OR
ITS AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY
INCIDENTAL DAMAGES, EXEMPLARY DAMAGES, PUNITIVE DAMAGES, INDIRECT OR
CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS), OR LOSS OF BUSINESS,
RECORDS, DATA, USE, REVENUE, OR ANTICIPATED SAVINGS, OR OTHER ECONOMIC LOSS,
WHETHER OR NOT THE PARTY OR ITS AFFILIATES WERE INFORMED OR AWARE OF THE
POSSIBILITY OF SUCH DAMAGES OR LOSS.  SOME JURISDICTIONS DO NOT ALLOW THE
LIMITATION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES; IN SUCH

 

13

 

JURISDICTIONS, THE
FOREGOING LIMITATION OF LIABILITY SHALL APPLY ONLY TO THE EXTENT PERMITTED BY
LAW.

 

18.           Governing Law/Jurisdiction.

 

18.1         The laws of the State of California shall govern the
provisions of this Agreement without reference to its conflict of law
provisions. The parties agree that the United Nations Convention on Contracts
for the International Sale of Goods shall not apply to this Agreement. Each
party hereby consents and submits to the exclusive jurisdiction of the State
and Federal courts sitting in Santa Clara County, California, and hereby agrees
that venue of any dispute which arises hereunder is proper, appropriate and
acceptable in these state and federal courts. The prevailing party to any legal
action shall be entitled to reimbursement of all reasonable costs and expenses
(including attorneys’ fees) incurred to defend such claim.

 

19.           Term and Termination.

 

19.1         Term.   This Agreement will commence upon the
Effective Date of this Agreement and shall continue in effect for a period of
five (5) years (the Initial Term), unless sooner terminated as specified
in this Section 19. Thereafter, this Agreement shall automatically renew
for additional two (2) year periods (each a “Renewal Term”), unless one
party notifies the other in writing at least six (6) months before the
expiration of its intent not to renew the Agreement.

 

19.2         Termination.  Either party may terminate this Agreement
upon written notice to the other party if (i) a party materially breaches
this Agreement and does not cure the breach within thirty (30) days of the date
of written notice of such breach;, (ii) a
party becomes insolvent or seeks protection under any bankruptcy, receivership,
trust deed, creditors arrangement, or comparable proceeding or if any such
proceeding is instituted against a party and not dismissed within ninety (90)
days; (iii) an assignment or
attempted assignment in violation of the assignment provision of this
Agreement; or (iv) Encision is otherwise unable or unwilling to supply
Products to Intuitive pursuant to the terms of this Agreement.

 

19.3         Effect of
Termination-Last Time Buy Order. 
Upon the expiration or termination of this Agreement for any reason,
Intuitive shall have the right to, within sixty (60) days from the date of
expiration or termination, place a Last Time Buy Order with Encision for
Products in quantities not more than 2 times the last nonbinding 12 month
forecast Intuitive provided to Encision pursuant to Section 3.1 (“Last
Time Buy Quantity”) with a delivery schedule generally consistent with the
previously agreed upon lead times, delivery dates and other delivery
obligations.  In the event of termination
subject to Section 19.2 or in the event Encision is otherwise unable or
unwilling to fulfill the Last Time Buy Order, then Encision shall transfer to
Intuitive those portions of Encision’s Intellectual Property necessary to
manufacture or have manufactured the Product to ensure that Intuitive gets
continued supply of Product up to the Last Time Buy Quantity or until
Encision is able to resume manufacturing Products for Intuitive, which shall
be determined at Intuitive’s reasonable and good faith discretion and
in accordance with Encision’s prior supply obligations under this
Agreement.  In connection with such
transfer of Encision’s Intellectual Property, Encision shall and hereby grants
Intuitive a limited, non-exclusive license to such Intellectual Property for
the sole purpose of enabling Intuitive to make or have made the Products.  If the Parties subsequently agree to allow
Encision to resume manufacturing and supply, this Agreement shall be deemed
reinstated and thereafter in full force and effect, without any further action
required by either Intuitive or Encision. Upon any such reinstatement, any and
all licenses and other rights granted under this Section 19.3 shall
immediately terminate and Intuitive shall return and/or destroy all copies of
Encision’s Intellectual Property transferred under the terms of this
Section.    Any such expiration or
termination shall not constitute a cancellation of open Scheduling Agreements
or purchase orders.

 

19.4         Termination of this Agreement shall not limit either
party from pursuing other remedies available to it, including injunctive
relief, nor shall such termination relieve Encision of its obligation to
immediately deliver to Intuitive any Products owed by Encision under any
Scheduling Agreement or

 

14

 

purchase order, order
form or invoice, minus any amounts paid or payments, deposits and installments
made by Intuitive, or in transit, prior to the date of termination.

 

19.5         Upon the expiration or termination of this Agreement
for any reason, and subject to the provisions in Sections 19.3 and 15.1(ii),
all licenses granted under this Agreement shall be revoked and Intuitive shall
cease all further use, manufacture, sale, offer for sale, exportation or
importation of the Products and the Encision Intellectual Property.  Nothing in this section shall be construed to
prohibit Intuitive from using, selling, offering for sale, importing or
exporting any Products supplied under the terms of this Agreement prior to any
termination or supplied pursuant to Section 19.3.

 

20.          Survival.

 

20.1         Each party’s rights and obligations under Sections 4.5
(Price), Section 4.7 (Payment), 6.3 (Obsolescence), 14 (Representations
and Warranties), 15.1(ii), 15.4 (Ownership of Intellectual Property), 16
(General Indemnification.), 17 (Limitation of Liability) 18 (Governing
Law/Jurisdiction), 19 (Term and Termination), 22 (Compliance with Law), 23
(Confidentiality/Nondisclosure), 24 (Assignment.), 25 (General), and any
provision which by its nature should survive, shall survive termination of this
Agreement.

 

21.           Force Majeure.

 

21.1         Neither party shall be held responsible for any delay
or failure in performance of any part of this Agreement to the extent such
delay or failure is caused by fire, flood, earthquake, explosion, war, embargo,
government requirement, civil or military authority, act of nature, riot,
strike, hostilities (including war, whether declared or not) or other similar
cause beyond its control and without the fault or negligence of the delayed or
non-performing party.

 

22.           Compliance with Law.

 

22.1         In the performance of this Agreement, Encision shall
at all times comply with all applicable governmental laws, statutes,
ordinances, rules, regulations, orders, and other requirements, including,
without limitation, the maintenance of a quality system and DHR (Device History
Records) as required by 21 CFR 820 and other such governmental requirements
applicable to environmental protection, wages, hours, equal employment
opportunity, nondiscrimination, health, safety, working conditions, export
control regulations, customs laws, and transportation regulations.  In the event that Intuitive’s assistance is
necessary to achieve such compliance, Encision shall promptly notify
Intuitive.  Upon Intuitive’s request,
Encision shall provide Intuitive with documentation demonstrating Encision’s
compliance with such government’s requirements. 
After reasonable notice and under reasonable conditions, Intuitive shall
have the right to inspect and copy any of Encision’s records regarding such
compliance.

 

23.           Confidentiality/Nondisclosure

 

23.1         During the term of this Agreement the parties may
receive and otherwise be exposed to confidential and proprietary information
relating to each other’s business practices, strategies, and technologies. Such
confidential and proprietary information may include but not be limited to
confidential and proprietary information supplied with the legend “Confidential
and Proprietary,” or equivalent, including information relating to products,
processes, know-how, designs, drawings, clinical data, test data, formulas,
source and object code, methods, samples, developmental or experimental work,
improvements, discoveries, plans for research, new products, forecasts,
Scheduling Agreements, purchase orders, specifications relating to Components
and Products, financial, customer or other information, normally considered to
be confidential, manufacturing, and all derivatives, improvements and
enhancements to any of the above which are created or developed under this
Agreement and information of third parties (collectively referred to as “Proprietary
Information”).

 

15

 

23.2         Each party shall maintain all Proprietary Information
in trust and confidence and shall not disclose any Proprietary Information to
any third party or use any Proprietary Information for any unauthorized
purpose. Each party may use such Proprietary Information only to the extent
required to accomplish the purposes of this Agreement.  Proprietary Information shall not be
reproduced in any form except as required to accomplish the purposes of this
Agreement.

 

23.3         All Proprietary Information (including all copies
thereof) shall remain the property of the disclosing party and shall be
returned to the disclosing party after the receiving party’s need for it has
expired, or upon request of the disclosing party, and in any event, upon
completion or termination of this Agreement.

 

23.4         The termination of this Agreement shall not relieve
either party of the obligations imposed by Paragraphs 23.1 through 23.3 of this
Agreement with respect to Proprietary Information. Each party shall agree to
hold information confidential for a period of five (5) years after the
date of last disclosure or five (5) years after the termination of this
Agreement, whichever is shorter.

 

23.5         The parties shall not disclose the existence of this
Agreement or its terms to others, except as may be necessary to enforce the
terms of this Agreement, or as such party will deem necessary to comply with
any disclosure or legal requirement.

 

23.6         Each party agrees not to disclose to the other party
the confidential or proprietary information of others.

 

23.7         Notwithstanding the foregoing, Proprietary Information
shall not include any information that:

 

(a)           becomes generally available to the public other than
as a result of a disclosure by the receiving party;

 

(b)           was available to the receiving party on a
non-confidential basis prior to the disclosure;

 

(c)           becomes available to the receiving party on a
non-confidential basis from a source other than the disclosing party or its
agents, advisors, or representatives which such source is entitled, to the best
of the receiving party’s knowledge, to make the disclosure; or

 

(d)           is independently developed by employees of the
receiving party without reference to or use of such Proprietary Information.

 

23.8         Publicity.  Neither party
shall publish or submit for publication any document or press release, whether
in written, electronic or other form, nor make any public announcement or
presentation that discloses information about the existence or terms of this
Agreement or transactions thereof, without the other party’s prior written
consent.  Such consent from Intuitive
shall not be unreasonably withheld.

 

24.           Assignment.

 

24.1         Encision shall not assign
any of its rights or obligations hereunder in whole or in part, without the
prior written consent of Intuitive (which consent shall not be unreasonably
withheld), whether or not as incident to a merger, consolidation, reorganization
or acquisition of stock or assets or a similar transaction affecting all or
substantially all of the assets or voting control of the Encision. Any
attempted assignment in violation of this provision shall be null, void and
without legal effect.

 

16

 

25.           General.

 

25.1         Waivers. No waiver of any right by either party
under this Agreement shall be of any effect unless such waiver is express, in
writing and signed by the waiving party. Any purported waiver not consistent
with the foregoing shall be void.

 

25.2         Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be invalid under any applicable
statute, rule or law, the parties agree that such invalidity shall not affect
the validity of the remaining provisions of the Agreement, and further agree to
substitute for the invalid provision a valid provision that most closely
approximates the intent and economic effect of the invalid provision.

 

25.3         Headings. Headings used in this Agreement are provided for
convenience only, and shall not in any way affect the meaning or interpretation
hereof.

 

25.4         Notices. Any notices given under this Agreement must be in
writing and shall be deemed given and received five (5) days after the
date of mailing, one (1) day after dispatch by overnight courier service,
or upon receipt if by hand delivery. Any notices pursuant to this Agreement
shall be sent to Intuitive or Encision at the addresses as set forth below.
Each party may change its address for receipt of notices by giving the other
party notice of the new address.

 

(a)   If to Encision, to:

 

Encision Inc.

6797 Winchester
Circle

Boulder, CO 80301

Attention: Jack
Serino, President & CEO

Facsimile
No.:  303-339-6939

E-mail:
jserino@encision.com

 

With a required
copy to:

 

Neugeboren O’Dowd
PC

1227 Spruce St., Suite 200

Boulder, CO 80302

Attention:  Craig Neugeboren, Esq.

Facsimile
No.:  720-536-4910

E-mail:  craig@neugeborenlaw.com

 

(b)   If to Intuitive, for operational issues
related to the contract:

Intuitive Surgical, Inc.

1266 Kifer Road

Building 101

Sunnyvale,
California 94086-5304

Attention:
Materials Management

Facsimile
No.:  408-523-1390

E-mail: [*]

 

with required
copies to each of the following:

 

Office of General
Counsel – Legal Department

 

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

 

Each party shall promptly
notify the other of a replacement of the contact person responsible for prompt
transmission of information in order to comply with Good Quality Practice (GQP)
Ordinance. (Only for finished goods suppliers shipping to Japan).

 

17

 

25.5         Insurance.   Encision shall
obtain and maintain throughout the term of the Agreement, Commercial General
Liability Insurance including coverage’s for contractual liability, product
liability, personal injury and bodily injury in an amount not less than
$1,000,000 per occurrence/$3,000,000 aggregate. Encision shall furnish
Intuitive with a certificate of insurance evidencing the coverage’s as outlined
above upon execution of this Agreement. Encision shall carry Workers’
Compensation Insurance as required by California State Law.

 

25.6         Relationship of
the Parties. The
parties understand and agree that their relationship hereunder is one of
contract and that they are not and shall not be construed as partners, joint
ventures, or agent and principal. In no event shall either party be authorized
to act for or on behalf of the other party.

 

25.7         Costs. Except as otherwise specifically
provided herein or as agreed to by the Parties, each party shall bear its own
costs and expenses incurred in connection with the performance of its
obligations hereunder.

 

25.8         Taxes. Any taxes, levies or similar
governmental charges, now in force or enacted in the future, however,
designated (“Taxes”) including related penalties and interest, imposed by any
governmental authority on or measured by the activities described herein shall
be paid by Intuitive in addition to the prices invoiced. Intuitive shall pay,
or reimburse Encision for the payment of all Taxes including related penalties
and interest, except Taxes for which Intuitive has provided a certificate of
exemption or resale acceptable to both Encision and the appropriate taxing
authority.

 

25.9         Counterparts. This Agreement may be executed in
multiple copies, each of which shall be deemed an original, and all of which taken together will constitute one
single agreement.

 

25.10       Specific Performance.  Encision
acknowledges and agrees that any breach of certain of Encision’s obligations
under this Agreement, including without limitation Encision’s obligations under
Sections 6.2, 6.3, 19.3 and 24 herein, will cause irreparable harm to Intuitive
for which monetary damages will not be adequate remedy.  Encision therefore agrees that Intuitive
shall be entitled (without limitation of any other rights or remedies otherwise
available to Intuitive) to specific performance without posting a bond.

 

25.11       Entire
Agreement; Amendment.  This Agreement sets forth the
entire agreement between Intuitive and Encision with respect to the subject
matter hereof and supersedes any prior agreements, understandings promises and
representations made orally or in writing by either party, to the other party,
concerning the subject matter herein, pricing and the applicable terms.  Any terms or conditions
contained in any Scheduling Agreement or purchase order, acknowledgement,
invoice or other similar forms of the parties which are different from,
inconsistent with or in addition to  the
terms and conditions of this Agreement shall be void and of no effect, unless otherwise mutually agreed to in writing
by the parties.  This Agreement may be amended only in
writing, signed by both parties.  Any
purported oral modification intended to amend the terms and conditions of this
Agreement shall be void.

 

Upon signing below he/she
acknowledges that they have read, understand and agree to be bound by the terms
and conditions of this Agreement.

 

In
Witness whereof,
the undersigned represents that he/she has the authority to bind his or her
party to this Agreement.

 

18

 

	
  ACCEPTED
  BY:

  	
   

  	
  ACCEPTED
  BY:

  
	
   

  	
   

  	
   

  
	
  INTUITIVE
  SURGICAL, INC.

  	
   

  	
  ENCISION,
  INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  

 

19

 

EXHIBIT A

 

PRODUCT
LIST/PRICING

 

	
  Product description

  	
   

  	
  Encision

  Part number

  	
   

  	
  Intuitive

  Part Number

  	
   

  	
  $ Price (per

  Unit)

  	
   

  	
  CE and 510K

  approvals

  responsibility of

  Encision or

  Intuitive.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EM2+
  Active Electrode Monitor

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [*

  	
  ]

  	
  Encision

  	
   

  
	
  EM2+A
  Active Electrode Monitor

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [*

  	
  ]

  	
  Encision

  	
   

  
	
  EM2+AHF
  Active Electrode Monitor

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [*

  	
  ]

  	
  Encision

  	
   

  
	
  EM2HF
  Active Electrode Monitor

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [*

  	
  ]

  	
  Encision

  	
   

  
	
  EM2AB
  Active Electrode Monitor

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [*

  	
  ]

  	
  Encision

  	
   

  
	
  EM2+E
  Active Electrode Monitor

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [*

  	
  ]

  	
  Encision

  	
   

  
	
  ES9005
  Active Adapter

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [*

  	
  ]

  	
  Encision

  	
   

  
	
  12
  ft Cord, to connect AEM® to Intuitive instrument

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [*

  	
  ]

  	
  Encision

  	
   

  

 

20

 

EXHIBIT B

 

SPECIFICATIONS

 

·      The AEM monitor must function as long as
the total capacitance of cord and instrument is no more than [*] pF.

·      The cord shall be [*] ft and must
have capacitance of no more than than [*]  pF.

·      Measurements will be made at [*] KHz.

·      Shall have a certified or validated
[*]-year shelf life.

 

Products shall comply
with the standards listed below as well as bear the third party certification
marks as specified:

 

Standards and
Agency Marks

 

	
  #

  	
   

  	
  Standard

  	
   

  	
  Description

  	
   

  	
  Test Agency Report / Marks

  
	
  1

  	
   

  	
  IEC 60601-1:1988

  (2nd Edition)

  	
   

  	
  Medical Electrical
  Equipment, Part 1: General Requirements for Safety

  	
   

  	
  Third party CB Test
  report and Certificate – To be issued by Underwriters Laboratories (UL)

  (For CE marked product only)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  UL60601-1 (2003)

  Amendments: A1 (6/2003), A2 (4/2006)

  	
   

  	
  Medical Electrical
  Equipment, Part 1: General Requirements for Safety

  	
   

  	
  UL Classification or
  equivalent

  Nationally
  Recognized Test Laboratory (NRTL) Mark (ETL mark scheduled for [*], test
  report to include item 4)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  CAN/CSA —C22.2
  No. 601.1B-90  

  (R2006)

  	
   

  	
  Medical Electrical
  Equipment, Part 1: General Requirements for Safety

  	
   

  	
  UL Classification for
  Canada

  (C-UL Mark) or equivalent mark accepted by the Standards Council of Canada
  (SCC)  

  cETL mark (subject to
  availability of [*] labeling) not currently scheduled.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  IEC 60601-2-2:2006

  (4th edition)

  Required for EU by
  10/01/09

  	
   

  	
  Medical electrical
  equipment - Part 2-2: Particular requirements for the safety of high
  frequency surgical equipment

  	
   

  	
  CB Test report and
  Certificate – per #1 above

  (For CE marked product only)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  IEC 60601-1-2:2007

  (3rd Edition)

  	
   

  	
  Medical Electrical
  Equipment, Part 1: General Requirements for Safety, 2. Collateral
  Standard. Electromagnetic compatibility – Requirements and tests.

  	
   

  	
  Third party test report
  by EMC lab accredited by both NVLAP and member of the International
  Accreditation Foundation (IAF) or EC-ACB (European Commission Association Of
  Competent Bodies)

  

 

In addition to the
standards listed in above, it is anticipated that compliance with the 3rd edition of IEC
60601-1 (IEC 60601-1:2005) will be completed by whenever such compliance is
required of Intuitive, or when it becomes mandatory for CE marking, whichever
comes first.  Encision shall ensure
compliance with IEC 60601-1:2005 and associated US and Canadian national
standards by when such compliance is applicable to Intuitive.

 

21

 

Encision shall conduct
all appropriate testing and labeling to ensure compatibility with Intuitive
instruments by December 31, 2009.

 

Any changes to these
specifications/requirements shall be by mutual written agreement.

 

22Exhibit 10.1

 

Memorandum of Terms of Settlement

 

1.             Whitney Information Network, Inc.,
WIN CR 11 Trust, and their respective affiliates, successors and assigns
(collectively, “WIN”) and Russell A. Whitney (“Whitney”), on the one hand, and
M. Barry Strudwick (“Strudwick”), Susan Weiss and Car] Weiss (Susan and Carl
Weiss collectively referred to as “Weiss”), on the other hand, agree to enter
into a binding and enforceable settlement agreement on the record in open Court
on or before Monday, September 14, 2009, or as soon after as the Court
will permit.

 

2.             WIN will pay to Strudwick and Weiss a
total principal amount of $3.8 million as follows:

 

a.             $600,000 no later
than September 30, 2009;

 

b.             $200,000 no later
than October 25, 2009;

 

c.             $200,000 no later than
November 25, 2009;

 

d.             5200,000 no later
than December 25, 2009;

 

e.             WIN will enter into a
commercially reasonable promissory note (“First Note”) in the amount of $2.3
million payable in equal quarterly payments payable over 3 years with payments
commencing on January 15, 2010 and occurring on the 15th day of each
succeeding quarter until paid over 3 years. 
Quarterly payments of simple interest will be payable on outstanding
principal at the rate of 6% per annum.  Late
payments will accrue interest at the rate of 8% per annum.  Payments will be in default if not made
within ten (10) days of the due date. 
In the event of default, the total unpaid First Note amount becomes
immediately due and payable.  The First
Note will be governed by the laws of New York. 
The First Note will be secured by any interests of WIN, Whitney and any
WIN and Whitney related entities, directly or indirectly, in MDM and the Hotel
(see paragraph 5 below) and WIN’s interest in Tranquility Bay (see paragraph 6
below).  WIN will use commercially
reasonably efforts to substitute the aforementioned security with a Letter of
Credit from a United States bank in the amount of any then unpaid balance on
the First Note, and will take such commercially reasonably steps as necessary
on a quarterly basis to obtain such Letter of Credit.  WIN may prepay the First Note, in whole or in
part, at any time and from time to time. 
The parties agree to the jurisdiction of Judge Tomlinson to enforce the
First Note and to enter a judgment thereon if there is a default.

 

f.              WIN will enter into
a second commercially reasonable promissory note (“Second Note”) in the amount
of $300,000.  The Second Note is payable
over four years, of which WIN will pay interest only in years one through
three, and principal and interest in year four. 
WIN’s payments will be payable in equal quarterly payments with payments
commencing on January 15, 2010 and occurring on the 15th day of each
succeeding quarter.  The Second Note will
accrue simple interest at the rate of 8% per annum.  Payments will be in default if

 

 

not made within ten (10) days
of the due date.  In the event of
default, the total unpaid Second Note amount becomes immediately due and
payable.  The Second Note will be
governed by the laws of New York.  The
Second Note will be secured by any interests of WIN, Whitney and any WIN and
Whitney related entities, directly or indirectly, in MDM and the Hotel (see
paragraph 5 below) and WIN’s interest in Tranquility Bay (see paragraph 6
below).  WIN will use commercially
reasonably efforts to substitute the aforementioned security with a Letter of
Credit from a United States bank in the amount of any then unpaid balance on
the Second Note, and will take such commercially reasonably steps as necessary
on a quarterly basis to obtain such Letter of Credit.  WIN may prepay the Second Note, in whole or
in part, at any time and from time to time. 
The parties agree to the jurisdiction of Judge Tomlinson to enforce the
Second Note and to enter a judgment thereon if there is a default.

 

g.             In the event that WIN
pays in full the First Note and the $1,200,000 (pursuant to subparagraphs 2(a) thru
2(d)) on or before 12 months after the date this agreement is placed on the
record (see paragraph 1 above), the principal of the Second Note will be
reduced by $150,000.

 

h.             All WIN payments will
be made payable to the Law Office of Arnold M. 
Weiner, which will receive them on behalf of Strudwick and Weiss.

 

3.             The parties (for themselves, their agents,
entities, and business associates) mutually release any and all claims they may
have against one another, their business associates, entities and attorneys
except that: (i) all claims of WIN against Whitney and Whitney against WIN
are preserved, and (ii) all claims of WIN and Whitney against Caputo, CPR,
Rothstein, RRA, Rothstein Rosenfeldt Adler Consulting Group, and Roger Stone
are preserved.  WIN and Whitney also
recognize that they are releasing any and all claims they may have against
William Ramirez and any of Strudwick’s and Weiss’s attorneys (including Garcia,
etc).  Excluding claims as preserved in (i) and
(ii) of this paragraph, all released persons and entities will sign mutual
global releases.

 

4.             The parties will cooperate in dismissing
all pending litigation between and among them. 
The parties will also cooperate as reasonably necessary to request that
any criminal or quasi-criminal prosecutions involving any of the parties and
this litigation be terminated.  The
parties intend that this settlement end all litigation between and among WIN
and Whitney, on the one hand, and Strudwick and Weiss, on the other hand,
including each party’s respective business associates and entities, and the
parties are unaware of any contemplated additional claims and litigation other
than potential claims as referenced in subparagraphs 3(i) and 3(ii) above.

 

5.             Within 3 business days after the agreement
is placed on the record, Weiss will place into escrow (Law Offices of Arnold
Weiner) her shares in MDM and the Hotel. 
Upon receipt by Strudwick and Weiss of the first $1,200,000 in payments
(pursuant to subparagraphs 2(a) through (d) above), the escrow agent

 

 

will surrender to WIN Weiss’s
shares in Monterey Del Mar and the Hotel. 
The parties will fully cooperate and take steps reasonably necessary to effectuate
the surrender of such shares_ Weiss also agrees to withdraw in writing any
claim of right to manage MDM and the Hotel, and agrees to relinquish any claim
to being an officer or director of MDM or the Hotel and to provide further
assurances as may be reasonably necessary to facilitate the transfer of MDM and
the Hotel.  Weiss further recognizes that
she will not receive any payment for her shares other than the payments as
provided herein to Strudwick and Weiss.

 

a.             All proceeds from the
sale of MDM and the Hotel payable to WIN, Whitney and any WIN and Whitney
related entities, directly or indirectly, whether for equity or debt., will be
directly payable to Strudwick and Weiss toward payment of any unpaid First Note
and Second Note amounts to either pay off the First Note and Second Note in
full or be applied to the principal so that the First Note and Second Note are
paid off sooner.

 

6.             The Note will also be secured by WIN’s
interest in Tranquility Bay in Lee County, Florida.  In the event of default by WIN on the First
Note or Second Note, Strudwick and Weiss may foreclose on WIN’s interest in the
Tranquility Bay.  WIN may substitute as
security other comparable or better security, such as a Letter of Credit from a
United States bank or interest in real property valued at equal or greater
value.

 

7.             This settlement will be reduced to writing
but this settlement is not contingent upon being so reduced to writing, The
writing will include neutral recitals without admissions by any party.  The parties agree that any disputes
pertaining to this settlement and its enforcement shall be decided by Judge
Tomlinson.  In the event any terms are not spelled out herein and the parties cannot
agree, the parties agree to submit such issues to Judge Tomlinson for her
determination, which determination shall be binding on the parties, final and
not subject to appeal.  All parties to
this agreement consent to Judge Tomlinson exercising such jurisdiction.

 

 

	
  /s/ K. Stewart Evans, Jr.

  	
   

  	
  /s/ Arnold M. Weiner

  
	
  K. Stewart Evans, Jr. as counsel to

  	
   

  	
  Arnold M. Weiner, as counsel to

  
	
  Whitney Information Network, Inc.

  	
   

  	
  M. Barry Strudwick

  
	
  and WIN CRII Trust

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ David J. Shuster

  	
   

  	
  /s/ Paul Aloe

  
	
  David J. Shuster, as counsel to

  	
   

  	
  Paul Aloe, as counsel to Susan Weiss 

  
	
  Russell A. Whitney

  	
   

  	
  and Carl Weiss

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