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.

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.

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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

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 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

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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:

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

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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 Intu