<PAGE>
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 1998
                                                      REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------
 
                                    FORM S-1
 
                             REGISTRATION STATEMENT
 
                                     UNDER
 
                           THE SECURITIES ACT OF 1933
                             ---------------------
 
                            INTUITIVE SURGICAL, INC.
 
             (Exact name of registrant as specified in its charter)
 

<TABLE>
<S>                                   <C>                                   <C>
              DELAWARE                                3842                               77-0416458
  (State or other jurisdiction of         (Primary Standard Industrial                (I.R.S. Employer
   incorporation or organization)         Classification Code Number)              Identification Number)
</TABLE>

 
                              -------------------
 
                            1340 W. MIDDLEFIELD ROAD
                        MOUNTAIN VIEW, CALIFORNIA 94043
                                 (650) 237-7000
 
  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)
                             ---------------------
 
                                LONNIE M. SMITH
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                            INTUITIVE SURGICAL, INC.
                            1340 W. MIDDLEFIELD ROAD
                        MOUNTAIN VIEW, CALIFORNIA 94043
                                 (650) 237-7000
 
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)
                             ---------------------
 
                                   COPIES TO:
 
       ALAN C. MENDELSON, ESQ.                    JAY K. HACHIGIAN, ESQ.
       PATRICK A. POHLEN, ESQ.                     RENEE F. LANAM, ESQ.
          Cooley Godward LLP                     Gunderson Dettmer Stough
        Five Palo Alto Square                     Villeneuve Franklin &
         3000 El Camino Real                          Hachigian, LLP
     Palo Alto, California 94306                  155 Constitution Drive
            (650) 843-5000                     Menlo Park, California 94025
                                                      (650) 321-2400
 
                              -------------------
 
                APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
                              -------------------
 
    If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
 
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
 
    If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
                             ---------------------
 

                        CALCULATION OF REGISTRATION FEE
 

<TABLE>
<CAPTION>
                                                                                  PROPOSED MAXIMUM
                                                                                 AGGREGATE OFFERING            AMOUNT OF
                    TITLE OF SECURITIES TO BE REGISTERED                              PRICE(1)              REGISTRATION FEE
<S>                                                                           <C>                       <C>
Common Stock, $.001 par value...............................................        $50,000,000                 $14,750
</TABLE>

 
(1) Estimated solely for the purpose of computing the amount of the registration
    fee in accordance with Rule 457 under the Securities Act of 1933.
                              -------------------
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
 
ISSUED              , 1998
 
                                          SHARES
 
                                [INTUITIVE LOGO]
 
                                  COMMON STOCK
                               -----------------
 
ALL OF THE        SHARES OF COMMON STOCK ARE BEING SOLD BY INTUITIVE SURGICAL,
INC. (THE "COMPANY"). PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC
     MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED
     THAT THE INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE BETWEEN
        $       AND $       . SEE "UNDERWRITERS" FOR A DISCUSSION OF THE
        FACTORS TO               BE CONSIDERED IN DETERMINING THE
                         INITIAL PUBLIC OFFERING PRICE.
                            ------------------------
 
        APPLICATION HAS BEEN MADE TO LIST THE COMMON STOCK FOR QUOTATION
             ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "ISRG."
                            ------------------------
 
        THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
                    BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
                               -----------------
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
  EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
    SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
      PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
       REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
                              -------------------
 
                                PRICE $  A SHARE
                              -------------------
 

<TABLE>
<CAPTION>

                                                                     UNDERWRITING
                                               PRICE TO              DISCOUNTS AND             PROCEEDS TO
                                                PUBLIC              COMMISSIONS(1)             COMPANY(2)
                                         ---------------------  -----------------------  -----------------------
<S>                                      <C>                    <C>                      <C>
PER SHARE..............................            $                       $                        $
TOTAL(3)...............................            $                       $                        $
</TABLE>

 
- ------------
    (1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
       LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
       AMENDED.
    (2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $      .
    (3) THE COMPANY HAS GRANTED TO THE UNDERWRITERS AN OPTION, EXERCISABLE
       WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF
             ADDITIONAL SHARES AT THE PRICE TO PUBLIC LESS UNDERWRITING
       DISCOUNTS AND COMMISSIONS FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF
       ANY. IF THE UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE TOTAL PRICE TO
       PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO COMPANY
       WILL BE $      , $      AND $      , RESPECTIVELY. SEE "UNDERWRITERS."
                            ------------------------
 
    THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY GUNDERSON DETTMER STOUGH VILLENEUVE FRANKLIN & HACHIGIAN, LLP, COUNSEL FOR
THE UNDERWRITERS. IT IS EXPECTED THAT DELIVERY OF THE SHARES WILL BE MADE ON OR
ABOUT             , 1998 AT THE OFFICE OF MORGAN STANLEY & CO. INCORPORATED, NEW
YORK, N.Y., AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
                              -------------------
 
MORGAN STANLEY DEAN WITTER
 
                    BEAR, STEARNS & CO. INC.
 
                                        BT ALEX. BROWN
 
        , 1998

<PAGE>
                             GENERATIONS OF SURGERY
 

<TABLE>
<S>            <C>
 OPEN SURGERY    [Photo of
 SIMPLE &           open
 COMPLEX          surgical
 PROCEDURES     instruments]
  - NATURAL
  MOTIONS
  - WIDE
  RANGE OF
  MOTION
  - HANDS
  INSIDE
  PATIENT
  - PRECISE
  TISSUE
 MANIPULATION
  - LARGE
  INCISION
 
  [Photo of     MINIMALLY
   minimally    INVASIVE
   invasive     SURGERY
  surgical      SIMPLE
 instruments]   PROCEDURES
                 - BACKWARD
                 MOTIONS
                 - LIMITED
                 RANGE OF
                 MOTION
                 - HANDS
                 OUTSIDE
                 PATIENT
                 - IMPRECISE
                 TISSUE
                MANIPULATION
                 - SMALL
                 INCISION
 
                    [Photo
INTUITIVE-TM-    of
 SURGERY         Intuitive's
 SIMPLE &        surgeon
 COMPLEX         console]
 PROCEDURES
  - NATURAL
  MOTIONS
  - WIDE
  RANGE OF
  MOTION
 - MECHANICAL
  WRISTS
  INSIDE
  PATIENT
  - PRECISE
  TISSUE
 MANIPULATION
  - SMALL
  INCISION
</TABLE>

 
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."

<PAGE>
                       INTUITIVE THIRD GENERATION SURGERY
 

<TABLE>
<S>                                                                                                <C>
           [Photo of Intuitive's products in the Company's preclinical procedure room]             With INTUITIVE surgery, surgeons
                                                                                                   operate while seated at a console
                                                                                                    and viewing a 3-D image of the
                                                                                                   surgical field. Their hands rest
                                                                                                       below the display holding
                                                                                                   instrument handles that resemble
                                                                                                     the handles of open surgical
                                                                                                       instruments. Natural hand
                                                                                                   movements made at the console are
                                                                                                        translated into precise
                                                                                                     microsurgical movements using
                                                                                                         instruments that are
                                                                                                    approximately seven millimeters
                                                                                                   in diameter and which incorporate
                                                                                                        real-time natural wrist
                                                                                                    movements. Intuitive's products
                                                                                                    are designed to allow surgeons,
                                                                                                   for the first time, to be able to
                                                                                                      perform surgical procedures
                                                                                                   through small incisions using the
                                                                                                    natural movements and precision
                                                                                                           of open surgery.
                                                                                                    [Photo of Company's instrument]
                                                                                                                  / /
                                                                                                              ACTUAL SIZE
                                 INTUITIVE'S PRODUCTS IN THE COMPANY'S PRECLINICAL PROCEDURE ROOM
 
The Company's products are investigational and, except as set forth in this Prospectus, have not           [INTUITIVE LOGO]
been approved by the FDA for sale in the United States. There can be no assurance that such
approval will ever be obtained. In addition, the Company's products have not been approved by
international regulatory agencies for sale in international markets. See "Risk Factors--Need for
Federal and State Regulatory Clearance or Approval," and "--Lack of International Regulatory
Clearance or Approval."
</TABLE>


<PAGE>
    NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREBY SHALL UNDER ANY
CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
 
                              -------------------
 
    UNTIL       , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
                              -------------------
 
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                   PAGE
                                                 ---------
<S>                                              <C>
Prospectus Summary.............................          4
Risk Factors...................................          7
Use of Proceeds................................         19
Dividend Policy................................         19
Capitalization.................................         20
Dilution.......................................         21
Selected Financial Data........................         22

Management's Discussion and Analysis of
  Financial Condition and Results of
  Operations...................................         23
Business.......................................         27
 
<CAPTION>
                                                   PAGE
                                                 ---------
<S>                                              <C>
Management.....................................         52
Certain Transactions...........................         61
Principal Stockholders.........................         62
Description of Capital Stock...................         64
Shares Eligible for Future Sale................         68
Underwriters...................................         70
Legal Matters..................................         72
Experts........................................         72
Additional Information.........................         72
Index to Financial Statements..................        F-1
</TABLE>

 
                              -------------------
 
    The Company intends to furnish its stockholders with annual reports
containing financial statements
audited by an independent certified public accounting firm and quarterly reports
for the first three quarters of each year containing unaudited financial
information.
 
                              -------------------
 
    INTUITIVE, ENDOWRIST, IMMERSIVE and the Company's logo are trademarks of the
Company. This Prospectus also includes trademarks of companies other than the
Company.
 
                                       3

<PAGE>

                               PROSPECTUS SUMMARY
 
    THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS AND NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET
FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT
OTHERWISE REQUIRES, THE TERMS "INTUITIVE" AND THE "COMPANY" REFER TO INTUITIVE
SURGICAL, INC., A DELAWARE CORPORATION. EXCEPT AS OTHERWISE NOTED HEREIN,
INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION, (II) GIVES EFFECT TO THE CONVERSION OF ALL OUTSTANDING
SHARES OF PREFERRED STOCK OF THE COMPANY INTO SHARES OF COMMON STOCK OF THE
COMPANY, WHICH WILL OCCUR UPON THE CLOSING OF THIS OFFERING, (III) GIVES EFFECT
TO THE FILING, UPON THE CLOSING OF THIS OFFERING, OF AN AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION, AUTHORIZING 10,000,000 SHARES OF UNDESIGNATED
PREFERRED STOCK AND 75,000,000 SHARES OF COMMON STOCK, AND (IV) DOES NOT GIVE
EFFECT TO A   FOR   REVERSE STOCK SPLIT TO BE EFFECTED PRIOR TO THE CLOSING OF
THIS OFFERING.
 

                                  THE COMPANY
 
    Intuitive designs and manufactures proprietary products which it believes
represent a fundamentally new generation of technology for surgery. This new
generation of surgery, INTUITIVE surgery, is believed by the Company to
represent an advance similar in scope to the previous two generations of
surgery--open surgery and minimally invasive ("MIS") surgery. The Company's
technology seamlessly translates the surgeon's natural hand movements on
instrument handles at a console into corresponding micro-movements of
instruments positioned inside the patient through small puncture incisions, or
"ports." Intuitive believes that its technology provides the surgeon with the
range of motion and fine tissue control possible with open surgery, while
simultaneously allowing the surgeon to work through the ports of MIS surgery.
 
    Although open surgery is still commonly performed and is used in almost
every area of the body, the large incisions required create significant trauma
to the patient, resulting in long hospitalization and recovery times, high
hospitalization costs, as well as significant pain and suffering. Over the past
several decades, MIS surgery has reduced trauma to the patient by allowing
surgery through ports rather than large incisions, resulting in shorter recovery
times and reduced hospitalization costs. MIS surgery has been widely adopted in
certain surgical procedures, but it has not been widely adopted for complex
procedures. The Company believes this slow adoption for complex procedures has
occurred because surgeons generally find MIS operative techniques more difficult
to learn and perform and less precise than open surgery for fine tissue
manipulations such as dissecting and suturing. Factors that make MIS techniques
more difficult or less precise include backward instrument movements, restricted
range of motion, magnified hand tremors, exaggerated instrument movements and
poor visualization.
 
    INTUITIVE surgery overcomes many of the limitations of existing MIS surgery
by utilizing a broad technology platform consisting of computer hardware,
software, algorithms, mechanics and optics to perform fine tissue manipulation
through ports in many parts of the body. Using Intuitive's technology, surgeons
perform surgical procedures while seated comfortably at a console viewing a 3-D
image of the surgical field. The surgeon's hands grasp the instrument handles
below the display in their normal orientation with respect to the surgeon's
eyes, and the Company's technology seamlessly translates these movements into
precise real-time microsurgical movements of electromechanical arms and
instruments inside the patient. The Company's technology is also designed to
give surgeons the perception that their hands are inside the patient, directly
holding instruments--even though their hands are outside--and to give surgeons
the perception that the surgical field is being directly visualized instead of
being viewed through an endoscope.
 
                                       4

<PAGE>
    An important advantage of the Company's technology is that surgeons can
learn to manipulate Intuitive's instruments with only a few minutes of training,
allowing surgeons to focus on the clinical procedure. When performing procedures
that the surgeon has previously performed only with open surgical techniques,
the Company believes that the surgeon will have to learn where to place ports
and how to approach the operation but will generally not have to relearn how to
perform basic tissue manipulations. The Company believes that tissue
manipulations using its products can be as natural to the surgeon as hand
movements in open surgery. As a result, the Company believes its products will
make a broad range of open surgical procedures suitable for INTUITIVE surgery,
with significantly less patient trauma and post-operative pain and shorter
recovery times.
 
    The Company's strategy is to focus initially on the cardiac surgery market
because (i) there are a large number of procedures concentrated in a small
number of hospitals that can be targeted by a focused sales force and field
organization, (ii) while approaches to these procedures have been developed that
are somewhat less invasive than open surgery, they are difficult and only
account for a small minority of cardiac surgery procedures being performed and
(iii) no existing technology is able to accomplish a full cardiac procedure
through ports. The Company believes that its technology can help surgeons
accomplish cardiac surgery procedures more easily, more accurately and with less
trauma to the patient than existing approaches. Cardiac surgery procedures are
among the most precise and demanding in all of surgery. As such, the Company
believes that if its technology is adopted for cardiac surgery, surgeons will
gain confidence that Intuitive's technology also can be used for less demanding
procedures in general and other surgery.
 
    The Company plans to derive its revenues from the direct sale of two types
of interlinked proprietary products (i) a surgeon's console and a patient-side
cart which holds the electromechanical arms and (ii) a range of "resposable"
instruments such as scissors, forceps and electrocautery. The resposable
instruments are resterilizable and the number of procedures that each instrument
can perform is controlled by a proprietary electronic interlock. This feature
will allow the Company to limit the number of uses of each instrument to less
than its tested usage so that the instrument's performance meets specifications
during each procedure. By defining the number of uses for each instrument, the
Company can effectively price its resposable instruments on a per-procedure
basis.
 
    Intuitive believes that it is the first mover in third generation surgery.
In March 1997, surgeons using Intuitive's technology successfully performed what
the Company believes to be the initial third generation surgery on humans.
Intuitive believes that its development efforts represent the largest effort
devoted to third generation surgery of any company in the world today. Intuitive
owns or has licensed 38 issued and 8 allowed patents, including patents from SRI
International and IBM, companies which in the late 1980s were early pioneers in
the research of third generation surgery.
 
    The Company was incorporated in Delaware in November 1995 as Intuitive
Surgical Devices, Inc. and changed its name to Intuitive Surgical, Inc. in
January 1997. The Company's executive offices are located at 1340 W. Middlefield
Road, Mountain View, California 94043, and its telephone number is (650)
237-7000.
 
                                       5

<PAGE>
                                  THE OFFERING
 

<TABLE>
<S>                                            <C>
Common Stock offered.........................  shares
Common Stock to be outstanding after this
 offering....................................  shares(1)
Use of Proceeds..............................  For research and development, clinical
                                               trials, manufacturing scale-up, expansion of
                                               sales and marketing activities, partial
                                               payment of a license fee to IBM, working
                                               capital and general corporate purposes.
Proposed Nasdaq National Market Symbol.......  ISRG
</TABLE>

 
                             SUMMARY FINANCIAL DATA
 

<TABLE>
<CAPTION>
                                                PERIOD FROM
                                                 INCEPTION                                         PERIOD FROM
                                                (NOVEMBER 9,                    THREE MONTHS        INCEPTION
                                                  1995) TO     YEAR ENDED     ENDED MARCH 31,      (NOVEMBER 9,
                                                DECEMBER 31,  DECEMBER 31,  --------------------  1995) TO MARCH
                                                  1996(2)         1997        1997       1998        31, 1998
                                                ------------  ------------  ---------  ---------  --------------
<S>                                             <C>           <C>           <C>        <C>        <C>
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA:
Operating costs and expenses:
  Research and development....................   $    2,934    $   14,282   $   1,793  $   6,764    $   23,980
  General and administrative..................          951         4,434         686      1,627         7,012
  Technology license..........................       --             6,000      --         --             6,000
                                                ------------  ------------  ---------  ---------  --------------
    Total operating costs and expenses........        3,885        24,716       2,479      8,391        36,992
                                                ------------  ------------  ---------  ---------  --------------
Loss from operations..........................       (3,885)      (24,716)     (2,479)    (8,391)      (36,992)
Interest income, net..........................          198         1,114          70        376         1,688
                                                ------------  ------------  ---------  ---------  --------------
Net loss......................................   $   (3,687)   $  (23,602)  $  (2,409) $  (8,015)   $  (35,304)
                                                ------------  ------------  ---------  ---------  --------------
                                                ------------  ------------  ---------  ---------  --------------
Pro forma net loss per share..................                 $    (1.85)             $   (0.47)
                                                              ------------             ---------
                                                              ------------             ---------
Shares used in computing pro forma net loss
 per share....................................                     12,730                 17,207
                                                              ------------             ---------
                                                              ------------             ---------
</TABLE>

 

<TABLE>
<CAPTION>
                                                                                           AS OF MARCH 31, 1998
                                                                                         -------------------------
                                                                                          ACTUAL    AS ADJUSTED(3)
                                                                                         ---------  --------------
<S>                                                                                      <C>        <C>
                                                                                              (IN THOUSANDS)
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......................................  $  26,303
Working capital........................................................................     17,792
Total assets...........................................................................     30,107
Capital lease obligations, noncurrent..................................................      1,297
Deficit accumulated during the development stage.......................................    (35,304)       (35,304)
Total stockholders' equity.............................................................     19,982
</TABLE>

 
- ------------
 
(1) Based on the number of shares outstanding on March 31, 1998. Excludes (i)
    977,250 shares of Common Stock issuable upon exercise of options
    outstanding, at a weighted average exercise price of $0.99 per share, (ii)
    an aggregate of 785,138 shares available for future grants or purchases
    pursuant to the Company's 1996 Equity Incentive Plan, and (iii) 11,000
    shares issuable upon exercise of a warrant outstanding, at an exercise price
    of $5.00 per share. In April 1998, an additional 4,700,000 shares were
    reserved for future grants or purchases pursuant to the Company's 1998
    Equity Incentive Plan, 1998 Employee Stock Purchase Plan and 1998
    Non-Employee Directors' Stock Option Plan. See "Capitalization," and
    "Management--Employee Benefit Plans."
 
(2) The Company's statement of operations data for the period from inception
    (November 9, 1995) to December 31, 1995 is not presented separately as the
    Company's operations during that period were not material.
 
(3) As adjusted to give effect to the sale in this offering of          shares
    of Common Stock by the Company and the application of the net proceeds
    therefrom. See "Use of Proceeds" and "Capitalization."
 
                                       6

<PAGE>

                                  RISK FACTORS
 
    AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. THE FOLLOWING FACTORS, IN ADDITION TO THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS, SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE
COMPANY AND ITS BUSINESS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED
HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS. FOR THIS PURPOSE,
ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACTS MAY
BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE FOREGOING, THE
WORDS "BELIEVES," "ANTICIPATES," "PLANS," "INTENDS" AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THERE ARE A NUMBER OF IMPORTANT
FACTORS THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE,
WITHOUT LIMITATION, THOSE SET FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS.
 
EARLY STAGE OF CLINICAL TESTING; NO ASSURANCE OF SAFETY, EFFICACY OR
  COMMERCIALIZATION
 
    The Company was founded in November 1995. To date, the Company has engaged
primarily in researching, developing, testing and pursuing regulatory clearances
for its initial product candidate which consists of a surgeon's console and
patient-side cart and certain resposable instruments. The Company will not be
able to sell its products in the United States unless it obtains clearance or
approval from the United States Food and Drug Administration (the "FDA").
Although the Company has received clearance from the FDA for the surgeon's
console, patient-side cart and certain blunt resposable instruments, it has not
received clearance or approval for certain other resposable instruments
necessary for performing most surgical procedures, including scissors, scalpels,
forceps/pickups, needle holders, clip appliers and electrocautery (the "Pending
Instruments"). Regulatory clearance or approval of the Pending Instruments is
necessary for the Company to commercialize its products. The FDA has determined
that the Company must submit substantial clinical data regarding use of the
Pending Instruments in certain thoracoscopic and laparoscopic surgical
procedures before it will consider the clearance or approval of such
instruments.
 
    In order to obtain the required clinical data, the Company intends to begin
a clinical trial using the Pending Instruments, together with the surgeon's
console and patient-side cart and certain other resposable instruments, in July
1998. However, this clinical trial could be delayed. Even if the clinical trial
commences on schedule, the Company cannot be certain when it will be completed
or that the results of the clinical trial will be favorable or support further
product development. If the results of the clinical trial do not indicate that
the Company's products are safe or effective, regulatory approval could be
delayed or denied. In particular, such results may require the Company to modify
or abandon its products. Even if the results of the clinical trial indicate that
the Company's products are safe and effective, the clinical trial may identify
significant technical or other obstacles that the Company would need to
overcome. These obstacles could significantly delay or prevent any product
launch, which could have a material adverse effect on the Company's business,
financial condition and results of operations. Furthermore, because the
surgeon's console and patient-side cart and resposable instruments together
represent the Company's sole product candidate, the Company could be required to
cease operations if it is not successfully commercialized. See
"Business--Intuitive's Products," "--Clinical Trials and Experience," and
"--Government Regulation."
 
DEVELOPMENT STAGE COMPANY; HISTORY OF LOSSES AND EXPECTATION OF FUTURE LOSSES
 
    As of March 31, 1998, the Company had an accumulated deficit of $35.3
million. The Company has not generated any revenue from product sales. The
Company's future profitability depends, in part, on the Company's ability to
obtain clearance or approval from the FDA to market the Pending Instruments in
the United States, its ability to obtain regulatory approval to market its
products internationally and its ability to successfully manufacture and market
its products. The Company's headcount was 23, 86 and 100 as of December 31, 1996
and December 31, 1997 and March 31, 1998, respectively. The Company expects to
expend substantial additional funds, increase headcount and continue to incur
significant operating losses for the foreseeable future as it continues to fund
clinical trials in support of regulatory approvals, expands
 
                                       7

<PAGE>
research and development activities, establishes commercial-scale manufacturing
capabilities and expands sales and marketing activities. Even if the Company is
able to successfully commercialize its products, the Company cannot be certain
that it will achieve significant revenues from either domestic or international
sales. Failure to achieve significant revenues from product sales would have a
material adverse effect on the Company's business, financial condition and
results of operations, and may require the Company to cease operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
UNCERTAINTY OF MARKET ACCEPTANCE; TRAINING REQUIREMENTS
 
    The Company's products represent a fundamentally new way of performing
surgery. The Company's ability to successfully commercialize its products will
depend, in part, on achieving physician and patient acceptance of INTUITIVE
surgery as a preferred method of performing surgery and for a broader array of
surgical procedures. There can be no assurance that the Company's products will
gain any significant degree of market acceptance by physicians, patients and
third-party payors even if necessary regulatory approvals are obtained. The
Company believes that physicians' and third-party payors' acceptance of the
benefits of procedures performed using the Company's products will be essential
for acceptance of the Company's products by patients. Physicians will not
recommend that procedures be performed using the Company's products unless the
Company is able to demonstrate similar efficacy and/or reduced trauma as
compared to existing surgical techniques. Even if the Company establishes the
clinical efficacy of procedures using its products, surgeons may elect not to
use the Company's products for any number of other reasons. For example, most
patients with cardiovascular disease first consult with a cardiologist who may
refer the patient to a cardiac surgeon for conventional open-heart surgery
because such surgery has become widely accepted.
 
    The Company expects that there will be a significant learning process
involved for surgical teams to become proficient in the use of the Company's
products in performing surgeries, such as cardiac surgery, which to date have
been mostly performed with open surgical techniques. Broad use of the system
will require training of surgical teams in performing minimally invasive
procedures, and market acceptance could be delayed by the time required to
complete this training. The Company cannot be certain that it will be able to
rapidly train surgical teams in numbers sufficient to generate adequate demand
for the Company's products. If the Company's products fail to achieve market
acceptance, the Company may not achieve revenues from product sales necessary to
support the Company's business. See "Business-- Intuitive's Products" and "--
Clinical Trials and Experience."
 
NEED FOR FEDERAL AND STATE REGULATORY CLEARANCE OR APPROVAL
 
    The design, manufacturing, labeling, distribution and marketing of the
Company's products are subject to extensive government regulation in the United
States. As a result, the process of obtaining required regulatory approvals is
lengthy, expensive and uncertain. In order for Intuitive to market its products
in the United States, it must obtain clearance or approval from the FDA. Before
a new device can be introduced into the United States market, the FDA requires
that a manufacturer obtain marketing clearance either through a premarket
notification process under Section 510(k) of the Federal Food, Drug and Cosmetic
Act (the "FDC Act") or a PMA application under Section 515 of the FDC Act. In
order to obtain clearance through a premarket notification under Section 510(k)
of the FDC Act ("510(k)"), the Company must provide information sufficient to
support a claim of substantial equivalence to a legally marketed predicate
device. The PMA application process is substantially more extensive than the
510(k) notification process. Based upon industry and FDA publications, the
Company believes that it generally takes from four to twelve months from the
date of submission to obtain a 510(k) clearance, but it may take longer. In June
1997, the Company submitted a 510(k) notification for the surgeon's console and
patient-side cart and certain blunt resposable instruments, and in July 1997,
the 510(k) notification was cleared by the FDA. A subsequent 510(k) notification
submission covering the Pending Instruments was withdrawn by
 
                                       8

<PAGE>
the Company in November 1997 after the FDA indicated that substantial clinical
data would be required prior to a determination of substantial equivalence. In
March 1998, the Company received approval of an Investigational Device Exemption
("IDE") in order to conduct a clinical trial using the Pending Instruments,
together with the surgeon's console and patient-side cart and certain other
resposable instruments, in certain thoracoscopic and laparoscopic surgical
procedures. The Company intends to submit the data obtained from the clinical
trial as part of a new 510(k) notification. The Company cannot be certain when
it will complete the clinical trial or file such 510(k) notification with the
FDA for the Pending Instruments. In addition, there can be no assurance whether
the results obtained from the clinical trial will support a finding of
substantial equivalence. It is possible that the FDA could require the Company
to submit a more extensive PMA application instead of a 510(k) notification for
the Pending Instruments. If 510(k) clearance is granted, the Company believes
based upon discussions with the FDA that the clearance will permit distribution
and promotion of the Pending Instruments for broad use in endoscopic surgery.
There can be no assurance, however, that the FDA will not require additional
510(k) clearances to be obtained before the Pending Instruments could be
distributed or promoted for use in other specific surgical procedures.
 
    If the Company is unable to utilize the 510(k) process, the Company will
incur additional costs and delays while it seeks FDA approval of a PMA
application to use the Pending Instruments for endoscopic indications. A PMA
application may be submitted to the FDA only after clinical trials and the
required patient follow-up for a particular system or its instruments are
successfully completed. Upon acceptance of a PMA application for filing, the FDA
commences a review process that, based upon industry and FDA publications, the
Company believes generally takes one to three years from the date on which the
PMA application is accepted for filing. However, the review process may take
significantly longer.
 
    The FDA may not act favorably or quickly on any of the Company's
submissions. As a result, the Company may encounter significant difficulties and
incur additional costs. For example, the FDA may request additional data or
require that the Company conduct further clinical trials, which would cause the
Company to incur substantial costs and delays. In addition, the FDA may impose
strict labeling requirements, onerous surgical training requirements or other
requirements as a condition of product approval. These restrictions could limit
the Company's ability to market its products. Furthermore, the Company cannot be
certain that it will ever receive FDA clearance or approval of the Pending
Instruments. If the Company is unable to obtain FDA clearance or approval of the
Pending Instruments, it will not be able to market and sell its products for
surgical procedures in the United States. Because the surgeon's console and
patient-side cart and resposable instruments, including the Pending Instruments,
together represent the Company's sole product candidate, the Company could be
required to cease operations if regulatory approvals of the Pending Instruments
which are necessary for commercialization of the Company's products are not
obtained.
 
    If the Company receives FDA approval or clearance of the Pending
Instruments, the Company will continue to be regulated by the FDA with regard to
the reporting of adverse events and ongoing compliance with FDA Quality System
Regulations ("QSR") which includes elaborate testing, control, documentation and
other quality assurance procedures. The Company's manufacturing facilities must
be registered with the FDA and will be subject to periodic inspections. The
Company's facilities have not yet been inspected by the FDA. Labeling and
promotional activities are subject to scrutiny by the FDA and, in certain
circumstances, by the Federal Trade Commission. Current FDA enforcement policy
prohibits the marketing of approved medical devices for unapproved ("off label")
uses.
 
    In addition to federal regulations, the State of California also requires
that the Company obtain a license to manufacture medical devices. The Company's
facilities and manufacturing processes were inspected in February 1998. The
Company passed the inspection and received a device manufacturing license from
the Food and Drug Branch of the California Department of Health Services
("CDHS") in March 1998. The Company will be subject to periodic inspections by
the CDHS. If the Company were unable to maintain this license following any
future inspections, it would be unable to manufacture or ship
 
                                       9

<PAGE>
any product which would have a material adverse effect on the Company's
business, financial condition and results of operations and may require the
Company to cease operations. See "Business--Government Regulation."
 
LACK OF INTERNATIONAL REGULATORY CLEARANCE OR APPROVAL
 
    In order for the Company to market its products in Europe and in certain
other foreign jurisdictions, the Company and its distributors and agents must
obtain required regulatory approvals and clearances and otherwise comply with
extensive regulations regarding safety and quality. These regulations, including
the requirements for approvals or clearance and the time required for regulatory
review, vary from country to country. The Company cannot be certain that it will
obtain regulatory approvals in other countries. The Company may also incur
significant costs in attempting to obtain or in maintaining foreign regulatory
approvals. If the Company experiences delays in receipt of approvals to market
its products outside of the United States, or if the Company fails to receive
these approvals, sales of such products may be materially adversely affected.
 
    Beginning in mid-1998, the European Union requires that medical products
receive the right to affix the CE mark. The CE mark is an international symbol
of adherence to quality assurance standards and compliance with applicable
European medical device directives. In order to obtain the right to affix the CE
mark to the Company's products, the Company will need to obtain certification
that the Company's processes meet European quality standards. These standards
include certification that the Company's design and manufacturing facility
complies with ISO 9001 standards. If the Company does not receive the right to
affix the CE mark, it will be prohibited from selling its products in member
countries of the European Union. The Company cannot be certain that it will be
successful in meeting European quality standards or other certification
requirements. See "Business--Government Regulation."
 
POSSIBLE FUTURE CAPITAL REQUIREMENTS
 
    The Company expects to expend substantial additional funds and continue to
incur significant operating losses for the foreseeable future as its continues
to fund clinical trials in support of regulatory approvals, expands research and
development activities, establishes commercial-scale manufacturing capabilities
and expands sales and marketing activities. If unanticipated difficulties arise
in any of these activities, the Company's cash requirements could increase
substantially. The Company's future liquidity and capital requirements will
depend upon numerous factors, including the extent of the Company's future
operating losses, the level and timing of future revenues and expenditures, the
progress of its product development efforts, the progress and scope of clinical
trials, actions relating to regulatory matters, the costs and timing of
expansion of product development, manufacturing and sales and marketing
activities, the extent to which the Company's products gain market acceptance,
the price of the Company's products and competitive developments. The Company
believes that the proceeds from this offering, together with interest income and
current cash, will be sufficient to meet its operating and capital requirements
at least for the next 12 months. The Company's forecast of the period of time
through which its financial resources will be adequate to support its operations
is a forward-looking statement that involves risks and uncertainties, and actual
results could vary. The Company may raise additional funds through public or
private financing or other arrangements. The Company cannot be certain that any
additional funding will be available when needed or at all. Even if such
financing is available, the terms may not be attractive. Furthermore, any
additional equity financing may be dilutive to stockholders, and debt financing,
if available, may involve restrictive covenants. If the Company is unable to
raise capital when needed, it may have to reduce operations in order to conserve
cash or cease operations entirely. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
 
                                       10

<PAGE>
FLUCTUATIONS IN OPERATING RESULTS
 
    The Company's results of operations will depend upon numerous factors,
including the following: the progress and results of clinical trials, actions
relating to regulatory matters, the extent to which the Company's products gain
market acceptance, the timing and ability of the Company to develop its
manufacturing and sales and marketing capabilities, demand for the Company's
products, the progress of surgical training in the use of the Company's
products, the ability of the Company to develop, introduce and market new or
enhanced versions of the Company's products on a timely basis, any product
quality problems and changes in third-party payor reimbursement policies. In
addition, sales by the Company of its surgeon's console and patient-side cart
could require lengthy sales and purchase order cycles because these products are
relatively expensive and require multiple levels of purchase authorizations. As
a result, the Company's quarterly or yearly results of operations may fluctuate
substantially and will be difficult to forecast. In addition, future revenue
from sales of the Company's products, if any, will be difficult to forecast
because the market for new surgical technologies is still evolving. As a result,
the Company's operating results in any particular period should not be relied
upon as an indication of future performance. In addition, it is possible that in
some future quarter the Company's operating results will be below the
expectations of public market analysts. If this occurs, the price of the
Company's Common Stock will likely decline. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
 
UNCERTAINTY RELATED TO THIRD-PARTY REIMBURSEMENT
 
    A combination of the government and/or health insurance companies is
responsible for hospital and surgeon reimbursement for virtually all surgical
procedures except for cosmetic surgery in both the United States and elsewhere.
Governments and insurance companies generally reimburse hospitals and physicians
for surgery when the procedures are considered non-experimental and
non-cosmetic. The Company believes that the cardiac procedures that will
constitute its initial focus, as well as the majority of non-cardiac procedures
it may eventually target, are generally already reimbursable by governments and
insurance companies. Accordingly, the Company believes hospitals and surgeons in
the United States will generally not be required to obtain new billing
authorizations or codes in order to be compensated for performing surgery using
the Company's products once such products have obtained FDA clearance or
approval, but there can be no assurance that this will be the case.
 
    Governments and insurance companies carefully review and increasingly
challenge the prices charged for medical products and services. Reimbursement
rates from private companies vary depending on the procedure performed, the
third-party payor, the insurance plan and other factors. Medicare reimburses
hospitals a prospectively determined fixed amount for the costs associated with
an in-patient hospitalization based on the patient's discharge diagnosis, and
reimburses physicians a prospectively determined fixed amount based on the
procedure performed, regardless of the actual costs incurred by the hospital or
physician in furnishing the care and unrelated to the specific devices used in
that procedure. Thus, the reimbursements that hospitals obtain for performing
surgery with Intuitive's products will generally have to cover any additional
costs that hospitals incur in purchasing the Company's products.
 
    In addition, the Company must obtain reimbursement approvals in certain
foreign countries. There can be no assurance that any such approvals will be
obtained in a timely manner or at all. Failure to obtain such approvals could
have a material adverse effect on market acceptance or sales of the Company's
products in the international markets in which approvals are required.
 
    The Company believes that the overall escalating cost of medical products
and services has led to and will continue to lead to increased pressures on the
health care industry, both foreign and domestic, to reduce the cost of products
and services, including products offered by the Company. There can be no
assurance that third-party reimbursement and coverage will be available or
adequate either in United States or foreign markets, that current reimbursement
amounts will not be decreased in the future or that future legislation,
regulation, or reimbursement policies of third-party payors will not otherwise
adversely affect the demand for the Company's products or its ability to sell
its products on a profitable basis, particularly if the Company's products are
more expensive than other cardiac surgery products. Moreover,
 
                                       11

<PAGE>
the Company is unable to predict whether additional legislation or regulation
relating to the healthcare industry or third-party reimbursement will be enacted
in the future, or the effect of such legislation or regulation on the sale of
the Company's products. If third-party payor coverage or reimbursement is
unavailable or inadequate, the Company's business, financial condition, and
results of operations could be materially adversely affected. See
"Business--Third-Party Reimbursement."
 
SIGNIFICANT COMPETITION; RAPID TECHNOLOGICAL CHANGE
 
    INTUITIVE surgery is a new technology that must compete with more
established procedures such as existing MIS surgery and open surgery. These
established procedures are widely accepted in the medical community and in many
cases have a long history of use. In addition, the Company expects that the
market for third generation surgery will be intensely competitive. Several
companies are developing new approaches and new products for the minimally
invasive treatment of heart disease and other conditions. Many of these
companies have an established presence in the field of MIS surgery, including
Boston Scientific Corporation, CardioThoracic Systems, Inc., C.R. Bard, Inc.,
Guidant Corporation, Heartport, Inc., Ethicon Endo-Surgery, Inc., a division of
Johnson & Johnson, Medtronic, Inc. and United States Surgical Corporation. Many
of these companies have substantially greater financial and other resources than
the Company. In particular, these companies frequently have larger research and
development staffs and more experience and capabilities in conducting research
and development activities, testing products in clinical trials, obtaining
regulatory approvals, and manufacturing, marketing and selling products. In
addition, a limited number of companies are using robots in surgery, including
Computer Motion, Inc. and Integrated Surgical Systems, Inc. which may develop
products which directly compete with the Company's products. Also, technological
advances in cardiac or other surgical procedures or the development of
innovative drugs could make other therapies more effective or lower in cost than
the Company's products. The Company cannot be certain that it will be able to
complete development of its products or develop new instruments for any
additional surgical procedures, that are more effective and cost-effective than
established treatments or new approaches and products developed by current or
future competitors. The Company could be unable to achieve adequate sales of the
Company's products if it is unable to demonstrate the efficacy and cost
advantages of such products over products or procedures of the Company's
competitors or over existing MIS or open surgical procedures. In addition, the
timing of market introduction of its products affects the Company's ability to
compete effectively. As a result, the Company's ability to complete product
development and clinical trials, obtain regulatory approvals and commercially
introduce its initial products are important factors in competing successfully.
Even if its initial products were to gain market acceptance and generate product
revenue, the Company's ability to achieve or sustain profitability could be
adversely affected if it fails to develop new technologies and products before
competitors. See "Business--Competition."
 
RISK OF SOFTWARE DEFECTS
 
    The Company's products incorporate sophisticated computer software. Software
as complex as that incorporated into the Company's products frequently contain
errors or failures, especially when first introduced. In addition, new products
or enhancements may contain undetected errors or performance problems that,
despite testing, are discovered only after commercial shipment. Because the
Company's products are designed to be used to perform complex surgical
procedures, the Company expects that its customers will have an increased
sensitivity to software defects than the market for software products generally.
There can be no assurance that errors or performance problems will not arise in
the future, causing delays in product shipments, loss of revenue, delay in
market acceptance, diversion of Company resources, damage to the Company's
reputation or increased service or warranty costs, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
DEPENDENCE ON PATENTS, LICENSES AND PROPRIETARY RIGHTS
 
    The Company's success will depend in part on its ability to obtain patent
protection and appropriate licenses from third parties for its products and
processes and its ability to preserve its trade secrets,
 
                                       12

<PAGE>
trademarks and copyrights, to operate without infringing or violating the
proprietary rights of others and to prevent others from infringing the
proprietary rights of the Company. The patent positions of medical device
companies, including those of the Company, are uncertain and involve complex and
evolving legal and factual questions. The coverage sought in a patent
application can either be denied or significantly reduced before or after the
patent is issued. Consequently, the Company cannot be certain that the scope of
any of the Company's patents will exclude competitors, provide competitive
advantages or prevent others from circumventing the Company's technology. Many
of the Company's competitors have substantial resources and have made
substantial investments in competing technologies. Such competitors may have
applied for or may apply for and obtain patents that will prevent, limit or
interfere with the Company's ability to make, use or sell the Company's products
either in the United States or in international markets. The Company cannot be
certain that any of its patents will be held valid if challenged by third
parties or that others will not claim rights in the Company's patents and other
proprietary rights.
 
    In view of the time delay in patent approval and secrecy afforded patent
applications, the Company does not know and is not able to determine if there
are patent applications belonging to others which have priority over
applications belonging to the Company. Moreover, portions or all of the
Company's patent applications could be rejected and there could be a material
adverse effect on the Company's business and future prospects if patents or
prior art exist that were not uncovered through database searches or there are
patent applications that have priority over any of the Company's patent
applications.
 
    Other companies, institutions or individuals may have filed applications
for, may have been issued patents or may obtain additional patents and
proprietary rights relating to products or processes similar in function or
effect to those of the Company or products that treat conditions that may be
treated by the Company's potential products. At this time, the Company cannot
predict whether or not these patents, patent applications and proprietary rights
will lead to the development of products competitive with the Company's
potential products. If such competitive products are developed and successfully
commercialized, they could materially adversely affect the Company's ability to
commercialize its potential products. If the United States Patent and Trademark
Office (the "PTO") should determine that any issued or pending patents claim the
same subject matter as any of the Company's pending patent applications and that
the subject matter of such issued or pending patents was invented first, the
Company could be prevented from obtaining patent protection or the scope of such
protection could be narrowed.
 
    The laws of certain foreign countries do not protect the Company's
intellectual property rights to the same extent as do the laws of the United
States. The Company attempts to protect the software included in its systems
under trade secret and copyright laws, but these laws provide only limited
protection. Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy or obtain information that the Company
regards as proprietary. In addition to patents, trademarks and copyrights, the
Company relies on trade secrets and proprietary know-how to compete. The Company
attempts to protect its trade secrets and proprietary know-how, in part, through
confidentiality and proprietary information agreements, however such agreements
may be breached. The Company cannot be certain that it will have adequate
remedies for any breach, or that its secrets will not otherwise become known to,
or independently developed by, competitors.
 
    The Company also relies on technology that it licenses from others,
including technology that is integrated into its products. The Company has
entered into a license agreement with SRI International ("SRI"), dated December
20, 1995 (the "SRI License"), pursuant to which the Company obtained an
exclusive, worldwide, royalty-free license to use certain telesurgery technology
for animal and human surgery. Under the terms of the SRI License, the Company is
required to use commercially reasonable and diligent efforts to conduct research
and development and clinical trials and to market products for use in surgery
once such products are approved for marketing by the FDA. If the Company fails
to commercialize its products by September 12, 2002, SRI has the option of
converting the exclusive license to a non-exclusive license. The SRI License
terminates upon the later of the last to expire of the patents licensed from SRI
or December 20, 2012. The license may also be terminated by SRI in the event of
a material
 
                                       13

<PAGE>
uncured breach of the Company's obligations. In the event of such termination
there can be no assurance that necessary licenses could be reacquired from SRI
on satisfactory terms or at all. In addition, in December 1997, the Company
entered into a license with IBM (the "IBM License") pursuant to which the
Company was granted an exclusive, worldwide, royalty-free license to use certain
IBM patents covering technology related to the application of computers and
robotics to surgery. Excluded from the licensed field were neurology,
ophthalmology, orthopedics and biopsies, but the Company obtained a nonexclusive
license in these fields. Under the terms of the license, the Company is
obligated to pay certain amounts upon achievements of certain milestones,
including $5.0 million within 10 days of the closing of this offering. The IBM
License will terminate upon the expiration of the last to expire of the licensed
patents. In addition, the IBM License may also be terminated if the Company
fails to make the required payments and such failure is not cured within 90 days
of written notice. In the event of such termination, there can be no assurance
that necessary licenses could be reacquired from IBM on satisfactory terms or at
all. The loss or failure to maintain these licenses could prevent or delay
further development or commercialization efforts of the Company's products which
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Intellectual Property."
 
    The Company may be required to obtain licenses to patents or proprietary
rights of others. As the medical device industry expands and more patents are
issued, the risk increases that the Company's potential products may give rise
to claims that they infringe the patents of others. No assurance can be given
that any licenses required under any such patents or proprietary rights would be
made available on terms acceptable to the Company. If the Company does not
obtain such licenses, it could encounter delays in product market introductions
while it attempts to design around such patents, or could find that the
development, manufacture or sale of products requiring such licenses could be
foreclosed. Litigation may be necessary to defend against or assert claims of
infringement, to enforce patents issued to the Company, to protect trade secrets
or know-how owned by the Company, or to determine the scope and validity of the
proprietary rights of others, and could result in substantial costs to and
diversion of effort by, and may have a material adverse impact on, the Company.
In addition, there can be no assurance that these efforts by the Company will be
successful.
 
RISKS OF THIRD-PARTY CLAIMS OF INFRINGEMENT
 
    The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights, and companies in the
medical device industry have employed intellectual property litigation to gain a
competitive advantage. The Company could become subject to patent infringement
claims or litigation in a court of law, interference proceedings declared by the
PTO to determine the priority of inventions or an opposition to a patent grant
in a foreign jurisdiction. As the medical device industry expands and more
patents are filed and issued, the risk increases that the Company's products may
give rise to a declaration of interference by the PTO or claims of patent
infringement by other companies, individuals and institutions. Such entities and
individuals could bring legal proceedings against the Company seeking damages or
seeking to enjoin the Company from testing, manufacturing or marketing its
products. Patent litigation is costly, and even if the Company prevails, the
cost of such litigation could adversely affect the Company's business. In
addition, such proceedings may result in a significant diversion of effort for
the Company's technical and management personnel. If other parties in any action
are successful, the Company could be required to cease the infringing activity
or obtain a license. Although patent and intellectual property disputes in the
medical device area have often been settled through licensing or similar
arrangements, costs associated with such arrangements may be substantial and
could include ongoing royalties. In addition, it is uncertain whether any
required license would be available to the Company on acceptable terms, or at
all. See "Business--Intellectual Property-- Patents."
 
                                       14

<PAGE>
LIMITED MANUFACTURING EXPERIENCE; SCALE-UP RISK
 
    The Company has manufactured prototypes of its products for further product
development and clinical trials only in limited quantities. The Company has no
experience manufacturing products in the volumes that will be necessary to
achieve significant commercial sales. The Company cannot be certain that it will
be able to establish or maintain reliable, high-volume manufacturing capacity.
Even if such capacity can be established and maintained, the Company cannot be
certain that the cost will be commercially reasonable. If the Company receives
FDA clearance or approval for the Pending Instruments, the Company will need to
expend significant capital resources and develop manufacturing expertise to
establish large-scale manufacturing capabilities. Manufacturers often encounter
difficulties in scaling up production of new products, including problems
involving production yields, quality control and assurance, component supply
shortages, shortages of qualified personnel, compliance with FDA regulations and
the need for further FDA approval of new manufacturing processes. In addition,
the manufacturing of the Company's products is a complex process with many
component parts. In the event demand for the Company's products exceeds
manufacturing capacity, the Company could develop a substantial backlog of
customer orders. If the Company is unable to establish and maintain large-scale
manufacturing capabilities, sales of the Company's products could be
substantially diminished, which would have a material adverse effect on the
Company's business, financial condition and results of operations.
 
    In addition, the Company's manufacturing facilities are subject to periodic
inspection by regulatory authorities, and the Company's operations will continue
to be regulated by the FDA with respect to QSR compliance. The Company will be
required to comply with QSR requirements in order to produce products for sale
in the United States and with ISO 9001 standards in order to produce products
for sale in Europe. If the Company fails to comply with QSR or ISO 9001
standards, it may be required to cease all or part of its operations for some
period of time until it can demonstrate that appropriate steps have been taken
to comply with such regulations. The Company cannot be certain that its
facilities will comply with QSR or ISO 9001 standards in future audits by
regulatory authorities. The State of California also requires that the Company
obtain a license to manufacture medical devices. The Company's facilities and
manufacturing processes were inspected in February 1998. The Company passed the
inspection and received a device manufacturing license from the CDHS in March
1998. The Company will be subject to periodic inspections by the CDHS. If the
Company were unable to maintain this license following any future inspections,
it would be unable to manufacture or ship any products which would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business-- Manufacturing" and "--Government
Regulation."
 
DEPENDENCE ON KEY SUPPLIERS
 
    The Company purchases certain key components, including motors, endoscopes,
monitors, and certain integrated circuit components, from single source
suppliers. For certain of these components, there are relatively few alternative
sources of supply. The Company may not be able to establish quickly additional
or replacement suppliers for many of the numerous components used in the
Company's products. In addition, establishing a replacement supplier could
involve significant additional costs. If the Company's current suppliers become
unable or unwilling to supply components when needed and the Company is unable
to obtain alternative suppliers, the Company might be unable to manufacture and
market its products, which would have a material adverse effect on its business,
financial condition and results of operations. See "Business--Manufacturing."
 
LIMITED SALES, MARKETING AND DISTRIBUTION EXPERIENCE
 
    The Company has no experience marketing and selling its products. If the
Company receives required regulatory clearance or approval, the Company intends
to market its products initially through a direct sales force in the United
States and Europe. Substantial efforts and significant management and financial
 
                                       15

<PAGE>
resources are required to establish marketing and sales capabilities sufficient
to support sales in commercial quantities. The Company cannot be certain that it
will be able to build such a marketing staff or sales force, that this strategy
will be cost-effective or that such sales and marketing efforts will be
successful. Failure to successfully market its products or any future products
could reduce the Company's revenues and may result in additional losses. See
"Business--Marketing and Distribution."
 
EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH
 
    In order to complete clinical trials, scale-up manufacturing, marketing and
distribution capabilities and develop future products, the Company will be
required to expand its operations. The Company expects that future expansion
will occur particularly in the areas of research and development, manufacturing
and sales and marketing. Such expansion will likely result in new and increased
responsibilities for management personnel and place significant strain upon the
Company's management, operating and financial systems and resources. To
accommodate any such growth and compete effectively, the Company will be
required to improve information systems, procedures and controls and expand,
train, motivate and manage the Company's work force. The Company's future
success will depend in part on the ability of current and future management
personnel to operate effectively, both independently and as a group. The Company
cannot be certain that its personnel, systems, procedures and controls will be
adequate to support the Company's future operations. If the Company fails to
implement and improve its operational, financial and management systems or to
expand, train, motivate or manage employees, the Company's business could be
adversely affected. See "--Dependence Upon Key Personnel," "Business--Employees"
and "Management."
 
RISK OF PRODUCT LIABILITY
 
    The Company's business exposes it to significant risks of product liability
claims. The medical device industry has historically been litigious, and the
Company faces financial exposure to product liability claims in the event that
the use of the Company's products results in personal injury or death. There is
also the possibility that defects in the design or manufacture of the Company's
products might necessitate a product recall. The Company cannot be certain
whether product liability claims will be asserted against it. The Company
currently maintains product liability insurance. The Company cannot be certain
that the coverage limits of such insurance will be adequate or that it will be
able to maintain such insurance on acceptable terms. A product liability claim,
regardless of its merit or eventual outcome, could result in significant legal
defense costs. Such costs would have the effect of increasing the Company's
expenses and could have a material adverse effect on its business, financial
condition and results of operations. See "Business--Product Liability and
Insurance."
 
DEPENDENCE UPON KEY PERSONNEL
 
    Because of the scientific nature of the Company's business, the Company is
highly dependent upon its ability to attract and retain certain key scientific,
technical, clinical, regulatory and managerial personnel. Competition for such
personnel is intense. In addition, the Company's success is also dependent on
its ability to hire qualified marketing and sales personnel. The loss of key
personnel or the inability to hire and retain qualified personnel could
adversely affect the Company's product development efforts. See "Management."
 
USE OF HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS
 
    The Company's operations produce waste products and involve the controlled
use of hazardous materials and chemicals. The Company is subject to federal,
state and local laws and regulations governing the use, manufacture, storage,
handling and disposal of such materials and waste products. Although the Company
believes that its safety procedures for handling and disposing of such materials
and wastes comply with the standards prescribed by such laws and regulations,
the risk of contamination or injury from
 
                                       16

<PAGE>
these materials cannot be eliminated completely. In such event, the Company can
be held liable for any damages that result and any such liability could exceed
the resources of the Company. There can be no assurance that the Company will
not be required to incur significant costs to comply with environmental laws and
regulations in the future, or that the Company's business, financial condition
or results of operations will not be materially adversely affected by current or
future environmental laws or regulations.
 
ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
 
    Certain provisions of the Company's charter documents may make it more
difficult for a third-party to acquire control of the Company. These provisions
may also limit the price that certain investors might be willing to pay in the
future for shares of the Company's Common Stock. These provisions include the
existence of a classified Board of Directors, the inability of stockholders to
act by written consent without a meeting, limits on the ability to remove
directors and certain procedures required for director nominations and
stockholder proposals. In addition, certain provisions of Delaware law may also
delay or make more difficult a merger, tender offer or proxy contest involving
the Company. One such provision of the Delaware law prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years unless certain conditions are met. In
addition, the Company's Board of Directors is authorized to issue up to
10,000,000 shares of Preferred Stock without stockholder approval on such terms
as the Board determines. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock could therefore make it more difficult for a third-party to acquire a
majority of the Company's outstanding voting stock. In addition, the Preferred
Stock may have other rights senior to the Common Stock. As a result, the
issuance of the Preferred Stock could decrease the market value of the Common
Stock. See "Description of Capital Stock--Preferred Stock" and "--Delaware
Anti-Takeover Law and Certain Charter Provisions."
 
SIGNIFICANT INFLUENCE BY EXISTING STOCKHOLDERS
 
    Following this offering, the Company's founders, directors and executive
officers and entities affiliated with them will beneficially own approximately
   % of the Company's outstanding Common Stock (   % if the Underwriters'
over-allotment option is exercised). These stockholders, if acting together,
would be able to significantly influence all matters requiring approval by the
Company's stockholders, including the election of directors and the approval of
mergers or other business combination transactions. Such control could have the
effect of delaying or preventing a change in control. See "Principal
Stockholders."
 
NO PRIOR PUBLIC TRADING MARKET FOR COMMON STOCK; POTENTIAL VOLATILITY OF STOCK
  PRICE
 
    Prior to this offering, there has been no public market for the Company's
Common Stock. The initial public offering price will be determined through
negotiations between the Company and the representatives of the Underwriters.
The initial public offering price bears no relationship to earnings, asset
values, book value or any other recognized criteria of value. In addition,
prospective investors who purchase in this offering may not be able to sell the
shares of Common Stock at or above the initial public offering price.
Furthermore, the Company does not know the extent to which investor interest in
the Company will lead to the development of a trading market, or how liquid that
market might be.
 
    The market price of the Company's Common Stock is likely to be highly
volatile. Certain factors may significantly affect the market price of the
Company's Common Stock, including actual or anticipated fluctuations in the
Company's operating results, regulatory developments, developments with respect
to clinical trials, announcements of technological innovations, new product
introductions by the Company or its competitors, developments with respect to
patents or proprietary rights, conditions and trends in the medical device and
other technology industries, changes in financial estimates by securities
analysts, changes in management or key personnel, general market conditions and
other factors. In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have
 
                                       17

<PAGE>
particularly affected the market prices for the common stocks of early stage
companies. These types of broad market fluctuations may adversely affect the
market price of the Company's Common Stock. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been initiated against that company. Such litigation
could result in substantial costs and a diversion of management's attention and
resources and could materially adversely affect the Company's revenues and
earnings. Any adverse determination in such litigation could also subject the
Company to significant liabilities.
 
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECTS ON FUTURE MARKET PRICE
 
    Sales of substantial amounts of Common Stock in the public market following
this offering could adversely affect the market price of the Common Stock. The
number of shares of Common Stock available for sale in the public market is
limited by restrictions under the Securities Act of 1933, as amended (the
"Securities Act"). In addition, all holders of outstanding shares of Common
Stock have agreed not to sell or otherwise dispose of any of their shares for a
period of 180 days after the date of this Prospectus. Morgan Stanley & Co.
Incorporated may at its sole discretion and at any time without notice release
all or any portion of these securities subject to such lock-up agreements. In
addition to the          shares of Common Stock to be sold in this offering,
there will be 20,874,779 shares of Common Stock outstanding as of the date of
this Prospectus (assuming no exercise of the Underwriters' over-allotment
option). All of these shares are "restricted" shares under the Securities Act.
As a result of the lock-up agreements described above and the provisions of
Rules 144(k), 144 and 701, the restricted shares will be available for sale in
the public market as follows: (i) no shares will be eligible for immediate sale
on the date of this Prospectus and (ii) approximately 18,447,659 shares
(excludes approximately 2,693,361 shares subject to repurchase by the Company
and includes approximately 255,241 shares subject to outstanding vested options
and 11,000 shares subject to an outstanding warrant) will be eligible for sale
180 days after the date of this Prospectus upon expiration of lock-up
agreements.
 
    In addition, the Company intends to file a registration statement on Form
S-8 with respect to the shares of Common Stock issuable upon exercise of options
under the Company's option plans. The Company's option plans together authorize
the issuance of options to purchase 9,040,000 shares of Common Stock. As of
March 31, 1998, there were options to purchase 3,554,862 shares of Common Stock
that have been issued under such option plans. Upon filing of the Form S-8
registration statement, the holders of such options may, subject to vesting
requirements, exercise and sell their shares immediately without restriction,
except for affiliates who are subject to certain volume limitations and manner
of sale requirements under Rule 144. Upon completion of this offering, the
holders of approximately 14,037,500 shares of Common Stock will be entitled to
certain rights with respect to registration of such shares under the Securities
Act. If such holders cause a large number of securities to be registered and
sold in the public market after the lock-up agreements expire, such sales could
cause the market price for the Common Stock to decline. See "Description of
Capital Stock--Registration Rights," "Shares Eligible for Future Sale" and
"Underwriters."
 
DILUTION IN NET TANGIBLE BOOK VALUE; ABSENCE OF DIVIDENDS
 
    Purchasers participating in this offering will experience immediate and
substantial dilution in the net tangible book value of the Common Stock from the
assumed initial public offering price of $    a share. Additional dilution is
likely to occur upon the exercise of any options and warrants that the Company
has granted. The Company has never paid dividends and does not expect to pay
dividends in the foreseeable future. See "Dilution" and "Dividend Policy."
 
                                       18

<PAGE>

                                USE OF PROCEEDS
 
    The net proceeds to the Company from the sale of       shares of Common
Stock offered hereby are estimated to be $   million ($   million if the
Underwriters' over-allotment option is exercised in full), at an assumed initial
public offering price of $   per share after deducting underwriters' discounts
and commissions and estimated offering expenses payable by the Company.
 
    The Company anticipates using approximately $    million of the net proceeds
from this offering for research and development of its products, including
clinical trials, approximately $    million for manufacturing scale-up, $
million for expansion of marketing and sales capabilities and $5.0 million as a
partial payment of license fees due under an exclusive license with IBM. The
balance of the net proceeds will be used for working capital and general
corporate purposes. The amounts and timing of the expenditures for these
purposes may vary significantly depending on numerous factors, such as the
progress of the Company's research and development efforts, including the
progress and scope of clinical trials, actions related to regulatory matters,
technological advances, determinations as to commercial potential and the status
of competitive products. In addition, the Company's research and development
expenditures will vary as projects are added, extended or terminated. The
Company may also use a portion of such net proceeds to acquire or invest in
businesses, products and technologies that are complementary to those of the
Company, although no such acquisitions are planned or being negotiated as of the
date of this Prospectus, and no portion of the net proceeds has been allocated
for any specific acquisition.
 
    The Company believes that its available cash, cash equivalents, short-term
investments, together with the net proceeds of this offering and the interest
thereon, will be sufficient to meet its capital requirements at least for the
next 12 months. Pending application of the net proceeds as described above, the
Company intends to invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
 

                                DIVIDEND POLICY
 
    The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain earnings for use in the operation and expansion of
its business, and therefore does not anticipate paying any cash dividends in the
foreseeable future.
 
                                       19

<PAGE>

                                 CAPITALIZATION
 
    The following table sets forth the capitalization of the Company as of March
31, 1998, (i) on an actual basis and (ii) as adjusted to give effect to the sale
of       shares of Common Stock offered by the Company hereby at an assumed
initial public offering price of $   per share (after deducting underwriting
discounts and commissions and estimated offering expenses payable by the
Company), the conversion of all outstanding Preferred Stock into Common Stock
and the authorization of 10,000,000 shares of undesignated Preferred Stock and
75,000,000 shares of Common Stock upon the closing of this offering.
 

<TABLE>
<CAPTION>
                                                                    AS OF MARCH 31, 1998
                                                                   ----------------------
                                                                    ACTUAL    AS ADJUSTED
                                                                   ---------  -----------
                                                                       (IN THOUSANDS)
<S>                                                                <C>        <C>
Capital lease obligations, noncurrent............................  $   1,297   $   1,297
Stockholders' equity:
  Convertible Preferred Stock, $0.001 par value; 15,000,000
    shares authorized, 14,037,500 shares issued and outstanding,
    actual; 10,000,000 shares authorized, none issued and
    outstanding, as adjusted.....................................         14      --
  Common Stock, $0.001 par value; 35,000,000 shares authorized,
    6,837,279 shares issued and outstanding, actual; 75,000,000
    shares authorized,       shares issued and outstanding, as
    adjusted (1).................................................          7
  Additional paid-in capital.....................................     57,450
  Deferred compensation..........................................     (2,185)     (2,185)
  Deficit accumulated during the development stage...............    (35,304)    (35,304)
                                                                   ---------  -----------
    Total stockholders' equity...................................     19,982
                                                                   ---------  -----------
      Total capitalization.......................................  $  21,279   $
                                                                   ---------  -----------
                                                                   ---------  -----------
</TABLE>

 
- ---------
 
(1) Based on the number of shares outstanding on March 31, 1998. Excludes (i)
    977,250 shares of Common Stock issuable upon exercise of options outstanding
    at a weighted average exercise price of $0.99 per share, (ii) an aggregate
    of 785,138 shares available for future grants or purchases pursuant to the
    Company's 1996 Equity Incentive Plan and (iii) 11,000 shares issuable upon
    exercise of a warrant outstanding at an exercise price of $5.00 per share.
    In April 1998, an additional 4,700,000 shares were reserved for future
    grants or purchases pursuant to the Company's 1998 Equity Incentive Plan,
    1998 Employee Stock Purchase Plan and 1998 Non-Employee Directors' Stock
    Option Plan.
 
                                       20

<PAGE>
                                    DILUTION
 
    The pro forma net tangible book value of the Company, as of March 31, 1998
was $20.0 million or $0.96 per share of Common Stock. Pro forma net tangible
book value per share represents the amount of total tangible assets less total
liabilities divided by the number of shares of Common Stock outstanding at that
date. After giving effect to the sale by the Company of the       shares of
Common Stock being offered hereby at an assumed initial public offering price of
$   per share and after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company, the Company's pro forma net
tangible book value as of March 31, 1998, would have been $      or $   per
share. This represents an immediate increase in pro forma net tangible book
value of $   per share to existing stockholders and an immediate dilution of
$   per share to new public investors. The following table illustrates this per
share dilution:
 

<TABLE>
<S>                                                               <C>        <C>
Assumed initial public offering price per share.................             $
                                                                             ---------
  Pro forma net tangible book value per share at March 31,
    1998........................................................  $    0.96
  Increase per share attributable to new public investors.......
                                                                  ---------
Pro forma net tangible book value per share after offering......
                                                                             ---------
Dilution per share to new public investors......................             $
                                                                             ---------
                                                                             ---------
</TABLE>

 
    The following table summarizes, on a pro forma basis as of March 31, 1998,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
existing stockholders and by the new public investors purchasing shares in this
offering (at an assumed initial public offering price of $   per share and
before deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company):
 

<TABLE>
<CAPTION>
                                                    SHARES PURCHASED      TOTAL CASH CONSIDERATION
                                                 -----------------------  ------------------------  AVERAGE PRICE
                                                    NUMBER      PERCENT      AMOUNT       PERCENT     PER SHARE
                                                 ------------  ---------  -------------  ---------  -------------
<S>                                              <C>           <C>        <C>            <C>        <C>
Existing stockholders..........................    20,874,779%            $  53,531,000%            $
New public investors...........................                                                     $
                                                 ------------  ---------  -------------  ---------
    Total......................................                    100.0% $                  100.0%
                                                 ------------  ---------  -------------  ---------
                                                 ------------  ---------  -------------  ---------
</TABLE>

 
    The foregoing computations assume no exercise of stock options or warrants
after March 31, 1998. As of March 31, 1998, there were outstanding (i) options
to purchase 977,250 shares of Common Stock, at a weighted average exercise price
of $0.99 per share and (ii) a warrant to purchase 11,000 shares of Common Stock
at an exercise price of $5.00 per share. In addition, as of March 31, 1998,
there were an aggregate of 785,138 shares available for future grants or
purchases pursuant to the Company's 1996 Equity Incentive Plan. In April 1998,
an additional 4,700,000 shares were reserved for future grants or purchases
pursuant to the Company's 1998 Equity Incentive Plan, 1998 Employee Stock
Purchase Plan and 1998 Non-Employee Directors' Stock Option Plan. To the extent
that any shares available for issuance upon exercise of outstanding options or
the warrant or reserved for issuance under the Company's stock plans are issued,
there will be further dilution to new public investors.
 
                                       21

<PAGE>
                            SELECTED FINANCIAL DATA
 
    The following selected financial data should be read in conjunction with the
Company's Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus. The statements of operations data for the
period from inception (November 9, 1995) through December 31, 1996 and the year
ended December 31, 1997 and the balance sheet data as of December 31, 1996 and
1997 are derived from financial statements of the Company that have been audited
by Ernst & Young LLP, independent auditors, and are included elsewhere in this
Prospectus. The statements of operations data for the three months ended March
31, 1997 and 1998 and the period from inception (November 9, 1995) to March 31,
1998 are derived from unaudited financial statements included elsewhere in this
Prospectus. The unaudited financial statements have been prepared on the same
basis as the audited financial statements and, in the opinion of management,
contain all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the Company's operating results and
financial position for such periods. The Company's operating results are not
necessarily indicative of the results to be expected for any other interim
period or any future year. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
 

<TABLE>
<CAPTION>
                                                     PERIOD FROM                                       PERIOD FROM
                                                      INCEPTION                                         INCEPTION
                                                    (NOVEMBER 9,                  THREE MONTHS ENDED   (NOVEMBER 9,
                                                      1995) TO      YEAR ENDED        MARCH 31,          1995) TO
                                                    DECEMBER 31,   DECEMBER 31,  --------------------   MARCH 31,
                                                       1996(1)         1997        1997       1998         1998
                                                    -------------  ------------  ---------  ---------  ------------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                 <C>            <C>           <C>        <C>        <C>
STATEMENTS OF OPERATIONS DATA:
Operating costs and expenses:
  Research and development........................    $   2,934     $   14,282   $   1,793  $   6,764   $   23,980
  General and administrative......................          951          4,434         686      1,627        7,012
  Technology license..............................       --              6,000      --         --            6,000
                                                    -------------  ------------  ---------  ---------  ------------
    Total operating costs and expenses............        3,885         24,716       2,479      8,391       36,992
                                                    -------------  ------------  ---------  ---------  ------------
Loss from operations..............................       (3,885)       (24,716)     (2,479)    (8,391)     (36,992)
Interest income, net..............................          198          1,114          70        376        1,688
                                                    -------------  ------------  ---------  ---------  ------------
Net loss..........................................    $  (3,687)    $  (23,602)  $  (2,409) $  (8,015)  $  (35,304)
                                                    -------------  ------------  ---------  ---------  ------------
                                                    -------------  ------------  ---------  ---------  ------------
Pro forma net loss per share......................                  $    (1.85)             $   (0.47)
                                                                   ------------             ---------
                                                                   ------------             ---------
Shares used in computing pro forma
  net loss per share..............................                      12,730                 17,207
                                                                   ------------             ---------
                                                                   ------------             ---------
</TABLE>

 

<TABLE>
<CAPTION>
                                                                                    AS OF DECEMBER 31,
                                                                                   --------------------  AS OF MARCH
                                                                                     1996       1997      31, 1998
                                                                                   ---------  ---------  -----------
                                                                                            (IN THOUSANDS)
<S>                                                                                <C>        <C>        <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments................................  $   1,494  $  32,674   $  26,303
Working capital..................................................................      1,045     25,424      17,792
Total assets.....................................................................      2,289     35,674      30,107
Capital lease obligations, noncurrent............................................     --            897       1,297
Deficit accumulated during the development stage.................................     (3,687)   (27,289)    (35,304)
Total stockholders' equity.......................................................      1,770     27,331      19,982
</TABLE>

 
- ----------
 
(1) The Company's statement of operations data for the period from inception
    (November 9, 1995) to December 31, 1995 is not presented separately as the
    Company's operations during that period were not material.
 
                                       22

<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
    THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN
THIS PROSPECTUS. THE COMPANY ASSUMES NO OBLIGATION TO UPDATE FORWARD-LOOKING
STATEMENTS OR SUCH RISK FACTORS. THE FOLLOWING DISCUSSION SHOULD BE READ IN
CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED
ELSEWHERE IN THIS PROSPECTUS.
 
OVERVIEW
 
    Since its inception in November 1995, the Company has been engaged in the
development of products that are designed to provide the flexibility of open
surgery while operating through ports. The Company believes that MIS surgery
decreases patient trauma and postoperative pain and reduces surgical
complications, length of hospital stay and total treatment costs. The Company is
a development-stage company, has generated no revenue from product sales and has
experienced significant operating losses. As of March 31, 1998, the Company had
an accumulated deficit of $35.3 million. To date, the Company has engaged
primarily in researching, developing, testing and pursuing regulatory clearances
for its products. The Company's headcount was 23, 86 and 100 as of December 31,
1996 and December 31, 1997 and March 31, 1998, respectively. The Company expects
to expend substantial additional funds, increase headcount and continue to incur
significant operating losses for the foreseeable future as it continues to fund
clinical trials in support of regulatory approvals, expands research and
development activities, establishes commercial-scale manufacturing capabilities
and expands sales and marketing activities.
 
    To date, the Company has obtained clearance from the FDA to market its
surgeon's console, patient-side cart and certain blunt resposable instruments.
The Company has not obtained clearance or approval from the FDA to market
certain other resposable instruments necessary for performing most surgical
procedures, including scissors, scalpels, forceps/pickups, needle holders, clip
appliers and electrocautery. The Company has submitted an application to the FDA
for clearance or approval of such instruments; however, substantial clinical
data is required before the FDA will consider giving such clearance or approval.
The Company will not generate any significant revenue in the United States until
such time, if ever, as these instruments obtain FDA clearance or approval. In
addition, the Company will not generate any significant revenue from
international sales until the Company receives comparable international
regulatory approvals. Even if the Company obtains such United States or foreign
clearance or approval, there can be no assurance that the Company will be
capable of manufacturing its products in commercial quantities at acceptable
costs or that its products will be successfully commercialized or will achieve
market acceptance. See "Risk Factors--Uncertainty of Market Acceptance; Training
Requirements," "--Need for Federal and State Regulatory Clearance or Approval"
and "Business--Government Regulation."
 
    The Company expects that its research and development expenses will increase
substantially as the Company continues developing its products and conducts
clinical trials. In addition, the Company does not have any experience in
manufacturing any products in commercial quantities and has no experience in
marketing or selling such products. If the Company receives FDA clearance or
approval, it will need to expend significant capital resources and develop
manufacturing expertise to establish large-scale manufacturing capabilities.
This investment is likely to result in low margins, if any, in its initial
manufacturing phase. Furthermore, manufacturers often encounter difficulties in
scaling up production of new products, including problems involving production
yields, quality control and assurance, component supply shortages, shortages of
qualified personnel, compliance with FDA regulations and the need for further
FDA approval of new manufacturing processes. In addition, if FDA clearances or
approvals are received, the Company intends to market its products primarily
through a direct sales force in the United States and internationally.
Establishing a marketing and direct sales capability sufficient to support sales
in
 
                                       23

<PAGE>
commercial quantities will require substantial efforts and require significant
management and financial resources which is likely to result in a substantial
increase in general and administrative expenses over historical amounts. See
"Risk Factors--Limited Manufacturing Experience; Scale-Up Risk," "--Limited
Sales, Marketing and Distribution Experience," "Business--Marketing and
Distribution" and "-- Manufacturing."
 
RESULTS OF OPERATIONS
 
    THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED MARCH
     31, 1997
 
    RESEARCH AND DEVELOPMENT.  Research and development expenses include costs
associated with product research, prototype development, clinical trials,
purchase of laboratory supplies, pursuing regulatory approvals and compensation
and other overhead costs associated with regulatory, clinical and engineering
personnel. In addition, manufacturing startup costs are included in research and
development during the development stage of the Company. Research and
development expenses increased to $6.8 million for the three months ended March
31, 1998 from $1.8 million for the three months ended March 31, 1997. This
increase was primarily attributable to increased costs associated with the
hiring of additional engineering, regulatory and clinical personnel and
increased prototype development and production costs. The Company believes that
research and development expenditures will increase in the future as the Company
invests in further developing its products, expands clinical research activities
and increases its research and development efforts related to new products and
technologies.
 
    GENERAL AND ADMINISTRATIVE.  General and administrative expenses include
payroll and personnel expenses for sales, marketing, senior management and
administrative personnel, legal and professional fees for patent and other
matters and marketing materials. General and administrative expenses increased
to $1.6 million for the three months ended March 31, 1998 from $686,000 for the
three months ended March 31, 1997. The increase was primarily attributable to
the costs related to expansion of administrative, finance, information systems,
sales and marketing functions and increased legal and professional fees related
to the filing and registration of the Company's patents. General and
administrative expenses are expected to increase in the future to support the
Company's expanding business activities and the additional costs expected to be
incurred as a publicly-traded company.
 
    DEFERRED COMPENSATION.  The Company recorded deferred compensation
representing the difference between the exercise price of options granted and
the deemed fair market value of its Common Stock at the time of grant for
financial reporting purposes. Deferred compensation of approximately $4.1
million was recorded through March 31, 1998, of which approximately $1.9 million
has been amortized to research and development expense and general and
administrative expense and $2.2 million will be amortized over the remaining
vesting periods of the options, generally four years from the date of grant.
 
    INTEREST INCOME, NET.  Net interest income increased to $376,000 for the
three months ended March 31, 1998 from $70,000 for the three months ended March
31, 1997. The increase resulted from increased interest income earned on higher
average cash, cash equivalent and short-term investment balances as a result of
sales of equity securities of the Company, partially offset by interest expense
in connection with increased equipment lease financing.
 
    NET LOSS.  The Company recognized net loss of $8.0 million and $2.4 million
for the three months ended March 31, 1998 and 1997, respectively.
 
    YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE PERIOD FROM INCEPTION (NOVEMBER
     9, 1995) TO DECEMBER 31, 1996
 
    RESEARCH AND DEVELOPMENT.  Research and development expenses increased to
$14.3 million in 1997 from $2.9 million in 1996. The increase in research and
development expenses was primarily attributable to increased payroll and
personnel expenses for additional regulatory, clinical and engineering personnel
for
 
                                       24

<PAGE>
the design, development and testing of the Company's products, increased
purchases of laboratory supplies, increased equipment and leasehold improvement
depreciation, increased facilities expenses associated with the Company's move
to its present facility and increased costs related to the manufacture of
prototype systems to be placed at clinical sites in the United States and
Europe.
 
    GENERAL AND ADMINISTRATIVE.  General and administrative expenses increased
to $4.4 million in 1997 from $1.0 million in 1996. The increase in general and
administrative expenses was primarily attributable to increased personnel costs
as the Company established and expanded the finance, information systems, sales
and marketing, and human resource functions, increased costs associated with
facilities and related services supporting expanding operations and increased
legal and professional fees in connection with the filing and registration of
the Company's patents.
 
    TECHNOLOGY LICENSE.  Technology license expense of $6.0 million was
recognized in 1997 in conjunction with the execution of the IBM License in
December 1997. In conjunction with the execution of the IBM License, a payment
of $1.0 million was made in December 1997. The IBM License also provides that
the Company pay an additional $5.0 million within 10 days after the closing of
the first underwritten public offering of the securities of the Company but in
any event not later than September 1, 1998, which date may be extended until
October 1, 1998, upon a showing of good cause by the Company. See Note 6 of
Notes to Financial Statements.
 
    INTEREST INCOME, NET.  Net interest income increased to $1.1 million in 1997
from $198,000 in 1996. The increase resulted from increased interest income
earned on higher average cash, cash equivalent and short-term investment
balances, partially offset by increased interest expense in connection with
increased equipment lease financing.
 
    NET LOSS.  The Company recognized net losses of $23.6 million and $3.7
million in 1997 and 1996, respectively.
 
    NET OPERATING LOSS AND RESEARCH TAX CREDIT CARRYFORWARDS.  As of December
31, 1997, the Company's reported net operating loss carryforwards were
approximately $13.1 million and $12.5 million for federal and state income tax
purposes, respectively. The Company's federal and state research tax credit
carryforwards were approximately $900,000. The state and federal net operating
loss carryforwards will expire at various dates from 2004 through 2012 if not
utilized. The utilization of such carryforwards may be subject to a substantial
annual limitation due to the "change in ownership" provisions of the Internal
Revenue Code of 1986, as amended, and similar state provisions. The annual
limitation may result in the expiration of net operating losses before
utilization.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    Since inception, the Company has financed its operations primarily through
sales of Preferred Stock yielding net proceeds of approximately $52.3 million,
and equipment lease financing arrangements yielding approximately $2.0 million.
As of March 31, 1998, the Company had cash, cash equivalents and short-term
investments of $26.3 million and working capital of $17.8 million.
 
    Net cash used in operating activities was approximately $3.1 million, $14.9
million and $6.1 million in 1996 and 1997 and the three months ended March 31,
1998, respectively. For such periods, net cash used in operating activities
resulted primarily from net losses.
 
    Net cash used in investing activities was approximately $898,000, $18.4
million and $4.0 million in 1996 and 1997 and the three months ended March 31,
1998, respectively. The net cash used in investing activities was attributable
to capital expenditures and the purchase of short-term investments. The Company
currently has no material purchase commitments for capital expenditures.
 
    Net cash provided by financing activities was approximately $5.5 million,
$48.9 million and $700,000 in 1996 and 1997 and the three months ended March 31,
1998, respectively. The net cash provided by
 
                                       25

<PAGE>
financing activities was primarily attributable to the sale of Preferred Stock
and proceeds from the Company's equipment lease financing arrangement.
 
    As of March 31, 1998, the Company had capital equipment of $4.6 million less
accumulated depreciation of $1.1 million to support its clinical, research,
development, manufacturing and administrative activities. The Company has
financed approximately $2.0 million from capital lease obligations through March
31, 1998. The Company expects capital expenditures to increase over the next
several years as it expands facilities and acquires equipment to support the
planned expansion of manufacturing capabilities.
 
    The Company's future liquidity and capital requirements will increase,
depending upon numerous factors, including the extent of the Company's future
operating losses, the level and timing of future revenues and expenditures, the
progress of its product development efforts, the progress and scope of clinical
trials, actions relating to regulatory matters, the costs and timing of
expansion of product development, manufacturing and sales and marketing
activities, the extent to which its products gain market acceptance, the price
of the Company's products and competitive developments. Although the Company
believes that the proceeds from this offering together with interest income and
current cash balances will be sufficient to meet the Company's operating and
capital requirements for at least the next 12 months, there can be no assurance
that the Company will not require additional financing sooner. The Company's
forecast of the period of time through which its financial resources will be
adequate to support its operations is a forward-looking statement that involves
risks and uncertainties, and actual results could vary. The Company's belief is
based on its current operating plan, which could change in the future and
require additional funding sooner than anticipated. Even if the Company has
sufficient cash for its current operating plan, it may seek to raise additional
capital because of favorable market conditions or other strategic factors. In
addition to the increasing operating expense, if the Company meets its current
revenue plan, working capital requirements will also increase substantially for
the foreseeable future. The Company may be required to raise additional funds
through public or private financing or other arrangements. There can be no
assurance that such additional funding, if needed, will be available on terms
attractive to the Company, or at all. Furthermore, any additional equity
financing may be dilutive to stockholders, and debt financing, if available, may
involve restrictive covenants. The failure of the Company to raise capital when
needed could have a material adverse effect on the Company's business, financial
position and results of operations. See "Risk Factors--Possible Future Capital
Requirements."
 
YEAR 2000 COMPLIANCE
 
    The widespread use of computer programs that rely on two-digit date programs
to perform computations and decision-making functions may cause computer systems
to malfunction in the year 2000 and lead to significant business delays and
disruptions. Intuitive has addressed the issue of year 2000 compliance in both
its internal information systems and its products. Based upon its design and
testing to date, the Company believes that it is fully year 2000 compliant. The
Company has made inquiries regarding the year 2000 issue of its significant
suppliers. Based upon such inquiries and a review of the Company's systems, the
Company does not believe year 2000 issues will have a material adverse impact
upon its business. However, there can be no assurance that this will be the
case.
 
                                       26

<PAGE>

 
                                   BUSINESS
 
INTRODUCTION
 
    Intuitive designs and manufactures proprietary products which it believes
represent a fundamentally new generation of technology for surgery. This new
generation of surgery, INTUITIVE surgery, is believed by the Company to
represent an advance similar in scope to the previous two generations of
surgery--open surgery and minimally invasive ("MIS") surgery. The Company's
technology seamlessly translates the surgeon's natural hand movements on
instrument handles at a console into corresponding micro-movements of
instruments positioned inside the patient through small puncture incisions, or
"ports." Intuitive believes that its technology provides the surgeon with the
range of motion and fine tissue control possible with open surgery, while
simultaneously allowing the surgeon to work through the ports of MIS surgery.
 
    Although open surgery is still commonly performed and is used in almost
every area of the body, the large incisions required create significant trauma
to the patient, resulting in long hospitalization and recovery times, high
hospitalization costs, as well as significant pain and suffering. Over the past
several decades, MIS surgery has reduced trauma to the patient by allowing
surgery through ports rather than large incisions, resulting in shorter recovery
times and reduced hospitalization costs. MIS surgery has been widely adopted in
certain surgical procedures, but it has not been widely adopted for complex
procedures. The Company believes this slow adoption for complex procedures has
occurred because surgeons generally find MIS operative techniques more difficult
to learn and perform and less precise than open surgery for fine tissue
manipulations such as dissecting and suturing. Factors that make MIS techniques
more difficult or less precise include backward instrument movements, restricted
range of motion, magnified hand tremors, exaggerated instrument movements and
poor visualization.
 
    INTUITIVE surgery overcomes many of the limitations of existing MIS surgery
by utilizing a broad technology platform consisting of computer hardware,
software, algorithms, mechanics and optics to perform fine tissue manipulation
through ports in many parts of the body. Using Intuitive's technology, surgeons
perform surgical procedures while seated comfortably at a console viewing a 3-D
image of the surgical field. The surgeon's hands grasp the instrument handles
below the display in their normal orientation with respect to the surgeon's
eyes, and the Company's technology seamlessly translates these movements into
precise real-time microsurgical movements of electromechanical arms and
instruments inside the patient. The Company's technology is also designed to
give surgeons the perception that their hands are inside the patient, directly
holding instruments--even though their hands are outside--and to give surgeons
the perception that the surgical field is being directly visualized instead of
being viewed through an endoscope.
 
    An important advantage of the Company's technology is that surgeons can
learn to manipulate Intuitive's instruments with only a few minutes of training,
allowing surgeons to focus on the clinical procedure. When performing procedures
that the surgeon has previously performed only with open surgical techniques,
the Company believes that the surgeon will have to learn where to place ports
and how to approach the operation but will generally not have to relearn how to
perform basic tissue manipulations. The Company believes that tissue
manipulations using its products can be as natural to the surgeon as hand
movements in open surgery. As a result, the Company believes its products will
make a broad range of open surgical procedures suitable for INTUITIVE surgery,
with significantly less patient trauma and post-operative pain and shorter
recovery times.
 
    The Company's strategy is to focus initially on the cardiac surgery market
because (i) there are a large number of procedures concentrated in a small
number of hospitals that can be targeted by a focused sales force and field
organization, (ii) while approaches to these procedures have been developed that
are somewhat less invasive than open surgery, they are difficult and only
account for a small minority of cardiac surgery procedures being performed and
(iii) no existing technology is able to accomplish a full cardiac procedure
through ports. The Company believes that its technology can help surgeons
accomplish
 
                                       27

<PAGE>
cardiac surgery procedures more easily, more accurately and with less trauma to
the patient than existing approaches. Cardiac surgery procedures are among the
most precise and demanding in all of surgery. As such, the Company believes that
if its technology is adopted for cardiac surgery, surgeons will gain confidence
that Intuitive's technology also can be used for less demanding procedures in
general and other surgery.
 
    The Company plans to derive its revenues from the direct sale of two types
of interlinked proprietary products (i) a surgeon's console and a patient-side
cart which holds the electromechanical arms and (ii) a range of "resposable"
instruments such as scissors, forceps and electrocautery. The resposable
instruments are resterilizable and the number of procedures that each instrument
can perform is controlled by a proprietary electronic interlock. This feature
will allow the Company to limit the number of uses of each instrument to less
than its tested usage so that the instrument's performance meets specifications
during each procedure. By defining the number of uses for each instrument, the
Company can effectively price its resposable instruments on a per-procedure
basis.
 
    Intuitive believes that it is the first mover in third generation surgery.
In March 1997, surgeons using Intuitive's technology successfully performed what
the Company believes to be the initial third generation surgery on humans.
Intuitive believes that its development efforts represent the largest effort
devoted to third generation surgery of any company in the world today. Intuitive
owns or has licensed 38 issued and 8 allowed patents, including patents from SRI
International and IBM, companies which in the late 1980s were early pioneers in
the research of third generation surgery.
 
BACKGROUND
 
    The Company believes that there are three fundamental generations of
surgical techniques (1) open surgery, which began its modern era in the 19th
century, (2) minimally invasive surgery, also known as MIS surgery, which has
developed over the past several decades, and (3) INTUITIVE surgery, which the
Company is in the process of developing. Each generation of surgery has been
enabled by the development of an important technology or set of related
technologies.
 
    FIRST GENERATION: OPEN SURGERY
 
    While surgery in one form or another has been practiced since the beginning
of recorded history, modern open surgical technique was enabled in the second
half of the 19th century because of the fusion of two breakthrough technological
developments: anesthesia, developed beginning in the 1840s, and sterile
technique, developed in the 1870s.
 
    Using open surgical techniques, a surgeon generally creates an incision in
the body large enough to allow both direct visualization of the operating field
and the insertion of at least two human hands to manipulate the patient's
tissues. Many different types of hand-held instruments such as the scalpel,
needle driver, retractor and clamp have been developed to enable the surgeon to
manipulate tissue precisely in almost every area of the body, and to accomplish
complicated movements such as suturing.
 
    The large incisions generally used in open surgery create very significant
trauma to the patient, resulting in long hospitalization and recovery times,
high hospitalization costs, as well as significant pain and suffering. However,
because the human hand has an extremely wide range of motion and can grip open
surgical instruments near their tips to allow very precise and natural tissue
manipulations, open surgical technique is generally the most precise and the
easiest technique for the surgeon to perform. Despite the trauma and other
drawbacks of open surgery, a significant number of the surgical procedures in
the United States are open surgical procedures.
 
                                       28

<PAGE>
    SECOND GENERATION: MINIMALLY INVASIVE SURGERY
 
    Minimally invasive surgical techniques have evolved over the past several
decades. The objective of MIS surgery is to substantially reduce trauma to the
patient by making small puncture incisions, or "ports," generally resulting in
shorter hospitalization and recovery times, reduced hospitalization costs and
substantially less pain and suffering.
 
    While a number of new technologies have enabled the growth of MIS surgical
procedures, the most fundamental have been (i) the development of endoscopes for
viewing a surgical field through a small incision and (ii) the development of
long, hand-held instruments that can manipulate tissues through ports.
 
    The long hand-held instruments generally used in MIS surgery are inserted
into the patient through ports, which are approximately ten millimeters in
diameter. These ports are created in the abdominal wall, chest wall, or other
areas of the body in locations designed to provide access to the organs on which
the surgeon intends to operate. Thus, the six to twelve inch incision (15 to 30
centimeters) typically required for open surgery is replaced with three or more
ports, each of approximately ten millimeters in diameter. Through the ports,
surgeons insert an endoscope through which they visualize the operation via a
television monitor. They also insert a variety of instruments through these
ports which surgeons use to perform the operation and manipulate tissue.
 
    The instruments used for MIS surgery typically have a tip which is similar
to the corresponding tip of an instrument used in open surgery, such as a
forceps or scissors. The tip is connected to a 15 to 18 inch tube (35 to 45
centimeters), which is connected to a handle. To perform the procedure, the
surgeon inserts the instrument through the port and manipulates the handle from
the outside of the patient's body.
 
    EXISTING LIMITATIONS OF MINIMALLY INVASIVE SURGERY.  The Company believes
that surgeons generally find MIS surgical techniques more difficult to learn and
perform than open surgery for reasons that include the following:
 
    "BACKWARD" INSTRUMENT MOVEMENTS.  Existing MIS instruments are essentially
long rigid levers which rotate around a fulcrum located at the port created in
the body wall. As a result, the "working end" of the instrument moves in the
opposite direction from the hand of the surgeon. For example, to move the
working end left, surgeons move the instrument handle to the right; to move the
working end up, surgeons move the instrument handle down. Surgeons must relearn
their hand-eye coordination to translate this backward environment into the
required instrument movements.
 
    RESTRICTED MOTIONS.  Existing MIS instruments provide surgeons less
flexibility, dexterity and range of motion than their own hands which are used
in an open surgical procedure. For example, MIS instruments in widespread use
today have no joints near their tips to provide the MIS-equivalents of the
real-time wrist motions used throughout open surgery to perform manipulations
such as reaching behind tissue and suturing. As a result, surgeons performing
MIS surgery with existing technology find it difficult to perform certain
necessary tissue manipulations through ports, such as fine dissection or
suturing.
 
    MAGNIFIED TREMORS AND EXAGGERATED INSTRUMENT MOVEMENTS.  In open surgery,
the instruments are held near their tips, allowing fine movements of the
surgeon's hands to be directly translated into fine movements of the
instruments. However, the lever arm of the 15 to 18 inch instruments (35 to 45
centimeters) used in MIS procedures magnifies the surgeon's hand movements
making fine tissue manipulation substantially more difficult. As a result, the
inherent tremor in a surgeon's hands is magnified, and the exaggerated motor
movements caused by MIS instruments make fine tissue manipulation more difficult
for the surgeon.
 
    POOR VISUALIZATION.  The video image from the endoscope is usually displayed
on a video monitor. The surgeon typically must look up and away from the patient
and the plane of the instruments to view the monitor. This can give the MIS
surgeon a feeling of being disconnected from the surgical field and the
instruments. In addition, most endoscopes currently being used give the surgeon
a two-dimensional image.
 
                                       29

<PAGE>
Although three-dimensional endoscopes exist, they typically have less resolution
and lower brightness than two-dimensional endoscopes, making it more difficult
for the surgeon to visualize fine structures.
 
    For these reasons, as well as others, using existing MIS techniques and
associated hand-held MIS instruments is generally less precise and more
difficult for the surgeon than using open surgical techniques. This can be
illustrated by the current status of surgical techniques used to perform
coronary artery bypass graft procedures ("CABG").
 
    In a CABG procedure, a blocked coronary artery is bypassed with a graft.
When available, an artery from the chest called the internal mammary artery
("IMA") is dissected from its natural position and grafted into place to perform
the bypass. When the IMA is not available, a saphenous vein from the leg is used
instead. The suturing of the graft to the coronary artery requires extremely
precise tissue manipulations, culminating in an "anastomosis"--the suturing of
the graft to the coronary artery to create near-perfect blood flow through the
graft and past the blockage in the coronary artery.
 
    In the past several years, a number of companies have devoted considerable
resources to developing devices that help convert open CABG procedures with
approximately twelve inch incisions (30 centimeters) into procedures with three
to five inch incisions (seven to twelve centimeters) ("Modified CABG"). Some of
these devices facilitate procedures where the heart is stopped through a
catheter-accessed heart-lung bypass system, while others facilitate procedures
where the heart is allowed to remain beating. Although these companies have made
significant progress with Modified CABG both technically and in the marketplace,
clinicians today generally perform a small portion or none of these procedures
using ports. Generally, the port-based instruments available today lack the
dexterity required to perform complex surgery of this nature. Instead, surgeons
performing these new types of cardiac procedures generally make a three to five
inch incision (seven to twelve centimeters) between the ribs. They then
generally spread the incision and ribs with a device known as a retractor. Under
direct visualization through this retracted incision, surgeons can perform
anastomoses to bypass blocked arteries using modified versions of the
instruments used in open CABG surgery.
 
    Because Modified CABG creates a substantial incision during part of the
procedure, it does not offer the patient the full benefits of an operation
completed through ports. Furthermore, these substantial incisions do not give
the surgeon as much access to certain tissues as is available in open CABG
surgery. This restricted access and other factors can make Modified CABG
relatively longer and more difficult to perform with precision than open CABG
surgery. In addition, the anastomoses between the grafts and the coronary
arteries are often more difficult to perform with Modified CABG than in open
surgery. This difficulty can cause concern among some surgeons because a
successful CABG procedure generally depends on the quality and precision of the
anastomoses.
 
    Although some CABG procedures have been converted from open surgery to
Modified CABG and although similar changes have been made to other cardiac
procedures (collectively, "Modified Cardiac Surgery"), the conversion rate has
been slower than originally forecast. The Company believes that two important
factors account for the relatively slow conversion rate (i) surgeons generally
find that the existing MIS approaches are more difficult to learn and perform
than open cardiac surgery and (ii) patient demand for and benefits from Modified
Cardiac Surgery are not as substantial as they would be for fully ported cardiac
surgeries. A significant portion of the difficulty surgeons have in performing
Modified Cardiac Surgery derives from the need to perform fine tissue
manipulations such as dissection and anatomosis in the restricted space that the
three to five inch incisions (seven to twelve centimeters) provide. However,
some of the technology used in these approaches may be important to use together
with the Company's products, and the Company believes its technology will be
compatible with both beating heart and stopped-heart approaches to performing
CABG procedures.
 
    MIS PROCEDURE CONVERSION RATES.  Despite the limitations of existing MIS
techniques, a number of procedures are routinely performed as MIS procedures.
For example, laparoscopic cholecystectomy (removal of the gallbladder through
ports) could be learned by most surgeons after a moderate amount of retraining,
in part because of the anatomical location of the gallbladder and the relatively
gross tissue
 
                                       30

<PAGE>
manipulations required. In the late 1980s and early 1990s, laparoscopic
cholecystectomy grew from a newly-introduced procedure to the "standard of care"
in the United States over approximately three years. Last year only 15% of
cholecystectomies were performed using open surgical techniques in the United
States. The Company believes that the limitations of MIS techniques did not
prevent the rapid conversion to laparoscopic cholecystectomy because large
numbers of surgeons could learn to perform the relatively simple tissue
manipulations with confidence. The conversion to laparoscopic cholecystectomy
was rapid because of reduced hospital stays, surgeon acceptance and patient
preference.
 
    The Company believes that the adoption rate of laparoscopic cholecystectomy
has not been replicated with subsequently introduced MIS procedures, despite
substantial patient benefits, because those new MIS procedures have been more
difficult to learn or perform. As a result of these difficulties, some complex
surgical procedures which are commonly performed using open surgery have not
been adapted to MIS techniques. Other complex surgical procedures, such as
hernia repair or Nissen fundoplication, have been performed by certain surgeons
using MIS techniques. However, the Company believes that these MIS procedures
are not being performed as often, or by as many surgeons, as they could be if
these complex procedures were easier to perform through ports. Surgeons began
performing Modified Cardiac Surgery approximately two years ago, and while such
procedures have established that Modified Cardiac Surgery is possible, more than
95% of cardiac surgery procedures are still performed using open surgery
techniques.
 
    The chart below sets forth the percentage of selected procedures that were
still performed worldwide in 1997 using open surgical techniques:
 
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
 

<TABLE>
<CAPTION>
% PERFORMED USING OPEN SURGICAL TECHNIQUES
<S>                                         <C>               <C>                    <C>            <C>             <C>
Cardiac                                                  96%
Hernia Repair                                            86%
Hysterectomy                                             80%
Gynecology (except Hysterectomy)                         57%
Cholecystectomy                                       35%(1)
                                             Cholecystectomy             Gynecology   Hysterectomy   Hernia Repair    Cardiac
                                                              (except Hysterectomy)
Number of Procedures Performed
Using Open Surgical Techniques:                      631,000              1,442,000        936,000       1,232,000  1,026,000
Total Number of Procedures Performed:              1,804,000              2,540,000      1,170,000       1,430,000  1,065,000
(1) 15% in United States.
Source: Medical Data International, Inc.
</TABLE>

 
                                       31

<PAGE>
    THIRD GENERATION: INTUITIVE SURGERY
 
    Intuitive's technology is designed to return to the surgeon the range of
motion and fine tissue control possible with open surgery, while simultaneously
allowing the surgeon to work through the ports used in MIS surgery. The Company
believes that such fine tissue manipulations are fundamental to many complex
surgical procedures which today are generally performed using open surgery.
Intuitive believes its products will make a broad range of open surgical
procedures newly suitable for minimally invasive approaches, and will increase
the surgeon's confidence and ease of use when performing procedures that have
already been adapted for MIS or Modified Cardiac Surgery. In addition, the
Company's technology may also allow surgeons to perform certain aspects of
surgical procedures with greater precision than is possible with open surgery.
 
    The Company believes that its technology has the potential to change
surgical procedures in three basic ways:
 
    NEW OPERATIONS WILL BE PIONEERED.  A number of surgical procedures that
currently cannot be performed using MIS or modified surgical techniques will be
made suitable for conversion to techniques that use ports.
 
    TODAY'S DIFFICULT MIS OPERATIONS WILL BECOME EASIER AND ROUTINE.  Surgical
procedures that today are performed only rarely using MIS or modified surgical
techniques, by certain surgeons, will be performed routinely and with confidence
through ports using Intuitive's technology.
 
    EXISTING HIGH-VOLUME MIS PROCEDURES WILL BECOME EASIER.  Surgical procedures
that today are performed routinely using MIS techniques will be performed more
quickly and safely with Intuitive's technology.
 
    In designing its products, the Company has focused on making the complexity
of its technology as transparent as possible to the user. The Company's
technology is designed to allow surgeons to perform procedures while seated at a
console, viewing a 3-D image of the surgical field through a high resolution
endoscope and display. The surgeon's hands grasp instrument handles below the
display in their normal orientation with respect to the surgeon's eyes.
Electromechanical arms mounted on a patient-side cart hold the Company's
resposable instruments that perform tissue manipulations, including cutting,
suturing, dissecting and holding tissue. The technology allows the surgeon's
natural hand movements on the instrument handles at the console to be translated
into corresponding micro-movements of the instruments positioned inside the
patient by the electromechanical arms. Further, the technology is designed to
give surgeons the visual perception that their hands are inside the patient,
directly holding the instruments-- even though they are outside--and gives the
perception that the surgical field is being directly visualized instead of being
viewed through an endoscope.
 
    Using sophisticated computer hardware and software, proprietary know-how and
highly specialized microsurgical instruments, Intuitive has designed a broad
technology platform which it believes will allow fine tissue manipulation
through ports across many types of surgeries in many parts of the body, thus
overcoming many of the limitations of current MIS surgery. Most surgery requires
fine tissue manipulations, including blunt or sharp dissection, placement of
clips, staples, electrocautery and suturing. The Company believes that tissue
manipulations using Intuitive's products are as natural as hand movements in
open surgery. In the Company's experience, surgeons can learn to manipulate
Intuitive's instruments with only minutes of training, allowing them to focus on
the clinical procedure itself instead of on relearning how to manipulate tissue
using existing MIS instruments. When surgeons use Intuitive's technology to
perform procedures with which they are already familiar from using MIS or
modified surgical techniques, the Company believes that only a modest amount of
training will be required because the surgeon already knows where to place ports
and how to approach the tissue manipulations required for that procedure. When
performing INTUITIVE surgery that the surgeon has previously performed only with
open surgical techniques, the Company believes that the surgeon will have to
spend a relatively larger
 
                                       32

<PAGE>
amount of time learning where to place ports and how to approach the tissue
manipulations required, but will not have to relearn how to perform basic tissue
manipulations.
 
    Intuitive believes that its technology can overcome many of the limitations
of existing MIS surgery, for the following reasons:
 
    NATURAL INSTRUMENT MOVEMENTS.  Intuitive's technology is designed to
directly transform the surgeon's natural hand movements outside the body into
corresponding micromovements inside the patient's body. For example, a hand
movement to the RIGHT outside the body causes the instrument inside the patient
to be moved to the RIGHT, eliminating the backward nature of existing MIS
surgery.
 
    ENDOWRIST-TM- FLEXIBILITY.  Intuitive's ENDOWRIST technology is designed to
provide surgeons with an instrument with a range of motion analogous to the
human wrist. These ENDOWRISTS are located near the tips of the instruments
inside the patient's body and the surgeon controls them in real-time with
natural wrist movements on the instrument handles outside the patient's body.
This capability is designed to allow surgeons, for example, to reach behind
tissues or suture with precision.
 
    REDUCED TREMORS AND FINER MOTOR MOVEMENTS.  Intuitive's technology is
designed to directly translate the surgeon's hand movements into a 1:1
correspondence INSIDE the body, unlike in existing MIS surgery, where the lever
arms of the 15 to 18 inch instruments (35 to 45 centimeters) can magnify the
surgeon's hand movements. With Intuitive's technology the surgeon can also use
"motion scaling," a feature which translates, for example, a four millimeter
hand movement OUTSIDE the patient's body into a one millimeter instrument
movement INSIDE the patient's body. Motion scaling is designed to allow greater
precision than is normally achievable in open surgery. In addition, Intuitive's
technology is designed to reduce or filter out the inherent tremor in a
surgeon's hands.
 
    IMMERSIVE-TM- 3-D VISUALIZATION.  Intuitive's technology is designed to give
surgeons the perception that their hands and eyes are immersed in the surgical
field even though they are outside the body. As a result, the Company believes
that surgeons will no longer feel disconnected from the surgical field and the
instruments, as they currently do with MIS surgery. IMMERSIVE technology also
includes a 3-D endoscopic visualization system that has substantially higher
contrast and resolution than conventional 3-D endoscopic visualization systems.
 
    The Company believes that these advantages, when integrated together in
Intuitive's products, give the patient the advantages of MIS surgery while
restoring to the surgeon the range of motion and fine tissue control possible
with open surgery.
 
INTUITIVE'S PRODUCTS
 
    The Company plans to derive its revenues from the sale of two types of
interlinked proprietary products (i) a surgeon's console and a patient-side cart
and (ii) a range of "resposable" instruments.
 
    SURGEON'S CONSOLE AND PATIENT-SIDE CART
 
    The surgeon's console consists of a 3-D display that uses high resolution 14
inch monitors, and instrument handles through which the surgeon controls the
procedure. Using Intuitive's technology, a surgeon performs surgical procedures
while seated at the console, viewing a 3-D image of the surgical field. The
surgeon's hands grasp the instrument handles below the display, in their normal
orientation with respect to the surgeon's eyes. Using hardware, software,
algorithms, mechanics and optics contained in the console (as well as in other
components of the system), the technology is designed to seamlessly translate
the surgeon's hand movements to precise real-time microsurgical movements of the
electromechanical arms of the patient-side cart and the resposable instruments
inside the patient. The patient-side cart, which can be moved next to the
operating table, holds electromechanical arms that manipulate instruments inside
the patient. Three arms attached to the cart can be easily positioned, as
appropriate for each part of the surgery, and then locked into place. The first
two arms (one representing the left hand and one the right hand) hold the
Company's resposable instruments containing ENDOWRIST technology, which transmit
precise movements to the instrument tips. The third arm positions the endoscope.
 
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    RESPOSABLE INSTRUMENTS
 
    The Company plans to manufacture a variety of resposable instruments, each
customized for a different range of tissue manipulations used in different
surgical procedures. These resposable instruments are currently approximately
seven millimeters in diameter. The resposable instruments provide the mechanical
capability necessary for performing complex tissue manipulations through a port,
and mount onto the electromechanical arms that represent the left and right
hands. The resposable instruments incorporate ENDOWRIST technology. At their
tips, the various resposable instruments include forceps,
 
scissors, electrocautery, blunt dissectors, and other end effectors that the
Company believes will be readily familiar to the surgeon from open and MIS
surgery. Generally, a variety of resposable instruments will be selected and
used interchangeably during the surgery. Where the instrument tip needs to
incorporate a disposable component (for example, an absorbent swab), a
disposable insert will be provided by the Company.
 
    The resposable instruments are resterilizable and reusable for a defined
number of procedures. A proprietary electronic interlock performs several
functions that help determine how the system and instruments work together. When
a resposable instrument is attached to an arm of the patient-side cart, the
interlock performs an electronic handshake which ensures that the instrument was
manufactured by the Company and recognizes the type and function of the
instrument and number of past uses. For example, the interlock recognizes which
instrument is a scissors and which is a blunt dissector and controls the unique
functions of different instruments as appropriate. In addition, the interlock
will not allow the instrument to be used for more than the prescribed number of
procedures. This feature will help the Company keep the number of uses of the
instrument lower than tested usage life of the resposable so that its
performance is up to specifications during each procedure. In addition, the
Company can sell the instrument for a fixed number of uses and effectively price
its resposable instruments on a per-procedure basis.
 
    During a procedure, the patient-side cart is positioned next to the
operating table with the arms arranged to provide access to the initial ports
selected by the surgeon. The surgeon performs the procedure while sitting at the
surgeon's console, manipulating the instrument handles. When a surgeon needs to
change instruments, as is done many times during an operation, the instrument is
withdrawn using the handles at the console, in similar fashion to the way a
surgeon withdraws instruments from the patient in MIS surgery. A scrub nurse
standing near the patient removes the unwanted instrument from the
electromechanical arm attached to the patient-side cart and replaces it with the
new instrument, in a process designed to be rapid enough to not disturb the
natural flow of the procedure. As a result, the scrub nurse will play a similar
role to that played in open and MIS surgery. Different types of operations will
require different sets of resposable instruments, and the Company expects to add
new types of resposable instruments in the future to tailor its technology to
additional types of surgical procedures.
 
INTUITIVE'S STRATEGY
 
    Intuitive believes that it is the first mover in third generation surgery.
In March 1997, surgeons used an early prototype employing Intuitive's technology
to successfully perform what the Company believes to be the initial third
generation surgery on humans. Intuitive believes that its development efforts
represent the largest effort devoted to third generation surgery of any company
in the world today. Intuitive owns or has licensed 38 issued and 8 allowed
patents, including patents from SRI International and IBM, companies which in
the late 1980s were early pioneers in the research of third generation surgery.
The Company's goal is to establish its technology as the preferred means for
performing complex surgery through ports and to become the leader in delivering
products and solutions for third generation surgery to surgeons, hospitals and
patients.
 
    Intuitive's goal is to maintain its first mover advantage by continuing to
develop and enhance its technology and deliver it to surgeons, hospitals and
patients. The Company intends to accomplish this by
 
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(i) focusing initially on the cardiac surgery market, (ii) concentrating efforts
on the institutions that perform the greatest number of cardiac surgical
procedures and (iii) expanding later to non-cardiac surgical markets.
 
    FOCUS FIRST ON CARDIAC SURGERY.  Intuitive will focus initially on the
cardiac surgery market. The Company selected this market for a number of
reasons. There are over one million cardiac procedures performed in the world
annually, and a few types of procedures, such as CABG and cardiac valve repair,
account for the majority of procedures performed by cardiac surgeons. These
procedures are routinely performed in high volumes using open surgical
techniques. However, these open procedures cause considerable pain, morbidity
and long patient recovery times. Although Modified Cardiac Surgery has been
developed to address some of the drawbacks of open cardiac surgery, such
procedures currently account for a small minority of cardiac surgery procedures
being performed, and no existing technology is able to accomplish a full cardiac
procedure through ports. Further, the Company believes that its technology can
help surgeons accomplish these procedures more easily, more accurately and with
less trauma to the patient than Modified Cardiac Surgery. As a result, the
Company believes its technology can help accelerate the conversion of open
cardiac surgery procedures to INTUITIVE surgery. In addition, approximately 200
hospitals are responsible for 45% of cardiac surgery procedures performed in the
United States, and 500 hospitals are responsible for 75%. As a result, Intuitive
believes it can address the United States cardiac surgery market with a small,
focused sales force and field organization. Finally, the tissue manipulations
required for cardiac procedures are among the most precise and demanding in all
of surgery. As a result, Intuitive believes that if it can establish its
products in cardiac surgery, many surgeons will have confidence that the
Company's technology can subsequently be used for less demanding procedures in
general surgery and other areas.
 
    Intuitive has already established relationships with a number of leading
cardiac surgeons and leading hospitals. The Company plans to complete the
clinical development of its initial products for cardiac surgery at sites
selected from these and other hospitals. Following receipt of required
regulatory approvals, the Company plans to begin manufacturing its products and
targeting their initial sale to a limited number of hospitals that perform a
high volume of cardiac surgery.
 
    FOCUS ON KEY INSTITUTIONS.  The Company believes that it is more valuable to
have a smaller number of hospitals using its products routinely for certain
types of cardiac procedures than it is to have a larger number of hospitals
using its products on a sporadic basis. The Company plans to focus intensely on
working with its early-adopting hospitals until such hospitals and their
surgeons are comfortable in performing a substantial portion of their cardiac
procedures using the Company's products. Using public relations and other
techniques, the Company intends to assist hospitals in educating patients and
referring physicians as to the potential benefits of performing INTUITIVE
surgery. Through such efforts, the Company believes early-adopting hospitals
will benefit by increasing their market share of cardiac surgery procedures. In
addition, the Company expects these efforts to drive interest in INTUITIVE
surgery among competitive hospitals and physicians.
 
    Many of these targeted United States hospitals have more than one surgical
suite devoted exclusively to cardiac surgery, and the largest 200 hospitals in
the United States have an average of over three such suites. The Company
believes that by concentrating on these large hospitals, it can leverage use of
its products in the first cardiac surgical suite at a given hospital into use in
additional suites of that hospital, thereby increasing the efficiency of its
field organization.
 
    EXPAND TO NON-CARDIAC MARKETS.  The 500 United States hospitals performing
the largest number of cardiac procedures also perform a large number of
non-cardiac surgical procedures, many of which are complex. The Company believes
this relationship also exists in Europe. Although the Company plans to focus on
the United States and European cardiac surgery market for the foreseeable
future, it plans to eventually broaden its focus to non-cardiac surgery using
its platform technology. Most non-cardiac procedures are performed in operating
suites that do not perform cardiac surgery. The Company believes
 
                                       35

<PAGE>
that its initial efforts in marketing its products for non-cardiac procedures
will be focused on the large institutions where it has already sold its products
for cardiac surgery, further leveraging its institutional relationships and
field organization. As appropriate, the Company intends to develop relationships
with leading physicians and hospitals in non-cardiac surgical areas in order to
complete clinical development for a critical mass of procedures for each
surgical specialty that it targets.
 
CLINICAL CONTRIBUTIONS
 
    CARDIAC SURGERY
 
    The Company's initial focus will be in cardiac surgery. The Company's
technology is designed to perform through ports the fine tissue manipulations
required for cardiac surgery with the precision required to complete the
procedure. The Company believes that cardiac surgeons using its technology will
be able to accomplish these manipulations more easily and precisely than can be
accomplished with existing instruments for Modified Cardiac Surgery, and will
also eventually be able to accomplish many of these procedures through ports. In
addition, the Company believes motion scaling, ENDOWRIST technology and superior
visualization may make it possible for certain tissue manipulations to be
accomplished with even greater precision than is possible in open surgery. Some
of the contributions that Intuitive believes it can make to cardiac surgery are
as follows:
 
    IMA DISSECTION.  In a CABG procedure, a blocked coronary artery is bypassed
with a graft. When available, an artery from the chest called the internal
mammary artery ("IMA") is dissected from its natural position and grafted into
place to perform the bypass. Because the IMA is located on the underside of the
anterior surface of the thorax, dissection of the vessel is challenging using
existing surgical instruments through the three to five inch incision currently
used in Modified CABG. The Company's products have multiple joints that emulate
the surgeon's shoulders and elbows, allowing exact positioning of the
instruments inside the patient's thorax. In addition, the ENDOWRIST technology
permits the surgeon to reach behind the tissues for easier dissection of the
IMA. Thus, the Company believes that the IMA can be dissected with greater ease
and precision using Intuitive's technology. In addition, the Company believes
that its technology can be used to dissect the IMA using ports.
 
    MULTI-VESSEL CORONARY ANASTOMOSIS.  CABG surgery and Modified CABG demand
that the surgeon delicately dissect and precisely suture very small structures
(less than two millimeters) under significant magnification. These procedures
are difficult when performed in open surgery; they are even more difficult when
performed using an endoscopic or limited incision approach. Intuitive's
technology is designed to allow surgeons to perform scaled instrument movements
that may be even more precise than the movements used in open surgery, including
precise suturing of multiple coronary vessels, while viewing the surgical field
through a 3-D monitor. The combination of precision, superior visualization, use
of ports and maneuverability is designed to capture many of the advantages of
both open CABG and Modified CABG.
 
    MITRAL AND AORTIC VALVE REPAIR/REPLACEMENT.  Valve repair and replacement
surgeries are challenging even when using open surgical techniques. Significant
exposure of the surgical field is essential to the identification and precise
manipulation of valvular and intracardiac structures, and is key to successful
surgical outcomes with minimal complications. The limitations inherent in
modified cardiac valve surgery are similar to those in Modified CABG surgery
because the restricted surgical field made possible by the three to five inch
incisions make visualization and repetition of precise surgical movements
challenging. Replacement of valves will always require a small incision, even if
the majority of the procedure is eventually performed through ports using the
Company's technology because the replacement valve itself is too large to be
inserted into the chest through a port. The Company believes that its technology
will help cardiac surgeons perform valve replacement and repair procedures in
confined spaces with greater ease and precision than is possible with existing
modified approaches to these procedures. In addition, the motion scaling
capability of the Company's technology may make it possible for surgeons to
perform certain extremely fine tissue manipulations that are important in valve
repair surgery with greater precision
 
                                       36

<PAGE>
than is possible even with open surgery, expanding the ability of cardiac
surgeons to repair some valves instead of replace them.
 
    NON-CARDIAC CLINICAL APPLICATIONS
 
    Although the Company intends to focus its efforts on the cardiac surgery
market for the foreseeable future, the Company believes its technology will
enhance or enable a number of other procedures in a variety of surgical
specialties outside of cardiac surgery. Some of these applications include the
following:
 
    AORTIC ANEURYSMS.  A common vascular procedure is the repair of aortic
aneurysms--sacs formed by the dilation of the wall of an artery caused primarily
by atherosclerosis. Surgical treatment involves clamping the aorta and making
long incisions at multiple sites to resect and replace the aneurysm with a
synthetic graft. Once the aorta is clamped, time is of the essence, since
procedures are typically done without cardiopulmonary bypass, allowing a narrow
window of time for completion. Currently, some aneurysms are treated by
intravascular stent-grafts. These stent-grafts can be inserted through the
femoral artery, and do not require an incision. However, the necessity of
traversing the femoral artery to gain access to the aorta limits the usage of
this technique. The Company believes that the ability of its technology to
deliver dexterity and the ability to suture grafts, alone or in conjunction with
stent-grafts, will help convert this procedure from open surgery to INTUITIVE
surgery.
 
    AORTO-FEMORAL BYPASS.  The lower portion of the abdominal aorta is often a
location of atherosclerosis. Atherosclerotic blockage of this portion of the
aorta restricts blood flow to the lower body. To treat this condition using open
surgery, a synthetic graft is attached to the vasculature above and below the
blockage. This procedure currently requires open surgery because of the need to
suture the grafts in place. The Company believes that with its technology, the
surgeon will be able to perform the required anastomosis through ports and avoid
the large incision currently required.
 
    CHOLECYSTECTOMY.  Removal of the gallbladder or cholecystectomy is the most
common procedure performed by the general surgeon. Although a laparoscopic
approach is now well accepted for routine cases, there is great variability in
the level of skill required to accomplish the procedure. The skill level
necessary to complete a laparoscopic cholecystectomy is dependent on the
pathology or disease status the surgeon discovers after the abdomen is entered.
For example, acute cholecystitis can result in inflammation and adhesion
formation that can require very meticulous surgery to access gallbladder
anatomy. Similarly, during the operation the surgeon may find a condition known
as choledocolithiasis, or stones in the common bile duct. The surgeon may choose
to incise or cut the common duct to extract stones that are caught between the
liver and intestine. Exploration of the common bile duct is an extremely
delicate procedure that requires micro-sutures to be placed in the common duct.
Most surgeons will not do this procedure laparoscopically because of the
difficulty of the procedure. This usually results in a conversion to open
technique or another surgical or delicate gastrointestinal endoscopic procedure
to extract the stones. With its technology, the Company believes that the
surgeon will have expanded capability to deal with complicated cholecystectomies
and can avoid subjecting the patient to a second procedure.
 
    NISSEN FUNDOPLICATION.  Nissen fundoplication is a general surgical
procedure which is performed to correct esophageal reflux. As an elective
procedure, it is currently performed on only a small fraction of candidates who
suffer from reflux esophagitis because the open surgical procedure is quite
invasive. An MIS alternative exists, but there are only a limited number of
surgeons who are skilled in the procedure. The Company believes that its
technology will significantly improve the ease of performing the Nissen
procedure through ports. Specifically, Intuitive's technology will address the
two most difficult steps in this procedure, which are made more difficult by
existing MIS techniques (i) esophageal dissection and (ii) suturing of the
fundus of the stomach. If adoption of Intuitive's technology becomes widespread
for Nissen procedures, the Company believes that the number of surgeons able to
do a Nissen procedure using port-based techniques might be expanded. Further,
the Company expects that the widespread availability of a port-based approach
may significantly expand the number of surgeries performed.
 
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<PAGE>
    COLON RESECTION.  Removal of the colon or large bowel is a common general
surgical procedure done for both benign and malignant disease. Colon resection
is accomplished in a variety of ways by removing all or part of the colon. These
procedures are complicated and involve resecting a portion of diseased tissue
and then re-anastomosing the two ends of the colon to re-establish continuity of
intestinal flow. When using existing MIS techniques, the challenge is to have
enough manipulating capability to perform fine dissection of the colon from its
peritoneal attachment and then to be able to sew or staple the ends of the bowel
to accomplish the re-anastomosis. The MIS procedure is currently performed by
only a small fraction of general surgeons. By making dissection significantly
more precise, the Company believes that its products will allow port-based colon
resection to be performed more widely.
 
    HERNIA REPAIR.  Repair of inguinal hernia is the second most common
procedure done in general surgery. A hernia is caused by a defect or weakness in
the inguinal fascia in the pelvic region. There are a variety of hernia
procedures available that use both open and MIS techniques. However, the lack of
precise dissection capability inhibits adoption of the MIS procedures.
Specifically, the delicate dissection of the spermatic cord structures and the
peritoneal sac, which is often adherent to the inguinal anatomy, is very
difficult for surgeons to accomplish using MIS techniques. The Company believes
that its technology will encourage surgeons to convert hernia procedures to the
port-based approach by removing the training barrier that limits adoption.
 
    GENERAL GYNECOLOGY.  Laparoscopy has been used for several decades in a
large number of diagnostic infertility procedures. Although there are a variety
of therapeutic infertility procedures which can currently be performed by some
gynecologists using existing MIS techniques, these procedures are relatively
difficult to perform using existing MIS tools because of the lack of tissue
control, inability to perform fine dissection, and limited suturing capability.
The Company believes that its technology will provide gynecologists with the
ability to do sophisticated procedures such as tubal re-anastomosis and
dissection of ovarian cysts, as well as common procedures such as oophorectomy
and salpingectomy.
 
    HYSTERECTOMY.  This is one of the most commonly performed surgeries in
gynecology and involves removal of the uterus. It can be done by using open or
MIS techniques. Like colon resection, it demands a significant degree of tissue
manipulation in the dissection and ligation of blood vessels, ligaments and
other pelvic structures. Further, laparoscopic techniques used in this procedure
increase the risk of injury to the ureters, vital structures that provide the
conduit for urine between the kidney and bladder. It is often difficult to
ensure the identification and prevention of injury to the ureters and bladder
with conventional MIS instruments because of the limited angles at which these
instruments can be positioned. The Company believes that its products will
increase the surgeon's dexterity in this procedure and, as a result, will have a
significant impact on safety, operating time, and rate of adoption of MIS
techniques in hysterectomy.
 
    BLADDER NECK SUSPENSION.  Bladder incontinence is a widespread condition
affecting middle aged women, which can be treated surgically with a procedure
known as bladder neck suspension. This procedure involves the elevation of the
bladder neck by suspension with sutures, surgically recreating the normal angle
of the urethra and re-establishing bladder sphincter control. The procedure
works well in open surgery and is the "gold standard" for correction of bladder
incontinence. However, because of its long recovery time, most women who would
be candidates are discouraged from undergoing the procedure using open surgical
technique. Instead, they use adult diapers for their incontinence which is an
embarrassment and inconvenience. Bladder neck suspension can currently be done
laparoscopically but is difficult to perform because of the need to suture at
awkward angles using existing MIS instruments. The Company believes that its
technology may provide a better solution for suturing the bladder neck and would
represent an advance in the ease of performing incontinence surgery.
 
    ORTHOPEDICS.  Many knee surgeries are accomplished by an MIS technique
called arthroscopy. This technique is well accepted in the surgical community.
However, many of the more sophisticated maneuvers in arthroscopy, such as
suturing torn meniscal tissue, are very difficult with existing MIS instruments.
The Company believes that its technology and the capabilities of its instruments
with ENDOWRIST flexibility will
 
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<PAGE>
increase the ease with which complex arthroscopy can be performed. Further, the
emerging techniques of MIS spine surgery, which involves completion of the very
common procedure of disc removal and spinal fusion, requires an approach to the
spine through the abdomen, involving very advanced laparoscopic technique. The
Company believes that its technology may make this procedure safer, easier and
more precise.
 
CLINICAL TRIALS AND EXPERIENCE
 
    The Company has conducted extensive laboratory testing of various prototypes
since early 1996. This testing has been directed at establishing the clinical
requirements for Intuitive's products and verifying that the final products will
meet those requirements. Clinical experience has also been important in
developing protocols and procedures for using its technology in the operating
room.
 
    In March 1997, clinical investigators in Belgium performed five human
surgeries using an early prototype employing Intuitive's technology. All five
procedures were completed after minimal training of the physicians and operating
room staff. Two of these procedures were laparoscopic cholecystecomies, and a
third was a lysis of adhesions. The purpose of these three procedures, all of
which were performed successfully through ports, was to establish that third
generation surgery could be used to perform procedures previously converted to
MIS techniques with equal or better results. The procedures were completed
successfully, and they demonstrated the prototype's ability to perform
successfully in an endoscopic environment. In two additional procedures, a
vascular surgeon performed an anastomosis between a small artery and a small
vein in the arm, using open surgical incisions. The goal of these two successful
anastomoses was to demonstrate that third generation surgery was capable of
performing precise anastomoses in small blood vessels only slightly larger in
size than the coronary vessels on which anastomosis are performed in CABG
procedures. Patency (blood flow) of the anastomoses was deemed by the surgeon to
be equal to or better than similar anastomoses he performs using open surgical
techniques. All five procedures were performed without complication, and all
patients recovered at the same rates as for conventional laparoscopic or open
surgery, respectively.
 
    In addition, the goals for these five procedures included gathering clinical
experience to help finalize specifications for the Company's initial products.
The Company used this experience to further develop its current prototypes. One
of the current prototypes is being tested in animal surgery and on cadavers. In
1998, the Company expects to begin human clinical testing in certain cardiac and
other surgical procedures in Europe. The Company intends to use the results of
these tests to finalize the current design of its products. In addition, the
Company has received approval from the FDA for an IDE to conduct a clinical
trial using the surgeon's console, patient-side cart and certain resposable
instruments necessary for performing most surgical procedures, including
scissors, scalpels, forceps/pickups, needle holders, clip appliers and
electrocautery (the "Pending Instruments"), in certain laparoscopic and
thoracoscopic surgical procedures. The Company intends to use the data from this
trial in order to seek clearance or approval from the FDA for the Pending
Instruments. There can be no assurance that this clinical trial will be
completed in a timely manner or that the results will demonstrate safety and
efficacy. Even if the results of the clinical trial demonstrate the safety and
efficacy of the Pending Instruments, FDA clearance or approval could be delayed
or prevented for other reasons. See "Risk Factors--Early Stage of Clinical
Testing; No Assurance of Safety, Efficacy or Commercialization," "--Need for
Federal and State Regulatory Clearance or Approval" and "Business--Government
Regulation."
 
MARKETING AND DISTRIBUTION
 
    The Company plans to derive its revenues from the direct sale of two types
of interlinked proprietary products (i) a surgeon's console and patient-side
cart and (ii) a range of resposable instruments. The resposable instruments are
resterilizable and reusable for a defined number of uses. An electronic chip
with a proprietary interlock monitors the number of surgical procedures that
each resposable instrument performs. The interlock will not allow the instrument
to be used more than the prescribed number of uses.
 
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This will help the Company keep the number of uses of the instrument lower than
the tested usage of the resposable so that its performance meets specifications
during each procedure. In addition, because of this controlled reusability, the
Company can effectively charge for resposable instruments on a per procedure
basis.
 
    The Company initially intends to market its products through a direct sales
force in the United States and Europe. Based on industry data, the Company
believes that the largest 200 cardiac centers account for approximately 45% of
the cardiac procedures performed in the United States. These 200 cardiac centers
and their surgeons have been identified by the Company as potential prospects
and will be the object of concentrated sales efforts when, and if, the Pending
Instruments receive regulatory approvals. The Company believes that the
concentrated nature of the cardiac market in the United States will allow it to
address this market with a small, targeted sales force.
 
    The Company's marketing and sales strategy in the United States and Europe
will involve the use of a combination of sales representatives and field
clinical specialists. The role of sales representatives will be to educate
physicians and surgeons on the advantages of INTUITIVE surgery and the clinical
applications that the Company's technology makes possible. The Company also
plans to train its sales representatives to educate hospital management on the
potential benefits of early adoption of Intuitive's technology and the potential
for increased local market share that may result. The role of the field clinical
specialist will be to coordinate installations of the Company's products and
provide training to physicians and other hospital staff on their use. Intuitive
will employ service technicians to provide non-clinical technical expertise,
upgrades, service and maintenance for its surgeon's consoles and patient-side
carts. The Company believes that this combination of sales representatives,
field clinical specialists and service technicians will provide an appropriate
balance of professional selling skills while maintaining an appropriate level of
technical expertise in the field.
 
    An important element of the Company's marketing strategy to date has been to
develop relationships with prominent academic surgeons who have a history of
research and publications in peer-reviewed journals concerning cardiac surgery
techniques. The Company's strategy is to leverage these relationships with
leading cardiac surgeons to gain market acceptance of its products. The Company
intends to continue to build these relationships through clinical investigator
meetings and participation in symposia and meetings to discuss clinical issues
and treatments.
 
    The Company has no experience marketing and selling its products. If the
Company receives required regulatory clearance or approval, the Company intends
to initially market its products through a direct sales force in the United
States and Europe. Substantial efforts and significant management and financial
resources are required to establish marketing and sales capabilities sufficient
to support sales in commercial quantities. The Company cannot be certain that it
will be able to build such a marketing staff or sales force, that this strategy
will be cost-effective or that such sales and marketing efforts will be
successful. Failure to successfully market its products or any future products
could reduce the Company's revenues and may result in additional losses. See
"Risk Factors--Limited Sales, Marketing and Distribution Experience."
 
INTELLECTUAL PROPERTY
 
    Since the inception of the Company in late 1995, Intuitive has encountered
and solved a number of technical hurdles, and has attempted to patent or
otherwise protect the technology that it developed to overcome such hurdles. In
addition to developing its own patent portfolio, Intuitive has spent significant
resources in acquiring license rights to necessary patents and intellectual
property from SRI and IBM, who were early leaders in performing research on
using robotics in surgery. The Company owns exclusive field-of-use licenses for
15 issued United States patents and 23 issued foreign patents. In addition, the
Company owns or has licensed numerous pending United States patent applications,
of which 8 have been allowed by the United States Patent and Trademark Office,
and has filed numerous corresponding foreign patent
 
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<PAGE>
applications that are currently pending in Europe, Japan and Canada. The
Company's patents and patent applications relate to a number of important
aspects of the Company's technology, including the technology related to the
Company's surgeon's console, surgical manipulators, and articulated surgical
instruments. The Company intends to file additional patent applications to seek
protection for other proprietary aspects of its technology in the future.
 
    SRI INTERNATIONAL AGREEMENT
 
    An option to acquire a license covering the original technology for the
Company's system was acquired by John G. Freund, M.D., a founder and director of
the Company, from SRI in 1995, and transferred to the Company in connection with
its formation and initial venture financing. SRI conducted research after
receiving funding in 1990 from the U. S. Advanced Research Projects Agency to
develop "telesurgery" to allow surgeons to perform surgery on the battlefield
from a remote location. A multidisciplinary SRI team developed the precise
electromechanics, force-feedback systems, vision systems and surgical
instruments needed to build and demonstrate a prototype system that could
faithfully reproduce the surgeon's hand motions with remote surgical
instruments.
 
    Under the terms of the SRI License Agreement dated December 20, 1995 (the
"SRI License"), the Company was granted an exclusive, worldwide, royalty-free
license to use the SRI technology developed prior to September 12, 1997 related
to the manipulation of human tissues and medical devices for animal and human
surgery, including but not limited to surgery, laparoscopic surgery and
microsurgery (the "Field"). The Company also has the right of first negotiation
with respect to SRI technology in the Field developed after September 12, 1997
but before September 12, 1999. As consideration for the SRI License, the Company
issued to SRI and certain designated employees of SRI a total of 585,000 shares
of the Company's Common Stock. The Company also paid SRI for patent prosecution
costs of $116,000 incurred before the execution of the SRI License and is
responsible for all subsequent patent prosecution costs relating to the SRI
License. In addition, under the terms of the SRI License, the Company granted
SRI a non-exclusive royalty-free license to the Company's technology developed
prior to September 12, 1997 for use outside the Field and non-commercial
research inside the Field.
 
    Under the terms of the SRI License, the Company is required to use
commercially reasonable and diligent efforts to conduct research and development
and clinical trials and to market products for use in surgery when they are
approved for marketing by the FDA. If the Company fails to commercialize its
products by September 12, 2002, SRI has the option of converting the exclusive
license to a non-exclusive license. The SRI License will terminate upon the last
expiration of the patents licensed from SRI or December 20, 2012, whichever is
later. Currently, the last patent expiration date is June 5, 2016, although this
could change due to subsequently issued patents. The SRI License may also be
terminated by SRI in the event of a material uncured breach of the Company's
obligations under the SRI License. In the event of such termination, there can
be no assurance that necessary licenses could be reacquired by the Company from
SRI on satisfactory terms, if at all. Adverse determinations in a judicial or
administrative proceeding or failure to obtain necessary licenses could prevent
the Company from manufacturing and selling its products, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
    IBM AGREEMENT
 
    IBM conducted research in the application of computers and robotics to
surgery during the late 1980s and early 1990s. As part of this project, a
Laparoscopic Assistant Robot System (LARS) was designed and developed at IBM in
conjunction with the Johns Hopkins Medical Center. IBM's system used an image-
guided surgical robot to work as a third hand to assist a human surgeon in a
variety of common laparoscopic surgical tasks. The system was built around a
specially designed seven-axis remote-center surgical robot and featured a
Cartesian motion controller, image-processing capabilities, telerobotic and
semi-autonomous control modalities, and a variety of man-machine interfaces for
easy and natural control of system functions. The initial focus was on
applications of the system to camera navigation and tissue biopsies within the
context of laparoscopic surgical procedures.
 
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<PAGE>
    In December 1997, the Company entered into a license with IBM covering
certain technology related to the application of computers and robotics to
surgery (the "IBM License"). Under the IBM License, the Company was granted an
exclusive, worldwide, royalty-free license to certain IBM patents in the field
of surgery. Excluded from the field were neurology, ophthalmology, orthopedics
and biopsies, but the Company has also been granted a non-exclusive license to
practice in these fields. The IBM License is also subject to a number of
pre-existing license agreements of IBM. As consideration for the IBM License,
the Company paid IBM a non-refundable license fee and is obligated to pay
additional amounts upon achievement of certain milestones, including $5.0
million within ten days of the closing of this offering.
 
    The IBM License will terminate upon the last expiration of the licensed
patents. Currently, the last patent expiration date is December 9, 2014,
although this could change due to subsequently issued patents. However, the
license may also be terminated by IBM in the event that the Company fails to
make the required payments and such failure is not cured within a 90 days of
written notice of the failure. In the event of such termination, there can be no
assurance that necessary licenses could be reacquired by the Company from IBM on
satisfactory terms, if at all. Adverse determinations in a judicial or
administrative proceeding or failure to obtain necessary licenses could prevent
the Company from manufacturing and selling its products, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
    PATENTS
 
    The Company's success will depend in part on its ability to obtain patent
and copyright protection for its products and processes, to preserve its trade
secrets, to operate without infringing or violating the proprietary rights of
third parties, and to prevent others from infringing on the proprietary rights
of the Company. The Company's strategy is to actively pursue patent protection
in the United States and in foreign jurisdictions for technology that it
believes to be proprietary and that offers a potential competitive advantage.
The Company owns or has licensed patents covering fundamental aspects of its
technology.
 
    The patent positions of medical device companies, including those of the
Company, are uncertain and involve complex and evolving legal and factual
questions. The coverage sought in a patent application either can be denied or
significantly reduced before or after the patent is issued. Consequently, there
can be no assurance that any patents, patents issuing from pending patent
applications or from any future patent application will be issued, that the
scope of any patent protection will exclude competitors or provide competitive
advantages to the Company, that any of the Company's patents will be held valid
if subsequently challenged or that others will not claim rights in or ownership
of the patents and other proprietary rights held by the Company. Since patent
applications are secret until patents are issued in the United States or
corresponding applications are published in international countries if at all,
and since publication of discoveries in the scientific or patent literature
often lags behind actual discoveries, the Company cannot be certain that it was
the first to make the inventions covered by each of its pending patent
applications or that it was the first to file patent applications for such
inventions. In addition, there can be no assurance that competitors, many of
which have substantial resources and have made substantial investments in
competing technologies, have not applied for and will not seek to apply for and
obtain patents that will prevent, limit or interfere with the Company's ability
to make, use or sell its products either in the United States or in
international markets. Further, the laws of certain foreign countries do not
protect the Company's intellectual property rights to the same extent as do the
laws of the United States. Litigation or regulatory proceedings, which could
result in substantial cost and uncertainty to the Company, may also be necessary
to enforce patent or other intellectual property rights of the Company or to
determine the scope and validity of other parties' proprietary rights. There can
be no assurance that the Company will have the financial resources to defend its
patents from infringement or claims of invalidity or to defend itself from
alleged infringement of third-party patents.
 
    In addition to patents, the Company relies on trade secrets and proprietary
know-how to compete, which it seeks to protect, in part, through appropriate
confidentiality and proprietary information
 
                                       42

<PAGE>
agreements. These agreements generally provide that all confidential information
developed or made known to individuals by the Company during the course of the
relationship with the Company is to be kept confidential and not disclosed to
third parties, except in specific circumstances. The agreements also generally
provide that all inventions conceived by the individual in the course of
rendering service to the Company and properly assigned to the Company shall be
the exclusive property of the Company. There can be no assurance that
proprietary information or confidentiality agreements with employees,
consultants and others will not be breached, that the Company will have adequate
remedies for any breach, or that the Company's trade secrets will not otherwise
become known to or independently developed by competitors. In addition,
confidentiality agreements with consultants and others may conflict with, or be
subject to, the rights of third parties with whom such individuals have
employment or consulting relationships.
 
    The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights, and companies in the
medical device industry have employed intellectual property litigation to gain a
competitive advantage. There can be no assurance that the Company will not
become subject to patent infringement claims or litigation in a court of law, or
interference proceedings declared by the PTO to determine the priority of
inventions or an opposition to a patent grant in a foreign jurisdiction. The
defense and prosecution of intellectual property suits, PTO interference or
opposition proceedings and related legal and administrative proceedings are both
costly and time-consuming. Any litigation, opposition or interference
proceedings will result in substantial expense to the Company and significant
diversion of effort by the Company's technical and management personnel. An
adverse determination in litigation or interference proceedings to which the
Company may become a party could subject the Company to significant liabilities
to third parties, require disputed rights to be licensed from third parties or
require the Company to cease using such technology. Although patent and
intellectual property disputes in the medical device area have often been
settled through licensing or similar arrangements, costs associated with such
arrangements may be substantial and could include payment of ongoing royalties.
Furthermore, there can be no assurance that necessary licenses from others would
be available to the Company on satisfactory terms, if at all. Adverse
determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent the Company from manufacturing and selling its
products, which would have a material adverse effect on the Company's business,
financial condition and results of operations.
 
    The Company is aware of certain patents owned or licensed by others and
relating to telesurgery and MIS surgery. Certain enhancements of the Company's
technology are still in the design and preclinical testing phase. Depending on
the ultimate design specifications and results of preclinical testing of these
enhancements, the Company may need to obtain licenses to third-party patents.
There can be no assurance that the Company would be able to obtain a license to
such third-party's patents or that a court would find that such third-party's
patents are either not infringed by the Company's enhanced products or are
invalid. Further, there can be no assurance that owners or licensees of these
patents will not attempt to enforce their patent rights against the Company in a
patent infringement suit or other legal proceeding, regardless of the likely
outcome of such suit or proceeding.
 
RESEARCH AND DEVELOPMENT
 
    As of March 31, 1998, substantially all of the Company's research and
development activity is performed internally by the Company's team of 51
scientists, engineers and technicians, in consultation with the Company's
Scientific Advisory Board and outside consultants. The Company's research and
development team is divided into four groups: software engineering, systems
analysis, electrical engineering and mechanical engineering. In addition,
various members of the research and development team support the design and
development of the manufacturing processes to be used in fabricating its
products.
 
                                       43

<PAGE>
    The Company's current research and development goals include the completion
of necessary clinical trials, optimizing the functionality of its products and
refining the design of its products in anticipation of commercial distribution.
Research and development expenses for the period from inception (November 9,
1995) to December 31, 1996, the year ended December 31, 1997 and the three
months ended March 31, 1998 were $2.9 million, $14.3 million and $6.8 million,
respectively. The Company intends to continue to make significant investments in
research and development for the foreseeable future.
 
MANUFACTURING
 
    The Company has a 9,000 square feet manufacturing facility in Mountain View,
California. The facility includes a cleanroom equipped for the assembly of
resposable instruments. The Company has used its facility and its manufacturing
personnel to complete the prototypes and resposable instruments that will be
used in clinical trials. The manufacture of the Company's products is a complex
operation involving a number of separate processes and components. The Company
purchases both custom and off-the-shelf components from a large number of
suppliers. Each product is assembled and individually tested by the Company in
accordance with FDA requirements.
 
    The Company has no experience manufacturing its products in the volumes that
will be necessary for the Company to achieve significant commercial sales, and
there can be no assurance that reliable, high-volume manufacturing capacity can
be established or maintained at commercially reasonable costs. If the Company
receives FDA clearance or approval for its products, it will need to expend
significant capital resources and develop manufacturing expertise to establish
large-scale manufacturing capabilities. Manufacturers often encounter
difficulties in scaling up production of new products, including problems
involving production yields, quality control and assurance, component supply
shortages, shortages of qualified personnel, compliance with FDA regulations,
and the need for further FDA approval of new manufacturing processes. In
addition, in the event demand for the Company's products exceeds manufacturing
capacity, the Company could develop a substantial backlog of customer orders. If
the Company is unable to establish and maintain large-scale manufacturing
capabilities, sales of the Company's products could be substantially diminished,
which would have a material adverse effect on the Company's business, financial
condition and results of operations.
 
    In addition, the Company's manufacturing facilities are subject to periodic
inspection by regulatory authorities, and the Company's operations will continue
to be regulated by the FDA with respect to Quality System Regulations ("QSR")
compliance. The Company will be required to comply with QSR requirements in
order to produce products for sale in the United States and with ISO 9001
standards in order to produce products for sale in Europe. If the Company fails
to comply with QSR or ISO 9001 standards, it may be required to cease all or
part of its operations for some period of time until it can demonstrate that
appropriate steps have been taken to comply with such regulations. The Company
cannot be certain that its facilities will comply with QSR or ISO 9001 standards
in future audits by regulatory authorities. The State of California also
requires that the Company obtain a license to manufacture medical devices. The
Company received a device manufacturing license from the California Department
of Health Services ("CDHS") in March 1998, but the Company will continue be
subject to periodic inspections by the CDHS. If the Company were unable to
maintain this license following any future inspections, it would be unable to
manufacture or ship any products, which would have a material adverse effect on
the Company's business, financial condition and results of operations.
 
    Components and raw materials are purchased from various qualified suppliers
and subjected to stringent quality specifications. The Company conducts quality
audits of suppliers and is establishing a vendor certification program. A number
of the components such as motors, endoscopes, monitors, and certain integrated
circuit components are provided by sole source suppliers. For certain of these
components, there are relatively few alternative sources of supply, and
establishing additional or replacement vendors for such components cannot be
accomplished quickly. The Company plans to qualify additional suppliers if and
when future production volumes increase. Because of the long lead time
 
                                       44

<PAGE>
required for some components that are currently available from a single source,
a vendor's inability to supply such components in a timely manner could impede
the Company's ability to manufacture and market its products and therefore could
have a material adverse effect on its business, financial condition and results
of operations. See "Risk Factors--Limited Manufacturing Experience; Scale-Up
Risk" and "--Dependence on Key Suppliers."
 
COMPETITION
 
    At present, the Company considers its primary competition to be existing
open or MIS surgical procedures. For the Company to be successful it must
convince hospitals, surgeons and patients to convert procedures from open or
existing MIS surgery to INTUITIVE surgery. In addition, several companies are
developing new approaches and new products for MIS and, in particular, minimally
invasive cardiac surgery. Many of these companies have an established presence
in the field of MIS, including Boston Scientific Corporation, CardioThoracic
Systems, Inc., C.R. Bard, Inc., Guidant Corporation, Heartport, Inc., Ethicon
Endo-Surgery, Inc., a division of Johnson & Johnson, Medtronic, Inc. and United
States Surgical Corporation. In addition, a limited number of companies are
using robots in surgery, including Computer Motion, Inc. and Integrated Surgical
Systems, Inc. which may develop products which directly compete with the
Company's products.
 
    The Company believes that the primary competitive factors in the market it
plans to address are capability, safety, efficacy, ease of use, price, quality,
reliability and effective sales, support, training and service. The length of
time required for products to be developed and to receive regulatory and
reimbursement approval is also an important competitive factor. The medical
device industry is characterized by rapid and significant technological change.
Accordingly, the Company's success will depend in part on its ability to respond
quickly to medical and technological changes through the development and
introduction of new products.
 
    However, many of the Company's potential competitors have substantially
greater financial and other resources than the Company, including larger
research and development staffs and more experience and capabilities in
conducting research and development activities, testing products in clinical
trials, obtaining regulatory approvals, and manufacturing, marketing and
distributing products. There can be no assurance that the Company will succeed
in developing and marketing technologies and products that are more clinically
efficacious and cost-effective than the more established treatments or the new
approaches and products developed and marketed by its competitors. Furthermore,
there can be no assurance that the Company will succeed in developing new
technologies and products that are available prior to competitors' products. The
failure of the Company to demonstrate the efficacy and cost advantages of its
products over those of its competitors or the failure to develop new
technologies and products before its competitors could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Risk Factors--Significant Competition; Rapid Technological Change."
 
GOVERNMENT REGULATION
 
    UNITED STATES
 
    Clinical testing, manufacture and sale of the Company's products are subject
to regulation by numerous governmental authorities, principally the FDA and
corresponding state and foreign regulatory agencies. Pursuant to the FDC Act,
the FDA regulates the clinical testing, manufacture, labeling, distribution and
promotion of medical devices. Noncompliance with applicable requirements can
result in, among other things, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of production, failure of the
government to grant premarket clearance or premarket approval for devices,
withdrawal of marketing approvals, a recommendation by the FDA that the Company
not be permitted to enter into government contracts and criminal prosecution.
The FDA also has the authority to
 
                                       45

<PAGE>
request repair, replacement or refund of the cost of any device manufactured or
distributed by the Company.
 
    In the United States, medical devices are classified into one of three
classes, Class I, II or III, on the basis of the controls deemed by the FDA to
be necessary to reasonably ensure their safety and effectiveness. Class I
devices are subject to general controls such as labeling, premarket notification
and adherence to QSR. Class II devices are subject to general controls and to
special controls (such as performance standards, postmarket surveillance,
patient registries, and FDA guidelines). Generally, Class III devices are those
that must receive premarket approval by the FDA to assure their safety and
effectiveness. Class III devices generally are life-sustaining, life-supporting
and implantable devices, or new devices which have not been found substantially
equivalent to legally marketed Class I and Class II devices.
 
    Before a new device can be introduced into the market, the manufacturer must
generally obtain marketing clearance through a premarket notification under
Section 510(k) of the FDC Act ("510(k)") or an approval of a premarket approval
application ("PMA application") under Section 515 of the FDC Act. A 510(k)
clearance typically will be granted if the submitted information establishes
that the proposed device is "substantially equivalent" to a predicate Class I or
II medical device or to a Class III medical device for which the FDA has not
called for PMAs. If a company cannot establish that a proposed device is
substantially equivalent to a legally marketed predicate device, the company
must seek premarket approval of the proposed device from the FDA through the
submission of a PMA application. Commercial distribution of a medical device for
which a 510(k) clearance or PMA is required cannot begin until clearance is
received from the FDA.
 
    In a 510(k) notification, a company must provide information to support a
claim of substantial equivalence, which may include laboratory test results or
the results of clinical trials of the device in humans. The FDA recently has
been requiring a more rigorous demonstration of substantial equivalence than in
the past and is more likely to require the submission of clinical trial data.
Based upon industry and FDA publications, the Company believes that it generally
takes from four to twelve months from the date of submission to obtain a 510(k)
clearance, but it may take longer. Commercial distribution of a medical device
for which a 510(k) clearance is required can only begin after the FDA issues an
order finding the device to be "substantially equivalent" to a predicate device.
The FDA may determine that a proposed device is not substantially equivalent to
a predicate device, or that additional information is needed before a
substantial equivalence determination can be made. A "not substantially
equivalent" determination, or a request for additional information, could delay
the market introduction of new products that fall into this category.
 
    For any devices that are cleared through the 510(k) process, modifications
or enhancements that could significantly affect safety or effectiveness, or
constitute a major change in the intended use of the device, will require new
510(k) submissions. There can be no assurance that the FDA will not require the
submission of a new 510(k) notification for any of the modifications. If the FDA
were to take such action, marketing the modified device could be delayed until a
new 510(k) notification was cleared by the FDA.
 
    If a company cannot establish that a proposed device is substantially
equivalent to a predicate device, the company must seek premarket approval of
the proposed device from the FDA through the submission of a PMA application. A
PMA application must be supported by valid scientific evidence that typically
includes extensive data, including preclinical and clinical data, to demonstrate
the safety and efficacy of the device. If clinical trials of a device are
required and the device presents a "significant risk," the sponsor of the trial
(usually the manufacturer or the distributor of the device) is required to file
an IDE application with the FDA prior to commencing clinical trials. The IDE
application must be supported by data, typically including the results of animal
and laboratory testing. If the IDE application is approved by the FDA and one or
more appropriate institutional review boards ("IRBs"), clinical trials may begin
at a specific number of investigational sites with a specific number of
patients, as approved by the FDA. An IDE supplement must be submitted to, and be
approved by, the FDA before a sponsor or an investigator may
 
                                       46

<PAGE>
make a change to the investigational plan that may affect its scientific
soundness or the rights, safety or welfare of human subjects.
 
    A PMA application must contain the results of clinical trials, the results
of all relevant bench tests, laboratory and animal studies, a complete
description of the device and its components, and a detailed description of the
methods, facilities and controls used to manufacture the device. In addition,
the submission must include the proposed labeling, advertising literature and
training methods (if required). Upon receipt of a PMA application, the FDA makes
a threshold determination as to whether the application is sufficiently complete
to permit a substantive review. If the FDA determines that the PMA application
is sufficiently complete to permit a substantive review, the FDA will accept the
application. Once the submission is accepted, the FDA begins an in-depth review
of the PMA application. Based upon industry and FDA publications, the Company
believes that an FDA review of a PMA application generally takes one to three
years. The review time is often significantly extended by the FDA asking for
more information or clarification of information already provided in the
submission.
 
    If the FDA's evaluation of the PMA application is favorable, the FDA may
issue either a clearance letter or request for additional information in the
form of an "approvable" letter which usually contains a number of conditions
that must be met in order to secure final approval of the PMA application. When
and if those conditions have been fulfilled to the satisfaction of the FDA, the
agency will issue a final clearance letter, authorizing commercial marketing of
the device for certain indications. If the FDA evaluation of the PMA application
is not favorable, the FDA will deny approval of the PMA or issue a "not
approvable" letter. The FDA may also determine that additional clinical trials
are necessary, in which case approval may be delayed for an indeterminate period
of time while additional clinical trials are conducted and submitted as an
amendment to the PMA application. The PMA process can be expensive, uncertain
and lengthy, and a number of devices for which FDA approval has been sought by
other companies have never been approved for marketing.
 
    In July 1997, the Company received 510(k) clearance from the FDA for the
surgeon's console and patient-side cart for use with rigid endoscopes, blunt
dissectors, retractors and stabilizer instruments. A subsequent 510(k)
submission covering additional resposable instruments necessary for performing
most surgical procedures, including scissors, scalpels, forceps / pickups,
needle holders, clip appliers and electrocautery (the "Pending Instruments"),
was withdrawn in November 1997 after the FDA indicated that clinical data would
be required prior to a determination of substantial equivalence for these
additional surgical tools. In March 1998, the Company received approval of an
IDE for a clinical trial to study the use of the surgeon's console and
patient-side cart and certain of the resposable instruments, including the
Pending Instruments in various thoracoscopic and laparoscopic surgical
procedures. Upon completion of the clinical trial, the Company intends to submit
the data obtained from the trial as part of a new 510(k) notification. There can
be no assurance as to when the clinical trial will be completed or whether the
results obtained will support a finding of substantial equivalence to a legally
marketed device. Accordingly, there can be no assurance that the FDA will not
require the Company to submit a PMA application for the Pending Instruments. If
510(k) clearance is granted, the Company believes based upon discussions with
the FDA that the clearance will permit distribution and promotion of the Pending
Instruments for broad use in endoscopic surgery. There can be no assurance,
however, that the FDA will not require additional 510(k) clearances to be
obtained before the Pending Instruments could be distributed or promoted for use
in other specific surgical procedures. In addition, there can be no assurance
that the Company will be able to obtain necessary regulatory approvals or
clearances on a timely basis or at all. Any delay in receipt of approval or
clearance or failure to receive such approval or clearance or failure to comply
with existing or future regulatory requirements would have a material adverse
effect on the Company's business, financial condition and results of operations.
 
    Subsequent to receipt of FDA approval or clearance, the Company will
continue to be regulated by the FDA with regard to, among other things, the
reporting of adverse events related to its products and ongoing QSR compliance,
which includes elaborate testing, control, documentation and other quality
 
                                       47

<PAGE>
assurance procedures. The Company's manufacturing facility must be registered
with the FDA and will be subject to periodic inspections. The Company's
facilities have not yet been inspected by the FDA. Labeling and promotional
activities are subject to scrutiny by FDA and, in certain circumstances, by the
Federal Trade Commission. Current FDA enforcement policy prohibits the marketing
of approved medical devices for unapproved ("off label") uses. See "Risk
Factors--Need for Federal and State Regulatory Clearance or Approval."
 
    CALIFORNIA
 
    The State of California requires that the Company obtain a license to
manufacture medical devices. The Company's facilities and manufacturing
processes were inspected in February 1998. The Company passed the inspection and
received a device manufacturing license from the Food and Drug Branch of the
CDHS in March 1998. The Company will be subject to periodic inspections by the
CDHS. If the Company were unable to maintain this license following any future
inspections, it would be unable to manufacture or ship any product, which
inability would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Risk Factors--Need for
Federal and State Regulatory Clearance or Approval."
 
    INTERNATIONAL
 
    In order for the Company to market its products in Europe and certain other
foreign jurisdictions, the Company must obtain required regulatory approvals and
clearances and otherwise comply with extensive regulations regarding safety and
manufacturing processes and quality. These regulations, including the
requirements for approvals or clearance to market and the time required for
regulatory review, vary from country to country. There can be no assurance that
the Company will obtain regulatory approvals in such countries or that it will
not be required to incur significant costs in obtaining or maintaining its
foreign regulatory approvals. Delays in receipt of approvals to market the
Company's products, failure to receive these approvals or future loss of
previously received approvals could have a material adverse effect on the
Company's business, financial condition and results of operations.
 
    The time required to obtain approval for sale in foreign countries may be
longer or shorter than that required for FDA approval, and the requirements may
differ. In addition, there may be foreign regulatory barriers other than
premarket approval, and the FDA must approve exports of devices that require a
PMA but are not yet approved domestically. The current rules provide that, in
order to obtain FDA export approval, the Company must provide the FDA with data
and information to demonstrate that the device (i) is not contrary to public
health and safety and (ii) has the approval of the country to which it is
intended for export. So that the FDA can determine that export of a device is
not contrary to public health and safety, the Company is required to submit
basic data regarding the safety of the device unless the device is the subject
of an FDA-approved IDE and it will be marketed or used for clinical trials in
the importing country for the same intended use, or at least two IRBs in the
United States have determined that the device is a nonsignificant risk device
and the device will be marketed or used for clinical trials in the importing
country for the same intended use. The Company also must submit a letter to the
FDA from the foreign country approving importation of the device.
 
    The Company is in the process of obtaining approvals for initiating clinical
trials in Germany, France and Belgium. Beginning in mid-1998, the EU requires
that medical products receive the right to affix the CE mark, an international
symbol of adherence to quality assurance standards and compliance with
applicable European medical device directives. The Company has implemented
policies and procedures intended to allow the Company to receive ISO 9001
certification, one of the CE mark certification prerequisites for its
manufacturing facility in Mountain View, California. While the Company intends
to satisfy the requisite policies and procedures that will permit it to receive
the CE mark certification, there can be no assurance that the Company will be
successful in meeting the European certification requirements and failure to
receive the right to affix the CE mark will prohibit the Company from selling
its products in member countries of the European Union. See "Risk Factors--Lack
of International Regulatory Clearance or Approval."
 
                                       48

<PAGE>
THIRD-PARTY REIMBURSEMENT
 
    A combination of the government and health insurance companies is
responsible for hospital and surgeon reimbursement for virtually all surgical
procedures except for cosmetic surgery, in both the United States and elsewhere.
Governments and insurance companies generally reimburse hospitals and physicians
for surgery when the procedures are considered non-experimental and
non-cosmetic. The Company believes that the cardiac procedures that will be the
subject of its initial focus, as well as the majority of non-cardiac procedures
it may eventually target, are generally already reimbursable by governments and
insurance companies. Accordingly, the Company believes hospitals and surgeons in
the United States will generally not be required to obtain new billing
authorizations or codes in order to be compensated for performing surgery using
the Company's products once such products have obtained FDA approval, but there
can be no assurance that this is the case.
 
    Governments and insurance companies carefully review and increasingly
challenge the prices charged for medical products and services. Reimbursement
rates from private companies vary depending on the procedure performed, the
third-party payor, the insurance plan and other factors. Medicare reimburses
hospitals a prospectively determined fixed amount for the costs associated with
an in-patient hospitalization based on the patient's discharge diagnosis, and
reimburses physicians a prospectively determined fixed amount based on the
procedure performed, regardless of the actual costs incurred by the hospital or
physician in furnishing the care and unrelated to the specific devices used in
that procedure. Thus, the reimbursements that hospitals obtain for performing
surgery with Intuitive's products will generally have to cover any additional
costs that hospitals incur in purchasing the Company's products.
 
    In countries outside the United States, reimbursement is obtained from a
variety of sources, including governmental authorities, private health insurance
plans, and labor unions. In most foreign countries, there are also private
insurance systems that may offer payments for some therapies. Although not as
prevalent as in the United States, health maintenance organizations are emerging
in certain European countries. The Company may need to seek international
reimbursement approvals, although there can be no assurance that any such
approvals will be obtained in a timely manner or at all. Failure to receive
international reimbursement approvals could have an adverse effect on market
acceptance of the Company's products in the international markets in which such
approvals are sought.
 
    The Company believes that the overall escalating cost of medical products
and services has led to and will continue to lead to increased pressures on the
health care industry, both foreign and domestic, to reduce the cost of products
and services, including products offered by the Company. There can be no
assurance that third-party reimbursement and coverage will be available or
adequate either in United States or foreign markets, that current reimbursement
amounts will not be decreased in the future or that future legislation,
regulation, or reimbursement policies of third-party payors will not otherwise
adversely affect the demand for the Company's products or its ability to sell
its products on a profitable basis, particularly if the Company's systems are
more expensive than other cardiac surgery products. Moreover, the Company is
unable to predict whether additional legislation or regulation relating to the
healthcare industry or third-party reimbursement will be enacted in the future,
or the effect of such legislation or regulation on the sale of the Company's
products. If third-party payor coverage or reimbursement is unavailable or
inadequate, the Company's business, financial condition, and results of
operations could be materially adversely affected. See "Risk
Factors--Uncertainty Related to Third-Party Reimbursement."
 
PRODUCT LIABILITY AND INSURANCE
 
    The development, manufacture and sale of medical products entail significant
risk of product liability claims and product failure claims. The Company has
conducted only limited clinical trials and does not yet have, and will not have
for a number of years, sufficient clinical data to allow the Company to measure
the risk of such claims with respect to its products. The Company faces an
inherent business risk of financial exposure to product liability claims in the
event that the use of its products results in personal injury or
 
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<PAGE>
death. The Company also faces the possibility that defects in the design or
manufacture of its products might necessitate a product recall. There can be no
assurance that the Company will not experience losses due to product liability
claims or recalls in the future. The Company currently maintains product
liability insurance, and there can be no assurance that the coverage limits of
the Company's insurance policies will be adequate. Any claims against the
Company, regardless of their merit or eventual outcome, could have a material
adverse effect upon the Company's business, financial condition and results of
operations. See "Risk Factors--Risk of Product Liability."
 
EMPLOYEES
 
    As of March 31, 1998, the Company had 100 employees, 54 of whom were engaged
directly in research, development, regulatory and clinical activities, 23 in
manufacturing and quality assurance and 23 in marketing, sales, and
administrative activities. No employee of the Company is covered by collective
bargaining agreements, and the Company believes that its relationship with its
employees is good.
 
FACILITIES
 
    The Company leases approximately 50,000 square feet in Mountain View,
California, approximately 16,000 square feet of which is subleased to a
third-party until November 1998. The facility is leased through February 2002,
at which time the Company has an option to extend the lease for an additional
three-year term. The Company believes that this facility will be adequate to
meet its needs through 1998.
 
INVESTIGATORS AND COLLABORATORS
 
    An important part of the Company's strategy is to build upon relationships
with institutions and surgeons in order to gain acceptance of its products in
the marketplace. The Company has assembled a group of prominent medical
investigators and collaborators to consult with the Company's engineers and
clinical research staff and to advise the Company on the design and development
of its products and on other scientific and medical matters in the areas of the
Company's business. The Company has formed a Scientific Advisory Board to assist
it in the development of cardiac procedures. The Scientific Advisory Board
includes the following cardiac surgeons:
 
    ALAIN CARPENTIER, M.D., PH.D. is the Professor of Cardiac Surgery,
University of Paris and Chief, Department of Cardiovascular and Thoracic
Surgery, Hospital Broussais, Paris, France.
 
    W. RANDOLPH CHITWOOD, M.D. is the Chairman, Department of Surgery and Chief
of Cardiothoracic Surgery, East Carolina University School of Medicine,
Greenville, North Carolina. Dr. Chitwood received a B.S. from Hampden-Sydney
College and an M.D. from the University of Virginia.
 
    LAWRENCE H. COHN, M.D. is a Professor of Surgery, Harvard Medical School and
Chief of Division of Cardiac Surgery, Brigham & Women's Hospital, Boston,
Massachusetts. Dr. Cohn received a B.A. from the University of California at
Berkeley, an M.D. from Stanford University and an M.A. from the Harvard
University School of Medicine.
 
    PAUL J. CORSO, M.D. is the Director, Section of Cardiac Surgery, Washington
Heart at Washington Hospital Center, Washington, D.C. Dr. Corso received both a
B.A. and an M.D. from The George Washington University.
 
    DELOS M. COSGROVE, M.D. is the Chairman, Thoracic and Cardiovascular
Surgery, The Cleveland Clinic Foundation, Cleveland, Ohio. Dr. Cosgrove received
an undergraduate degree from Williams College and an M.D. from the University of
Virginia School of Medicine.
 
    ALBERT STARR, M.D. is the Director of Heart Institute at St. Vincent's
Hospital and Medical Center located in Portland, Oregon. He received a B.A. from
Columbia College and an M.D. from Columbia's College of Physicians and Surgeons.
 
                                       50

<PAGE>
    The Company has also formed a Clinical Advisory Board to assist it in the
development of its products and clinical protocols. The Clinical Advisory Board
includes the following cardiac and general surgeons:
 
    GUY BERNARD CADIERE, M.D., PH.D. is a full Professor of Surgery at both St.
Pierre University Hospital, Brussels, Belgium and University Paul Sabatier of
Toulouse, France.
 
    JACQUES HIMPENS, M.D. is an attending surgeon at Sint Blasius Hospital,
Dendermonde, Belgium, and at St. Pierre University Hospital, Brussels, Belgium.
He received an M.D. from University Hospital of Leuven, Belgium.
 
    BARRY N. GARDINER, M.D. is a general surgeon in private practice in Oakland,
California. He is also Associate Clinical Professor, Department of Surgery, the
University of California Davis Medical Center. He received a B.A. from the
University of Utah and an M.D. from the University of Pennsylvania.
 
    MARK M. SUZUKI, M.D. is a cardiovascular surgeon in private practice in
Pittsburgh, Pennsylvania. He received a B.S. from the University of California
Davis and an M.D. from The George Washington University.
 
    WILLIAM P. SWEEZER, M.D. is a cardiovascular surgeon in private practice in
Concord, California. He attended Michigan State University for his pre-med
curriculum and received an M.D. from Meharry Medical College.
 
    CHRISTOPHER ZARINS, M.D. is a professor in the Department of Surgery at
Stanford University Medical Center. Dr. Zarins is also Chief of Vascular Surgery
at Stanford University Medial Center. He received a B.A. from Lehigh University
and an M.D. from the Johns Hopkins School of Medicine.
 
    Each of the Company's investigators and collaborators has entered into a
confidentiality and non-disclosure agreement with the Company. These
investigators and collaborators are generally employed by employers other than
the Company and may have commitments to or consulting advisory contracts with
other entities that may limit their availability to the Company. Although
generally each investigator and collaborator agrees not to perform services for
another person or entity which would create a conflict of interest with the
individual's services for the Company, there can be no assurance that such
conflict will not arise.
 
                                       51

<PAGE>

                                   MANAGEMENT
 
OFFICERS AND DIRECTORS
 
    The officers and directors of the Company, and their ages and positions as
of March 31, 1998, are as follows:
 

<TABLE>
<CAPTION>
NAME                                                  AGE                               POSITION
- ------------------------------------------------  -----------  ----------------------------------------------------------
<S>                                               <C>          <C>
Lonnie M. Smith.................................          53   President, Chief Executive Officer and Director
 
Susan K. Barnes.................................          44   Vice President, Finance, Chief Financial Officer and
                                                                 Assistant Secretary
 
Frederic H. Moll, M.D...........................          46   Vice President, Medical Director and Director
 
Robert G. Younge................................          46   Vice President, Engineering
 
Thierry B. Thaure...............................          35   Vice President, Sales and Marketing
 
Michael A. Daniel...............................          46   Vice President, Regulatory, Clinical Affairs and Quality
 
Marc N. Hoffman.................................          41   Vice President, Manufacturing and Services
 
Douglas M. Bruce................................          40   Vice President, Program Management
 
K. Iain McAusland...............................          32   Chief Patent Counsel
 
Alan C. Mendelson...............................          50   Secretary
 
John G. Freund, M.D.(1).........................          44   Director
 
Scott S. Halsted (1)............................          38   Director
 
Russell C. Hirsch, M.D., Ph.D.(2)...............          35   Director
 
Petri T. Vainio, M.D., Ph.D.(2).................          38   Director
</TABLE>

 
- ---------
 
(1) Member of the Audit Committee.
 
(2) Member of the Compensation Committee.
 
    LONNIE M. SMITH has served as President and Chief Executive Officer of the
Company since May 1997 and has served as a director of the Company since
December 1996. From 1977 until joining the Company, Mr. Smith was with
Hillenbrand Industries, Inc., a public holding company, serving as the Senior
Executive Vice President, a member of the Office of the President, and director
since 1982, as Executive Vice President of American Tourister, Inc. (a wholly
owned subsidiary) from 1978 to 1982, and as Senior Vice President of Corporate
Planning from 1977 to 1978. Mr. Smith has also held positions with The Boston
Consulting Group and IBM. Mr. Smith currently serves as a director of Biosite
Diagnostics, Inc. Mr. Smith received a B.S.E.E. from Utah State University and
an M.B.A. from Harvard Business School.
 
    SUSAN K. BARNES has served as Vice President, Finance, Chief Financial
Officer and Assistant Secretary of the Company since May 1997. From January 1995
to September 1996, Ms. Barnes founded and served as Managing Director of the
Private Equity Group of Jefferies and Company, Inc., an investment bank. From
January 1994 to January 1995, she founded and served as Managing General Partner
of Westwind Capital Partners, a private equity fund. From June 1991 to January
1994, Ms. Barnes served as Chief Financial Officer and Managing Director of
Richard C. Blum & Associates, Inc., a merchant banking firm. From September 1985
to June 1991, she served as Vice President and Chief Financial Officer of NeXT
Computer, Inc., a computer company. Ms. Barnes received a B.A. from Bryn Mawr
College and an M.B.A. from the Wharton School, University of Pennsylvania.
 
    FREDERIC H. MOLL, M.D. is a co-founder of the Company and has served as Vice
President, Medical Director and a director since inception. In 1989, Dr. Moll
co-founded Origin Medsystems, Inc., a medical
 
                                       52

<PAGE>
device company ("Origin") and served as Medical Director through 1995. Origin
was acquired by Eli Lilly & Company in 1992 and is now a wholly owned subsidiary
of Guidant Corporation, a medical device company. In 1984, Dr. Moll founded
Endotherapeutics, Inc., a medical device company, which was acquired by United
States Surgical Corporation in 1992. Dr. Moll received a B.A. from the
University of California, Berkeley, an M.S. in Management from Stanford
University's Sloan Program and an M.D. from the University of Washington.
 
    ROBERT G. YOUNGE is a co-founder of the Company and has served as Vice
President, Engineering since inception. Mr. Younge co-founded Acuson
Corporation, a medical device company ("Acuson"), in 1981 and served as Vice
President, Engineering and in various capacities until founding the Company.
From 1994 to December 1995, Mr. Younge managed the Product Engineering Group at
Acuson which introduced the Aspen System in 1996. In 1991, he founded Acuson's
Transducer Division and served as its General Manager until 1994. The Transducer
Division introduced Acuson's first flexible endoscopic transducer. Mr. Younge
received both a B.S.E.E. and an M.S.E.E. from Stanford University.
 
    THIERRY B. THAURE has served as Vice President, Sales and Marketing of the
Company since May 1997. From January 1994 to April 1997, Mr. Thaure served as
Director of International Sales and Marketing for Guidant Corporation's
Minimally Invasive System Group, and from January 1993 to January 1994, he
served as Manager, International Sales and Marketing of Guidant Corporation.
From July 1990 to December 1992, Mr. Thaure held various positions in Marketing
and Business Development at Advanced Cardiovascular Systems, Inc., a wholly
owned subsidiary of Guidant Corporation. Mr. Thaure received a B.S. from Duke
University and an M.M. from Northwestern University.
 
    MICHAEL A. DANIEL has served as Vice President, Regulatory, Clinical Affairs
and Quality of the Company since February 1997. From June 1995 to February 1997,
Mr. Daniel served as Vice President, Product Assurance of FemRx, Inc., a medical
device company. From April 1993 to June 1995, he served as Manager, Product
Assurance and Regulatory Affairs of SmithKline Beckman Instruments, Inc., a
medical device company. From June 1988 to April 1993, Mr. Daniel served as
Director, Quality Assurance and Director NIH Product Development Programs of
Novacor, a division of Baxter Healthcare Corporation. Mr. Daniel received a B.S.
from Michigan State University, an M.S. from Illinois Institute of Technology
and an M.B.A. from the University of California, Berkeley.
 
    MARC N. HOFFMAN has served as Vice President, Manufacturing and Services of
the Company since January 1998. From August 1995 to December 1997, Mr. Hoffman
served as Vice President, Operations, Engines, of AlliedSignal Aerospace, a
manufacturer of aircraft engines and a division of AlliedSignal, Inc.
("AlliedSignal"), and from August 1994 to July 1995, he served as Vice
President, Manufacturing, Aerospace Sector, of AlliedSignal. From January 1993
to July 1994, Mr. Hoffman served as a Senior Management Consultant of TBM
Consulting Group, a consulting firm, and from February 1981 to December 1992, he
served as Plant Manager, Components Manufacturing Company, of General Electric
Company. Mr. Hoffman received a B.S. from Cornell University.
 
    DOUGLAS M. BRUCE has served as Vice President, Program Management of the
Company since December 1997 and as a Program Manager from May 1997 to December
1997. From February 1997 to May 1997, Mr. Bruce served as Vice President,
Engineering of Acuson and from December 1995 to January 1997, he served as its
Director of Engineering. From August 1994 to December 1995, Mr. Bruce served as
a Program Manager of Acuson and from October 1987 to August 1994, he served as
Mechanical Engineering Manager. Mr. Bruce received a B.S. from the University of
California, Berkeley and an M.S. from the University of Santa Clara.
 
    K. IAIN MCAUSLAND has served as Chief Patent Counsel of the Company since
June 1996. From September 1991 to June 1996, Mr. McAusland was an associate at
Fish & Neave. Mr. McAusland received a B.A. from Pembroke College at Cambridge
University and a J.D. from Boston College Law School.
 
                                       53

<PAGE>
    ALAN C. MENDELSON has served as Secretary of the Company since inception. He
has been a partner of Cooley Godward LLP, counsel to the Company, since 1980 and
served as Managing Partner of its Palo Alto office from 1990 to 1995 and from
November 1996 to September 1997. Mr. Mendelson also served as Secretary and
Acting General Counsel of Amgen, Inc., a biopharmaceutical company, from 1990 to
1991, and served as Acting General Counsel of Cadence Design Systems, Inc., an
electronic design automation software company, from November 1995 to June 1996.
Mr. Mendelson currently serves as a director of Acuson, CoCensys, Inc. and Isis
Pharmaceuticals, Inc. Mr. Mendelson received a B.A. from the University of
California, Berkeley and a J.D. from the Harvard Law School.
 
    JOHN G. FREUND, M.D. is a co-founder of the Company and has served as a
director since inception. At the time of inception, he also served briefly as
the Company's Chief Executive Officer. Dr. Freund has served as Managing
Director of the General Partner of Skyline Venture Partners, L.P., a venture
capital firm, since October 1997. He served as Managing Director in the
Alternative Assets Group of Chancellor Capital Management, Inc. (later
Chancellor LGT Asset Management, Inc.), from August 1995 to September 1997. From
July 1988 through December 1994, Dr. Freund was employed at Acuson, where he was
Vice President, Corporate Development and later Executive Vice President.
Previously, he was a partner in Morgan Stanley Venture Partners, a venture
capital firm, and also co-founded the healthcare group in the corporate finance
department of Morgan Stanley & Co. Incorporated. Dr. Freund currently serves as
a director of LJL BioSystems, Inc. and several private companies. Dr. Freund
received a B.A. from Harvard College, an M.D. from the Harvard Medical School
and an M.B.A. from Harvard Business School where he was a Baker Scholar.
 
    SCOTT S. HALSTED has served as a director of the Company since March 1997.
Mr. Halsted joined Morgan Stanley Venture Partners, a venture capital firm, in
1987, and has been a general partner since 1997. Mr. Halsted currently serves as
a director of several private healthcare companies. Mr. Halsted received an A.B.
and B.E. degrees in Biomechanical Engineering from Dartmouth College and an M.M.
from Northwestern University.
 
    RUSSELL C. HIRSCH, M.D., PH.D., has served as a director of the Company
since December 1995. He joined Mayfield Fund, a venture capital firm, in 1992,
and has been a managing member of several venture capital funds affiliated with
Mayfield Fund since 1995. From 1984 to 1992, Dr. Hirsch conducted research in
the laboratories of Nobel Laureate Harold Varmus, M.D., and Don Ganem, M.D., at
the University of California, San Francisco. Dr. Hirsch currently serves as a
director of Megabios Corp. Dr. Hirsch received a B.S. in Chemistry from the
University of Chicago and an M.D. and a Ph.D. from the University of California,
San Francisco.
 
    PETRI T. VAINIO, M.D., PH.D. has served as a director of the Company since
December 1995. He joined Sierra Ventures, a venture capital firm, in 1988, and
has been a general partner of Sierra Ventures since 1990. Dr. Vainio currently
serves as a director of Heartport, Inc. and Symphonix Devices, Inc. Dr. Vainio
received an M.D. and a Ph.D. from the University of Helsinki, Finland, and an
M.B.A. from Stanford University.
 
    The Company's Bylaws currently authorize one or more directors, the number
of directors to be determined from time to time by resolution of the Board of
Directors. The Company's Board of Directors is currently comprised of six
directors. Directors are elected by the stockholders at each annual meeting of
stockholders to serve until the next annual meeting of stockholders or until
their successors are duly elected and qualified. Executive officers are elected
by, and serve at the discretion of, the Board. The Company's Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws, both of
which will become effective upon the closing of this offering, provide that as
soon as the Company is no longer subject to Section 2115 of the California
Corporations Code ("Section 2115"), the Board of Directors will be divided into
three classes, Class I, Class II and Class III, with each class serving
staggered three-year terms. The Class I directors, initially Mr. Halsted and Dr.
Vainio, will stand for re-election or election at the 1999 annual meeting of
stockholders. The Class II directors, initially Drs. Hirsch and
 
                                       54

<PAGE>
Freund, will stand for re-election or election at the 2000 annual meeting of
stockholders and the Class III directors, initially Dr. Moll and Mr. Smith, will
stand for re-election or election at the 2001 annual meeting of stockholders.
Until the Company is no longer subject to Section 2115, the directors will each
be elected each year to serve one year terms. In addition, stockholders may, in
certain circumstances, be entitled to cumulate votes with respect to the
election of directors. See "Description of Capital Stock."
 
BOARD COMMITTEES
 
    The Company's Compensation Committee was formed in February 1997, to review
and approve the compensation and benefits for the Company's key executive
officers, administer the Company's stock purchase and stock option plans and
make recommendations to the Board regarding such matters. The Compensation
Committee is currently composed of Drs. Hirsch and Vainio. The Audit Committee
was formed in February 1997, to review the internal accounting procedures of the
Company and to consult with and review the services provided by the Company's
independent auditors. The Audit Committee is currently composed of Dr. Freund
and Mr. Halsted.
 
DIRECTOR COMPENSATION
 
    Directors currently receive no cash compensation from the Company for their
services as members of the Board of Directors. They are reimbursed for certain
expenses in connection with attendance at Board and Committee meetings.
 
    All of the Company's non-employee directors are entitled to receive
non-discretionary stock option grants under the Company's 1998 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"). Options granted under the
Directors' Plan are intended by the Company not to qualify as incentive stock
options under the Code. Each option granted pursuant to the Directors' Plan has
an exercise price equal to the fair market value of the Common Stock on the date
of grant. The Directors' Plan provides for the grant of an option to purchase
25,000 shares for each non-employee director who joins the Board following the
initial public offering (the "Initial Grant"). The Initial Grant vests with
respect to 1/8(th) of the option shares on the six-month anniversary of the date
of grant and the remaining option shares vest in equal monthly installments over
the following 42 months. In addition to the Initial Grant, the Directors' Plan
provides for the grant of an option to purchase 2,500 shares (which amount shall
be prorated for non-employee directors who do not continuously serve as a
non-employee director of the Company for the 12 months prior to such grant)
immediately following each annual meeting of stockholders, beginning with a
grant in calendar year 1999 (the "Annual Grant"). The Annual Grant vests in 36
equal monthly installments over a 3-year period measured from the date of grant.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
    From the Company's inception through February 1997, the Board of Directors
made all determinations with respect to executive officer compensation. Since
March 1997, the Compensation Committee has made all determinations relating to
executive officer compensation.
 

EXECUTIVE COMPENSATION
 
    The following table sets forth certain summary information concerning the
compensation awarded to, earned by, or paid for services rendered to the Company
in all capacities by the Company's Chief
 
                                       55

<PAGE>
Executive Officer and each of the Company's executive officers who earned more
than $100,000 during the year ended December 31, 1997 (collectively, the "Named
Executive Officers").
 
                           SUMMARY COMPENSATION TABLE
 

<TABLE>
<CAPTION>
                                                                                        LONG TERM
                                                                                       COMPENSATION
                                                                                         AWARDS
                                                            ANNUAL COMPENSATION(1)     -----------
                                                         ----------------------------  SECURITIES
                                                                        OTHER ANNUAL   UNDERLYING
NAME AND PRINCIPAL POSITION                     YEAR       SALARY($)    COMPENSATION($) OPTIONS(#)
- --------------------------------------------  ---------  -------------  -------------  -----------
<S>                                           <C>        <C>            <C>            <C>
Lonnie M. Smith.............................       1997    $ 212,500      $  62,532(2)    300,000
President and Chief Executive Officer
 
Susan K. Barnes.............................       1997      105,705         --           200,000
Vice President, Finance, Chief Financial
  Officer and Assistant Secretary
 
Frederic H. Moll, M.D.......................       1997      170,000         --           300,000
Vice President and Medical Director
 
Robert G. Younge............................       1997      160,025         --           300,000
Vice President, Engineering
</TABLE>

 
- ---------
 
(1) In accordance with the rules of the Securities and Exchange Commission (the
    "Commission"), other annual compensation in the form of perquisites and
    other personal benefits has been omitted where the aggregate amount of such
    perquisites and other personal benefits constitutes less than the lesser of
    $50,000 or 10% of the total annual salary and bonus for the Named Executive
    Officer for the year.
 
(2) Includes reimbursement of expenses incurred in connection with relocating to
    California as follows: $32,607 in direct reimbursement and $29,925 in tax
    gross-up.
 
                             OPTION GRANTS IN 1997
 
    The following table sets forth certain information regarding stock options
granted to each of the Named Executive Officers during the year ended December
31, 1997.
 

<TABLE>
<CAPTION>
                                                                                         POTENTIAL REALIZABLE VALUE
                                   INDIVIDUAL GRANTS(1)
                              ------------------------------                             AT ASSUMED ANNUAL RATES OF
                               NUMBER OF     PERCENTAGE OF
                              SECURITIES     TOTAL OPTIONS                              STOCK PRICE APPRECIATION FOR
                              UNDERLYING      GRANTED TO      EXERCISE OR                      OPTION TERM(4)
                                OPTIONS      EMPLOYEES IN     BASE PRICE   EXPIRATION   ----------------------------
NAME                          GRANTED(#)    FISCAL YEAR(2)     ($/SH)(3)      DATE          5%($)         10%($)
- ----------------------------  -----------  -----------------  -----------  -----------  -------------  -------------
<S>                           <C>          <C>                <C>          <C>          <C>            <C>
Lonnie M. Smith.............     300,000            11.6%      $    0.50     05/08/07
Susan K. Barnes.............     200,000             7.7            0.50     05/18/07
Frederic H. Moll, M.D.......     300,000            11.6            0.50     05/08/07
Robert G. Younge............     300,000            11.6            0.50     05/08/07
</TABLE>

 
- ---------
 
(1) Options granted under the Company's 1996 Equity Incentive Plan. These
    options are immediately exercisable. They vest as to 1/8(th) of the option
    shares on the six-month anniversary of the date of grant and the remaining
    option shares vest in equal monthly installments over the following 42
    months. These options have a term of ten years. Upon certain changes of
    control of the Company, this vesting schedule will accelerate as to 100% of
    any shares that are then unvested. See "Employee Benefit Plans" for a
    description of the material terms of these options.
 
                                       56

<PAGE>
(2) Based on an aggregate of 2,585,950 options granted to employees, consultants
    and directors of the Company in 1997, including the Named Executive
    Officers.
 
(3) The exercise price is equal to 100% of the fair market value of the Common
    Stock on the date of grant, as determined by the Board of Directors.
 
(4) The potential realizable value is calculated based on the term of the option
    at the time of grant (ten years). Stock price appreciation of five percent
    and ten percent is assumed pursuant to rules promulgated by the Commission
    and does not represent the Company's prediction of its stock price
    performance. The potential realizable value at 5% and 10% appreciation is
    calculated by assuming that the assumed initial public offering price
    ($        per share) appreciates at the indicated rate for the entire term
    of the option and that the option is exercised at the exercise price and
    sold on the last day of its term at the appreciated price.
 
         AGGREGATE OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
 
    The following table sets forth information regarding the exercise of stock
options by the Named Executive Officers during 1997 and stock options held as of
December 31, 1997, by the Named Executive Officers.
 

<TABLE>
<CAPTION>
                                                               NUMBER OF SECURITIES
                                                                    UNDERLYING             VALUE OF UNEXERCISED
                                                               UNEXERCISED OPTIONS         IN-THE-MONEY OPTIONS
                                 SHARES                      AT DECEMBER 31, 1997(#)    AT DECEMBER 31, 1997($)(2)
                              ACQUIRED ON        VALUE      --------------------------  --------------------------
NAME                          EXERCISE(#)    REALIZED($)(1) EXERCISABLE  UNEXERCISABLE  EXERCISABLE  UNEXERCISABLE
- ---------------------------  --------------  -------------  -----------  -------------  -----------  -------------
<S>                          <C>             <C>            <C>          <C>            <C>          <C>
Lonnie M. Smith............       300,000     $                 --            --            --            --
 
Susan K. Barnes............       200,000                       --            --            --            --
 
Frederic H. Moll, M.D......       300,000                       --            --            --            --
 
Robert G. Younge...........        --             --           300,000        --         $                --
</TABLE>

 
- ---------
 
(1) Value realized is based on the assumed initial offering price of the
    Company's Common Stock ($         per share), less the exercise price,
    without taking into account any taxes that may be payable in connection with
    the transaction, multiplied by the number of shares underlying the option.
    Certain shares acquired on exercise remain subject to a right of repurchase
    by the Company.
 
(2) Based on the assumed initial offering price of the Company's Common Stock
    ($         per share), less the exercise price, without taking into account
    any taxes that may be payable in connection with the transaction, multiplied
    by the number of shares underlying the option.
 
EMPLOYEE BENEFIT PLANS
 
    1998 EQUITY INCENTIVE PLAN.  In January 1996, the Board adopted, and the
stockholders approved, the 1996 Equity Incentive Plan. In April 1998, the Board
adopted, subject to stockholder approval, the 1998 Equity Incentive Plan (the
"Incentive Plan") as an amendment and restatement of the Company's 1996 Equity
Incentive Plan. The Company has reserved a total of 7,340,000 shares for
issuance under the Incentive Plan; provided that such amount shall be increased
on January 1 of each year, beginning with January 1, 1999, by an amount equal to
3% of the total outstanding shares of Common Stock (calculated on a fully
diluted, fully converted basis) measured as of the immediately preceding
December 31. The Incentive Plan provides for grants of incentive stock options
that qualify under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), to employees (including officers and employee directors) of the
Company or any affiliate and nonstatutory stock options, restricted stock
purchase awards, stock bonuses and stock appreciation rights to employees
(including officers and employee directors), directors of and consultants to the
Company or any affiliate. The number of shares granted pursuant to stock bonuses
shall at no time exceed 10% of the then current share reserve. The Incentive
 
                                       57

<PAGE>
Plan shall be administered by the Board or a committee appointed by the Board
(references herein to the Board shall include any such committee). It is
intended that the Incentive Plan will be administered by the Compensation
Committee currently consisting of Drs. Hirsch and Vainio, both of whom are "non-
employee directors" under applicable securities laws and "outside directors," as
defined under the Code. The Board has the authority to determine which
recipients and what types of awards are to be granted, including the exercise
price, number of shares subject to the award and the exercisability thereof.
 
    The term of a stock option granted under the Incentive Plan generally may
not exceed ten years. The exercise price of options granted under the Incentive
Plan is determined by the Board, but, in the case of an incentive stock option,
cannot be less than 100% of the fair market value of the Common Stock on the
date of grant. Options granted under the Incentive Plan vest at the rate
specified in the option agreement. Except as expressly provided by the terms of
a nonstatutory stock option agreement, no option may be transferred by the
optionee other than by will or the laws of descent or distribution or, in
certain limited instances, pursuant to a qualified domestic relations order,
provided that an optionee may designate a beneficiary who may exercise the
option following the optionee's death. An optionee whose relationship with the
Company or any related corporation ceases for any reason (other than by death or
permanent and total disability) may exercise vested options in the three-month
period following such cessation (unless such options terminate or expire sooner
by their terms) or in such longer period as may be determined by the Board and
set forth in the option agreement. Vested options may be exercised for up to
twelve months after an optionee's relationship with the Company or its affiliate
ceases due to disability and for up to eighteen months after such relationship
with the Company or its affiliate ceases due to death.
 
    No incentive stock option may be granted to any person who, at the time of
the grant, owns (or is deemed to own) stock possessing more than 10% of the
total combined voting power of the Company or any affiliate of the Company,
unless the option exercise price is at least 110% of the fair market value of
the stock subject to the option on the date of grant and the term of the option
does not exceed five (5) years from the date of grant. In addition, the
aggregate fair market value, determined at the time of grant, of the shares of
Common Stock with respect to which incentive stock options are exercisable for
the first time by an optionee during any calendar year (under the Incentive Plan
and all other stock plans of the Company and its affiliates) may not exceed
$100,000. The options, or portions thereof, which exceed this limit are treated
as nonstatutory options.
 
    When the Company becomes subject to Section 162(m) of the Code (which denies
a deduction to publicly held corporations for certain compensation paid to
specific employees in a taxable year to the extent that the compensation exceeds
$1.0 million, no person may be granted options under the Incentive Plan covering
more than 1,000,000 shares of Common Stock in any calendar year.
 
    Shares subject to stock awards which have lapsed or terminated, without
having been exercised in full, and any shares repurchased by the Company
pursuant to a repurchase option provided under the Incentive Plan may again
become available for the grant of awards under the Incentive Plan. Shares
subject to stock appreciation rights exercised in accordance with the Incentive
Plan may not again become available for the grant of awards under the Incentive
Plan. In the event of a decline in the value of the Company's Common Stock, the
Board of Directors has the authority to offer optionees the opportunity to
replace outstanding options with new options for the same or a different number
of shares. Both the original and the new option will count towards the
per-person, calendar year limitation set forth above.
 
    Restricted stock purchase awards granted under the Incentive Plan may be
granted pursuant to a repurchase option in favor of the Company in accordance
with a vesting schedule determined by the Board. The purchase price of such
awards will be at least 85% of the fair market value of the Common Stock on the
date of grant. Stock bonuses may be awarded in consideration for past services
without a purchase payment. Rights under a stock bonus or restricted stock bonus
agreement may not be transferred other than by will, the laws of descent and
distribution or a qualified domestic relations order while the stock awarded
pursuant to such an agreement remains subject to the agreement, provided that an
optionee
 
                                       58

<PAGE>
may designate a beneficiary who may exercise the option following optionee's
death. Stock appreciation rights authorized for issuance under the Incentive
Plan may be tandem stock appreciation rights, concurrent stock appreciation
rights or independent stock appreciation rights.
 
    Upon certain changes in control of the Company, all outstanding stock awards
under the Incentive Plan shall either be assumed or substituted by the surviving
entity. If the surviving entity determines not to assume or substitute such
awards, then with respect to persons whose service with the Company or an
affiliate has not terminated prior to such change in control, the time during
which such awards may be exercised shall be accelerated and the awards
terminated if not exercised prior to such change in control and any Company
repurchase option or reacquisition right with respect to such person shall
lapse. Further, certain stock award agreements may provide that, with respect to
persons whose service with the Company or an affiliate has not terminated prior
to a change in control, if upon or within 24 months following a change in
control certain triggering events occur, then such person's stock awards will
automatically become fully vested and exercisable and any Company repurchase
option or reacquisition right with respect to such person's stock awards shall
lapse.
 
    As of April 15, 1998, 2,477,695 shares had been issued upon the exercise of
options granted under the Incentive Plan and options to purchase 1,059,100
shares were outstanding with 3,703,205 shares reserved for future grants or
purchases under the Incentive Plan. In addition, the Company has also granted
stock awards to purchase 100,000 shares of Common Stock to consultants pursuant
to the Incentive Plan. The Incentive Plan will terminate in April 2008, unless
terminated sooner by the Board. See Note 4 of Notes to Financial Statements.
 
    1998 EMPLOYEE STOCK PURCHASE PLAN.  In April 1998, the Board adopted,
subject to stockholder approval, the 1998 Employee Stock Purchase Plan (the
"Purchase Plan") covering an aggregate of 1,500,000 shares of Common Stock. The
Purchase Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Code. Under the Purchase Plan, the Board may
authorize participation by eligible employees, including officers, in periodic
offerings following the adoption of the Purchase Plan. The offering period for
any offering will be no more than 27 months.
 
    Employees are eligible to participate if they are employed by the Company,
or an affiliate of the Company designated by the Board, for at least 20 hours
per week and are employed by the Company, or an affiliate of the Company
designated by the Board, for at least five months per calendar year. Employees
who participate in an offering can have up to 10% of their earnings withheld
pursuant to the Purchase Plan. The amount withheld will then be used to purchase
shares of the Common Stock on specified dates determined by the Board. The price
of Common Stock purchased under the Purchase Plan will be equal to 85% of the
lower of the fair market value of the Common Stock on the commencement date of
each offering period or on the specified purchase date. Employees may end their
participation in the offering at any time during the offering period.
Participation ends automatically on termination of employment with the Company.
 
    In the event of certain changes of control of the Company, the Board has
discretion to provide that each right to purchase Common Stock will be assumed
or an equivalent right substituted by the successor corporation, or the Board
may shorten the offering period and provide for all sums collected by payroll
deductions to be applied to purchase Common Stock immediately prior to the
change in control. The Purchase Plan will terminate at the Board's discretion.
The Board has the authority to amend or terminate the Purchase Plan, subject to
the limitation that no such action may adversely affect any outstanding rights
to purchase Common Stock. See Note 7 of Notes to Financial Statements.
 
    1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN.  In April 1998, the Board
adopted, subject to stockholder approval, the 1998 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan") to provide for the automatic grant of
options to purchase shares of Common Stock to non-employee directors of the
Company. The Directors' Plan is administered by the Board, unless the Board
delegates administration to a committee comprised of members of the Board.
 
                                       59

<PAGE>
    The aggregate number of shares of Common Stock that may be issued pursuant
to options granted under the Directors' Plan is 200,000. Pursuant to the terms
of the Directors' Plan, each director of the Company who is not an employee of
the Company (a "Non-Employee Director") and who is first elected or appointed to
be a Non-Employee Director after the closing of this offering shall
automatically be granted an option to purchase 25,000 shares of Common Stock
upon the date of such election or appointment (an "Initial Grant"). In addition,
each Non-Employee Director who continues to serve as a Non-Employee Director of
the Company will automatically be granted an option to purchase 2,500 shares of
Common Stock immediately following the annual meeting of stockholders of the
Company (an "Annual Grant"), which amount shall be pro-rated for any
Non-Employee Director who has not continuously served as a director for the 12
month period prior to the date of such annual meeting of stockholders. Each
Initial Grant shall vest as to 1/8(th) of the option shares on the six-month
anniversary of the date of grant and the remaining option shares shall vest in
equal monthly installments over the following 42 months. Each Annual Grant shall
vest in 36 equal monthly installments over a 3-year period measured from the
grant date.
 
    In the event of certain changes of control of the Company and the occurrence
of a triggering event within 24 months of such change of control of the Company,
then such Non-Employee Director's options will automatically become fully vested
and exercisable.
 
    No option granted under the Directors' Plan may be exercised after the
expiration of ten years from the date it was granted. The exercise price of
options under the Directors' Plan will equal the fair market value of the Common
Stock on the date of grant. The Directors' Plan will terminate in April 2008,
unless earlier terminated by the Board. See Note 7 of Notes to Financial
Statements.
 
    As of April 15, 1998, no options to purchase Common Stock have been granted
pursuant to the Directors' Plan.
 
EXECUTIVE OFFICER AND EMPLOYMENT ARRANGEMENTS
 
    In February 1997, the Company entered into an agreement with Mr. Smith
providing that, in the case of involuntary termination other than for cause, his
salary and benefits will continue to be paid for a period of one year from the
date of termination.
 
                                       60

<PAGE>

                              CERTAIN TRANSACTIONS
 
    Since November 1995, the Company has sold the following shares of Common
Stock and Preferred Stock in private placement transactions: in November 1995
and December 1995, 3,385,000 shares of Common Stock at a price of $0.001 per
share; in December 1995 and January 1996, 5,442,500 shares of Series A Preferred
Stock at a price of $1.00 per share; in January 1996, 470,000 shares of Series B
Preferred Stock at a price of $0.10 per share; in December 1996 and January
1997, 910,000 shares of Common Stock at a price of $0.05 per share; in January
1997 and March 1997, 6,000,000 shares of Series C Preferred Stock at a price of
$5.00 per share and in November 1997, 2,125,000 shares of Series D Preferred
Stock at a price of $8.00 per share. The Company also issued a warrant to
purchase 11,000 shares of Common Stock at an exercise price of $5.00 per share
in April 1997.
 
    The purchasers of Common Stock and Preferred Stock described above included,
among others, the following officers, directors and holders of more than five
percent of the Company's voting securities:
 

<TABLE>
<CAPTION>
                                                                            SHARES OF PREFERRED STOCK
                                                      COMMON      ---------------------------------------------
                                                      STOCK        SERIES A    SERIES B    SERIES C   SERIES D
                                                  --------------  ----------  ----------  ----------  ---------
<S>                                               <C>             <C>         <C>         <C>         <C>
DIRECTORS AND EXECUTIVE OFFICERS
John G. Freund, M.D.............................        500,000       50,000      --          --         --
Frederic H. Moll, M.D...........................      1,050,000      150,000      --          --         --
Lonnie M. Smith.................................        700,000       --          --          --         --
Robert G. Younge................................      1,100,000      100,000      --          --         --
 
ENTITIES AFFILIATED WITH DIRECTORS
Mayfield Fund...................................        150,000    2,700,000      --         960,000    355,400
Sierra Ventures.................................        --         2,300,000      --         600,000    125,000
Morgan Stanley Venture Partners.................        --            --          --       1,500,000     --
 
OTHER 5% STOCKHOLDERS
Allan G. Lozier.................................        --            --          --       1,200,000    116,000
</TABLE>

 
    INVESTOR RIGHTS AGREEMENT.  The Company, the holders of Preferred Stock, and
Drs. Freund and Moll and Mr. Younge (the "Founders") have entered into an
Amended and Restated Investor Rights Agreement, dated November 14, 1997 (the
"Investor Rights Agreement"), pursuant to which the holders of all Preferred
Stock have certain registration rights with respect to their shares of Common
Stock following the closing of this offering. See "Description of Capital
Stock--Registration Rights."
 
    STOCKHOLDERS AGREEMENT.  The Company, the Founders, Mr. Smith, and entities
affiliated with Mayfield Fund, Sierra Ventures and Morgan Stanley Venture
Partners have entered into a Stockholders Agreement dated December 20, 1995, as
amended March 27, 1997 (the "Stockholders Agreement"). The Stockholders
Agreement provides all shares of voting capital stock of the Company registered
in the parties' respective names or beneficially owned by them shall be voted at
the election of directors so that one director shall be the Company's Chief
Executive Officer, two directors shall be nominees designated by the Founders,
two directors shall be nominees designated by Mayfield Fund, one director shall
be a nominee designated by Sierra Ventures and one director shall be a nominee
designated by Morgan Stanley Venture Partners. The Stockholders Agreement
terminates upon the closing of this offering.
 
    The Company intends to enter into indemnification agreements with its
directors and officers for the indemnification of and advancement of expenses to
such persons to the full extent permitted by law. The Company also intends to
execute such agreements with its future directors and officers.
 
    See also "Management--Executive Officer and Employment Arrangements."
 
                                       61

<PAGE>
                             PRINCIPAL STOCKHOLDERS
 
    The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 31, 1998 held by
(i) each person known to the Company to be the beneficial owner of more than 5%
of its outstanding shares of Common Stock, (ii) each director of the Company,
(iii) each of the Named Executive Officers of the Company, and (iv) all
directors and executive officers of the Company as a group. Except as otherwise
noted below, the address of each person listed below is c/o the Company, 1340 W.
Middlefield Road, Mountain View, California 94043.
 

<TABLE>
<CAPTION>
                                                                                              PERCENTAGE OF SHARES
                                                                                              BENEFICIALLY OWNED(1)
                                                                                 SHARES     -------------------------
                                                                              BENEFICIALLY   PRIOR TO       AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER                                            OWNED(1)     OFFERING      OFFERING
- ----------------------------------------------------------------------------  ------------  -----------  ------------
<S>                                                                           <C>           <C>          <C>
Entities affiliated with Mayfield Fund (2) .................................     4,165,400       20.0%
2800 Sand Hill Road
Menlo Park, California 94025
 
Entity affiliated with Sierra Ventures (3) .................................     3,025,000       14.5%
3000 Sand Hill Road
Building 4, Suite 210
Menlo Park, California 94025
 
Entities affiliated with Morgan Stanley Venture Partners (4) ...............     1,500,000        7.2%
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, California 94025
 
Frederic H. Moll, M.D. (5)..................................................     1,500,000        7.2%
 
Allan G. Lozier ............................................................     1,316,000        6.3%
c/o Lozier Corporation
6226 Pershing Drive
Omaha, Nebraska 67810
 
Robert G. Younge (6)........................................................     1,298,000        6.1%
 
Russell C. Hirsch, M.D., Ph.D. (2)..........................................     4,165,400       20.0%
 
Petri T. Vainio, M.D., Ph.D. (3)............................................     3,025,000       14.5%
 
Scott S. Halsted (4)........................................................     1,500,000        7.2%
 
Lonnie M. Smith (7).........................................................     1,000,000        4.8%
 
John G. Freund, M.D. (8)....................................................       550,000        2.6%
 
Susan K. Barnes (9).........................................................       200,000        1.0%
 
All directors and executive officers as a group
(8 persons) (10)............................................................    13,238,400       62.5%
</TABLE>

 
- ---------
 
(1) Beneficial ownership is determined in accordance with the rules of the
    Commission and generally includes voting or investment power with respect to
    securities. Beneficial ownership also includes shares of stock subject to
    options and warrants currently exercisable or convertible, or exercisable or
    convertible within 60 days of March 31, 1998. Percentage of beneficial
    ownership is based on 20,874,779 shares of Common Stock outstanding as of
    March 31, 1998, and           shares of Common Stock outstanding after the
    closing of this offering assuming the Underwriters' over-allotment option is
    not exercised. Unless otherwise indicated below, to the knowledge of the
 
                                       62

<PAGE>
    Company, all persons listed below have sole voting and investment power with
    respect to their shares of Common Stock, except to the extent authority is
    shared by spouses under applicable law.
 
(2) Represents 3,957,130 shares held by Mayfield VIII and 208,270 shares held by
    Mayfield Associates Fund II. Dr. Hirsch, a director of the Company, is a
    managing member of the general partner of Mayfield VIII and a general
    partner of Mayfield Associates Fund II. Dr. Hirsch disclaims beneficial
    ownership of shares held by such entities except to the extent of his
    proportionate partnership interest therein.
 
(3) Represents 3,025,000 shares held by Sierra Ventures V, L.P. Dr. Vainio, a
    director of the Company, is a general partner of the general partner of such
    entity. Dr. Vainio disclaims beneficial ownership of shares held by such
    entity except to the extent of his proportionate partnership interest
    therein.
 
(4) Represents 1,368,600 shares held by Morgan Stanley Venture Partners III,
    L.P. and 131,400 shares held by Morgan Stanley Venture Investors III, L.P.
    Mr. Halsted, a director of the Company, is a general partner of the general
    partner of such entities. Mr. Halsted disclaims beneficial ownership of
    shares held by such entities except to the extent of his proportionate
    partnership interest therein.
 
(5) Includes 645,000 shares subject to a right of repurchase by the Company 60
    days from March 31, 1998.
 
(6) Includes 30,000 shares held by Diane Lauren Sotos, Trustee of the Younge
    Irrevocable Trust fbo Ellen Sotos McCoy dated June 25, 1996 and 3,000 shares
    held by Arthur G. Closson, Custodian fbo Eric Roy Younge, under the CUTMA,
    to age 21. Also includes 440,000 shares subject to a right of repurchase by
    the Company 60 days from March 31, 1998 and 300,000 shares Mr. Younge has
    the right to acquire pursuant to options exercisable within 60 days of March
    31, 1998. Mr. Younge disclaims beneficial ownership of the shares held for
    the benefit of Ellen Sotos McCoy and Eric Roy Younge.
 
(7) Includes 200,000 shares held by McKRAM Investors, L.P. ("McKRAM"). Also
    includes 702,667 shares subject to a right of repurchase by the Company 60
    days from March 31, 1998. Mr. Smith, a partner of McKRAM, disclaims
    beneficial ownership of shares held by such entity.
 
(8) Represents (i) 450,000 shares held by the Freund/Sexton Living Trust dated
    February 8, 1991, (ii) 75,000 shares held by the Freund/Sexton 1997
    Children's Trust dated January 20, 1997 ("Children's Trust") and (iii)
    25,000 shares held by the Sexton/Freund 1984 Family Trust ("Family Trust").
    Dr. Freund does not have sole voting and investment power with respect to
    the shares held by the Children's Trust. Dr. Freund disclaims beneficial
    ownership of shares in the Children's Trust and Family Trust.
 
(9) Includes 150,000 shares subject to a right of repurchase by the Company 60
    days from March 31, 1998.
 
(10) Includes 8,690,400 shares held by entities affiliated with certain
    directors of the Company. Also includes 1,937,667 shares subject to a right
    of repurchase by the Company 60 days from March 31, 1998 and 300,000 shares
    subject to options exercisable within 60 days of March 31, 1998.
 
                                       63

<PAGE>

                          DESCRIPTION OF CAPITAL STOCK
 
    Upon the closing of this offering, the authorized capital stock of the
Company will consist of 75,000,000 shares of Common Stock, par value $0.001, and
10,000,000 shares of Preferred Stock, par value $0.001.
 
    The Company may be subject to Section 2115 of the California Corporations
Code. Section 2115 provides that, regardless of a company's legal domicile,
certain provisions of California corporate law will apply to that company if the
company meets certain requirements relating to its property, payroll and sales
in California and if more than one-half of its outstanding voting securities are
held of record by persons having addresses in California. Among other things,
Section 2115 may limit the ability of the Company to elect a classified Board of
Directors. The Company will not be subject to Section 2115 (i) at such time as
the Company is qualified for trading as a national market security on the Nasdaq
National Market and has 800 stockholders as of the record date of its most
recent annual meeting of stockholders or (ii) at the end of any income year
during which a certificate shall have been filed showing that less than one-half
of its outstanding voting securities are held of record by persons having
addresses in California or that one of the other tests of Section 2115 is not
met.
 
COMMON STOCK
 
    Upon the closing of this offering, based on the number of shares outstanding
on March 31, 1998, there will be       shares of Common Stock outstanding (plus
up to 11,000 shares that may be issued upon the exercise of an outstanding
warrant). The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders. Until the
Company is no longer subject to Section 2115, the holders of Common Stock are
entitled to cumulative voting rights with respect to the election of directors.
At such time or times as the Company is no longer subject to Section 2115, the
holders of Common Stock will not be entitled to cumulate voting rights with
respect to the election of directors, and as a consequence, minority
stockholders will not be able to elect directors on the basis of their votes
alone.
 
    Subject to preferences that may be applicable to any Preferred Stock
outstanding at the time, the holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the Board of Directors may from time to time
determine. See "Dividend Policy." Upon liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to all assets remaining after
payment of liabilities and the liquidation preference of any then outstanding
shares of Preferred Stock. Holders of Common Stock have no preemptive rights and
no right to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are, and all shares of Common Stock to be
outstanding upon closing of this offering will be, fully paid and nonassessable.
 
PREFERRED STOCK
 
    Upon the closing of this offering, each outstanding share of Preferred Stock
will be converted into     of a share of Common Stock. Pursuant to the Company's
Amended and Restated Certificate of Incorporation, to be effective upon the
closing of this offering, the Board of Directors has the authority, without
further action by the stockholders, to issue up to 10,000,000 shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of such series, without any further vote or action by the stockholders. The
issuance of Preferred Stock could adversely affect the voting power of holders
of Common Stock and the likelihood that such holders will receive dividend
payments and payments upon liquidation may have the effect of delaying,
deferring or preventing a change in control of
 
                                       64

<PAGE>
the Company, which could have a depressive effect on the market price of the
Company's Common Stock. The Company has no present plan to issue any shares of
Preferred Stock.
 
WARRANT
 
    In April 1997, the Company issued a warrant to purchase 11,000 shares of its
Common Stock at an exercise price of $5.00 per share, exercisable at any time
through April 15, 2003, in connection with an equipment lease.
 
REGISTRATION RIGHTS
 
    Upon the closing of this offering, the holders (or their permitted
transferees) ("Holders") of 14,037,500 shares of Common Stock are entitled to
certain rights with respect to the registration of such shares under the
Securities Act. If the Company proposes to register any of its securities under
the Securities Act, either for its own account or for the account of other
security holders, the Holders are entitled to notice of the registration and are
entitled to include, at the Company's expense, such shares therein. In addition,
certain of the Holders may require the Company at its expense on not more than
two occasions at any time beginning approximately six months from the date of
this Prospectus to file a Registration Statement under the Securities Act, with
respect to their shares of Common Stock, and the Company is required to use its
best efforts to effect the registration, subject to certain conditions and
limitations. Further, the Holders may require the Company at its expense to
register their shares on Form S-3 when such form becomes available to the
Company, subject to certain conditions and limitations.
 
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
 
    The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless (i) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder,
(ii) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding, for purposes of determining the number of
shares outstanding, those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer or (iii) on or subsequent to
such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least two-thirds of the outstanding
voting stock that is not owned by the interested stockholder.
 
    Section 203 defines business combination to include (i) any merger or
consolidation involving the corporation and the interested stockholder, (ii) any
sale, transfer, pledge or other disposition involving the interested stockholder
of 10% or more of the assets of the corporation, (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder or
(iv) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation. In general, Section 203 defines an interested stockholder as
any entity or person beneficially owning 15% or more of the outstanding voting
stock of the corporation and any entity or person affiliated with or controlling
or controlled by such entity or person. See "Risk Factors--Anti-Takeover Effect
of Delaware Law and Certain Charter and Bylaw Provisions."
 
                                       65

<PAGE>
    The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and Amended and Restated Bylaws (the "Bylaws"),
both of which will become effective upon the closing of this offering, provide
that at such time or times that the Company is no longer subject to Section
2115, the Company will have a classified Board of Directors. Accordingly, at
that time, each director will serve for a three-year term, with approximately
one-third of the directors to be elected annually. Candidates for director may
be nominated only by the Board of Directors or by a stockholder who gives
written notice to the Company no later than 60 days prior nor earlier than 90
days prior to the first anniversary of the last annual meeting of stockholders.
The Board may consist of one or more members to be determined from time to time
by resolution of the Board. The Board currently consists of six members. Between
stockholder meetings, the Board may appoint new directors to fill vacancies or
newly created directorships. The Certificate of Incorporation and Bylaws provide
that at such time as the Company is no longer subject to Section 2115,
cumulative voting at stockholder meetings for the election of directors will not
be allowed. As a result, stockholders controlling more than 50% of the
outstanding Common Stock will be able to elect the entire Board of Directors,
while stockholders controlling 49% of the outstanding Common Stock may not be
able to elect any directors. The Certificate of Incorporation and Bylaws also
provide that during such time as the Company is subject to Section 2115, a
director may be removed with or without cause by the affirmative vote of the
holders of at least a majority of the then outstanding shares of voting stock.
At such time that the Company is no longer subject to Section 2115, the
Certificate of Incorporation and Bylaws provide that a director may be removed
from office for cause by the affirmative vote of a majority of the combined
voting power of the then outstanding shares of stock entitled to vote generally
in the election of directors.
 
    The Company's Certificate of Incorporation and Bylaws require that upon the
closing of this offering, any action required or permitted to be taken by
stockholders of the Company must be effected at a duly called annual or special
meeting of stockholders and may not be effected by a consent in writing. The
Company's Certificate of Incorporation also provides that the authorized number
of directors may be changed only by resolution of the Board of Directors. See
"Management--Officers and Directors." Delaware Law and these charter provisions
may have the effect of deterring hostile takeovers or delaying changes in
control or management of the Company, which could have a depressive effect on
the market price of the Company's Common Stock.
 
LIMITATION OF LIABILITY AND INDEMNIFICATION
 
    The Company's Certificate of Incorporation and Bylaws contain certain
provisions permitted under Delaware Law relating to the liability of directors.
These provisions eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in certain circumstances
involving certain wrongful acts, such as (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derives an improper personal
benefit. These provisions do not limit or eliminate the rights of the Company or
any stockholder to seek non-monetary relief, such as an injunction or
rescission, in the event of a breach of director's fiduciary duty. These
provisions will not alter a director's liability under federal securities laws.
The Company's Certificate of Incorporation and Bylaws also contain provisions
indemnifying the directors and officers of the Company to the fullest extent
permitted by Delaware General Corporation Law. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors and officers.
 
    The Company intends to enter into indemnification agreements with its
directors and officers for the indemnification of and advancement of expenses to
such persons to the full extent permitted by law. The Company also intends to
execute such agreements with its future directors and officers.
 
                                       66

<PAGE>
TRANSFER AGENT
 
    The transfer agent and registrar for the Common Stock of the Company is
BankBoston, N.A. (the "Transfer Agent"). The telephone number of the Transfer
Agent is (781) 575-2000.
 
LISTING
 
    The Company has applied to have the Common Stock quoted on the Nasdaq
National Market under the symbol "ISRG."
 
                                       67

<PAGE>
                        SHARES ELIGIBLE FOR FUTURE SALE
 
    Prior to this offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices from time to time.
Furthermore, since no shares will be available for sale shortly after this
offering because of certain contractual and legal restrictions on resale (as
described below), sales of substantial amounts of Common Stock of the Company in
the public market after these restrictions lapse could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future.
 
    Upon the closing of this offering, the Company will have outstanding an
aggregate of       shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options and a
warrant. Of these shares, the       shares sold in this offering will be freely
tradable without restriction or further registration under the Securities Act,
unless such shares are purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act (the "Affiliates"). The remaining
20,874,779 shares of Common Stock held by existing stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act
("Restricted Shares"). Restricted Shares may be sold in the public market only
if registered or if they qualify for an exemption from registration described
below under Rules 144, 144(k) or 701 promulgated under the Securities Act, which
rules are summarized below. As a result of such contractual restrictions and the
provisions of Rules 144, 144(k) and 701, the Restricted Shares will be available
for sale in the public market as follows: (i) no shares will be eligible for
immediate sale on the date of this Prospectus and (ii) approximately 18,447,659
shares (excludes approximately 2,693,361 shares subject to repurchase by the
Company and includes approximately 255,241 shares subject to outstanding vested
options and 11,000 shares subject to an outstanding warrant) will be eligible
for sale upon expiration of the lock-up agreements 180 days after the date of
this Prospectus. All officers, directors, stockholders and option holders of the
Company have agreed not to offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly (or enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of), any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Common Stock, for a period of 180 days
after the date of this Prospectus, without the prior written consent of Morgan
Stanley & Co. Incorporated. Morgan Stanley & Co. Incorporated may in its sole
discretion choose to release a certain number of these shares from such
restrictions prior to the expiration of such 180 day period.
 
    In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner except an Affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) 1% of the number of shares of Common Stock then outstanding
(which will equal approximately       shares immediately after this offering);
or (ii) the average weekly trading volume of the Common Stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a notice
on Form 144 with respect to such sale. Sales under Rule 144 are also subject to
certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an Affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years (including the holding period of any
prior owner except an Affiliate), is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144; therefore, unless otherwise restricted, shares
will qualify as "144(k) shares" on the date of this Prospectus and may be sold
immediately upon the completion of this offering.
 
    Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, employees, directors, officers, consultants or
advisors may rely on Rule 701 with respect to the resale of
 
                                       68

<PAGE>
securities originally purchased from the Company prior to the date the issuer
becomes subject to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), pursuant to written compensatory benefit
plans or written contracts relating to the compensation of such persons. In
addition, the Commission has indicated that Rule 701 will apply to typical stock
options granted by an issuer before it becomes subject to the reporting
requirements of the Exchange Act, along with the shares acquired upon exercise
of such options (including exercises after the date of this Prospectus).
Securities issued in reliance on Rule 701 are restricted securities and, subject
to the contractual restrictions described above, beginning 90 days after the
date of this Prospectus, may be sold by persons other than Affiliates subject
only to the manner of sale provisions of Rule 144, and by Affiliates under Rule
144 without compliance with its holding period requirements.
 
    Upon the closing of this offering, the holders of approximately 14,037,500
shares of Common Stock, or their transferees, will be entitled to certain rights
with respect to the registration of such shares under the Securities Act. See
"Description of Capital Stock--Registration Rights." Registration of such shares
under the Securities Act would result in such shares becoming freely tradable
without restriction under the Securities Act (except for share purchases by
affiliates) immediately upon the effectiveness of such registration.
 
    The Company intends to file registration statements under the Securities Act
covering 9,040,000 shares of Common Stock reserved for issuance under the
Incentive Plan, the Purchase Plan and the Directors' Plan. See
"Management--Employee Benefit Plans." Such registration statements are expected
to be filed and become effective as soon as practicable after the effective date
of this offering. Accordingly, shares registered under such registration
statements will, subject to Rule 144 volume limitations applicable to
Affiliates, be available for sale in the open market, beginning 180 days after
the date of the Prospectus, unless such shares are subject to vesting
restrictions with the Company.
 
                                       69

<PAGE>
                                  UNDERWRITERS
 
    Under the terms of and subject to the conditions contained in an
Underwriting Agreement dated the date of this Prospectus hereof (the
"Underwriting Agreement"), the Underwriters named below (the "Underwriters"),
for whom Morgan Stanley & Co. Incorporated, Bear, Stearns & Co. Inc. and BT
Alex. Brown Incorporated are serving as Representatives (the "Representatives"),
have severally agreed to purchase, and the Company has agreed to sell to the
Underwriters severally, the respective number of shares of Common Stock set
forth opposite the names of such Underwriters below:
 

<TABLE>
<CAPTION>
                                                                                     NUMBER
                                      NAME                                         OF SHARES
- ---------------------------------------------------------------------------------  ----------
<S>                                                                                <C>
Morgan Stanley & Co. Incorporated................................................
Bear, Stearns & Co. Inc..........................................................
BT Alex. Brown Incorporated......................................................
 
                                                                                   ----------
  Total..........................................................................
                                                                                   ----------
                                                                                   ----------
</TABLE>

 
    The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all of the shares of Common Stock offered hereby (other than the
shares covered by the over-allotment option described below) if any such shares
are taken.
 
    The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the initial public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $        a share under the initial public offering
price. Any Underwriter may allow, and such dealers may reallow, a concession not
in excess of $        a share to other Underwriters or to certain dealers. After
the initial offering of the shares of Common Stock, the offering price and other
selling terms may from time to time be varied by the Underwriters.
 
    The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of
        additional shares of Common Stock at the initial public offering price
set forth on the cover page hereof, less underwriting discounts and commissions.
The Underwriters may exercise such option to purchase solely for the purpose of
covering over-allotments, if any, incurred in the sale of the shares of Common
Stock offered hereby. To the extent such option is exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional shares of Common Stock as the number set
forth next to such Underwriter's name in the preceding table bears to the total
number of shares of Common Stock offered hereby to the Underwriters.
 
    The Representatives have informed the Company that they will not make sales
of the Common Stock offered hereby to accounts over which they exercise
discretionary authority without prior specific written approval of the customer.
 
                                       70

<PAGE>
    In March 1997, Morgan Stanley Venture Partners III, L.P. and Morgan Stanley
Venture Investors III, L.P., entities affiliated with Morgan Stanley & Co.
Incorporated, purchased an aggregate of 1,500,000 shares of the Company's
Preferred Stock at a purchase price of $5.00 per share, for an aggregate of
$7,500,000. Such shares will convert into 1,500,000 shares of Common Stock upon
the closing of this offering.
 
    See "Shares Eligible for Future Sale" for a description of certain
arrangements by which all officers, directors, stockholders and option holders
of the Company have agreed not to sell or otherwise dispose of Common Stock or
convertible securities of the Company for up to 180 days after the date of this
Prospectus without the prior consent of Morgan Stanley & Co. Incorporated. The
Company has agreed in the Underwriting Agreement that it will not, directly or
indirectly, without the prior written consent of Morgan Stanley & Co.
Incorporated, offer, pledge, sell, lend, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, for a period of 180 days after the date of this Prospectus,
except under certain circumstances.
 
    In order to facilitate the offering of Common Stock, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Common Stock. Specifically, the Underwriters may over-allot in connection
with the offering, creating a short position in the Common Stock for their own
account. In addition, to cover the over-allotments or to stabilize the price of
the Common Stock, the Underwriters may bid for, and purchase, shares of Common
Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Common Stock in the offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
 
    The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
 
    The offering is being conducted in accordance with Rule 2720 ("Rule 2720")
of the Conduct Rules promulgated by the National Association of Securities
Dealers, Inc. (the "NASD") which provides that, among other things, when an NASD
member firm participates in the offering of equity securities of a company with
whom such member has a "conflict of interest" (as defined in Rule 2720), the
initial public offering price can be no higher than that recommended by a
"qualified independent underwriter" (as defined in Rule 2720) (a "QIU"). Morgan
Stanley & Co. Incorporated is deemed to have such a conflict of interest with
the Company due to the fact that certain entities affiliated with Morgan Stanley
& Co. Incorporated own shares of the Company's Preferred Stock as described
above.           is serving as the QIU in the offering and will recommend a
price in compliance with the requirements of Rule 2720.           has performed
due diligence investigations and reviewed and participated in the preparation of
this Prospectus and the Registration Statement of which this Prospectus forms a
part.           , in its capacity as QIU, will receive no additional
compensation as such in connection with the offering.
 
    The Underwriters have reserved for sale, at the initial public offering
price, up to five percent of the Common Stock offered hereby for employees and
directors of the Company and certain others who have expressed an interest in
purchasing such shares of Common Stock in the offering. The number of shares
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased will
be offered by the Underwriters to the general public on the same basis as other
shares offered hereby.
 
                                       71

<PAGE>
PRICING OF THE OFFERING
 
    Prior to this offering, there has been no public market for the Common Stock
or any other securities of the Company. The initial public offering price for
the Common Stock will be determined by negotiations between the Company and the
Representatives. Among the factors that will be considered in determining the
initial public offering price are the future prospects of the Company and its
industry in general; sales, earnings and certain other financial and operating
information of the Company in recent periods; and certain ratios, price-sales
ratios, market prices of securities and certain financial and operating
information of companies engaged in activities similar to those of the Company.
 

                                 LEGAL MATTERS
 
    The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cooley Godward LLP, Palo Alto, California. GC&H
Investments, an entity affiliated with Cooley Godward LLP, beneficially owns
30,000 shares of the Company's Preferred Stock which shares will convert into
        shares of the Company's Common Stock upon the closing of this offering.
Certain legal matters will be passed upon for the Underwriters by Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo Park, California.
 

                                    EXPERTS
 
    The financial statements of the Company as of December 31, 1996, and 1997
and for the period from inception (November 9, 1995) to December 31, 1996 and
for the year ended December 31, 1997 appearing in this Prospectus and
Registration Statement have been included herein and in the Registration
Statement in reliance upon the reports of Ernst & Young LLP, independent
certified accountants appearing elsewhere herein, and upon authority of said
firm as experts in accounting and auditing.
 
                             ADDITIONAL INFORMATION
 
    The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement on Form S-1 under the Securities Act with respect to the
shares of Common Stock offered. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedule filed therewith. Certain items are omitted in accordance with the rules
and regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedule filed therewith. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. A copy of the Registration Statement, and the
exhibits and schedule filed therewith, may be inspected without charge at the
public reference facilities maintained by the Commission in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the Commission's regional offices
located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048, and copies of all or any part of the Registration Statement may be
obtained from such offices upon the payment of the fees prescribed by the
Commission. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
site is http://www.sec.gov. The Registration Statement, including all exhibits
thereto and amendments thereof, has been filed with the Commission through the
Electronic Data Gathering, Analysis and Retrieval system (EDGAR).
 
                                       72

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 

                         INDEX TO FINANCIAL STATEMENTS
 

<TABLE>
<S>                                                                                     <C>
Report of Ernst & Young LLP, Independent Auditors.....................................        F-2
 
Balance Sheets........................................................................        F-3
 
Statements of Operations..............................................................        F-4
 
Statement of Stockholders' Equity.....................................................        F-5
 
Statements of Cash Flows..............................................................        F-6
 
Notes to Financial Statements.........................................................        F-7

</TABLE>

 
                                      F-1

<PAGE>

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
The Board of Directors and Stockholders
Intuitive Surgical, Inc.
 
    We have audited the accompanying balance sheets of Intuitive Surgical, Inc.
(a development stage company) as of December 31, 1996 and 1997, and the related
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 1997, the period from inception (November 9, 1995) to December 31,
1996, and the period from inception (November 9, 1995) to December 31, 1997 (not
separately presented herein). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Intuitive Surgical, Inc. (a
development stage company) at December 31, 1996 and 1997, and the results of its
operations and its cash flows for the year ended December 31, 1997, the period
from inception (November 9, 1995) to December 31, 1996, and the period from
inception (November 9, 1995) to December 31, 1997 (not separately presented
herein), in conformity with generally accepted accounting principles.
 
                                          ERNST & YOUNG LLP
 
Palo Alto, California
February 6, 1998,

except for Note 7, as to which the date is
  April 21, 1998
 
                                      F-2

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                                 BALANCE SHEETS
 
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                                         UNAUDITED
                                                                                         PRO FORMA
                                                                                        STOCKHOLDERS'
                                                         DECEMBER 31,                    EQUITY AT
                                                     --------------------   MARCH 31,    MARCH 31,
                                                       1996       1997        1998         1998
                                                     ---------  ---------  -----------  -----------
                                                                           (UNAUDITED)   (NOTE 7)
<S>                                                  <C>        <C>        <C>          <C>
ASSETS
Current assets:
  Cash and cash equivalents........................  $   1,494  $  17,034   $   7,625
  Short-term investments...........................     --         15,640      18,678
  Prepaid expenses.................................         70        196         317
                                                     ---------  ---------  -----------
Total current assets...............................      1,564     32,870      26,620
 
Property and equipment, net........................        725      2,804       3,487
                                                     ---------  ---------  -----------
                                                     $   2,289  $  35,674   $  30,107
                                                     ---------  ---------  -----------
                                                     ---------  ---------  -----------
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable.................................  $     472  $   1,811   $   2,857
  Accrued liabilities..............................         47        377         568
  Accrued license fee..............................     --          5,000       5,000
  Current portion of capital lease obligations.....     --            258         403
                                                     ---------  ---------  -----------
Total current liabilities..........................        519      7,446       8,828
 
Capital lease obligations, noncurrent..............     --            897       1,297
Commitments and contingencies
 
Stockholders' equity:
  Convertible preferred stock, 15,000,000 shares
    authorized, $0.001 par value, issuable in
    series: 14,412,500 designated, 14,037,500
    shares issued and outstanding, aggregate
    liquidation preference of $52,489,500 at March
    31, 1998; none pro forma.......................          6         14          14    $  --
  Common stock, 35,000,000 shares authorized,
    $0.001 par value, 3,833,000, 6,594,520 and
    6,837,279 shares issued and outstanding at
    December 31, 1996, December 31, 1997, and March
    31, 1998, respectively, and 20,874,779 pro
    forma..........................................          4          7           7           21
  Additional paid-in capital.......................      5,447     56,430      57,450       57,450
  Deferred compensation............................     --         (1,831)     (2,185)      (2,185)
  Deficit accumulated during the development
    stage..........................................     (3,687)   (27,289)    (35,304)     (35,304)
                                                     ---------  ---------  -----------  -----------
Total stockholders' equity.........................      1,770     27,331      19,982    $  19,982
                                                     ---------  ---------  -----------  -----------
                                                                                        -----------
                                                     $   2,289  $  35,674   $  30,107
                                                     ---------  ---------  -----------
                                                     ---------  ---------  -----------
</TABLE>

 
                            SEE ACCOMPANYING NOTES.
 
                                      F-3

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                            STATEMENTS OF OPERATIONS
 
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                  PERIOD FROM                                       PERIOD FROM
                                                   INCEPTION                                         INCEPTION
                                                  (NOVEMBER 9,                 THREE MONTHS ENDED   (NOVEMBER 9,
                                                    1995) TO     YEAR ENDED        MARCH 31,          1995) TO
                                                  DECEMBER 31,  DECEMBER 31,  --------------------   MARCH 31,
                                                      1996          1997        1997       1998         1998
                                                  ------------  ------------  ---------  ---------  ------------
                                                                                  (UNAUDITED)       (UNAUDITED)
<S>                                               <C>           <C>           <C>        <C>        <C>
Operating costs and expenses:
  Research and development......................   $    2,934    $   14,282   $   1,793  $   6,764   $   23,980
  General and administrative....................          951         4,434         686      1,627        7,012
  Technology license............................       --             6,000      --         --            6,000
                                                  ------------  ------------  ---------  ---------  ------------
Total operating costs and expenses..............        3,885        24,716       2,479      8,391       36,992
                                                  ------------  ------------  ---------  ---------  ------------
 
Loss from operations............................       (3,885)      (24,716)     (2,479)    (8,391)     (36,992)
 
Interest income.................................          198         1,244          70        423        1,865
Interest expense................................       --              (130)     --            (47)        (177)
                                                  ------------  ------------  ---------  ---------  ------------
Net loss........................................   $   (3,687)   $  (23,602)  $  (2,409) $  (8,015)  $  (35,304)
                                                  ------------  ------------  ---------  ---------  ------------
                                                  ------------  ------------  ---------  ---------  ------------
 
Pro forma net loss per share....................                 $    (1.85)             $   (0.47)
                                                                ------------             ---------
                                                                ------------             ---------
Shares used in computing pro forma net loss per
  share.........................................                     12,730                 17,207
                                                                ------------             ---------
                                                                ------------             ---------
</TABLE>

 
                            SEE ACCOMPANYING NOTES.
 
                                      F-4

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                       STATEMENT OF STOCKHOLDERS' EQUITY
 
           PERIOD FROM INCEPTION (NOVEMBER 9, 1995) TO MARCH 31, 1998
 
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                              CONVERTIBLE PREFERRED
                                                      STOCK                 COMMON STOCK        ADDITIONAL
                                             ------------------------  -----------------------    PAID-IN       DEFERRED
                                               SHARES       AMOUNT       SHARES      AMOUNT       CAPITAL     COMPENSATION
                                             -----------  -----------  ----------  -----------  -----------  ---------------
<S>                                          <C>          <C>          <C>         <C>          <C>          <C>
Issuance of common stock to founders at
  $0.001 per share in December 1995 for
  technology license, cash and services....      --           --        3,385,000   $       4    $  --          $  --
Issuance of Series A stock to investors at
  $1.00 per share in December 1995 for
  cash, net of issuance costs of $53.......    5,442,500           5       --          --            5,384         --
Issuance of Series B stock to investors at
  $0.10 per share in January 1996 for cash,
  net of issuance costs of $5..............      470,000           1       --          --               41         --
Issuance of common stock to employees and
  consultants at $0.05 per share for cash
  and services.............................      --           --          448,000      --               22         --
Net loss from Inception (November 9, 1995)
  to December 31, 1996.....................      --           --           --          --           --             --
                                             -----------       -----   ----------       -----   -----------       -------
Balances at December 31, 1996..............    5,912,500           6    3,833,000           4        5,447         --
Issuance of Series C stock to investors at
  $5.00 per share in January 1997 and March
  1997 for cash, net of issuance costs of
  $51......................................    6,000,000           6       --          --           29,943         --
Issuance of Series D stock to investors at
  $8.00 per share in November 1997 for
  cash, net of issuance costs of $75.......    2,125,000           2       --          --           16,923         --
Issuance of common stock to employees and
  consultants at $0.05-$1.50 per share for
  cash and services........................      --           --        2,874,853           3          864         --
Repurchase of common stock from employees
  at $0.05 per share.......................      --           --         (113,333)     --               (6)        --
Deferred compensation resulting from grant
  of options...............................      --           --           --          --            3,259         (3,259)
Amortization of deferred compensation......      --           --           --          --           --              1,428
Net loss...................................      --           --           --          --           --             --
                                             -----------       -----   ----------       -----   -----------       -------
Balances at December 31, 1997..............   14,037,500          14    6,594,520           7       56,430         (1,831)
Issuance of common stock to employees and
  consultants at $0.05-$3.00 per share for
  cash (unaudited).........................      --           --          242,759      --              155         --
Deferred compensation resulting from grant
  of options (unaudited)...................      --           --           --          --              865           (865)
Amortization of deferred compensation
  (unaudited)..............................      --           --           --          --           --                511
Net loss (unaudited).......................      --           --           --          --           --             --
                                             -----------       -----   ----------       -----   -----------       -------
Balances at March 31, 1998 (unaudited).....   14,037,500   $      14    6,837,279   $       7    $  57,450      $  (2,185)
                                             -----------       -----   ----------       -----   -----------       -------
                                             -----------       -----   ----------       -----   -----------       -------
 
<CAPTION>
                                                DEFICIT
                                              ACCUMULATED
                                               DURING THE        TOTAL
                                              DEVELOPMENT    STOCKHOLDERS'
                                                 STAGE          EQUITY
                                             --------------  -------------
<S>                                          <C>             <C>
Issuance of common stock to founders at
  $0.001 per share in December 1995 for
  technology license, cash and services....    $   --          $       4
Issuance of Series A stock to investors at
  $1.00 per share in December 1995 for
  cash, net of issuance costs of $53.......        --              5,389
Issuance of Series B stock to investors at
  $0.10 per share in January 1996 for cash,
  net of issuance costs of $5..............        --                 42
Issuance of common stock to employees and
  consultants at $0.05 per share for cash
  and services.............................        --                 22
Net loss from Inception (November 9, 1995)
  to December 31, 1996.....................        (3,687)        (3,687)
                                             --------------  -------------
Balances at December 31, 1996..............        (3,687)         1,770
Issuance of Series C stock to investors at
  $5.00 per share in January 1997 and March
  1997 for cash, net of issuance costs of
  $51......................................        --             29,949
Issuance of Series D stock to investors at
  $8.00 per share in November 1997 for
  cash, net of issuance costs of $75.......        --             16,925
Issuance of common stock to employees and
  consultants at $0.05-$1.50 per share for
  cash and services........................        --                867
Repurchase of common stock from employees
  at $0.05 per share.......................        --                 (6)
Deferred compensation resulting from grant
  of options...............................        --             --
Amortization of deferred compensation......        --              1,428
Net loss...................................       (23,602)       (23,602)
                                             --------------  -------------
Balances at December 31, 1997..............       (27,289)        27,331
Issuance of common stock to employees and
  consultants at $0.05-$3.00 per share for
  cash (unaudited).........................        --                155
Deferred compensation resulting from grant
  of options (unaudited)...................        --             --
Amortization of deferred compensation
  (unaudited)..............................        --                511
Net loss (unaudited).......................        (8,015)        (8,015)
                                             --------------  -------------
Balances at March 31, 1998 (unaudited).....    $  (35,304)     $  19,982
                                             --------------  -------------
                                             --------------  -------------
</TABLE>

 
                            SEE ACCOMPANYING NOTES.
 
                                      F-5

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                            STATEMENTS OF CASH FLOWS
 
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                  PERIOD FROM                                       PERIOD FROM
                                                   INCEPTION                                         INCEPTION
                                                  (NOVEMBER 9,                 THREE MONTHS ENDED   (NOVEMBER 9,
                                                    1995) TO     YEAR ENDED         MARCH 31          1995) TO
                                                  DECEMBER 31,  DECEMBER 31,  --------------------   MARCH 31,
                                                      1996          1997        1997       1998         1998
                                                  ------------  ------------  ---------  ---------  ------------
                                                                                  (UNAUDITED)       (UNAUDITED)
<S>                                               <C>           <C>           <C>        <C>        <C>
OPERATING ACTIVITIES
Net loss........................................   $   (3,687)   $  (23,602)  $  (2,409) $  (8,015)  $  (35,304)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Depreciation and amortization...............          173           706         133        265        1,144
    Amortization of deferred compensation.......       --             1,428          67        511        1,939
    Changes in operating assets and liabilities:
      Prepaid expenses..........................          (70)         (126)        (86)      (121)        (317)
      Accounts payable..........................          472         1,339        (208)     1,046        2,857
      Accrued liabilities.......................           47           330          60        191          568
      Accrued license fee.......................       --             5,000      --         --            5,000
                                                  ------------  ------------  ---------  ---------  ------------
Net cash used in operating activities...........       (3,065)      (14,925)     (2,443)    (6,123)     (24,113)
 
INVESTING ACTIVITIES
Capital expenditures............................         (898)       (2,785)     (1,190)      (948)      (4,631)
Purchase of short-term investments, net.........       --           (15,640)     --         (3,038)     (18,678)
                                                  ------------  ------------  ---------  ---------  ------------
Net cash used in investing activities...........         (898)      (18,425)     (1,190)    (3,986)     (23,309)
 
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock,
  net...........................................        5,431        46,874      29,949     --           52,305
Proceeds from issuance of common stock..........           26           861         105        155        1,042
Proceeds from long-term borrowings..............       --             1,359      --            644        2,003
Repayment of long-term borrowings...............       --              (204)     --            (99)        (303)
                                                  ------------  ------------  ---------  ---------  ------------
Net cash provided by financing activities.......        5,457        48,890      30,054        700       55,047
                                                  ------------  ------------  ---------  ---------  ------------
 
Net increase (decrease) in cash and cash
  equivalents...................................        1,494        15,540      26,421     (9,409)       7,625
Cash and cash equivalents at beginning of
  period........................................       --             1,494       1,494     17,034       --
                                                  ------------  ------------  ---------  ---------  ------------
Cash and cash equivalents at end of period......   $    1,494    $   17,034   $  27,915  $   7,625   $    7,625
                                                  ------------  ------------  ---------  ---------  ------------
                                                  ------------  ------------  ---------  ---------  ------------
</TABLE>

 
                            SEE ACCOMPANYING NOTES.
 
                                      F-6

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                         NOTES TO FINANCIAL STATEMENTS
 
 (INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    NATURE OF OPERATIONS
 
    Intuitive Surgical, Inc., formerly Intuitive Surgical Devices, Inc. (the
"Company") was incorporated in Delaware on November 9, 1995 and is engaged in
the development of products designed to provide the flexibility of open surgery
while operating through ports. The Company is a development stage company, has
generated no revenue from product sales and has experienced significant
operating losses. As of March 31, 1998, the Company had an accumulated deficit
of $35.3 million. To date, the Company has engaged primarily in researching,
developing, testing and pursuing regulatory clearances for its products. The
Company expects to expend substantial additional funds and continue to incur
significant operating losses for the foreseeable future as it continues to fund
clinical trials in support of regulatory approvals, expands research and
development activities, establishes commercial-scale manufacturing capabilities
and expands sales and marketing activities.
 
    The Company's results of operations for the period from inception (November
9, 1995) to December 31, 1995 were not material.
 
    CASH AND CASH EQUIVALENTS
 
    The Company considers all highly liquid investments with an original
maturity from date of purchase of three months or less to be cash equivalents
for the purpose of balance sheet and statement of cash flows presentation. The
Company's excess cash is invested in a Government Portfolio Class A
Institutional Money Market Fund, which is classified as a cash equivalent. The
carrying value of cash and cash equivalents approximates market value at
December 31, 1996 and 1997 and March 31, 1998.
 
    SHORT-TERM INVESTMENTS
 
    All short-term investments are classified as available-for-sale and
therefore carried at fair value. The Company's short-term investments primarily
consist of commercial paper with maturity dates greater than three months and
less than one year from date of purchase. Unrealized gains and losses on such
securities, when material, are reported as a separate component of stockholders'
equity. Realized gains and losses on available-for-sale securities are included
in investment income. The cost of securities sold is based on the specific
identification method. Interest and dividends on securities classified as
available-for-sale are included in interest income.
 
    PROPERTY AND EQUIPMENT
 
    Property and equipment are stated at cost, net of accumulated amortization
and depreciation. Property and equipment are depreciated on a straight-line
basis over the estimated useful lives of the assets as follows: computer
equipment--three years; lab and manufacturing equipment--five years; office
furniture and equipment--five years; leasehold improvements--the shorter of the
remaining term of the related lease or five years; and software--the shorter of
the life of the license or three years. Equipment under capital lease is
amortized over the related lease term.
 
                                      F-7

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
 (INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    RESEARCH AND DEVELOPMENT
 
    Research and development costs, which include clinical and regulatory costs,
are expensed to operations as incurred.
 
    USE OF ESTIMATES
 
    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from these estimates.
 
    INTERIM FINANCIAL INFORMATION
 
    The financial information at March 31, 1998 and for the three months ended
March 31, 1997 and 1998 is unaudited but includes all adjustments (consisting of
normal recurring adjustments) which the Company considers necessary for a fair
presentation of the financial position at such date and the operating results
and cash flows for those periods. Results of the March 31, 1998 period are not
necessarily indicative of the results for the entire year.
 
    NET LOSS PER SHARE
 
    In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share" ("SFAS No. 128"). SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously required fully diluted
earnings per share. Stock options, warrants and common stock subject to a right
of repurchase have been excluded from the computation as their effect is
antidilutive.
 
    Pro forma net loss per share for 1997 and the three months ended March 31,
1998 has been computed to give effect to the automatic conversion of convertible
preferred stock into 14,037,500 shares of common stock upon completion of the
Company's initial public offering (using the as-if-converted method) from the
original date of issuance.
 
                                      F-8

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
 (INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    A reconciliation of shares used in the calculation of basic and diluted and
pro forma net loss per share follows:
 

<TABLE>
<CAPTION>
                                                               YEAR ENDED                 THREE MONTHS ENDED
                                                              DECEMBER 31,                    MARCH 31,
                                                      -----------------------------  ----------------------------
                                                          1996            1997           1997           1998
                                                      -------------  --------------  -------------  -------------
<S>                                                   <C>            <C>             <C>            <C>
Net loss............................................  $  (3,687,000) $  (23,602,000) $  (2,409,000) $  (8,015,000)
                                                      -------------  --------------  -------------  -------------
                                                      -------------  --------------  -------------  -------------
Basic and Diluted:
  Weighted average shares of common stock
    outstanding.....................................      1,286,912       2,099,605      1,662,272      3,169,328
                                                      -------------  --------------  -------------  -------------
                                                      -------------  --------------  -------------  -------------
Basic and diluted net loss per share................  $       (2.86) $       (11.24) $       (1.45) $       (2.53)
                                                      -------------  --------------  -------------  -------------
                                                      -------------  --------------  -------------  -------------
Pro forma:
  Shares used in computing basic and diluted net
    loss per share..................................                      2,099,605                     3,169,328
  Adjusted to reflect the effect of the assumed
    conversion of preferred stock...................                     10,629,966                    14,037,500
                                                                     --------------                 -------------
  Weighted average shares used in computing pro
    forma net loss per share........................                     12,729,571                    17,206,828
                                                                     --------------                 -------------
                                                                     --------------                 -------------
Pro forma net loss per share........................                 $        (1.85)                $       (0.47)
                                                                     --------------                 -------------
                                                                     --------------                 -------------
</TABLE>

 
    Had the Company been in a net income position, diluted earnings per share
would have included additional shares relating to outstanding options, warrants,
and common stock subject to a right of repurchase determined using the treasury
stock method. Options, warrants, and common stock subject to a right of
repurchase amounted to 2,615,768 and 4,523,834 at December 31, 1996 and 1997,
respectively, and 3,748,033 and 4,447,576 at March 31, 1997 and 1998,
respectively.
 
    UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
 
    If the initial public offering is consummated, all of the convertible
preferred stock outstanding as of the closing date will automatically be
converted into 14,037,500 shares of common stock, based on the shares of
convertible preferred stock outstanding as of March 31, 1998. Pro forma
stockholders' equity at March 31, 1998, as adjusted for the conversion of
preferred stock is disclosed on the balance sheet.
 
    STOCK COMPENSATION
 
    Effective for the fiscal year ended December 31, 1996, the Company adopted
the provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"). In accordance with
the provisions of SFAS No. 123, the Company applies APB Opinion 25 ("APB 25"),
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock option grants to employees and directors with an
exercise price equal to or in excess of the fair value of the shares at the date
of grant.
 
                                      F-9

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
 (INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    LONG-LIVED ASSETS
 
    The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," effective January 1, 1996. The Company continually reviews
long-lived assets to assess recoverability based upon undiscounted cash flow
analysis. Impairments, if any, are recognized in operating results in the period
in which a permanent diminution in value is determined.
 
    EFFECT OF NEW ACCOUNTING STANDARDS
 
    In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("SFAS No. 130"), and Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information" ("SFAS No.
131"). The Company is required to adopt these Statements in fiscal 1998. SFAS
No. 130 establishes new standards for reporting and displaying comprehensive
income and its components. SFAS No. 131 requires disclosure of certain
information regarding operating segments, products and services, geographic
areas of operation and major customers. Adoption of these Statements is expected
to have no impact on the Company's financial position, results of operations or
cash flows.
 
2. PROPERTY AND EQUIPMENT
 
    Property and equipment consists of the following (in thousands):
 

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                                  --------------------   MARCH 31,
                                                                    1996       1997        1998
                                                                  ---------  ---------  -----------
<S>                                                               <C>        <C>        <C>
Computer equipment..............................................  $     348  $   1,300   $   1,572
Lab/manufacturing equipment.....................................        167        643         810
Office furniture/equipment......................................         76        542         655
Leasehold improvements..........................................     --            476         834
Software........................................................        307        722         760
                                                                  ---------  ---------  -----------
                                                                        898      3,683       4,631
Less accumulated depreciation and amortization..................       (173)      (879)     (1,144)
                                                                  ---------  ---------  -----------
Property and equipment, net.....................................  $     725  $   2,804   $   3,487
                                                                  ---------  ---------  -----------
                                                                  ---------  ---------  -----------
</TABLE>

 
3. COMMITMENTS
 
    OPERATING LEASES
 
    Effective March 1997, the Company entered into two operating lease
arrangements for office space in Mountain View, California which expire February
28, 2002. Both of these leases include an option to renew the lease for one
additional three-year term.
 
    Rent expense was approximately $179,000 for the three months ended March 31,
1998, $586,000 for the year ended December 31, 1997, $99,000 for the period from
inception to December 31, 1996 and $864,000 for the period from inception to
March 31, 1998.
 
                                      F-10

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
 (INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
3. COMMITMENTS (CONTINUED)
    Future minimum rental commitments under the operating leases as of December
31, 1997 are as follows (in thousands):
 

<TABLE>
<S>                                                                   <C>
1998................................................................  $     825
1999................................................................        855
2000................................................................        855
2001................................................................        855
2002................................................................         65
                                                                      ---------
                                                                      $   3,455
                                                                      ---------
                                                                      ---------
</TABLE>

 
    CAPITAL LEASES
 
    In April 1997, the Company entered into a master lease agreement with a
third party for an equipment lease line against which the Company has drawn
approximately $1.4 million at December 31, 1997. The term of the lease is 48
months and provides for monthly payments of approximately $33,000 with a final
payment of approximately $204,000 in March 1999. The Company has granted to the
third party a security interest in all equipment leased under this agreement.
Assets capitalized under capital leases totaled approximately $1.4 million at
December 31, 1997, and are included in computer equipment, lab equipment, office
furniture and equipment and software. Accumulated amortization for assets
capitalized under capital leases totaled approximately $577,000 at December 31,
1997. Amortization of leased assets is included in depreciation expense. Future
minimum lease payments under capital lease obligations at December 31, 1997 are
as follows (in thousands):
 

<TABLE>
<S>                                                                   <C>
1998................................................................  $     401
1999................................................................        401
2000................................................................        401
2001................................................................        271
                                                                      ---------
Total minimum lease payments........................................      1,474
Less amount representing interest...................................       (319)
                                                                      ---------
Present value of net minimum lease payments.........................      1,155
Less current portion................................................       (258)
                                                                      ---------
Long-term portion...................................................  $     897
                                                                      ---------
                                                                      ---------
</TABLE>

 
    In February 1998, the Company entered into an additional lease agreement
with a third party for an equipment lease line totaling approximately $644,000.
The term of the lease is 42 months and provides for monthly payments of
approximately $17,000 with a final payment of approximately $97,000. The Company
has granted to the third party a security interest in all equipment leased under
this agreement. Assets capitalized under this lease agreement include computer
equipment, lab equipment, office furniture and equipment and software.
 
                                      F-11

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
 (INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
4. STOCKHOLDERS' EQUITY
 
    At December 31, 1997, the Company was authorized to issue up to 15,000,000
shares of preferred stock, issuable in series, with the rights and preferences
of each designated series to be determined by the Company's board of directors.
At December 31, 1997, 5,442,500 shares have been designated as Series A
preferred stock, 470,000 shares as Series B preferred stock, 6,000,000 shares as
Series C preferred stock and 2,500,000 shares as Series D preferred stock. The
outstanding shares of convertible preferred stock automatically convert into
common stock upon the closing of an underwritten public offering of common stock
under the Securities Act of 1933 in which the Company receives at least $10.0
million in gross proceeds and the price per share is at least $10.00 as adjusted
for stock splits, recapitalization and the like, or at the election of the
holders of at least two-thirds of the then outstanding shares of Series A, B, C
and D preferred stock.
 
    PREFERRED STOCK
 
    Preferred stock at December 31, 1997 and March 31, 1998 is as follows:
 

<TABLE>
<CAPTION>
                                                     SHARES
                                                   ISSUED AND                              LIQUIDATION
                                      DESIGNATED  OUTSTANDING   PAR VALUE  NET PROCEEDS    PREFERENCE
                                      ----------  ------------  ---------  -------------  -------------
<S>                                   <C>         <C>           <C>        <C>            <C>
Series A convertible................   5,442,500     5,442,500  $   0.001  $   5,389,499  $   5,442,500
Series B convertible................     470,000       470,000      0.001         41,750         47,000
Series C convertible................   6,000,000     6,000,000      0.001     29,948,787     30,000,000
Series D convertible................   2,500,000     2,125,000      0.001     16,924,873     17,000,000
                                                  ------------             -------------  -------------
                                                    14,037,500             $  52,304,909  $  52,489,500
                                                  ------------             -------------  -------------
                                                  ------------             -------------  -------------
</TABLE>

 
    Each share of Series A, B, C and D convertible preferred stock is
convertible, at the option of the holder, into common stock on a one-for-one
basis, subject to certain adjustments for dilution, if any, resulting from
future stock issuances.
 
    Series A, B, C and D convertible preferred stockholders are entitled to
noncumulative dividends, before and in preference to any dividends paid on
common stock, at the rate of 8% of the original issuance price per annum on each
outstanding share of preferred stock as adjusted for stock splits,
recapitalization and the like. Dividends will be paid only when declared by the
board of directors out of legally available funds. No dividends have been
declared as of March 31, 1997.
 
    The Series A, B, C and D convertible preferred stockholders are entitled to
receive, upon liquidation, dissolution or winding up of the Company, an amount
per share equal to the original issuance price, plus all declared but unpaid
dividends. Thereafter, the remaining assets and funds, if any, shall be
distributed pro rata among the common stockholders. If the assets or property
were not sufficient to allow full payment to the Series A, B, C and D
stockholders, the available assets or property shall be distributed ratably
among the Series A, B, C and D stockholders.
 
    The Series A, B, C and D convertible preferred stockholders have voting
rights equal to the shares of common stock issuable upon conversion.
 
                                      F-12

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
 (INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
4. STOCKHOLDERS' EQUITY (CONTINUED)
    COMMON STOCK
 
    The Company has previously issued shares of common stock which are subject
to the Company's right to repurchase at the original issuance price upon the
occurrence of certain events, as defined in the agreements relating to the sale
of such stock. At December 31, 1996 and 1997, approximately 2,217,768 and
3,523,425 shares, respectively, were subject to repurchase.
 
    Subject to the preferences of preferred stock, the holders of common stock
are entitled to receive ratably such dividends, if any, as may be declared from
time to time by the board of directors out of funds legally available for
payment. In the event of the liquidation, dissolution, or winding up of the
Company, holders of common stock are entitled to receive, after payment of the
full liquidation price on the preferred stock, the balance of any remaining
assets of the Company.
 
    WARRANT TO PURCHASE COMMON STOCK
 
    In April 1997, in connection with the capital lease agreement discussed in
Note 3, the Company issued a warrant to purchase 11,000 shares of common stock
at an exercise price of $5.00. The warrant, which is currently exercisable,
expires in April 2003. The Company has reserved 11,000 common shares for the
exercise of this warrant. The fair value of the warrant is not material.
 
    1996 EQUITY INCENTIVE PLAN
 
    In January 1996, the board of directors adopted, and the stockholders
approved, the 1996 Equity Incentive Plan (the "1996 Plan") for issuance of
common stock to employees, consultants and directors. Incentive stock options
granted under the 1996 Plan are at prices not less than the fair value on the
date of grant while nonstatutory options granted under the 1996 Plan are at
prices not less than 85% of the fair value on the date of grant. Options granted
under the 1996 Plan expire 10 years from the date of grant. Options generally
become exercisable upon grant subject to repurchase rights in favor of the
Company until vested. Options generally vest ratably over a period of four years
from the date of grant; however, options may be granted with different vesting
terms from time to time. A total of 4,340,000 shares of common stock have been
authorized for issuance pursuant to the 1996 Plan.
 
                                      F-13

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
 (INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
4. STOCKHOLDERS' EQUITY (CONTINUED)
    Stock activity under the 1996 Equity Incentive Plan was as follows:
 

<TABLE>
<CAPTION>
                                                       SHARES                     WEIGHTED-
                                                      AVAILABLE     OPTIONS        AVERAGE
                                                      FOR GRANT   OUTSTANDING  EXERCISE PRICE
                                                     -----------  -----------  ---------------
<S>                                                  <C>          <C>          <C>
  Authorized.......................................    1,500,000      --             --
  Granted..........................................     (743,000)     743,000     $    0.05
  Exercised........................................      --          (345,000)    $    0.05
                                                     -----------  -----------
Balance as of December 31, 1996....................      757,000      398,000     $    0.05
  Authorized.......................................    2,840,000      --
  Granted..........................................   (2,585,950)   2,585,950     $    0.56
  Exercised........................................      --        (1,989,853)    $    0.39
  Canceled.........................................        4,688       (4,688)    $    0.66
                                                     -----------  -----------
Balance as of December 31, 1997....................    1,015,738      989,409     $    0.68
  Authorized.......................................      --           --             --
  Granted..........................................     (239,600)     239,600     $    1.90
  Exercised........................................      --          (242,759)    $    0.64
  Canceled.........................................        9,000       (9,000)    $    0.50
                                                     -----------  -----------
Balance as of March 31, 1998.......................      785,138      977,250     $    0.99
                                                     -----------  -----------
                                                     -----------  -----------
</TABLE>

 
    Since the Company's inception through December 31, 1997, options to purchase
a total of 3,328,950 shares were granted at prices ranging from $0.05 to $1.50
per share. Deferred compensation of approximately $3.3 million was recorded for
these option grants based on the deemed fair value of common stock (ranging from
$0.35 to $5.00 per share). In the first quarter of 1998, the Company granted
options to purchase 239,600 shares of common stock at prices ranging from $1.50
to $3.00 per share for which deferred compensation of approximately $865,000 was
recorded based on the deemed fair value of common stock (ranging from $5.00 to
$7.00 per share).
 
    The following table summarizes information concerning outstanding and vested
options at December 31, 1997:
 

<TABLE>
<CAPTION>
                            OPTIONS OUTSTANDING                 OPTIONS OUTSTANDING AND VESTED
             -------------------------------------------------  ------------------------------
                          WEIGHTED-AVERAGE                        NUMBER
 EXERCISE      NUMBER         REMAINING      WEIGHTED-AVERAGE   OUTSTANDING  WEIGHTED-AVERAGE
  PRICES     OUTSTANDING  CONTRACTUAL LIFE    EXERCISE PRICE    AND VESTED    EXERCISE PRICE
- -----------  -----------  -----------------  -----------------  -----------  -----------------
<S>          <C>          <C>                <C>                <C>          <C>
 $    0.05       92,000            8.70          $    0.05           7,017       $    0.05
 $    0.50      675,709            9.40          $    0.50          61,082       $    0.50
 $    1.50      221,700            9.80          $    1.50           1,665       $    1.50
             -----------                                        -----------
                989,409                                             69,764
             -----------                                        -----------
             -----------                                        -----------
</TABLE>

 
                                      F-14

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
 (INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
4. STOCKHOLDERS' EQUITY (CONTINUED)
    The following table summarizes information concerning outstanding and vested
options at March 31, 1998:
 

<TABLE>
<CAPTION>
                            OPTIONS OUTSTANDING                 OPTIONS OUTSTANDING AND VESTED
             -------------------------------------------------  ------------------------------
                          WEIGHTED-AVERAGE                        NUMBER
 EXERCISE      NUMBER         REMAINING      WEIGHTED-AVERAGE   OUTSTANDING  WEIGHTED-AVERAGE
  PRICES     OUTSTANDING  CONTRACTUAL LIFE    EXERCISE PRICE    AND VESTED    EXERCISE PRICE
- -----------  -----------  -----------------  -----------------  -----------  -----------------
<S>          <C>          <C>                <C>                <C>          <C>
 $    0.05       35,000            8.30          $    0.05          --           $    0.05
 $    0.50      536,150            9.20          $    0.50          76,697       $    0.50
 $    1.50      345,600            9.70          $    1.50          15,137       $    1.50
 $    3.00       60,500           10.00          $    3.00          --           $    3.00
             -----------                                        -----------
                977,250                                             91,834
             -----------                                        -----------
             -----------                                        -----------
</TABLE>

 
    STOCK-BASED COMPENSATION
 
    During 1996, the Company adopted SFAS No. 123. In accordance with SFAS No.
123, the Company follows APB 25 in accounting for option grants to employees
under the 1996 Plan, and, accordingly, does not recognize compensation expense
for options granted to employees at fair value. However, as noted earlier in
this footnote, the Company has recorded deferred compensation expense based on
the deemed fair value of common stock which is higher than the originally
determined fair value.
 
    Pro forma information regarding net loss and loss per share is required by
SFAS No. 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options under the fair value method
of SFAS No. 123. The Company has evaluated the effects of SFAS No. 123 and
determined that the effect of applying the minimum value method allowed under
SFAS No. 123 to options granted to employees in 1996 and 1997 did not result in
a pro forma net loss that is materially different from historical amounts
reported. Therefore, such pro forma information is not presented herein. The
minimum value method was applied using the following weighted-average
assumptions: risk-free interest rate of 6.5%, a weighted average expected option
life of 2.16 years; and no annual dividends. Future pro forma results of
operations may be materially different from actual amounts reported.
 
5. INCOME TAXES
 
    No provision for income taxes has been made due to operating losses with no
current tax benefit.
 
                                      F-15

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
 (INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
5. INCOME TAXES (CONTINUED)
    Deferred income taxes reflect tax carryforwards and the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting and the amount used for income tax purposes. Significant
components of the Company's deferred tax assets are as follows:
 

<TABLE>
<CAPTION>
                                                                      AS OF DECEMBER 31,
                                                                 -----------------------------
                                                                     1996            1997
                                                                 -------------  --------------
                                                                        (IN THOUSANDS)
<S>                                                              <C>            <C>
Net operating loss carryforward................................  $      35,000  $    5,200,000
Research credits...............................................        150,000         900,000
Expenses capitalized for tax purposes..........................      1,400,000       5,300,000
                                                                 -------------  --------------
Total deferred tax assets......................................      1,585,000      11,400,000
Valuation allowance for deferred tax assets....................     (1,585,000)    (11,400,000)
                                                                 -------------  --------------
Total..........................................................  $    --        $     --
                                                                 -------------  --------------
                                                                 -------------  --------------
</TABLE>

 
    The state and federal net operating loss and credit carryforwards (above)
will expire at various dates from 2004 through 2012, if not utilized. The
utilization of such carryforwards may be subject to a substantial annual
limitation due to the "change in ownership" provisions of the Internal Revenue
Code of 1986 and similar state provisions. The annual limitation may result in
the expiration of net operating losses and credits before utilization.
 
6. TECHNOLOGY LICENSE AGREEMENT
 
    In December 1997, the Company executed a license agreement with IBM. In
conjunction with the execution of the license agreement, a payment of $1.0
million was made in December 1997. The license agreement also provides that the
Company pay a sum of $5.0 million within 10 days after the closing of the first
underwritten public offering registered under the Securities Act of 1933, as
amended, but in any event not later than September 1, 1998, which date may be
extended until October 1, 1998, upon a showing of good cause by the Company.
During 1997, the Company recorded $6.0 million to operating costs and expenses
related to this license agreement. The license agreement also provides for
payments of $1.0 million each upon the Company reaching revenue milestones, as
defined, of $25.0 million and $50.0 million. Each $1.0 million payment is due
and payable after the end of the fiscal year in which the cumulative total of
all sales of products and services in that year meet the revenue milestone. Both
payments may become due in the same year. No further payments are required under
the license agreement. The license agreement expires upon the expiration of the
last patent covered under the agreement. The license agreement may not be
terminated by the licensor without cause.
 
7. SUBSEQUENT EVENTS
 
    INITIAL PUBLIC OFFERING
 
    In April 1998, the board of directors authorized management of the Company
to file a registration statement with the Securities and Exchange Commission
permitting the Company to sell shares of its common stock to the public. If the
initial public offering is closed under the terms presently anticipated, all
 
                                      F-16

<PAGE>
                            INTUITIVE SURGICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
 (INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
7. SUBSEQUENT EVENTS (CONTINUED)
of the preferred stock outstanding will automatically convert into 14,037,500
shares of common stock. Unaudited pro forma stockholders' equity, as adjusted
for the assumed conversion of the preferred stock, is set forth on the balance
sheet.
 
    1998 EQUITY INCENTIVE PLAN
 
    In April 1998, the Company's Board of Directors adopted, subject to
stockholder approval, the 1998 Equity Incentive Plan (the "Incentive Plan") as
an amendment and restatement of the Company's 1996 Equity Incentive Plan. The
key provisions of the Incentive Plan are generally consistent with that of the
1996 Equity Incentive Plan. In connection with the amendment and restatement, an
additional 3,000,000 shares were authorized for issuance under the Incentive
Plan.
 
    1998 EMPLOYEE STOCK PURCHASE PLAN
 
    In April 1998, the Company's Board of Directors adopted, subject to
stockholder approval, the 1998 Employee Stock Purchase Plan (the "Purchase
Plan") covering an aggregate of 1,500,000 shares of the Company's common stock.
Under the Purchase Plan, the Board of Directors may authorize participation by
eligible employees, including officers, in periodic offerings which can be no
more than 27 months. Eligible employees can have up to 10% of their earnings
withheld in order to purchase shares of common stock at 85% of the lower of the
fair market value of the common stock on the commencement date of each offering
period or on the specified purchase date.
 
    1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
 
    In April 1998, the Company's Board of Directors adopted, subject to
stockholder approval, the 1998 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") to provide for the automatic grant of options to purchase
shares of Common Stock to non-employee directors of the Company. The aggregate
number of shares of Common Stock that can be issued under the Directors' Plan is
200,000. Stock options granted under the Directors' Plan are at prices not less
than the fair value on the date of grant and expire 10 years from the date of
grant. Options generally ratably vest over a period of three or four years from
the date of grant.
 
                                      F-17

<PAGE>
                                CARDIAC SURGERY
 

<TABLE>
<S>                                 <C>
OPEN CABG SURGERY: FULL STERNOTOMY
 
   [Photo of open CABG surgery]     - LARGE INCISION (30 CM LONG)
                                    - EXTENDED RANGE OF MOTION
 
                                    MODIFIED CABG SURGERY:
                                    MINI-THORACOTOMY
 
- - SMALLER INCISION (7 TO 12 CM       [Photo of modified CABG surgery]
LONG)
- - REDUCED RANGE OF MOTION
 
INTUITIVE CABG SURGERY: FULLY ENDOSCOPIC
 
 [Photo of Intuitive CABG Surgery   - SMALL INCISIONS (1 CM LONG)
     performed on a cadaver]        - EXTENDED RANGE OF MOTION
 
INTUITIVE CABG being practiced on
a cadaver
</TABLE>

 

<PAGE>
                                [INTUITIVE LOGO]

<PAGE>

 
                                   PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
    The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts are estimates except for
the registration fee and the NASD filing fee.
 

<TABLE>
<S>                                                                       <C>
Registration fee........................................................  $  14,750
Nasdaq National Market listing fee......................................
NASD filing fee.........................................................      5,500
Blue sky qualification fees and expenses................................     15,000
Printing and engraving expenses.........................................    125,000
Legal fees and expenses.................................................    350,000
Accounting fees and expenses............................................    125,000
Transfer agent and registrar fees.......................................
Directors' and Officers' Insurance......................................    150,000
Miscellaneous...........................................................
                                                                          ---------
  Total.................................................................  $
                                                                          ---------
                                                                          ---------
</TABLE>

 

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
    Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). The Registrant's Bylaws also
provide that the Registrant will indemnify its directors and executive officers
and may indemnify its other officers, employees and agents to the fullest extent
permitted by Delaware law. The Company intends to enter into indemnification
agreements with its directors and officers for the indemnification of and
advancement of expenses to such persons to the full extent permitted by law. The
Company also intends to execute such agreements with its future directors and
officers.
 
    The Company's Certificate of Incorporation provides for the elimination of
liability for monetary damages for breach of the directors' fiduciary duty of
care to the Registrant and its stockholders. These provisions do not eliminate
the directors' duty of care and, in appropriate circumstances, equitable
remedies such an injunctive or other forms of non-monetary relief will remain
available under Delaware law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
 
    The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement, will provide for indemnification by the Underwriters and their
controlling persons, on the one hand, and of the Registrant and its controlling
persons on the other hand, for certain liabilities arising under the Securities
Act or otherwise.
 

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
 
    Since inception, the Company has sold and issued the following unregistered
securities:
 
        (1) From November 1995 through the date hereof, the Registrant has
    granted stock options to purchase 3,550,900 shares of the Common Stock to
    employees, consultants and directors pursuant to its 1998 Equity Incentive
    Plan (the "Plan"). Of these options, 14,105 have been canceled without being
    exercised, 2,477,695 have been exercised and 1,059,100 remain outstanding.
    From November
 
                                      II-1

<PAGE>
    1995 through the date hereof, the Registrant has also granted stock awards
    to purchase 100,000 shares of Common Stock to consultants pursuant to the
    Incentive Plan.
 
        (2) In November 1995 and December 1995, the Registrant issued an
    aggregate of 3,385,000 shares of Common Stock to 14 purchasers at $0.001 per
    share, for an aggregate purchase price of $3,385.
 
        (3) In December 1995 and January 1996, the Registrant issued an
    aggregate of 5,442,500 shares of Series A Preferred Stock to 13 purchasers
    at $1.00 per share, for an aggregate purchase price of $5,442,500. Shares of
    Series A Preferred Stock are convertible into shares of Common Stock at the
    rate of one share of Common Stock for each share of Series A Preferred Stock
    owned.
 
        (4) In January 1996, the Registrant issued an aggregate of 470,000
    shares of Series B Preferred Stock to one purchaser at $0.10 per share, for
    an aggregate purchase price of $47,000. Shares of Series B Preferred Stock
    are convertible into shares of Common Stock at the rate of one share of
    Common Stock for each share of Series B Preferred Stock owned.
 
        (5) In May 1996, the Registrant issued 50,000 shares of Common Stock to
    one purchaser at $0.05 per share, for a purchase price of $2,500.
 
        (6) In June 1996, the Registrant issued 3,000 shares of Common Stock for
    services rendered.
 
        (7) In December 1996 and January 1997, the Registrant issued an
    aggregate of 910,000 shares of Common Stock to four purchasers at $0.05 per
    share, for an aggregate purchase price of $45,500.
 
        (8) In January 1997 and March 1997, the Registrant issued an aggregate
    of 6,000,000 shares of Series C Preferred Stock to 21 purchasers at a
    purchase price of $5.00 per share, for an aggregate purchase price of
    $30,000,000. Shares of Series C Preferred Stock are convertible into shares
    of Common Stock at the rate of one share of Common Stock for each share of
    Series C Preferred Stock owned.
 
        (9) In April 1997, the Registrant issued a warrant to purchase 11,000
    shares of the Common Stock of the Registrant to Lease Management Services,
    Inc., for an exercise price of $5.00 per share, issuable upon exercise of
    the warrant.
 
        (10) In November 1997, the Registrant issued an aggregate of 2,125,000
    shares of Series D Preferred Stock to 23 purchasers at a purchase price of
    $8.00 per share for an aggregate purchase price of $17,000,000. Shares of
    Series D Preferred Stock are convertible into shares of Common Stock at the
    rate of one share of Common Stock for each share of Series D Preferred Stock
    owned.
 
        (11) In November 1997, the Registrant issued 25,000 shares of Common
    Stock for services rendered in connection with the Series D Preferred Stock
    financing.
 
        (12) In April 1998, the Registrant issued 10,000 shares of Common Stock
    to one purchaser at $3.00 per share, for a purchase price of $30,000.
 
    The sales and issuances of securities described in paragraph (1) above were
deemed to be exempt from registration under the Securities Act by virtue of Rule
701 of the Securities Act in that they were offered and sold either pursuant to
a written compensatory benefit plan or pursuant to a written contract relating
to compensation, as provided by Rule 701. The sales and issuances of securities
described in paragraphs (2) through (12) above were deemed to be exempt from
registration under the Securities Act by virtue of Rule 4(2), Regulation D or
Regulation S promulgated thereunder. With respect to the grant of options
described in paragraph (1), an exemption from registration was unnecessary in
that none of the transactions involved a "sale" of securities as such term is
used in Section 2(3) of the Act.
 
    Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. All recipients either received adequate
information about the Registrant or had access, through employment or other
relationships, to such information.
 
                                      II-2

<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 
    (a)  The following is a list of exhibits filed as a part of this
Registration Statement:
 

<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER                                            DESCRIPTION OF DOCUMENT
- ----------  --------------------------------------------------------------------------------------------------------
<C>         <S>
 
     1.1*   Form of Underwriting Agreement.
 
     3.1    Restated Certificate of Incorporation of the Registrant.
 
     3.2*   Certificate of Amendment of Restated Certificate of Incorporation of the Registrant.
 
     3.3    Form of Amended and Restated Certificate of Incorporation of the Registrant to be effective upon the
            closing of the offering.
 
     3.4    Bylaws of the Registrant.
 
     3.5    Form of Amended and Restated Bylaws of the Registrant to be effective upon the closing of the offering.
 
     4.1    Reference is made to Exhibits 3.1 through 3.5.
 
     4.2*   Specimen Stock Certificate.
 
     5.1*   Opinion of Cooley Godward LLP.
 
    10.1    Form of Indemnity Agreement.
 
    10.2    1998 Equity Incentive Plan.
 
    10.3    Form of Stock Option Grant Notice.
 
    10.4    Form of Stock Option Agreement.
 
    10.5    1998 Non-Employee Directors' Stock Option Plan.
 
    10.6    Form of Nonstatutory Stock Option.
 
    10.7    1998 Employee Stock Purchase Plan.
 
    10.8    Amended and Restated Investor Rights Agreement dated November 14, 1997.
 
    10.9    Equipment Financing Agreement (No. 10809), dated April 2, 1997, between the Registrant and Lease
            Management Services, Inc., and related addendums.
 
    10.10   Warrant, dated April 15, 1997, to purchase Common Stock of the Registrant issued to Lease Management
            Services, Inc.
 
    10.11*  License Agreement, dated December 20, 1995, between the Registrant and SRI International.
 
    10.12*  License Agreement, dated December 29, 1997, between the Registrant and International Business Machines
            Corporation.
 
    10.13   Lease, dated September 9, 1996, between the Registrant and Zappettini Investment Co.
 
    10.14   Lease, dated February 5, 1997, between the Registrant and Zappettini Investment Co.
 
    10.15   Employment Agreement, dated February 28, 1997, between the Registrant and Lonnie M. Smith.
 
    23.1    Consent of Ernst & Young LLP.
 
    23.2*   Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
 
    24.1    Power of Attorney. See Signature Page.
 
    27.1    Financial Data Schedule.
</TABLE>

 
- ---------
 
*   To be filed by amendment.
 
                                      II-3

<PAGE>

ITEM 17. UNDERTAKINGS.
 
    The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
 
    Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will governed by the final adjudication of such issue.
 
    The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act, the information omitted from the form of
prospectus filed as part of the registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared effective, and
(2) for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
 
                                      II-4

<PAGE>

                                   SIGNATURES
 
    In accordance with the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, in the City of Mountain View, County of Santa
Clara, State of California, on the 22nd day of April, 1998.
 
                                          INTUITIVE SURGICAL, INC.
 
                                          By:        /s/ LONNIE M. SMITH
 
                                             -----------------------------------
                                                       Lonnie M. Smith
                                             President, Chief Executive Officer
                                                       and Director
                                                (PRINCIPAL EXECUTIVE OFFICER)
 
                               POWER OF ATTORNEY
 
KNOW ALL PERSONS BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW HEREBY CONSTITUTES AND APPOINTS, JOINTLY AND SEVERALLY, LONNIE M. SMITH
AND SUSAN K. BARNES, AND EACH OF THEM, HIS ATTORNEYS-IN-FACT, WITH FULL POWER OF
SUBSTITUTION, FOR HIM IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS
TO THIS REGISTRATION STATEMENT (INCLUDING POST-EFFECTIVE AMENDMENTS), AND ANY
AND ALL REGISTRATION STATEMENTS FILED PURSUANT TO RULE 462 UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, IN CONNECTION WITH OR RELATED TO THE OFFERING
CONTEMPLATED BY THIS REGISTRATION STATEMENT AND ITS AMENDMENTS, IF ANY, AND TO
FILE THE SAME, WITH EXHIBITS THERETO AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, HEREBY RATIFYING AND
CONFIRMING OUR SIGNATURES AS THEY MAY BE SIGNED BY OUR SAID ATTORNEY TO ANY AND
ALL AMENDMENTS TO SAID REGISTRATION STATEMENT.
 
    IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT WAS SIGNED BELOW BY THE FOLLOWING PERSON IN THE
CAPACITIES AND ON THE DATES STATED.
 
          SIGNATURE                       TITLE                    DATE
- ------------------------------  --------------------------  -------------------
 
                                President, Chief Executive    April 22, 1998
     /s/ LONNIE M. SMITH            Officer and Director
- ------------------------------     (PRINCIPAL EXECUTIVE
       Lonnie M. Smith                    OFFICER)
 
     /s/ SUSAN K. BARNES         Vice President, Finance,     April 22, 1998
- ------------------------------    Chief Financial Officer
       Susan K. Barnes           and Assistant Secretary
                                 (PRINCIPAL FINANCIAL AND
                                    ACCOUNTING OFFICER)
 
   /s/ JOHN G. FREUND, M.D.                                   April 22, 1998
- ------------------------------  Director
     John G. Freund, M.D.
 
     /s/ SCOTT S. HALSTED                                     April 22, 1998
- ------------------------------  Director
       Scott S. Halsted
 
 /s/ RUSSELL C. HIRSCH, M.D.,                                 April 22, 1998
            PH.D.
- ------------------------------  Director
Russell C. Hirsch, M.D., Ph.D.
 
  /s/ FREDERIC H. MOLL, M.D.                                  April 22, 1998
- ------------------------------  Director
    Frederic H. Moll, M.D.
 
  /s/ PETRI T. VAINIO, M.D.,                                  April 22, 1998
             PH.D
- ------------------------------  Director
 Petri T. Vainio, M.D., Ph.D.
 
                                      II-5

<PAGE>

                                 EXHIBIT INDEX
 

<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER                                            DESCRIPTION OF DOCUMENT
- ----------  --------------------------------------------------------------------------------------------------------
<C>         <S>
 
     1.1*   Form of Underwriting Agreement.
 
     3.1    Restated Certificate of Incorporation of the Registrant.
 
     3.2*   Certificate of Amendment of Restated Certificate of Incorporation of the Registrant.
 
     3.3    Form of Amended and Restated Certificate of Incorporation of the Registrant to be effective upon the
            closing of the offering.
 
     3.4    Bylaws of the Registrant.
 
     3.5    Form of Amended and Restated Bylaws of the Registrant to be effective upon the closing of the offering.
 
     4.1    Reference is made to Exhibits 3.1 through 3.5.
 
     4.2*   Specimen Stock Certificate.
 
     5.1*   Opinion of Cooley Godward LLP.
 
    10.1    Form of Indemnity Agreement.
 
    10.2    1998 Equity Incentive Plan.
 
    10.3    Form of Stock Option Grant Notice.
 
    10.4    Form of Stock Option Agreement.
 
    10.5    1998 Non-Employee Directors' Stock Option Plan.
 
    10.6    Form of Nonstatutory Stock Option.
 
    10.7    1998 Employee Stock Purchase Plan.
 
    10.8    Amended and Restated Investor Rights Agreement dated November 14, 1997.
 
    10.9    Equipment Financing Agreement (No. 10809), dated April 2, 1997, between the Registrant and Lease
            Management Services, Inc., and related addendums.
 
    10.10   Warrant, dated April 15, 1997, to purchase Common Stock of the Registrant issued to Lease Management
            Services, Inc.
 
    10.11*  License Agreement, dated December 20, 1995, between the Registrant and SRI International.
 
    10.12*  License Agreement, dated December 29, 1997, between the Registrant and International Business Machines
            Corporation.
 
    10.13   Lease, dated September 9, 1996, between the Registrant and Zappettini Investment Co.
 
    10.14   Lease, dated February 5, 1997, between the Registrant and Zappettini Investment Co.
 
    10.15   Employment Agreement, dated February 28, 1997, between the Registrant and Lonnie M. Smith.
 
    23.1    Consent of Ernst & Young LLP.
 
    23.2*   Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
 
    24.1    Power of Attorney. See Signature Page.
 
    27.1    Financial Data Schedules.
</TABLE>

 
- ---------
 
*   To be filed by amendment.





<PAGE>

                              STATE OF DELAWARE

                      OFFICE OF THE SECRETARY OF STATE
                      --------------------------------

     I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO 

HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED 

CERTIFICATE OF "INTUITIVE SURGICAL, INC." FILED IN THIS OFFICE ON THE 

THIRTEENTH DAY OF NOVEMBER, A.D. 1997, AT 9 O'CLOCK A.M.

     A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW 

CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.





                                [SEAL]     /s/ Edward J. Freel
                                           -----------------------------------
                                           Edward J. Freel, Secretary of State

                                           AUTHENTICATION:  8758079
                  
                                                     DATE:  11-14-97



<PAGE>

                      RESTATED CERTIFICATE OF INCORPORATION OF
                              INTUITIVE SURGICAL, INC.


     Lonnie M. Smith and Alan C. Mendelson hereby certify that:

     1.   The original name of this corporation is Intuitive Surgical 
Devices, Inc. and the date of filing the original Certificate of Incorporation
of this corporation with the Secretary of State of the State of Delaware
is November 9, 1995.

     2.   They are the duly elected and acting Chief Executive Officer and 
Secretary, respectively, of Intuitive Surgical, Inc., a Delaware corporation.

     3.   The Certificate of Incorporation of this corporation is hereby 
amended and restated to read as follows:
                                          
                                         I.

     The name of the corporation is Intuitive Surgical, Inc. (the "Corporation"
or the "Company").
                                          
                                        II.

     The
 address of the registered office of the Corporation in the State of
Delaware is:

               The Prentice-Hall Corporation System, Inc.
               1013 Centre Road
               Wilmington, DE 19805
               County of New Castle

     The name of the Corporation's registered agent at said address is The
Prentice-Hall Corporation System, Inc.
                                          
                                        III.

     The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
                                          
                                        IV.

     A.   This Corporation is authorized to issue two classes of stock to be 
designated, respectively, "Common Stock" and "Preferred Stock."  The total 
number of shares which the corporation is authorized to issue is Fifty 
Million (50,000,000) shares, Thirty-Five Million (35,000,000) shares of which 
shall be Common Stock (the "Common Stock") and Fifteen Million (15,000,000) 
shares of which shall be Preferred Stock (the "Preferred Stock").  The 
Preferred Stock shall have a par value of one-tenth of one cent ($.001) per 
share and the Common Stock shall have a par value of one-tenth of one cent 
($.001) per share.


<PAGE>

     B.   The number of authorized shares of Common Stock may be increased or 
decreased (but not below the number of shares of Common Stock then 
outstanding) by the affirmative vote of the holders of a majority of the 
stock of the Corporation (voting together on an as-if-converted basis).

     C.   The Preferred Stock may be issued from time to time in one or more 
series.  Subject to compliance with applicable protective voting rights which 
have been or may be granted to the Preferred Stock or series thereto in 
Certificates of Determination or the Corporation's Certificate of 
Incorporation, the Board of Directors is hereby authorized, within the 
limitations and restrictions stated in this Restated Certificate, to fix or 
alter the dividend rights, dividend rate, conversion rights, voting rights, 
rights and terms of redemption (including sinking fund provisions), the 
redemption price or prices, the liquidation preferences of any wholly 
unissued series of Preferred Stock, and the number of shares constituting any 
such series and the designation thereof, or any of them; and to increase or 
decrease the number of shares of any such series subsequent to the issue of 
shares of that series, but not below the number of shares of such series then 
outstanding.  In case the number of shares of any series shall be so 
decreased, the shares constituting such decrease shall resume the status 
which they had prior to the adoption of the resolution originally fixing the 
number of shares of such series.

     D.   Five Million Four Hundred Forty-Two Thousand Five Hundred 
(5,442,500) of the authorized shares of Preferred Stock are hereby designated 
"Series A Preferred Stock" (the "Series A Preferred").  Four Hundred Seventy 
Thousand (470,000) of the authorized shares of Preferred Stock are hereby 
designated "Series B Preferred Stock" (the "Series B Preferred").  Six 
Million (6,000,000) of the authorized shares of Preferred Stock are hereby 
designated "Series C Preferred Stock" (the "Series C Preferred").  Two 
Million Five Hundred Thousand (2,500,000) of the authorized shares of 
Preferred Stock are hereby designated "Series D Preferred Stock" (the "Series 
D Preferred").  "Preferred Stock", when used herein, includes Series A 
Preferred, Series B Preferred, Series C Preferred and Series D Preferred 
Stock.

     E.   The rights, preferences, privileges, restrictions and other matters 
relating to the Preferred Stock are as follows:

          1.   DIVIDEND RIGHTS.

               (a)   Holders of Preferred Stock, in preference to the holders 
of any other stock of the Company ("Junior Stock"), shall be entitled to 
receive, when and as declared by the Board of Directors, but only out of 
funds that are legally available therefor, cash dividends at the rate of 
eight percent (8%) of the "Original Issue Price" per annum on each 
outstanding share of Preferred Stock (as adjusted for any stock dividends, 
combinations, splits, recapitalizations and the like with respect to such 
shares).  The Original Issue Price of the Series A Preferred shall be one 
dollar ($1.00).  The Original Issue Price of the Series B Preferred shall be 
ten cents ($0.10).  The Original Issue Price of the Series C Preferred shall 
be five dollars ($5.00).  The Original Issue Price of the Series D Preferred 
shall be eight dollars ($8.00).  Such dividends shall be payable only when, 
as and if declared by the Board of Directors and shall be non-cumulative from 
the Original Issue Date (as defined in Section 4(e) below).

                                       2


<PAGE>

               (b)   So long as any shares of Preferred Stock shall be 
outstanding, no dividend, whether in cash or property, shall be paid or 
declared, nor shall any other distribution be made, on any Junior Stock, nor 
shall any shares of any Junior Stock of the Company be purchased, redeemed, 
or otherwise acquired for value by the Company (except for acquisitions of 
Common Stock by the Company pursuant to agreements which permit the Company 
to repurchase such shares upon termination of services to the Company or in 
exercise of the Company's right of first refusal upon a proposed transfer) 
until all dividends (set forth in Section 1(a) above) on the Preferred Stock 
shall have been paid or declared and set apart.  In the event dividends are 
paid on any share of Common Stock, an additional dividend shall be paid with 
respect to all outstanding shares of Preferred Stock in an amount equal per 
share (on an as-if-converted to Common Stock basis) to the amount paid or set 
aside for each share of Common Stock.  The provisions of this Section 1(b) 
shall not, however, apply to (i) a dividend payable in Common Stock, (ii) the 
acquisition of shares of any Junior Stock in exchange for shares of any other 
Junior Stock, or (iii) any repurchase of any outstanding securities of the 
Company that is unanimously approved by the Company's Board of Directors.

          2.   VOTING RIGHTS.

               (a)   GENERAL RIGHTS.  Except as otherwise provided herein or 
as required by law, the Preferred Stock shall be voted with the shares of the 
Common Stock of the Company and not as a separate class, at any annual or 
special meeting of stockholders of the Company, and may act by written 
consent in the same manner as the Common Stock, in either case upon the 
following basis: each holder of shares of Preferred Stock shall be entitled 
to such number of votes as shall be equal to the whole number of shares of 
Common Stock into which such holder's aggregate number of shares of Preferred 
Stock are convertible (pursuant to Section 4 hereof) immediately after the 
close of business on the record date fixed for such meeting or the effective 
date of such written consent.  Each holder of Common Stock shall be entitled 
to one (1) vote for each share of Common Stock held.

               (b)   SEPARATE VOTE OF PREFERRED STOCK.  For so long as at 
least One Million (1,000,000) shares of Preferred Stock remain outstanding, 
in addition to any other vote or consent required herein or by law, the vote 
or written consent of the holders of at least a majority of the outstanding 
Preferred Stock shall be necessary for effecting or validating the following 
actions:

                     (i)   Any amendment, alteration, or repeal of any 
provision of the Restated Certificate or the Bylaws of the Company, that 
affects adversely the voting powers, preferences, or other special rights or 
privileges, qualifications, limitations, or restrictions of the Preferred 
Stock;

                     (ii)  Any authorization or any increase, whether by 
reclassification or otherwise, in the authorized amount of any class of 
shares or series of equity securities of the Company senior to, or PARI PASSU 
with, the Preferred Stock in right of redemption, liquidation preference, 
voting or dividends;

                     (iii) Any redemption, repurchase, payment of 
dividends or other distributions with respect to Junior Stock (except for 
acquisitions of Common Stock by the 

                                       3


<PAGE>

Company pursuant to agreements which permit the Company to repurchase such 
shares upon termination of services to the Company or in exercise of the 
Company's right of first refusal upon a proposed transfer); or

                     (iv)  Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in 
Section 3(c)). 

               (c)   ELECTION OF BOARD OF DIRECTORS.  For so long as at least 
1,000,000 shares of Preferred Stock remain outstanding (i) the holders of 
Series A Preferred Stock, voting as a separate class, shall be entitled to 
elect three (3) members of the Company's Board of Directors at each meeting 
or pursuant to each consent of the Company's stockholders for the election of 
directors, and to remove from office such directors and to fill any vacancy 
caused by the resignation, death or removal of such directors; and (ii) the 
holders of Common Stock and Preferred Stock, voting together as a class, 
shall be entitled to elect all remaining members of the Board of Directors.

          3.   LIQUIDATION RIGHTS.

               (a)   Upon any liquidation, dissolution, or winding up of the 
Company, whether voluntary or involuntary, before any distribution or payment 
shall be made to the holders of any Junior Stock, the holders of Preferred 
Stock shall be entitled to be paid out of the assets of the Company an amount 
per share of Preferred Stock equal to the applicable Original Issue Price, 
plus all declared and unpaid dividends on such shares of Preferred Stock (as 
adjusted for any stock dividends, combinations, splits, recapitalizations and 
the like with respect to such shares) for each share of Preferred Stock held 
by them.

               (b)   After the payment of the full liquidation preference of 
the  Preferred Stock as set forth in Section 3(a) above, the remaining assets 
of the Company legally available for distribution, if any, shall be 
distributed ratably to the holders of the Common Stock.

               (c)   The following events shall be considered a liquidation 
under this Section:

                     (i)   any consolidation or merger of the Company with or 
into any other corporation or other entity or person, or any other corporate 
reorganization, in which the stockholders of the Company immediately prior to 
such consolidation, merger or reorganization, own less than fifty percent 
(50%) of the Company's voting power immediately after such consolidation, 
merger or reorganization, or any transaction or series of related 
transactions in which in excess of fifty percent (50%) of the Company's 
voting power is transferred (an "Acquisition"); or

                     (ii)  a sale, lease or other disposition of all or 
substantially all of the assets of the Company (an "Asset Transfer").

               (d)   If, upon any liquidation, distribution, or winding up, the
assets of the Company shall be insufficient to make payment in full to all
holders of Preferred Stock of the liquidation preference set forth in Section
3(a), then such assets shall be distributed among the 

                                       4


<PAGE>

holders of Preferred Stock at the time outstanding, ratably in proportion to 
the full amounts to which they would otherwise be respectively entitled.  

               (e)   In any of such events, if the consideration received by 
the Corporation is other than cash, its value will be deemed its fair market 
value.  Any securities shall be valued as follows:

                     (i)   Securities not subject to investment letter or other
similar restrictions on free marketability:

                              1)  If traded on a securities exchange or 
through NASDAQ National Market, the value shall be deemed to be the average 
of the closing prices of the securities on such exchange over the thirty-day 
(30-day) period ending three (3) days prior to the closing;

                              2)  If actively traded over-the-counter, the 
value shall be deemed to be the average of the closing bid or sales prices 
(whichever is applicable) over the thirty-day (30-day) period ending three 
(3) days prior to the closing; and

                              3)  If there is no active public market, the 
value shall be the fair market value thereof, as mutually determined by the 
corporation and the holders of at least a majority of the voting power of all 
then-outstanding shares of Preferred Stock.

                     (ii)  The method of valuation of securities subject 
to investment letter or other restrictions on free marketability (other than 
restrictions arising solely by virtue of a stockholder's status as an 
affiliate or former affiliate) shall be to make an appropriate discount from 
the market value determined as above in (i) 1),2) or 3) to reflect the 
approximate fair market value thereof, as mutually determined by the 
Corporation and the holders of at least a majority of the voting power of all 
then-outstanding shares of such Preferred Stock.

          4.   CONVERSION RIGHTS.

          The holders of the Preferred Stock shall have the following rights 
with respect to the conversion of the Preferred Stock into shares of Common 
Stock (the "Conversion Rights"):

               (a)   OPTIONAL CONVERSION.  Subject to and in compliance with 
the provisions of this Section 4, any shares of Preferred Stock may, at the 
option of the holder, be converted at any time into fully-paid and 
nonassessable shares of Common Stock.  The number of shares of Common Stock 
to which a holder of Series A Preferred, Series B Preferred, Series C 
Preferred or Series D Preferred shall be entitled upon conversion shall be 
the product obtained by multiplying the "Series A Conversion Rate," "Series B 
Conversion Rate," "Series C Conversion Rate," or "Series D Conversion Rate," 
as applicable, then in effect (determined as provided in Section 4(b)) by the 
number of shares of Series A Preferred, Series B Preferred, Series C 
Preferred or Series D Preferred being converted.

               (b)   CONVERSION RATE.  The conversion rate in effect at any 
time for conversion of (i) the Series A Preferred (the "Series A Conversion 
Rate") shall be the quotient obtained by dividing the Original Issue Price of 
the Series A Preferred by the "Series A 

                                       5


<PAGE>

Conversion Price," calculated as provided in Section 4(c); (ii) the Series B 
Preferred (the "Series B Conversion Rate") shall be the quotient obtained by 
dividing the Original Issue Price of the Series B Preferred by the "Series B 
Conversion Price," calculated as provided in Section 4(c); (iii) the Series C 
Preferred (the "Series C Conversion Rate") shall be the quotient obtained by 
dividing the Original Issue Price of the Series C Preferred by the "Series C 
Conversion Price," calculated as provided in Section 4(c); (iv) the Series D 
Preferred (the "Series D Conversion Rate") shall be the quotient obtained by 
dividing the Original Issue Price of the Series D Preferred by the "Series D 
Conversion Price," calculated as provided in Section 4(c).

               (c)   CONVERSION PRICE.  The conversion price for the Series A 
Preferred shall initially be the Original Issue Price of the Series A 
Preferred (the "Series A Conversion Price").  The conversion price for the 
Series B Preferred shall initially be the Original Issue Price of the Series 
B Preferred (the "Series B Conversion Price").  The conversion price for the 
Series C Preferred shall initially be the Original Issue Price of the Series 
C Preferred (the "Series C Conversion Price").  The conversion price for the 
Series D Preferred shall initially be the Original Issue Price of the Series 
D Preferred (the "Series D Conversion Price").  The term "Conversion Price" 
shall be read as referring to the Series A Conversion Price, Series B 
Conversion Price, the Series C Conversion Price, or the Series D Conversion 
Price as applicable.  Each initial Conversion Price shall be adjusted from 
time to time in accordance with this Section 4.  All references to the 
Conversion Price herein shall mean the Conversion Price as so adjusted.
  
               
               (d)  MECHANICS OF CONVERSION.  Each holder of Preferred Stock 
who desires to convert the same into shares of Common Stock pursuant to this 
Section 4 shall surrender the certificate or certificates therefor, duly 
endorsed, at the office of the Company or any transfer agent for the 
Preferred Stock, and shall give written notice to the Company at such office 
that such holder elects to convert the same.  Such notice shall state the 
number of shares of Preferred Stock being converted.  Thereupon, the Company 
shall promptly issue and deliver at such office to such holder a certificate 
or certificates for the number of shares of Common Stock to which such holder 
is entitled and shall promptly pay in cash or, to the extent sufficient funds 
are not then legally available therefor, in Common Stock (at the Common 
Stock's fair market value determined by the Board of Directors as of the date 
of such conversion), any declared and unpaid dividends on the shares of 
Series Preferred being converted.  Such conversion shall be deemed to have 
been made at the close of business on the date of such surrender of the 
certificates representing the shares of Preferred Stock to be converted, and 
the person entitled to receive the shares of Common Stock issuable upon such 
conversion shall be treated for all purposes as the record holder of such 
shares of Common Stock on such date.

               (e)   ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Company shall at any time or from time to time after the date that the first
share of each series of Preferred Stock is issued (the "Original Issue Date")
effect a subdivision of the outstanding Common Stock, each Conversion Price in
effect immediately before that subdivision shall be proportionately decreased. 
Conversely, if the Company shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock into a
smaller number of shares, each Conversion Price in effect immediately before the
combination shall be proportionately increased.  Any adjustment under this
Section 4(e) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

                                       6



<PAGE>

               (f)   ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. 
If the Company at any time or from time to time after the Original Issue Date 
makes, or fixes a record date for the determination of holders of Common 
Stock entitled to receive, a dividend or other distribution payable in 
additional shares of Common Stock, in each such event each Conversion Price 
that is then in effect shall be decreased as of the time of such issuance or, 
in the event such record date is fixed, as of the close of business on such 
record date, by multiplying each Conversion Price then in effect by a 
fraction (1) the numerator of which is the total number of shares of Common 
Stock issued and outstanding immediately prior to the time of such issuance 
or the close of business on such record date, and (2) the denominator of 
which is the total number of shares of Common Stock issued and outstanding 
immediately prior to the time of such issuance or the close of business on 
such record date plus the number of shares of Common Stock issuable in 
payment of such dividend or distribution; provided, however, that if such 
record date is fixed and such dividend is not fully paid or if such 
distribution is not fully made on the date fixed therefor, each Conversion 
Price shall be recomputed accordingly as of the close of business on such 
record date and thereafter each Conversion Price shall be adjusted pursuant 
to this Section 4(f) to reflect the actual payment of such dividend or 
distribution.

               (g)   ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS.  If 
the Company at any time or from time to time after the Original Issue Date 
makes, or fixes a record date for the determination of holders of Common 
Stock entitled to receive, a dividend or other distribution payable in 
securities of the Company other than shares of Common Stock, in each such 
event provision shall be made so that the holders of the Preferred Stock 
shall receive upon conversion thereof, in addition to the number of shares of 
Common Stock receivable thereupon, the amount of other securities of the 
Company which they would have received had their Preferred Stock been 
converted into Common Stock on the date of such event and had they 
thereafter, during the period from the date of such event to and including 
the conversion date, retained such securities receivable by them as aforesaid 
during such period, subject to all other adjustments called for during such 
period under this Section 4 with respect to the rights of the holders of the 
Preferred Stock or with respect to such other securities by their terms.

               (h)   ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND 
SUBSTITUTION.  If at any time or from time to time after the Original Issue 
Date, the Common Stock issuable upon the conversion of the Preferred Stock is 
changed into the same or a different number of shares of any class or classes 
of stock, whether by recapitalization, reclassification or otherwise (other 
than an Acquisition or Asset Transfer as defined in Section 3(c) or a 
subdivision or combination of shares or stock dividend or a reorganization, 
merger, consolidation or sale of assets provided for elsewhere in this 
Section 4), in any such event each holder of Preferred Stock shall have the 
right thereafter to convert such stock into the kind and amount of stock and 
other securities and property receivable upon such recapitalization, 
reclassification or other change by holders of the maximum number of shares 
of Common Stock into which such shares of Preferred Stock could have been 
converted immediately prior to such recapitalization, reclassification or 
change, all subject to further adjustment as provided herein or with respect 
to such other securities or property by the terms thereof.

               (i)   REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF 
ASSETS.  If at any time or from time to time after the Original Issue Date, 
there is a capital reorganization of the Common Stock (other than an 
Acquisition or Asset Transfer as defined in Section 3(c) or a 


                                      7

<PAGE>

recapitalization, subdivision, combination, reclassification, exchange or 
substitution of shares provided for elsewhere in this Section 4), as a part 
of such capital reorganization, provision shall be made so that the holders 
of the Preferred Stock shall thereafter be entitled to receive upon 
conversion of the Preferred Stock the number of shares of stock or other 
securities or property of the Company to which a holder of the number of 
shares of Common Stock deliverable upon conversion would have been entitled 
on such capital reorganization, subject to adjustment in respect of such 
stock or securities by the terms thereof.  In any such case, appropriate 
adjustment shall be made in the application of the provisions of this Section 
4 with respect to the rights of the holders of Preferred Stock after the 
capital reorganization to the end that the provisions of this Section 4 
(including adjustment of each Conversion Price then in effect and the number 
of shares issuable upon conversion of Preferred Stock) shall be applicable 
after that event and be as nearly equivalent as practicable.

               (j)   SALE OF SHARES BELOW EITHER CONVERSION PRICE.

                     (i) If at any time or from time to time after the 
Original Issue Date, the Company issues or sells, or is deemed by the express 
provisions of this subsection (j) to have issued or sold, Additional Shares 
of Common Stock (as hereinafter defined), other than as a dividend or other 
distribution on any class of stock as provided in Section 4(f) above, and 
other than a subdivision or combination of shares of Common Stock as provided 
in Section 4(e) above, for an Effective Price (as hereinafter defined) less 
than the then-effective Conversion Price for any series of Preferred Stock, 
then and in each such case the then existing Conversion Price for such series 
of Preferred Stock shall be reduced, as of the opening of business on the 
date of such issue or sale, to a price determined by multiplying the then 
existing Conversion Price for such series of Preferred Stock by a fraction 
(i) the numerator of which shall be (A) the number of shares of Common Stock 
deemed outstanding (as defined below) immediately prior to such issue or 
sale, plus (B) the number of shares of Common Stock which the aggregate 
consideration received (as defined in subsection (j)(ii)) by the Company for 
the total number of Additional Shares of Common Stock so issued would 
purchase at such Conversion Price, and (ii) the denominator of which shall be 
the number of shares of Common Stock deemed outstanding (as defined below) 
immediately prior to such issue or sale plus the total number of Additional 
Shares of Common Stock so issued.  For the purposes of the preceding 
sentence, the number of shares of Common Stock deemed to be outstanding as of 
a given date shall be the sum of (A) the number of shares of Common Stock 
actually outstanding, (B) the number of shares of Common Stock into which the 
then outstanding shares of Preferred Stock could be converted if fully 
converted on the day immediately preceding the given date, and (C) the number 
of shares of Common Stock which could be obtained through the exercise or 
conversion of all other rights, options and convertible securities on the day 
immediately preceding the given date.

                     (ii)     For the purpose of making any adjustment 
required under this Section 4(j), the consideration received by the Company 
for any issue or sale of securities shall (A) to the extent it consists of 
cash, be computed at the net amount of cash received by the Company after 
deduction of any underwriting or similar commissions, compensation or 
concessions paid or allowed by the Company in connection with such issue or 
sale but without deduction of any expenses payable by the Company, (B) to the 
extent it consists of property other than cash, be computed at the fair value 
of that property as determined in good faith by the Board of Directors, and 
(C) if Additional Shares of Common Stock, Convertible Securities (as 


                                      8

<PAGE>

hereinafter defined) or rights or options to purchase either Additional 
Shares of Common Stock or Convertible Securities are issued or sold together 
with other stock or securities or other assets of the Company for a 
consideration which covers both, be computed as the portion of the 
consideration so received that may be reasonably determined in good faith by 
the Board of Directors to be allocable to such Additional Shares of Common 
Stock, Convertible Securities or rights or options.

                     (iii)    For the purpose of the adjustment required 
under this Section 4(j), if the Company issues or sells any rights or options 
for the purchase of, or stock or other securities convertible into, 
Additional Shares of Common Stock (such convertible stock or securities being 
herein referred to as "Convertible Securities") and if the Effective Price of 
such Additional Shares of Common Stock is less than any Conversion Price, in 
each case the Company shall be deemed to have issued at the time of the 
issuance of such rights or options or Convertible Securities the maximum 
number of Additional Shares of Common Stock issuable upon exercise or 
conversion thereof and to have received as consideration for the issuance of 
such shares an amount equal to the total amount of the consideration, if any, 
received by the Company for the issuance of such rights or options or 
Convertible Securities, plus, in the case of such rights or options, the 
minimum amounts of consideration, if any, payable to the Company upon the 
exercise of such rights or options, plus, in the case of Convertible 
Securities, the minimum amounts of consideration, if any, payable to the 
Company upon the conversion thereof; provided that if in the case of 
Convertible Securities the minimum amounts of such consideration cannot be 
ascertained, but are a function of antidilution or similar protective 
clauses, the Company shall be deemed to have received the minimum amounts of 
consideration without reference to such clauses; provided further that if the 
minimum amount of consideration payable to the Company upon the exercise or 
conversion of rights, options or Convertible Securities is reduced over time 
or on the occurrence or non-occurrence of specified events other than by 
reason of antidilution adjustments, the Effective Price shall be recalculated 
using the figure to which such minimum amount of consideration is reduced; 
provided further that if the minimum amount of consideration payable to the 
Company upon the exercise or conversion of such rights, options or 
Convertible Securities is subsequently increased, the Effective Price shall 
be again recalculated using the increased minimum amount of consideration 
payable to the Company upon the exercise or conversion of such rights, 
options or Convertible Securities.  No further adjustment of the Conversion 
Price, as adjusted upon the issuance of such rights, options or Convertible 
Securities, shall be made as a result of the actual issuance of Additional 
Shares of Common Stock on the exercise of any such rights or options or the 
conversion of any such Convertible Securities.  If any such rights or options 
or the conversion privilege represented by any such Convertible Securities 
shall expire without having been exercised, the Conversion Price as adjusted 
upon the issuance of such rights, options or Convertible Securities shall be 
readjusted to the Conversion Price which would have been in effect had an 
adjustment been made on the basis that the only Additional Shares of Common 
Stock so issued were the Additional Shares of Common Stock, if any, actually 
issued or sold on the exercise of such rights or options or rights of 
conversion of such Convertible Securities, and such Additional Shares of 
Common Stock, if any, were issued or sold for the consideration actually 
received by the Company upon such exercise, plus the consideration, if any, 
actually received by the Company for the granting of all such rights or 
options, whether or not exercised, plus the consideration received for 
issuing or selling the Convertible Securities actually converted, plus the 
consideration, if any, actually received by the Company on the conversion of 
such Convertible 


                                      9

<PAGE>

Securities, provided that such readjustment shall not apply to prior 
conversions of Preferred Stock.

                     (iv)     "Additional Shares of Common Stock" shall mean 
all shares of Common Stock issued by the Company or deemed to be issued 
pursuant to this Section 4(j), whether or not subsequently reacquired or 
retired by the Company other than (1) shares of Common Stock issued upon 
conversion of the Preferred Stock; (2) shares of Common Stock and/or options, 
warrants or other Common Stock purchase rights, and the Common Stock issued 
pursuant to such options, warrants or other rights (as adjusted for any stock 
dividends, combinations, splits, recapitalizations and the like) issued or to 
be issued to employees, officers or directors of, or consultants or advisors 
to the Company or any subsidiary pursuant to stock purchase or stock option 
plans or other arrangements that are approved by the Board; (3) shares of 
Common Stock issued pursuant to the exercise of options, warrants or 
convertible securities outstanding as of the Original Issue Date; (4) those 
shares of Common Stock and/or options, warrants or other Common Stock 
purchase rights, and the Common Stock issued pursuant to such options, 
warrants or other rights (as adjusted for any stock dividends, combinations, 
splits, recapitalizations and the like) issued or to be issued to Stanford 
Research Institute ("SRI") in connection with that license agreement between 
the Company and SRI dated December 1995, and (5) those shares of Common Stock 
or Preferred Stock issued or to be issued to Guidant Corporation, its 
subsidiaries or affiliates prior to March 31, 1996. The "Effective Price" of 
Additional Shares of Common Stock shall mean the quotient determined by 
dividing the total number of Additional Shares of Common Stock issued or 
sold, or deemed to have been issued or sold by the Company under this Section 
4(j), into the aggregate consideration received, or deemed to have been 
received by the Company for such issue under this Section 4(j), for such 
Additional Shares of Common Stock.

               (k)   ACCOUNTANTS' CERTIFICATE OF ADJUSTMENT.  In each case of 
an adjustment or readjustment of either Conversion Price for the number of 
shares of Common Stock or other securities issuable upon conversion of 
Preferred Stock, if the Preferred Stock is then convertible pursuant to this 
Section 4, the Company, at its expense, shall compute such adjustment or 
readjustment in accordance with the provisions hereof and prepare a 
certificate showing such adjustment or readjustment, and shall mail such 
certificate, by first class mail, postage prepaid, to each registered holder 
of Preferred Stock at the holder's address as shown in the Company's books.  
The certificate shall set forth such adjustment or readjustment, showing in 
detail the facts upon which such adjustment or readjustment is based, 
including a statement of (1) the consideration received or deemed to be 
received by the Company for any Additional Shares of Common Stock issued or 
sold or deemed to have been issued or sold, (2) the Conversion Price at the 
time in effect, (3) the number of Additional Shares of Common Stock and (4) 
the type and amount, if any, of other property which at the time would be 
received upon conversion of the Preferred Stock.

               (l)   NOTICES OF RECORD DATE.  Upon (i) any taking by the 
Company of a record of the holders of any class of securities for the purpose 
of determining the holders thereof who are entitled to receive any dividend 
or other distribution, or (ii) any Acquisition (as defined in Section 3(c)) 
or other capital reorganization of the Company, any reclassification or 
recapitalization of the capital stock of the Company, any merger or 
consolidation of the Company with or into any other corporation, or any Asset 
Transfer (as defined in Section 3(c)), 


                                      10

<PAGE>

or any voluntary or involuntary dissolution, liquidation or winding up of the 
Company, the Company shall mail to each holder of Preferred Stock at least 
twenty (20) days prior to the record date specified therein a notice 
specifying (1) the date on which any such record is to be taken for the 
purpose of such dividend or distribution and a description of such dividend 
or distribution, (2) the date on which any such Acquisition, reorganization, 
reclassification, transfer, consolidation, merger, Asset Transfer, 
dissolution, liquidation or winding up is expected to become effective, and 
the material terms of such transaction, and (3) the date, if any, that is to 
be fixed as to when the holders of record of Common Stock (or other 
securities) shall be entitled to exchange their shares of Common Stock (or 
other securities) for securities or other property deliverable upon such 
Acquisition, reorganization, reclassification, transfer, consolidation, 
merger, Asset Transfer, dissolution, liquidation or winding up.

               (m)   AUTOMATIC CONVERSION.

                     (i) Each share of Preferred Stock shall automatically be 
converted into shares of Common Stock, based on each then-effective 
Conversion Price, (A) at any time upon the affirmative vote of the holders of 
at least two-thirds (2/3rds) of the outstanding shares of the Preferred 
Stock, or (B) immediately upon the closing of a firmly underwritten public 
offering pursuant to an effective registration statement under the Securities 
Act of 1933, as amended, covering the offer and sale of Common Stock for the 
account of the Company in which (i) the per share price is at least ten 
dollars ($10.00) (as adjusted for stock dividends, combinations, splits, 
recapitalizations and the like), and (ii) the gross cash proceeds to the 
Company (before underwriting discounts, commissions and fees) are at least 
ten million dollars ($10,000,000.00).  Upon such automatic conversion, any 
declared and unpaid dividends shall be paid in accordance with the provisions 
of Section 4(d).

                     (ii)     Upon the occurrence of either event specified 
in paragraph (i) above, the outstanding shares of Preferred Stock shall be 
converted automatically without any further action by the holders of such 
shares and whether or not the certificates representing such shares are 
surrendered to the Company or its transfer agent; provided, however, that the 
Company shall not be obligated to issue certificates evidencing the shares of 
Common Stock issuable upon such conversion unless the certificates evidencing 
such shares of Preferred Stock are either delivered to the Company or its 
transfer agent as provided below, or the holder notifies the Company or its 
transfer agent that such certificates have been lost, stolen or destroyed and 
executes an agreement satisfactory to the Company to indemnify the Company 
from any loss incurred by it in connection with such certificates.  Upon the 
occurrence of such automatic conversion of the Preferred Stock, the holders 
of Preferred Stock shall surrender the certificates representing such shares 
at the office of the Company or any transfer agent for the Preferred Stock.  
Thereupon, there shall be issued and delivered to such holder promptly at 
such office and in its name as shown on such surrendered certificate or 
certificates, a certificate or certificates for the number of shares of 
Common Stock into which the shares of Preferred Stock surrendered were 
convertible on the date on which such automatic conversion occurred, and the 
Company shall promptly pay in cash or, at the option of the Company, Common 
Stock (at the Common Stock's fair market value determined by the Board as of 
the date of such conversion), or, at the option of the Company, both, all 
declared and unpaid dividends on the shares of Preferred Stock being 
converted, to and including the date of such conversion.



                                      11

<PAGE>

               (n)   FRACTIONAL SHARES.  No fractional shares of Common Stock 
shall be issued upon conversion of Preferred Stock.  All shares of Common 
Stock (including fractions thereof) issuable upon conversion of more than one 
share of Preferred Stock by a holder thereof shall be aggregated for purposes 
of determining whether the conversion would result in the issuance of any 
fractional share.  If, after the aforementioned aggregation, the conversion 
would result in the issuance of any fractional share, the Corporation shall, 
in lieu of issuing any fractional share, pay cash equal to the product of 
such fraction multiplied by the Common Stock's fair market value (as 
determined by the Board) on the date of conversion.

               (o)   RESERVATION OF STOCK ISSUABLE UPON CONVERSION.  The 
Company shall at all times reserve and keep available out of its authorized 
but unissued shares of Common Stock, solely for the purpose of effecting the 
conversion of the shares of the Preferred Stock, such number of its shares of 
Common Stock as shall from time to time be sufficient to effect the 
conversion of all outstanding shares of the Preferred Stock.  If at any time 
the number of authorized but unissued shares of Common Stock shall not be 
sufficient to effect the conversion of all then outstanding shares of the 
Preferred Stock, the Company will take such corporate action as may, in the 
opinion of its counsel, be necessary to increase its authorized but unissued 
shares of Common Stock to such number of shares as shall be sufficient for 
such purpose.

               (p)   NOTICES.  Any notice required by the provisions of this 
Section 4 shall be in writing and shall be deemed effectively given: (i) upon 
personal delivery to the party to be notified, (ii) when sent by confirmed 
telex or facsimile if sent during normal business hours of the recipient; if 
not, then on the next business day, (iii) five (5) days after having been 
sent by registered or certified mail, return receipt requested, postage 
prepaid, or (iv) one (1) day after deposit with a nationally recognized 
overnight courier, having specified next day delivery, with written 
verification of receipt.  All notices shall be addressed to each holder of 
record at the address of such holder appearing on the books of the Company.

               (q)   PAYMENT OF TAXES.  The Company will pay all taxes (other 
than taxes based upon income) and other governmental charges that may be 
imposed with respect to the issue or delivery of shares of Common Stock upon 
conversion of shares of Preferred Stock, excluding any tax or other charge 
imposed in connection with any transfer involved in the issue and delivery of 
shares of Common Stock in a name other than that in which the shares of 
Preferred Stock so converted were registered.

               (r)   NO DILUTION OR IMPAIRMENT.  The Company shall not amend 
its Restated Certificate of Incorporation or participate in any 
reorganization, transfer of assets, consolidation, merger, dissolution, issue 
or sale of securities or any other voluntary action, for the purpose of 
avoiding or seeking to avoid the observance or performance of any of the 
terms to be observed or performed hereunder by the Company, but shall at all 
times in good faith assist in carrying out all such action as may be 
reasonably necessary or appropriate in order to protect the conversion rights 
of the holders of the Preferred Stock against dilution or other impairment.

          4.   REDEMPTION.  Preferred Stock is not redeemable.

          5.   NO REISSUANCE OF PREFERRED STOCK.  No share or shares of 
Preferred Stock acquired by the Corporation shall be reissued.



                                      12

<PAGE>

          6.   NO PREEMPTIVE RIGHTS.  Stockholders shall have no preemptive 
rights except as granted by the Company pursuant to written agreements.
                                          
                                      V.

     A.   A director of the corporation shall not be personally liable to the 
Corporation or its stockholders for monetary damages for any breach of 
fiduciary duty as a director, except for liability (i) for any breach of the 
director's duty of loyalty to the Corporation or its stockholders, (ii) for 
acts or omissions not in good faith or which involve intentional misconduct 
or a knowing violation of law, (iii) under Section 174 of the Delaware 
General Corporation Law, or (iv) for any transaction from which the director 
derived an improper personal benefit.  If the Delaware General Corporation 
Law is amended after approval by the stockholders of this Article to 
authorize corporate action further eliminating or limiting the personal 
liability of directors, then the liability of a director shall be eliminated 
or limited to the fullest extent permitted by the Delaware General 
Corporation Law, as so amended.

     B.   Any repeal or modification of this Article V shall be prospective 
and shall not affect the rights under this Article V in effect at the time of 
the alleged occurrence of any act or omission to act giving rise to liability 
or indemnification.
                                          
                                     VI.

     For the management of the business and for the conduct of the affairs of 
the Corporation, and in further definition, limitation and regulation of the 
powers of the Corporation, of its directors and of its stockholders or any 
class thereof, as the case may be, it is further provided that:

     (i)  The management of the business and the conduct of the affairs of 
the Corporation shall be vested in its Board of Directors.  Except as set 
forth herein, the number of directors which shall constitute the whole Board 
of Directors shall be fixed by the Board of Directors in the manner provided 
in the Bylaws.

     (ii) The Board of Directors may from time to time make, amend, 
supplement or repeal the Bylaws; provided, however, that the stockholders may 
change or repeal any Bylaw adopted by the Board of Directors by the 
affirmative vote of the holders of a majority of the voting power of all of 
the then outstanding shares of the capital stock of the Corporation; and, 
provided further, that no amendment or supplement to the Bylaws adopted by 
the Board of Directors shall vary or conflict with any amendment or 
supplement thus adopted by the stockholders.

     (iii)     The directors of the Corporation need not be elected by 
written ballot unless the Bylaws so provide.
                                          
                                      VII.

     The Corporation reserves the right to amend, alter, change or repeal any 
provision contained in this Certificate of Incorporation, in the manner now 
or hereafter prescribed by statute, and all rights conferred upon the 
stockholders herein are granted subject to this right."



                                      13

<PAGE>

                                  * * * * 

     4.   This Restated Certificate of Incorporation has been duly adopted in 
accordance with the provisions of Section 245 of the General Corporation Law 
of the State of Delaware.  The total number of outstanding shares entitled to 
vote or act by written consent was Six Million Three Hundred Sixty Thousand 
Seven Hundred Twenty Nine (6,360,729) shares of Common Stock, Five Million 
Four Hundred Forty Two Thousand Five Hundred (5,442,500) shares of Series A 
Preferred, Four Hundred Seventy Thousand (470,000) shares of Series B 
Preferred, and Six Million (6,000,000) shares of Series C Preferred.  A 
majority of the outstanding shares of Common Stock and a majority of the 
outstanding shares of Preferred Stock approved this Restated Certificate of 
Incorporation by written consent in accordance with Section 228 of the 
General Corporation Law of the State of Delaware and written notice of such 
was given by the Corporation in accordance with Section 228 of the General 
Corporation Law of the State of Delaware to those stockholders who did not 
consent in writing.  This is also duly adopted in accordance with the 
provisions of Section 242 of the General Corporation Law of the State of 
Delaware.


                                      14

<PAGE>

     IN WITNESS WHEREOF, Intuitive Surgical, Inc. has caused this Restated 
Certificate of Incorporation to be signed by the Chief Executive Officer and 
Secretary in Palo Alto, California this 13th day of November, 1997.

                                   INTUITIVE SURGICAL, INC.




                                   By   /s/ Lonnie M. Smith
                                     ------------------------------------------
                                        LONNIE M. SMITH
                                        Chief Executive Officer 


                                   By   /s/ Alan C. Mendelson
                                     ------------------------------------------
                                        ALAN C. MENDELSON
                                        Secretary



                                      15




<PAGE>

                                 AMENDED AND RESTATED

                             CERTIFICATE OF INCORPORATION

                                          OF

                               INTUITIVE SURGICAL, INC.


     Lonnie M. Smith does hereby certify:

     1.   He is the President and Chief Executive Officer of Intuitive Surgical,
Inc., a corporation organized and existing under the laws of the state of
Delaware.

     2.   The original name of this corporation is Intuitive Surgical Devices,
Inc. and the original Certificate of Incorporation was filed with the Secretary
of State of the State of Delaware on November 9, 1995. 

     3.   The Certificate of Incorporation of this Corporation is hereby amended
and restated as follows:

                                          I

     The name of this corporation is Intuitive Surgical, Inc. (the "Corporation"
or the "Company"). 

                                          II

     The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, and the
name of the registered agent of the Corporation in the State of Delaware at such
address is The Prentice-Hall Corporation System, Inc. 

                                         III

     The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.

                                          IV

     A.   The Corporation is authorized to issue two classes of stock to be
designated, respectively,
 "Common Stock" and "Preferred Stock."  The total
number of shares which the corporation is authorized to issue is eighty-five
million (85,000,000) shares.  Seventy-five million (75,000,000) shares shall be
Common Stock, each having a par value of one tenth of one cent ($0.001). 
Ten million (10,000,000) shares shall be Preferred Stock, each having a par
value of one tenth of one cent ($0.001).

     B.   The Preferred Stock may be issued from time to time in one or more
series.  The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation")


<PAGE>

pursuant to the Delaware General Corporation Law, to fix or alter from time to
time the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series or any of them; and to increase or
decrease the number of shares of any series subsequent to the issuance of shares
of that series, but not below the number of shares of such series then
outstanding.  In case the number of shares of any series shall be decreased in
accordance with the foregoing sentence, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.

                                          V

     For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:

     A.   (1)  The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors.  The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.

          (2)  ELECTION OF DIRECTORS.

               a.   Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock to the public (the "Initial Public Offering")
and during such time or times that the corporation is not subject to Section
2115(b) of the California General Corporation Law (the "CGCL"), the directors
shall be divided into three classes designated as Class I, Class II and Class
III, respectively.  Directors shall be assigned to each class in accordance with
a resolution or resolutions adopted by the Board of Directors.  At the first
annual meeting of stockholders following the Initial Public Offering (assuming
the corporation is not subject to Section 2115(b) of the CGCL), the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of three years.  At the second annual meeting of
stockholders following the Initial Public Offering (assuming the corporation is
not subject to Section 2115(b) of the CGCL), the term of office of the Class II
directors shall expire and Class II directors shall be elected for a full term
of three years.  At the third annual meeting of stockholders following the
Initial Public Offering (assuming the corporation is not subject to Section
2115(b) of the CGCL), the term of office of the Class III directors shall expire
and Class III directors shall be elected for a full term of three years.  At
each succeeding annual meeting of stockholders (assuming the corporation is not
subject to Section 2115(b) of the CGCL), directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.

               b.   Prior to the Initial Public Offering and in the event that
the corporation is subject to Section 2115(b) of the CGCL at any time, or from
time to time, Section A.(2)a.


                                          2

<PAGE>

of this Article V shall not apply and all directors shall be designated of the
same class, each director shall hold office until the next annual meeting and
the directors shall be elected at each annual meeting of stockholders to hold
office until the next annual meeting. 

               c.   (i)  No person entitled to vote at an election for directors
may cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation is subject to Section 2115(b) of the CGCL.

                    (ii) During such time or times that the corporation is
subject to Section 2115(b) of the CGCL, every stockholder entitled to vote at an
election for directors may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such stockholder's shares are
otherwise entitled, or distribute the stockholders votes on the same principal
among as many candidates as such stockholder thinks fit.  No stockholder,
however, shall be entitled to so cumulate such stockholder's votes unless (i)
the names of such candidate or candidates have been placed in nomination prior
to the voting and (ii) the stockholder has given notice at the meeting, prior to
the voting, of such stockholder's intention to cumulate such stockholder's
votes.  If any stockholder has given proper notice, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. The candidates receiving the highest number of votes, up to the
number of directors to be elected, are elected.

Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal.  No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.

          (3)  REMOVAL OF DIRECTORS.

               a.   During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, subject to the rights of the holders of any series
of Preferred Stock and the limitations imposed by law, the Board of Directors or
any individual director may be removed from office at any time with or without
cause by the affirmative vote of the holders of at least a majority of the
then-outstanding shares of voting stock of the corporation, entitled to vote at
an election of directors (the "Voting Stock"); provided, however, that unless
the entire Board is removed, no individual director may be removed when the
votes cast against such director's removal, or not consenting in writing to such
removal, would be sufficient to elect that director if voted cumulatively at an
election at which the same total number of votes were cast (or, if such action
is taken by written consent, all shares entitled to vote were voted) and the
entire number of directors authorized at the time of such director's most recent
election were then being elected.

               b.   Following any date on which the corporation is no longer
subject to Section 2115(b) of the CGCL, subject to the rights of the holders of
any series of Preferred Stock and any limitations imposed by law, Section
A.(3)a. above shall no longer apply and no director shall be removed without
cause.  Subject to the rights of the holders of any series of Preferred Stock
and any limitations imposed by law, the Board of Directors or any individual
director may


                                          3

<PAGE>

be removed from office at any time with cause by the affirmative vote of the
holders of a majority of the voting power of all then-outstanding shares of
Voting Stock.

          (4)  Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders.  Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified. 

     B.   (1)  Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the Voting Stock.  The Board of Directors shall
also have the power to adopt, amend, or repeal Bylaws.

          (2)  The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.

          (3)  No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws or by written consent of stockholders in accordance with the Bylaws
prior to the closing of the Initial Public Offering and following the closing of
the Initial Public Offering no action shall be taken by the stockholders by
written consent. 

          (4)  Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors shall fix.

          (5)  Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.

                                          VI

     A.   A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.  If the Delaware


                                          4

<PAGE>

General Corporation Law is amended after approval by the stockholders of this
Article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director shall be
eliminated or limited to the fullest extent permitted by the Delaware General
corporation Law, as so amended.

     B.   Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.


                                         VII

     A.   The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation. 

     B.   Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.

     The foregoing Amended and Restated Certificate of Incorporation has been
duly approved by the Board of Directors.

     The foregoing Amended and Restated Certificate of Incorporation has been
duly approved by the vote of the stockholders in accordance with Sections 242
and 245 of the Delaware General Corporation Law.  The total number of
outstanding shares of the Corporation entitled to vote on the amendment was
________ shares of Common Stock, ________ shares of Series A Preferred Stock,
________ shares of Series B Preferred Stock, ________ shares of Series C
Preferred Stock and ________ shares of Series D Preferred Stock. The number of
shares voting in favor of the amendment equaled or exceeded the vote required. 
The percentage vote required was more than 50% of the Common Stock and more than
50% of the Preferred Stock each voting separately as a separate class and more
than 50% of the Common Stock and Preferred Stock voting together as a single
class on an as-converted basis.


                                          5

<PAGE>

     I further declare under penalty of perjury under the laws of the state of
Delaware that the matters set forth in this Amended and Restated Certificate of
Incorporation are true and correct.



                                   ---------------------------------------------
_________, 1998                    Lonnie M. Smith
                                   President and 
                                   Chief Executive Officer


                                          6



<PAGE>


















                                    BYLAWS

                                      OF

                           INTUITIVE SURGICAL, INC.
                           (A DELAWARE CORPORATION)
                                          

<PAGE>

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>

                                                                           PAGE
                                                                           ----

<S>                                                                        <C>
ARTICLE I

     OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
     Section 1.Registered Office . . . . . . . . . . . . . . . . . . . . . .  1
     Section 2.Other Offices . . . . . . . . . . . . . . . . . . . . . . . .  1

ARTICLE II

     CORPORATE SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
     Section 3.Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . .  1

ARTICLE III

     STOCKHOLDERS' MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . .  1
     Section 4.Place of Meetings . . . . . . . . . . . . . . . . . . . . . .  1
     Section 5.Annual Meeting. . . . . . . . . . . . . . . . . . . . . . . .  2
     Section 6.Special Meetings. . . . . . . . . . . . . . . . . . . . . . .  2
     Section 7.Notice of Meetings. . . . . . . . . . . . . . . . . . . . . .  2
     Section 8.Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . .  2
     Section 9.Adjournment and Notice of Adjourned Meetings. . . . . . . . .  3
     Section 10 Voting Rights. . . . . . . . . . . . . . . . . . . . . . . .  3
     Section 11 Beneficial Owners of Stock . . . . . . . . . . . . . . . . .  3
     Section 12 List of Stockholders . . . . . . . . . . . . . . . . . . . .  4
     Section 13 Action without Meeting . . . . . . . . . . . . . . . . . . .  4
     Section 14 Organization . . . . . . . . . . . . . . . . . . . . . . . .  5

ARTICLE IV

     DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5
     Section 15 Number and Term of Office. . . . . . . . . . . . . . . . . .  5
     Section 16 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
     Section 17 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . .  6
     Section 18 Resignation. . . . . . . . . . . . . . . . . . . . . . . . .  6
     Section 19 Removal. . . . . . . . . . . . . . . . . . . . . . . . . . .  6
     Section 20 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . .  6
            (a)   Annual Meetings. . . . . . . . . . . . . . . . . . . . . .  6
            (b)   Regular Meetings . . . . . . . . . . . . . . . . . . . . .  7
            (c)   Special Meetings . . . . . . . . . . . . . . . . . . . . .  7
            (d)   Telephone Meetings . . . . . . . . . . . . . . . . . . . .  7
            (e)   Notice of Meetings . . . . . . . . . . . . . . . . . . . .  7
            (f)   Waiver of Notice . . . . . . . . . . . . . . . . . . . . .  7
     Section 21.Quorum and Voting. . . . . . . . . . . . . . . . . . . . . .  7


                                       1


<PAGE>

     Section 22.Action without Meeting . . . . . . . . . . . . . . . . . . .  8
     Section 23.Fees and Compensation. . . . . . . . . . . . . . . . . . . .  8
     Section 24.Committees . . . . . . . . . . . . . . . . . . . . . . . . .  8
            (a)   Executive Committee. . . . . . . . . . . . . . . . . . . .  8
            (b)   Other Committees . . . . . . . . . . . . . . . . . . . . .  8
            (c)   Term . . . . . . . . . . . . . . . . . . . . . . . . . . .  9
            (d)   Meetings . . . . . . . . . . . . . . . . . . . . . . . . .  9
     Section 25.Organization . . . . . . . . . . . . . . . . . . . . . . . .  9

ARTICLE V

     OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
     Section 26.Officers Designated. . . . . . . . . . . . . . . . . . . . . 10
     Section
 27.Tenure and Duties of Officers. . . . . . . . . . . . . . . . 10
            (a)   General. . . . . . . . . . . . . . . . . . . . . . . . . . 10
            (b)   Duties of Chairman of the Board of Directors . . . . . . . 10
            (c)   Duties of President. . . . . . . . . . . . . . . . . . . . 10
            (d)   Duties of Vice Presidents. . . . . . . . . . . . . . . . . 11
            (e)   Duties of Secretary. . . . . . . . . . . . . . . . . . . . 11
            (f)   Duties of Chief Financial Officer or Treasurer . . . . . . 11
     Section 28.Delegation of Authority. . . . . . . . . . . . . . . . . . . 11
     Section 29.Resignations . . . . . . . . . . . . . . . . . . . . . . . . 11
     Section 30.Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . 12

ARTICLE VI

     EXECUTION OF CORPORATE INSTRUMENTS AND
     VOTING OF SECURITIES OWNED BY THE CORPORATION . . . . . . . . . . . . . 12
     Section 31.Execution of Corporate Instruments . . . . . . . . . . . . . 12
     Section 32.Voting of Securities Owned by the Corporation. . . . . . . . 12

ARTICLE VII

     SHARES OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
     Section 33.Form and Execution of Certificates . . . . . . . . . . . . . 13
     Section 34.Lost Certificates. . . . . . . . . . . . . . . . . . . . . . 13
     Section 35.Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . 13
     Section 36.Fixing Record Dates. . . . . . . . . . . . . . . . . . . . . 14
     Section 37.Registered Stockholders. . . . . . . . . . . . . . . . . . . 15

ARTICLE VIII

     OTHER SECURITIES OF THE CORPORATION . . . . . . . . . . . . . . . . . . 15
     Section 38.Execution of Other Securities. . . . . . . . . . . . . . . . 15

ARTICLE IX


                                       2


<PAGE>

     DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
     Section 39.Declaration of Dividends . . . . . . . . . . . . . . . . . . 15
     Section 40.Dividend Reserve . . . . . . . . . . . . . . . . . . . . . . 16

ARTICLE X

     FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
     Section 41.Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . 16

ARTICLE XI

     INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
     Section 42.  Indemnification of Directors, Officers, Employees and
                  Other Agents . . . . . . . . . . . . . . . . . . . . . . . 16
            (a)   Directors and Executive Officers . . . . . . . . . . . . . 16
            (b)   Other Officers, Employees and Other Agents . . . . . . . . 16
            (c)   Good Faith . . . . . . . . . . . . . . . . . . . . . . . . 16
            (d)   Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 17
            (e)   Enforcement. . . . . . . . . . . . . . . . . . . . . . . . 17
            (f)   Non-Exclusivity of Rights. . . . . . . . . . . . . . . . . 18
            (g)   Survival of Rights . . . . . . . . . . . . . . . . . . . . 18
            (h)   Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 18
            (i)   Amendments . . . . . . . . . . . . . . . . . . . . . . . . 18
            (j)   Saving Clause. . . . . . . . . . . . . . . . . . . . . . . 18
            (k)   Certain Definitions. . . . . . . . . . . . . . . . . . . . 19

ARTICLE XII

     NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
     Section 43.Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
            (a)   Notice to Stockholders . . . . . . . . . . . . . . . . . . 20
            (b)   Notice to Directors. . . . . . . . . . . . . . . . . . . . 20
            (c)   Address Unknown. . . . . . . . . . . . . . . . . . . . . . 20
            (d)   Affidavit of Mailing . . . . . . . . . . . . . . . . . . . 20
            (e)   Time Notices Deemed Given. . . . . . . . . . . . . . . . . 20
            (f)   Methods of Notice. . . . . . . . . . . . . . . . . . . . . 20
            (g)   Failure to Receive Notice. . . . . . . . . . . . . . . . . 20
            (h)   Notice to Person with Whom Communication Is Unlawful . . . 21
            (i)   Notice to Person with Undeliverable Address. . . . . . . . 21

ARTICLE XIII

     AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
     Section 44.Amendments . . . . . . . . . . . . . . . . . . . . . . . . . 21


                                       3


<PAGE>

ARTICLE XIV

     RIGHT OF FIRST REFUSAL. . . . . . . . . . . . . . . . . . . . . . . . . 22
     Section 45.Right of First Refusal . . . . . . . . . . . . . . . . . . . 22

ARTICLE XV

     LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
     Section 46.Loans to Officers. . . . . . . . . . . . . . . . . . . . . . 24

ARTICLE XVI

     MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
     Section 47.Annual Report. . . . . . . . . . . . . . . . . . . . . . . . 25


</TABLE>


                                       4



<PAGE>


                                      BYLAWS

                                        OF

                              INTUITIVE SURGICAL, INC.
                              (A DELAWARE CORPORATION)


                                     ARTICLE I
                                          
                                      OFFICES

     SECTION 1.     REGISTERED OFFICE.  The registered office of the corporation
in the State of Delaware shall be in the City of Dover, County of Kent.  (Del.
Code Ann., tit. 8, Section  131)

     SECTION 2.     OTHER OFFICES.  The corporation shall also have and 
maintain an office or principal place of business in 86 Alejandra Avenue, 
Atherton, California, at such place as may be fixed by the Board of 
Directors, and may also have offices at such other places, both within and 
without the State of Delaware as the Board of Directors may from time to time 
determine or the business of the corporation may require.  (Del. Code Ann., 
tit. 8, Section 122(8))

                                          
                                     ARTICLE II
                                          
                                   CORPORATE SEAL

     SECTION 3.     CORPORATE SEAL.  The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware."  Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.  (Del. Code Ann., tit. 8,
Section 122(3))

                                          
                                    ARTICLE III
                                          
                               STOCKHOLDERS' MEETINGS

     SECTION 4.     PLACE OF MEETINGS.  Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.  (Del. Code Ann., tit. 8, Section
211(a))

     SECTION 5.     ANNUAL MEETING.  The annual meeting of the stockholders of
the corporation, for the purpose of election of Directors and for such other
business as may lawfully 

                                      1

<PAGE>

come before it, shall be held on such date and at such time as may be 
designated from time to time by the Board of Directors.  (Del. Code Ann., 
tit. 8, Section  211(b))

     SECTION 6.     SPECIAL MEETINGS.  Special meetings of the stockholders 
of the corporation may be called, for any purpose or purposes, by (i) the 
Chairman of the Board, (ii) the President, (iii) the Board of Directors 
pursuant to a resolution adopted by a majority of the total number of 
authorized directors (whether or not there exist any vacancies in previously 
authorized directorships at the time any such resolution is presented to the 
Board for adoption)or (iv) by the holders of shares entitled to cast not less 
than ten percent (10%) of the votes at the meeting, and shall be held at such 
place, on such date, and at such time as they or he shall fix; PROVIDED, 
HOWEVER, that following registration of any of the classes of equity 
securities of the corporation pursuant to the provisions of the Securities 
Exchange Act of 1934, as amended, special meetings of the stockholders may 
only be called by the Board of Directors pursuant to a resolution adopted by 
a majority of the total number of authorized Directors.  

     SECTION 7.     NOTICE OF MEETINGS.  Except as otherwise provided by law 
or the Certificate of Incorporation, written notice of each meeting of 
stockholders shall be given not less than ten (10) nor more than sixty (60) 
days before the date of the meeting to each stockholder entitled to vote at 
such meeting, such notice to specify the place, date and hour and purpose or 
purposes of the meeting.  Notice of the time, place and purpose of any 
meeting of stockholders may be waived in writing, signed by the person 
entitled to notice thereof, either before or after such meeting, and will be 
waived by any stockholder by his attendance thereat in person or by proxy, 
except when the stockholder attends a meeting for the express purpose of 
objecting, at the beginning of the meeting, to the transaction of any 
business because the meeting is not lawfully called or convened.  Any 
stockholder so waiving notice of such meeting shall be bound by the 
proceedings of any such meeting in all respects as if due notice thereof had 
been given.  (Del. Code Ann., tit. 8, Sections  222, 229)

     SECTION 8.     QUORUM.  At all meetings of stockholders, except where 
otherwise provided by statute or by the Certificate of Incorporation, or by 
these Bylaws, the presence, in person or by proxy duly authorized, of the 
holders of a majority of the outstanding shares of stock entitled to vote 
shall constitute a quorum for the transaction of business.  Any shares, the 
voting of which at said meeting has been enjoined, or which for any reason 
cannot be lawfully voted at such meeting, shall not be counted to determine a 
quorum at such meeting.  In the absence of a quorum any meeting of 
stockholders may be adjourned, from time to time, either by the chairman of 
the meeting or by vote of the holders of a majority of the shares represented 
thereat, but no other business shall be transacted at such meeting.  The 
stockholders present at a duly called or convened meeting, at which a quorum 
is present, may continue to transact business until adjournment, 
notwithstanding the withdrawal of enough stockholders to leave less than a 
quorum.  Except as otherwise provided by law, the Certificate of 
Incorporation or these Bylaws, all action taken by the holders of a majority 
of the voting power represented at any meeting at which a quorum is present 
shall be valid and binding upon the corporation; PROVIDED, HOWEVER, that 
Directors shall be elected by a plurality of the votes of the shares present 
in person or represented by proxy at the meeting and entitled to vote on the 
election of Directors.  Where a separate vote by a class or classes is 
required, a majority of the outstanding shares of such class or classes, 
present in person or represented by proxy, shall constitute a quorum entitled 
to take

                                      2

<PAGE>

action with respect to that vote on that matter and the affirmative vote of 
the majority (plurality, in the case of the election of Directors) of shares 
of such class or classes present in person or represented by proxy at the 
meeting shall be the act of such class.  (Del. Code Ann., tit. 8, Section 216)

     SECTION 9.     ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS.  Any 
meeting of stockholders, whether annual or special, may be adjourned from 
time to time by the vote of a majority of the shares represented thereat.  
When a meeting is adjourned to another time or place, notice need not be 
given of the adjourned meeting if the time and place thereof are announced at 
the meeting at which the adjournment is taken.  At the adjourned meeting the 
corporation may transact any business which might have been transacted at the 
original meeting.  If the adjournment is for more than thirty (30) days, or 
if after the adjournment a new record date is fixed for the adjourned 
meeting, a notice of the adjourned meeting shall be given to each stockholder 
of record entitled to vote at the meeting.  (Del. Code Ann., tit. 8, Section  
222(c))

     SECTION 10.    VOTING RIGHTS.  For the purpose of determining those 
stockholders entitled to vote at any meeting of the stockholders, except as 
otherwise provided by law, only persons in whose names shares stand on the 
stock records of the corporation on the record date, as provided in Section 
12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. 
Except as may be otherwise provided in the Certificate of Incorporation or 
these Bylaws, each stockholder shall be entitled to one vote for each share 
of capital stock held by such stockholder.  Every person entitled to vote or 
execute consents shall have the right to do so either in person or by an 
agent or agents authorized by a written proxy executed by such person or his 
duly authorized agent, which proxy shall be filed with the Secretary at or 
before the meeting at which it is to be used.  An agent so appointed need not 
be a stockholder.  No proxy shall be voted  after three (3) years from its 
date of creation unless the proxy provides for a longer period.  All 
elections of Directors shall be by written ballot, unless otherwise provided 
in the Certificate of Incorporation. (Del. Code Ann., tit. 8, Sections  
211(e), 212(b))

     SECTION 11.    BENEFICIAL OWNERS OF STOCK.

           (a) If shares or other securities having voting power stand of 
record in the names of two (2) or more persons, whether fiduciaries, members 
of a partnership, joint tenants, tenants in common, tenants by the entirety, 
or otherwise, or if two (2) or more persons have the same fiduciary 
relationship respecting the same shares, unless the Secretary is given 
written notice to the contrary and is furnished with a copy of the instrument 
or order appointing them or creating the relationship wherein it is so 
provided, their acts with respect to voting shall have the following effect:  
(a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, 
the act of the majority so voting binds all; (c) if more than one (1) votes, 
but the vote is evenly split on any particular matter, each faction may vote 
the securities in question proportionally, or may apply to the Delaware Court 
of Chancery for relief as provided in the General Corporation Law of 
Delaware, Section 217(b).  If the instrument filed with the Secretary shows 
that any such tenancy is held in unequal interests, a majority or even-split 
for the purpose of this subsection (c) shall be a majority or even-split in 
interest.  (Del. Code Ann., tit. 8, Section  217(b))

           (b) Persons holding stock in a fiduciary capacity shall be 
entitled to vote the shares so held.  Persons whose stock is pledged shall be 
entitled to vote, unless in the transfer by

                                      3

<PAGE>

the pledgor on the books of the corporation he has expressly empowered the 
pledgee to vote thereon, in which case only the pledgee, or his proxy, may 
represent such stock and vote thereon. (Del. Code Ann., tit. 8, Section  
217(a))

     SECTION 12.    LIST OF STOCKHOLDERS.  The Secretary shall prepare and 
make, at least ten (10) days before every meeting of stockholders, a complete 
list of the stockholders entitled to vote at said meeting, arranged in 
alphabetical order, showing the address of each stockholder and the number of 
shares registered in the name of each stockholder.  Such list shall be open 
to the examination of any stockholder, for any purpose germane to the 
meeting, during ordinary business hours, for a period of at least ten (10) 
days prior to the meeting, either at a place within the city where the 
meeting is to be held, which place shall be specified in the notice of the 
meeting, or, if not specified, at the place where the meeting is to be held.  
The list shall be produced and kept at the time and place of meeting during 
the whole time thereof, and may be inspected by any stockholder who is 
present.  (Del. Code Ann., tit. 8, Section  219(a))

     SECTION 13.    ACTION WITHOUT MEETING.

           (a) Any action required by statute to be taken at any annual or 
special meeting of the stockholders, or any action which may be taken at any 
annual or special meeting of the stockholders, may be taken without a 
meeting, without prior notice and without a vote, if a consent or consents in 
writing, setting forth the action so taken, are signed by the holders of 
outstanding stock having not less than the minimum number of votes that would 
be necessary to authorize or take such action at a meeting at which all 
shares entitled to vote thereon were present and voted.

           (b) Every written consent shall bear the date of signature of each 
stockholder who signs the consent, and no written consent shall be effective 
to take the corporate action referred to therein unless, within sixty (60) 
days of the earliest dated consent delivered to the Corporation in the manner 
herein required, written consents signed by a sufficient number of 
stockholders to take action are delivered to the corporation by delivery to 
its registered office in the State of Delaware, its principal place of 
business or an officer or agent of the corporation having custody of the book 
in which proceedings of meetings of stockholders are recorded.  Delivery made 
to a corporation's registered office shall be by hand or by certified or 
registered mail, return receipt requested.  (Del. Code Ann., tit. 8, Section  
228)

           (c) Prompt notice of the taking of the corporate action without a 
meeting by less than unanimous written consent shall be given to those 
stockholders who have not consented in writing.  If the action which is 
consented to is such as would have required the filing of a certificate under 
any section of the General corporation Law of Delaware if such action had 
been voted on by stockholders at a meeting thereof, then the certificate 
filed under such section shall state, in lieu of any statement required by 
such section concerning any vote of stockholders, that written notice and 
written consent have been given as provided in Section 228 of the General 
Corporation Law of Delaware.

     SECTION 14.    ORGANIZATION.

                                      4

<PAGE>

           (a) At every meeting of stockholders, the Chairman of the Board of 
Directors, or, if a Chairman has not been appointed or is absent, the 
President, or, if the President is absent, the most senior Vice President 
present, or in the absence of any such officer, a chairman of the meeting 
chosen by a majority in interest of the stockholders entitled to vote, 
present in person or by proxy, shall act as chairman.  The Secretary, or, in 
his absence, an Assistant Secretary directed to do so by the President, shall 
act as secretary of the meeting.

           (b) The Board of Directors of the corporation shall be entitled to 
make such rules or regulations for the conduct of meetings of stockholders as 
it shall deem necessary, appropriate or convenient.  Subject to such rules 
and regulations of the Board of Directors, if any, the chairman of the 
meeting shall have the right and authority to prescribe such rules, 
regulations and procedures and to do all such acts as, in the judgment of 
such chairman, are necessary, appropriate or convenient for the proper 
conduct of the meeting, including, without limitation, establishing an agenda 
or order of business for the meeting, rules and procedures for maintaining 
order at the meeting and the safety of those present, limitations on 
participation in such meeting to stockholders of record of the corporation 
and their duly authorized and constituted proxies, and such other persons as 
the chairman shall permit, restrictions on entry to the meeting after the 
time fixed for the commencement thereof, limitations on the time allotted to 
questions or comments by participants and regulation of the opening and 
closing of the polls for balloting on matters which are to be voted on by 
ballot.  Unless, and to the extent determined by the Board of Directors or 
the chairman of the meeting, meetings of stockholders shall not be required 
to be held in accordance with rules of parliamentary procedure.

                                          
                                     ARTICLE IV
                                          
                                     DIRECTORS

     SECTION 15.    NUMBER AND TERM OF OFFICE.  The Board of Directors shall 
consist of one or more members, the number thereof to be determined from time 
to time by resolution of the Board of Directors.  The number of authorized 
Directors may be modified from time to time by amendment of this Section 15 
in accordance with the provisions of Section 44 hereof.  Except as provided 
in Section 17, the Directors shall be elected by the stockholders at their 
annual meeting in each year and shall hold office until the next annual 
meeting and until their successors shall be duly elected and qualified.  
Directors need not be stockholders unless so required by the Certificate of 
Incorporation.  If for any cause, the Directors shall not have been elected 
at an annual meeting, they may be elected as soon thereafter as convenient at 
a special meeting of the stockholders called for that purpose in the manner 
provided in these Bylaws.  No reduction of the authorized number of Directors 
shall have the effect of removing any Director before the Director's term of 
office expires, unless such removal is made pursuant to the provisions of 
Section 19 hereof.  (Del. Code Ann., tit. 8, Sections  141(b), 211(b), (c))

     SECTION 16.    POWERS.  The powers of the corporation shall be 
exercised, its business conducted and its property controlled by the Board of 
Directors, except as may be otherwise provided by statute or by the 
Certificate of Incorporation.  (Del. Code Ann., tit. 8, Section  141(a))

                                      5

<PAGE>

     SECTION 17.    VACANCIES.  Unless otherwise provided in the Certificate 
of Incorporation, vacancies and newly created directorships resulting from 
any increase in the authorized number of Directors may be filled by a 
majority of the Directors then in office, although less than a quorum, or by 
a sole remaining Director, and each Director so elected shall hold office for 
the unexpired portion of the term of the Director whose place shall be vacant 
and until his successor shall have been duly elected and qualified.  A 
vacancy in the Board of Directors shall be deemed to exist under this Section 
17 in the case of the death, removal or resignation of any Director, or if 
the stockholders fail at any meeting of stockholders at which Directors are 
to be elected (including any meeting referred to in Section 19 below) to 
elect the number of Directors then constituting the whole Board of Directors. 
(Del. Code Ann., tit. 8, Section  223(a), (b))

     SECTION 18.    RESIGNATION.  Any Director may resign at any time by 
delivering his written resignation to the Secretary, such resignation to 
specify whether it will be effective at a particular time, upon receipt by 
the Secretary or at the pleasure of the Board of Directors.  If no such 
specification is made, it shall be deemed effective at the pleasure of the 
Board of Directors.  When one or more Directors shall resign from the Board 
of Directors, effective at a future date, a majority of the Directors then in 
office, including those who have so resigned, shall have power to fill such 
vacancy or vacancies, the vote thereon to take effect when such resignation 
or resignations shall become effective, and each Director so chosen shall 
hold office for the unexpired portion of the term of the Director whose place 
shall be vacated and until his successor shall have been duly elected and 
qualified.  (Del. Code Ann., tit. 8, Sections  141(b), 223(d))

     SECTION 19.    REMOVAL.  At a special meeting of stockholders called for 
the purpose in the manner hereinabove provided, subject to any limitations 
imposed by law or the Certificate of Incorporation, the Board of Directors, 
or any individual Director, may be removed from office, with or without 
cause, and a new Director or Directors elected by a vote of stockholders 
holding a majority of the outstanding shares entitled to vote at an election 
of Directors.  (Del. Code Ann., tit. 8, Section  141(k))

     SECTION 20.    MEETINGS.

           (a) ANNUAL MEETINGS.  The annual meeting of the Board of Directors 
shall be held immediately after the annual meeting of stockholders and at the 
place where such meeting is held.  No notice of an annual meeting of the 
Board of Directors shall be necessary and such meeting shall be held for the 
purpose of electing officers and transacting such other business as may 
lawfully come before it.

           (b) REGULAR MEETINGS.  Except as hereinafter otherwise provided, 
regular meetings of the Board of Directors shall be held in the office of the 
corporation required to be maintained pursuant to Section 2 hereof.  Unless 
otherwise restricted by the Certificate of Incorporation, regular meetings of 
the Board of Directors may also be held at any place within or without the 
State of Delaware which has been determined by the Board of Directors.  (Del. 
Code Ann., tit. 8, Section  141(g))

           (c) SPECIAL MEETINGS.  Unless otherwise restricted by the 
Certificate of Incorporation, special meetings of the Board of Directors may 
be held at any time and place

                                      6

<PAGE>

within or without the State of Delaware whenever called by the President or a 
majority of the Directors.  (Del. Code Ann., tit. 8, Section  141(g))

           (d) TELEPHONE MEETINGS.  Any member of the Board of Directors, or 
of any committee thereof, may participate in a meeting by means of conference 
telephone or similar communications equipment by means of which all persons 
participating in the meeting can hear each other, and participation in a 
meeting by such means shall constitute presence in person at such meeting.  
(Del. Code Ann., tit. 8, Section  141(i))

           (e) NOTICE OF MEETINGS.  Written notice of the time and place of 
all special meetings of the Board of Directors shall be given at least one 
(1) day before the date of the meeting.  Notice of any meeting may be waived 
in writing at any time before or after the meeting and will be waived by any 
Director by attendance thereat, except when the Director attends the meeting 
for the express purpose of objecting, at the beginning of the meeting, to the 
transaction of any business because the meeting is not lawfully called or 
convened.  (Del. Code Ann., tit. 8, Section  229)

           (f) WAIVER OF NOTICE.  The transaction of all business at any 
meeting of the Board of Directors, or any committee thereof, however called 
or noticed, or wherever held, shall be as valid as though had at a meeting 
duly held after regular call and notice, if a quorum be present and if, 
either before or after the meeting, each of the Directors not present shall 
sign a written waiver of notice, or a consent to holding such meeting, or an 
approval of the minutes thereof.  Neither the business to be transacted at, 
nor the purpose of, any regular or special meeting of the Board of Directors 
need be specified in any written waiver of notice or consent unless so 
required by the Certificate of Incorporation or these Bylaws.  All such 
waivers, consents or approvals shall be filed with the corporate records or 
made a part of the minutes of the meeting. (Del. Code Ann., tit. 8, Section  
229)

     SECTION 21.    QUORUM AND VOTING.

           (a) Unless the Certificate of Incorporation requires a greater 
number and except with respect to indemnification questions arising under 
Section 42 hereof, for which a quorum shall be one-third of the exact number 
of Directors fixed from time to time in accordance with Section 15 hereof, 
but not less than one (1), a quorum of the Board of Directors shall consist 
of a majority of the exact number of Directors fixed from time to time in 
accordance with Section 15 of these Bylaws, but not less than one (1); 
PROVIDED, HOWEVER, at any meeting whether a quorum be present or otherwise, a 
majority of the Directors present may adjourn from time to time until the 
time fixed for the next regular meeting of the Board of Directors, without 
notice other than by announcement at the meeting.  (Del. Code Ann., tit. 8, 
Section  141(b))

           (b) At each meeting of the Board of Directors at which a quorum is 
present all questions and business shall be determined by a vote of a 
majority of the Directors present, unless a different vote be required by 
law, the Certificate of Incorporation or these Bylaws.  (Del. Code Ann., tit. 
8, Section  141(b))

     SECTION 22.    ACTION WITHOUT MEETING.  Unless otherwise restricted by 
the Certificate of Incorporation or these Bylaws, any action required or 
permitted to be taken at any meeting of the

                                      7

<PAGE>

Board of Directors or of any committee thereof may be taken without a 
meeting, if all members of the Board of Directors or committee, as the case 
may be, consent thereto in writing, and such writing or writings are filed 
with the minutes of proceedings of the Board of Directors or committee.  
(Del. Code Ann., tit. 8, Section  141(f))

     SECTION 23.    FEES AND COMPENSATION.  Directors shall be entitled to 
such compensation for their services as may be approved by the Board of 
Directors, including, if so approved, by resolution of the Board of 
Directors, a fixed sum and expenses of attendance, if any, for attendance at 
each regular or special meeting of the Board of Directors and at any meeting 
of a committee of the Board of Directors.  Nothing herein contained shall be 
construed to preclude any Director from serving the corporation in any other 
capacity as an officer, agent, employee, or otherwise and receiving 
compensation therefor.  (Del. Code Ann., tit. 8, Section  141(h))

     SECTION 24.    COMMITTEES.

           (a) EXECUTIVE COMMITTEE.  The Board of Directors may by resolution 
passed by a majority of the whole Board of Directors, appoint an Executive 
Committee to consist of one (1) or more members of the Board of Directors.  
The Executive Committee, to the extent permitted by law and specifically 
granted by the Board of Directors, shall have and may exercise when the Board 
of Directors is not in session all powers of the Board of Directors in the 
management of the business and affairs of the corporation, including, without 
limitation, the power and authority to declare a dividend or to authorize the 
issuance of stock, except such committee shall not have the power or 
authority to amend the Certificate of Incorporation, to adopt an agreement of 
merger or consolidation, to recommend to the stockholders the sale, lease or 
exchange of all or substantially all of the corporation's property and 
assets, to recommend to the stockholders of the corporation a dissolution of 
the corporation or a revocation of a dissolution or to amend these Bylaws.  
(Del. Code Ann., tit. 8, Section  141(c))

           (b) OTHER COMMITTEES.  The Board of Directors may, by resolution 
passed by a majority of the whole Board of Directors, from time to time 
appoint such other committees as may be permitted by law.  Such other 
committees appointed by the Board of Directors shall consist of one (1) or 
more members of the Board of Directors, and shall have such powers and 
perform such duties as may be prescribed by the resolution or resolutions 
creating such committees, but in no event shall such committee have the 
powers denied to the Executive Committee in these Bylaws.  (Del. Code Ann., 
tit. 8, Section  141(c))

           (c) TERM.  The members of all committees of the Board of Directors 
shall serve a term coexistent with that of the Board of Directors which shall 
have appointed such committee.  The Board of Directors, subject to the 
provisions of subsections (a) or (b) of this Section 24, may at any time 
increase or decrease the number of members of a committee or terminate the 
existence of a committee.  The membership of a committee member shall 
terminate on the date of his death or voluntary resignation from the 
committee or from the Board of Directors.  The Board of Directors may at any 
time for any reason remove any individual committee member and the Board of 
Directors may fill any committee vacancy created by death, resignation, 
removal or increase in the number of members of the committee.  The Board of 
Directors may designate one or more Directors as alternate members of any 
committee, who may

                                      8

<PAGE>

replace any absent or disqualified member at any meeting of the committee, 
and, in addition, in the absence or disqualification of any member of a 
committee, the member or members thereof present at any meeting and not 
disqualified from voting, whether or not he or they constitute a quorum, may 
unanimously appoint another member of the Board of Directors to act at the 
meeting in the place of any such absent or disqualified member.  (Del. Code 
Ann., tit. 8, Section 141(c))

           (d) MEETINGS.  Unless the Board of Directors shall otherwise 
provide, regular meetings of the Executive Committee or any other committee 
appointed pursuant to this Section 24 shall be held at such times and places 
as are determined by the Board of Directors, or by any such committee, and 
when notice thereof has been given to each member of such committee, no 
further notice of such regular meetings need be given thereafter.  Special 
meetings of any such committee may be held at any place which has been 
determined from time to time by such committee, and may be called by any 
Director who is a member of such committee, upon written notice to the 
members of such committee of the time and place of such special meeting given 
in the manner provided for the giving of written notice to members of the 
Board of Directors of the time and place of special meetings of the Board of 
Directors.  Notice of any special meeting of any committee may be waived in 
writing at any time before or after the meeting and will be waived by any 
Director by attendance thereat, except when the Director attends such special 
meeting for the express purpose of objecting, at the beginning of the 
meeting, to the transaction of any business because the meeting is not 
lawfully called or convened.  A majority of the authorized number of members 
of any such committee shall constitute a quorum for the transaction of 
business, and the act of a majority of those present at any meeting at which 
a quorum is present shall be the act of such committee.  (Del. Code Ann., 
tit. 8, Sections  141(c), 229)

     SECTION 25.    ORGANIZATION.  At every meeting of the Directors, the 
Chairman of the Board of Directors, or, if a Chairman has not been appointed 
or is absent, the President, or if the President is absent, the most senior 
Vice President, or, in the absence of any such officer, a chairman of the 
meeting chosen by a majority of the Directors present, shall preside over the 
meeting. The Secretary, or in his absence, an Assistant Secretary directed to 
do so by the President, shall act as secretary of the meeting.

                                          
                                     ARTICLE V
                                          
                                      OFFICERS

     SECTION 26.    OFFICERS DESIGNATED.  The officers of the corporation 
shall be the Chairman of the Board of Directors, the President, one or more 
Vice Presidents, the Secretary and the Chief Financial Officer or Treasurer, 
all of whom shall be elected at the annual organizational meeting of the 
Board of Directors.  The order of the seniority of the Vice Presidents shall 
be in the order of their nomination, unless otherwise determined by the Board 
of Directors.  The Board of Directors may also appoint one or more Assistant 
Secretaries, Assistant Treasurers, and such other officers and agents with 
such powers and duties as it shall deem necessary.  The Board of Directors 
may assign such additional titles to one or more of the officers as it shall 
deem appropriate.  Any one person may hold any number of offices of the

                                      9




<PAGE>

corporation at any one time unless specifically prohibited therefrom by law.  
The salaries and other compensation of the officers of the corporation shall 
be fixed by or in the manner designated by the Board of Directors.  (Del. 
Code Ann., tit. 8, Sections  122(5), 142(a), (b))

     SECTION 27.    TENURE AND DUTIES OF OFFICERS.

           (a) GENERAL.  All officers shall hold office at the pleasure of 
the Board of Directors and until their successors shall have been duly 
elected and qualified, unless sooner removed.  Any officer elected or 
appointed by the Board of Directors may be removed at any time by the Board 
of Directors.  If the office of any officer becomes vacant for any reason, 
the vacancy may be filled by the Board of Directors.  (Del. Code Ann., tit. 
8, Section  141(b), (e))

           (b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS.  The Chairman of 
the Board of Directors, when present, shall preside at all meetings of the 
stockholders and the Board of Directors.  The Chairman of the Board of 
Directors shall perform other duties commonly incident to his office and 
shall also perform such other duties and have such other powers as the Board 
of Directors shall designate from time to time.  If there is no President, 
then the Chairman of the Board of Directors shall also serve as the Chief 
Executive Officer of the corporation and shall have the powers and duties 
prescribed in paragraph (c) of this Section 27.  (Del. Code Ann., tit. 8, 
Section  142(a))

           (c) DUTIES OF PRESIDENT.  The President shall preside at all 
meetings of the stockholders and at all meetings of the Board of Directors, 
unless the Chairman of the Board of Directors has been appointed and is 
present. The President shall be the Chief Executive Officer of the 
corporation and shall, subject to the control of the Board of Directors, have 
general supervision, direction and control of the business and officers of 
the corporation.  The President shall perform other duties commonly incident 
to his office and shall also perform such other duties and have such other 
powers as the Board of Directors shall designate from time to time.  (Del. 
Code Ann., tit. 8, Section  142(a))

           (d) DUTIES OF VICE PRESIDENTS.  The Vice Presidents, in the order 
of their seniority, may assume and perform the duties of the President in the 
absence or disability of the President or whenever the office of President is 
vacant.  The Vice Presidents shall perform other duties commonly incident to 
their office and shall also perform such other duties and have such other 
powers as the Board of Directors or the President shall designate from time 
to time. (Del. Code Ann., tit. 8, Section  142(a))

           (e) DUTIES OF SECRETARY.  The Secretary shall attend all meetings 
of the stockholders and of the Board of Directors, and shall record all acts 
and proceedings thereof in the minute book of the corporation.  The Secretary 
shall give notice in conformity with these Bylaws of all meetings of the 
stockholders, and of all meetings of the Board of Directors and any committee 
thereof requiring notice.  The Secretary shall perform all other duties given 
him in these Bylaws and other duties commonly incident to his office and 
shall also perform such other duties and have such other powers as the Board 
of Directors shall designate from time to time.  The President may direct any 
Assistant Secretary to assume and perform the duties of the Secretary in the 
absence or disability of the Secretary, and each Assistant Secretary shall 
perform other duties commonly incident to his office and shall also perform 
such other duties and have

                                      10

<PAGE>

such other powers as the Board of Directors or the President shall designate 
from time to time.  (Del. Code Ann., tit. 8, Section  142(a))

           (f) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER.  The Chief 
Financial Officer or Treasurer shall keep or cause to be kept the books of 
account of the corporation in a thorough and proper manner, and shall render 
statements of the financial affairs of the corporation in such form and as 
often as required by the Board of Directors or the President.  The Chief 
Financial Officer or Treasurer, subject to the order of the Board of 
Directors, shall have the custody of all funds and securities of the 
corporation.  The Chief Financial Officer or Treasurer shall perform other 
duties commonly incident to his office and shall also perform such other 
duties and have such other powers as the Board of Directors or the President 
shall designate from time to time.  The President may direct any Assistant 
Treasurer to assume and perform the duties of the Chief Financial Officer or 
Treasurer in the absence or disability of the Chief Financial Officer or 
Treasurer, and each Assistant Treasurer shall perform other duties commonly 
incident to his office and shall also perform such other duties and have such 
other powers as the Board of Directors or the President shall designate from 
time to time.  (Del. Code Ann., tit. 8, Section  142(a))

     SECTION 28.    DELEGATION OF AUTHORITY.  The Board of Directors may from 
time to time delegate the powers or duties of any officer to any other 
officer or agent, notwithstanding any provision hereof.

     SECTION 29.    RESIGNATIONS.  Any officer may resign at any time by 
giving written notice to the Board of Directors or to the President or to the 
Secretary.  Any such resignation shall be effective when received by the 
person or persons to whom such notice is given, unless a later time is 
specified therein, in which event the resignation shall become effective at 
such later time.  Unless otherwise specified in such notice, the acceptance 
of any such resignation shall not be necessary to make it effective.  Any 
resignation shall be without prejudice to the rights, if any, of the 
corporation under any contract with the resigning officer.  (Del. Code Ann., 
tit. 8, Section  142(b))

     SECTION 30.    REMOVAL.  Any officer may be removed from office at any 
time, either with or without cause, by the vote or written consent of a 
majority of the Directors in office at the time, or by any committee or 
superior officers upon whom such power of removal may have been conferred by 
the Board of Directors.

                                          
                                     ARTICLE VI
                                          
                       EXECUTION OF CORPORATE INSTRUMENTS AND
                                          
                   VOTING OF SECURITIES OWNED BY THE CORPORATION

     SECTION 31.    EXECUTION OF CORPORATE INSTRUMENTS.  The Board of 
Directors may, in its discretion, determine the method and designate the 
signatory officer or officers, or other person or persons, to execute on 
behalf of the corporation any corporate instrument or document, or to sign on 
behalf of the corporation the corporate name without limitation, or to enter 
into contracts on behalf of the corporation, except where otherwise provided 
by law or these Bylaws,

                                      11

<PAGE>

and such execution or signature shall be binding upon the corporation.  (Del. 
Code Ann., tit. 8, Sections  103(a), 142(a), 158)

     Unless otherwise specifically determined by the Board of Directors or 
otherwise required by law, promissory notes, deeds of trust, mortgages and 
other evidences of indebtedness of the corporation, and other corporate 
instruments or documents requiring the corporate seal, and certificates of 
shares of stock owned by the corporation, shall be executed, signed or 
endorsed by the Chairman of the Board of Directors, or the President or any 
Vice President, and by the Secretary or Chief Financial Officer or Treasurer 
or any Assistant Secretary or Assistant Treasurer.  All other instruments and 
documents requiring the corporate signature, but not requiring the corporate 
seal, may be executed as aforesaid or in such other manner as may be directed 
by the Board of Directors. (Del. Code Ann., tit. 8, Sections  103(a), 142(a), 
158)

     All checks and drafts drawn on banks or other depositaries on funds to 
the credit of the corporation or in special accounts of the corporation shall 
be signed by such person or persons as the Board of Directors shall authorize 
so to do.

     Unless authorized or ratified by the Board of Directors or within the 
agency power of an officer, no officer, agent or employee shall have any 
power or authority to bind the corporation by any contract or engagement or 
to pledge its credit or to render it liable for any purpose or for any 
amount.  (Del. Code Ann., tit. 8, Sections  103(a), 142(a), 158)

     SECTION 32.    VOTING OF SECURITIES OWNED BY THE CORPORATION.  All stock 
and other securities of other corporations owned or held by the corporation 
for itself, or for other parties in any capacity, shall be voted, and all 
proxies with respect thereto shall be executed, by the person authorized so 
to do by resolution of the Board of Directors, or, in the absence of such 
authorization, by the Chairman of the Board of Directors, the President, or 
any Vice President. (Del. Code Ann., tit. 8, Section  123)

                                          
                                    ARTICLE VII
                                          
                                  SHARES OF STOCK

     SECTION 33.    FORM AND EXECUTION OF CERTIFICATES.  Certificates for the 
shares of stock of the corporation shall be in such form as is consistent 
with the Certificate of Incorporation and applicable law.  Every holder of 
stock in the corporation shall be entitled to have a certificate signed by or 
in the name of the corporation by the Chairman of the Board of Directors, or 
the President or any Vice President and by the Treasurer or Assistant 
Treasurer or the Secretary or Assistant Secretary, certifying the number of 
shares owned by him in the corporation.  Where such certificate is 
countersigned by a transfer agent other than the corporation or its employee, 
or by a registrar other than the corporation or its employee, any other 
signature on the certificate may be a facsimile.  In case any officer, 
transfer agent, or registrar who has signed or whose facsimile signature has 
been placed upon a certificate shall have ceased to be such officer, transfer 
agent, or registrar before such certificate is issued, it may be issued with 
the same effect as if he were such officer, transfer agent, or registrar at 
the date of issue.  Each certificate shall state upon the face or back 
thereof, in full or in summary, all of the designations, preferences, 

                                      12

<PAGE>

limitations, restrictions on transfer and relative rights of the shares 
authorized to be issued.  (Del. Code Ann., tit. 8, Section  158)

     SECTION 34.    LOST CERTIFICATES.  A new certificate or certificates 
shall be issued in place of any certificate or certificates theretofore 
issued by the corporation alleged to have been lost, stolen, or destroyed, 
upon the making of an affidavit of that fact by the person claiming the 
certificate of stock to be lost, stolen, or destroyed.  The corporation may 
require, as a condition precedent to the issuance of a new certificate or 
certificates, the owner of such lost, stolen, or destroyed certificate or 
certificates, or his legal representative, to advertise the same in such 
manner as it shall require or to give the corporation a surety bond in such 
form and amount as it may direct as indemnity against any claim that may be 
made against the corporation with respect to the certificate alleged to have 
been lost, stolen, or destroyed. (Del. Code Ann., tit. 8, Section  167)

     SECTION 35.    TRANSFERS.

           (a) Transfers of record of shares of stock of the corporation 
shall be made only upon its books by the holders thereof, in person or by 
attorney duly authorized, and upon the surrender of a properly endorsed 
certificate or certificates for a like number of shares.  (Del. Code Ann., 
tit. 8, Section  201, tit. 6, Section  8-401(1))

           (b) The corporation shall have power to enter into and perform any 
agreement with any number of stockholders of any one or more classes of stock 
of the corporation to restrict the transfer of shares of stock of the 
corporation of any one or more classes owned by such stockholders in any 
manner not prohibited by the General Corporation Law of Delaware. (Del. Code 
Ann., tit. 8, Section  160 (a))

     SECTION 36.    FIXING RECORD DATES.

           (a) In order that the Corporation may determine the stockholders 
entitled to notice of or to vote at any meeting of stockholders or any 
adjournment thereof, the Board of Directors may fix, in advance, a record 
date, which record date shall not precede the date upon which the resolution 
fixing the record date is adopted by the Board of Directors, and which record 
date shall not be more than sixty (60) nor less than ten (10) days before the 
date of such meeting.  If no record date is fixed by the Board of Directors, 
the record date for determining stockholders entitled to notice of or to vote 
at a meeting of stockholders shall be at the close of business on the day 
next preceding the day on which notice is given, or if notice is waived, at 
the close of business on the day next preceding the day on which the meeting 
is held.  A determination of stockholders of record entitled to notice of or 
to vote at a meeting of stockholders shall apply to any adjournment of the 
meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record 
date for the adjourned meeting.

           (b) In order that the Corporation may determine the stockholders 
entitled to consent to corporate action in writing without a meeting, the 
Board of Directors may fix, in advance, a record date, which record date 
shall not precede the date upon which the resolution fixing the record date 
is adopted by the Board of Directors, and which date shall not be more than 
ten (10) days after the date upon which the resolution fixing the record date 
is adopted by the Board of Directors.  If no record date has been fixed by 
the Board of Directors, the record

                                      13

<PAGE>

date for determining stockholders entitled to consent to corporate action in 
writing without a meeting, when no prior action by the Board of Directors is 
required by law, shall be the first date on which a signed written consent 
setting forth the action taken or proposed to be taken is delivered to the 
Corporation by delivery to its registered office in the State of Delaware, 
its principal place of business or an officer or agent of the Corporation 
having custody of the book in which proceedings of meetings of stockholders 
are recorded.  Delivery made to a Corporation's registered office shall be by 
hand or by certified or registered mail, return receipt requested. If no 
record date has been fixed by the Board of Directors and prior action by the 
Board of Directors is required by law, the record date for determining 
stockholders entitled to consent to corporate action in writing without a 
meeting shall be at the close of business on the day on which the Board of 
Directors adopts the resolution taking such prior action.

           (c) In order that the corporation may determine the stockholders 
entitled to receive payment of any dividend or other distribution or 
allotment of any rights or the stockholders entitled to exercise any rights 
in respect of any change, conversion or exchange of stock, or for the purpose 
of any other lawful action, the Board of Directors may fix, in advance, a 
record date, which record date shall not precede the date upon which the 
resolution fixing the record date is adopted, and which record date shall be 
not more than sixty (60) days prior to such action.  If no record date is 
fixed, the record date for determining stockholders for any such purpose 
shall be at the close of business on the day on which the Board of Directors 
adopts the resolution relating thereto.  (Del. Code Ann., tit. 8, Section  
213)

     SECTION 37.    REGISTERED STOCKHOLDERS.  The corporation shall be 
entitled to recognize the exclusive right of a person registered on its books 
as the owner of shares to receive dividends, and to vote as such owner, and 
shall not be bound to recognize any equitable or other claim to or interest 
in such share or shares on the part of any other person whether or not it 
shall have express or other notice thereof, except as otherwise provided by 
the laws of Delaware. (Del. Code Ann., tit. 8, Sections  213(a), 219)

                                          
                                    ARTICLE VIII
                                          
                        OTHER SECURITIES OF THE CORPORATION

     SECTION 38.    EXECUTION OF OTHER SECURITIES.  All bonds, debentures and 
other corporate securities of the corporation, other than stock certificates 
(covered in Section 33), may be signed by the Chairman of the Board of 
Directors, the President or any Vice President, or such other person as may 
be authorized by the Board of Directors, and the corporate seal impressed 
thereon or a facsimile of such seal imprinted thereon and attested by the 
signature of the Secretary or an Assistant Secretary, or the Chief Financial 
Officer or Treasurer or an Assistant Treasurer; PROVIDED, HOWEVER, that where 
any such bond, debenture or other corporate security shall be authenticated 
by the manual signature of a trustee under an indenture pursuant to which 
such bond, debenture or other corporate security shall be issued, the 
signatures of the persons signing and attesting the corporate seal on such 
bond, debenture or other corporate security may be the imprinted facsimile of 
the signatures of such persons.  Interest coupons appertaining to any such 
bond, debenture or other corporate security, authenticated by a trustee

                                      14

<PAGE>

as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of 
the corporation or such other person as may be authorized by the Board of 
Directors, or bear imprinted thereon the facsimile signature of such person.  
In case any officer who shall have signed or attested any bond, debenture or 
other corporate security, or whose facsimile signature shall appear thereon 
or on any such interest coupon, shall have ceased to be such officer before 
the bond, debenture or other corporate security so signed or attested shall 
have been delivered, such bond, debenture or other corporate security 
nevertheless may be adopted by the corporation and issued and delivered as 
though the person who signed the same or whose facsimile signature shall have 
been used thereon had not ceased to be such officer of the corporation.

                                          
                                     ARTICLE IX
                                          
                                     DIVIDENDS

     SECTION 39.    DECLARATION OF DIVIDENDS.  Dividends upon the capital 
stock of the corporation, subject to the provisions of the Certificate of 
Incorporation, if any, may be declared by the Board of Directors pursuant to 
law at any regular or special meeting.  Dividends may be paid in cash, in 
property, or in shares of the capital stock, subject to the provisions of the 
Certificate of Incorporation.  (Del. Code Ann., tit. 8, Sections  170, 173)

     SECTION 40.    DIVIDEND RESERVE.  Before payment of any dividend, there 
may be set aside out of any funds of the corporation available for dividends 
such sum or sums as the Board of Directors from time to time, in their 
absolute discretion, think proper as a reserve or reserves to meet 
contingencies, or for equalizing dividends, or for repairing or maintaining 
any property of the corporation, or for such other purpose as the Board of 
Directors shall think conducive to the interests of the corporation, and the 
Board of Directors may modify or abolish any such reserve in the manner in 
which it was created.  (Del. Code Ann., tit. 8, Section  171)

                                          
                                     ARTICLE X
                                          
                                    FISCAL YEAR

     SECTION 41.    FISCAL YEAR.  The fiscal year of the corporation shall be 
fixed by resolution of the Board of Directors.

                                          
                                     ARTICLE XI
                                          
                                  INDEMNIFICATION

     SECTION 42.    INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
                    AGENTS.

           (a) DIRECTORS AND EXECUTIVE OFFICERS.  The corporation shall
indemnify its Directors and executive officers to the fullest extent not
prohibited by the Delaware General

                                      15


<PAGE>

Corporation Law; PROVIDED, HOWEVER, that the corporation may limit the extent 
of such indemnification by individual contracts with its Directors and 
executive officers; and, PROVIDED, FURTHER, that the corporation shall not be 
required to indemnify any Director or executive officer in connection with 
any proceeding (or part thereof) initiated by such person or any proceeding 
by such person against the corporation or its Directors, officers, employees 
or other agents unless (i) such indemnification is expressly required to be 
made by law, (ii) the proceeding was authorized by the Board of Directors of 
the corporation or (iii) such indemnification is provided by the corporation, 
in its sole discretion, pursuant to the powers vested in the corporation 
under the Delaware General Corporation Law.

           (b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS.  The corporation 
shall have power to indemnify its other officers, employees and other agents 
as set forth in the Delaware General Corporation Law.

           (c) GOOD FAITH.

               (1)  For purposes of any determination under this Bylaw, a 
Director or executive officer shall be deemed to have acted in good faith and 
in a manner he reasonably believed to be in or not opposed to the best 
interests of the corporation, and, with respect to any criminal action or 
proceeding, to have had no reasonable cause to believe that his conduct was 
unlawful, if his action is based on information, opinions, reports and 
statements, including financial statements and other financial data, in each 
case prepared or presented by:

                      (i)     one or more officers or employees of the 
corporation whom the Director or executive officer believed to be reliable 
and competent in the matters presented;

                      (ii)    counsel, independent accountants or other 
persons as to matters which the Director or executive officer believed to be 
within such person's professional competence; and  

                      (iii)   with respect to a Director, a committee of the 
Board upon which such Director does not serve, as to matters within such 
Committee's designated authority, which committee the Director believes to 
merit confidence; so long as, in each case, the Director or executive officer 
acts without knowledge that would cause such reliance to be unwarranted.

               (2)  The termination of any proceeding by judgment, order, 
settlement, conviction or upon a plea of nolo contendere or its equivalent 
shall not, of itself, create a presumption that the person did not act in 
good faith and in a manner which he reasonably believed to be in or not 
opposed to the best interests of the corporation, and, with respect to any 
criminal proceeding, that he had reasonable cause to believe that his conduct 
was unlawful.

               (3)  The provisions of this paragraph (c) shall not be deemed 
to be exclusive or to limit in any way the circumstances in which a person 
may be deemed to have met the applicable standard of conduct set forth by the 
Delaware General Corporation Law.

                                       16

<PAGE>

           (d) EXPENSES.  The corporation shall advance, prior to the final 
disposition of any proceeding, promptly following request therefor, all 
expenses incurred by any Director or executive officer in connection with 
such proceeding upon receipt of an undertaking by or on behalf of such person 
to repay said amounts if it should be determined ultimately that such person 
is not entitled to be indemnified under this Bylaw or otherwise.

     Notwithstanding the foregoing, unless otherwise determined pursuant to 
paragraph (e) of this Bylaw, no advance shall be made by the corporation if a 
determination is reasonably and promptly made (1) by the Board of Directors 
by a majority vote of a quorum consisting of Directors who were not parties 
to the proceeding, or (2) if such quorum is not obtainable, or, even if 
obtainable, a quorum of disinterested directors so directs, by independent 
legal counsel in a written opinion, that the facts known to the decision 
making party at the time such determination is made demonstrate clearly and 
convincingly that such person acted in bad faith or in a manner that such 
person did not believe to be in or not opposed to the best interests of the 
corporation.

           (e) ENFORCEMENT.  Without the necessity of entering into an 
express contract, all rights to indemnification and advances to Directors and 
executive officers under this Bylaw shall be deemed to be contractual rights 
and be effective to the same extent and as if provided for in a contract 
between the corporation and the Director or executive officer.  Any right to 
indemnification or advances granted by this Bylaw to a Director or executive 
officer shall be enforceable by or on behalf of the person holding such right 
in any court of competent jurisdiction if (i) the claim for indemnification 
or advances is denied, in whole or in part, or (ii) no disposition of such 
claim is made within ninety (90) days of request therefor.  The claimant in 
such enforcement action, if successful in whole or in part, shall be entitled 
to be paid also the expense of prosecuting his claim.  The corporation shall 
be entitled to raise as a defense to any such action that the claimant has 
not met the standards of conduct that make it permissible under the Delaware 
General Corporation Law for the corporation to indemnify the claimant for the 
amount claimed.  Neither the failure of the corporation (including its Board 
of Directors, independent legal counsel or its stockholders) to have made a 
determination prior to the commencement of such action that indemnification 
of the claimant is proper in the circumstances because he has met the 
applicable standard of conduct set forth in the Delaware General Corporation 
Law, nor an actual determination by the corporation (including its Board of 
Directors, independent legal counsel or its stockholders) that the claimant 
has not met such applicable standard of conduct, shall be a defense to the 
action or create a presumption that claimant has not met the applicable 
standard of conduct.

           (f) NON-EXCLUSIVITY OF RIGHTS.  The rights conferred on any person 
by this Bylaw shall not be exclusive of any other right which such person may 
have or hereafter acquire under any statute, provision of the Certificate of 
Incorporation, Bylaws, agreement, vote of stockholders or disinterested 
Directors or otherwise, both as to action in his official capacity and as to 
action in another capacity while holding office.  The corporation is 
specifically authorized to enter into individual contracts with any or all of 
its Directors, officers, employees or agents respecting indemnification and 
advances, to the fullest extent not prohibited by the Delaware General 
Corporation Law.

                                       17

<PAGE>

           (g) SURVIVAL OF RIGHTS.  The rights conferred on any person by 
this Bylaw shall continue as to a person who has ceased to be a Director, 
officer, employee or other agent and shall inure to the benefit of the heirs, 
executors and administrators of such a person.

           (h) INSURANCE.  To the fullest extent permitted by the Delaware 
General Corporation Law, the corporation, upon approval by the Board of 
Directors, may purchase insurance on behalf of any person required or 
permitted to be indemnified pursuant to this Bylaw.

           (i) AMENDMENTS.  Any repeal or modification of this Bylaw shall 
only be prospective and shall not affect the rights under this Bylaw in 
effect at the time of the alleged occurrence of any action or omission to act 
that is the cause of any proceeding against any agent of the corporation.

           (j) SAVING CLAUSE.  If this Bylaw or any portion hereof shall be 
invalidated on any ground by any court of competent jurisdiction, then the 
corporation shall nevertheless indemnify each Director and executive officer 
to the full extent not prohibited by any applicable portion of this Bylaw 
that shall not have been invalidated, or by any other applicable law.

           (k) CERTAIN DEFINITIONS.  For the purposes of this Bylaw, the 
following definitions shall apply:

               (1)    The term "PROCEEDING" shall be broadly construed 
and shall include, without limitation, the investigation, preparation, 
prosecution, defense, settlement, arbitration and appeal of, and the giving 
of testimony in, any threatened, pending or completed action, suit or 
proceeding, whether civil, criminal, administrative or investigative.

               (2)    The term "EXPENSES" shall be broadly construed and 
shall include, without limitation, court costs, attorneys' fees, witness 
fees, fines, amounts paid in settlement or judgment and any other costs and 
expenses of any nature or kind incurred in connection with any proceeding.

               (3)  The term the "CORPORATION" shall include, in addition to 
the resulting corporation, any constituent corporation (including any 
constituent of a constituent) absorbed in a consolidation or merger which, if 
its separate existence had continued, would have had power and authority to 
indemnify its directors, officers, and employees or agents, so that any 
person who is or was a director, officer, employee or agent of such 
constituent corporation, or is or was serving at the request of such 
constituent corporation as a director, officer, employee or agent of another 
corporation, partnership, joint venture, trust or other enterprise, shall 
stand in the same position under the provisions of this Bylaw with respect to 
the resulting or surviving corporation as he would have with respect to such 
constituent corporation if its separate existence had continued.

               (4)  References to a "DIRECTOR," "OFFICER," "EMPLOYEE," or
"AGENT" of the corporation shall include, without limitation, situations where
such person is serving at the request of the corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.

                                       18

<PAGE>

               (5)  References to "OTHER ENTERPRISES" shall include employee 
benefit plans; references to "FINES" shall include any excise taxes assessed 
on a person with respect to an employee benefit plan; and references to 
"SERVING AT THE REQUEST OF THE CORPORATION" shall include any service as a 
director, officer, employee or agent of the corporation which imposes duties 
on, or involves services by, such director, officer, employee, or agent with 
respect to an employee benefit plan, its participants, or beneficiaries; and 
a person who acted in good faith and in a manner he reasonably believed to be 
in the interest of the participants and beneficiaries of an employee benefit 
plan shall be deemed to have acted in a manner "NOT OPPOSED TO THE BEST 
INTERESTS OF THE CORPORATION" as referred to in this Bylaw.

                                          
                                    ARTICLE XII
                                          
                                      NOTICES

     SECTION 43.    NOTICES.

           (a) NOTICE TO STOCKHOLDERS.  Whenever, under any provisions of 
these Bylaws, notice is required to be given to any stockholder, it shall be 
given in writing, timely and duly deposited in the United States mail, 
postage prepaid, and addressed to his last known post office address as shown 
by the stock record of the corporation or its transfer agent.  (Del. Code 
Ann., tit. 8, Section  222)

           (b) NOTICE TO DIRECTORS.  Any notice required to be given to any 
Director may be given by the method stated in subsection (a), or by 
facsimile, telex or telegram, except that such notice other than one which is 
delivered personally shall be sent to such address as such Director shall 
have filed in writing with the Secretary, or, in the absence of such filing, 
to the last known post office address of such Director.

           (c) ADDRESS UNKNOWN.  If no address of a stockholder or Director 
be known, notice may be sent to the office of the corporation required to be 
maintained pursuant to Section 2 hereof.

           (d) AFFIDAVIT OF MAILING.  An affidavit of mailing, executed by a 
duly authorized and competent employee of the corporation or its transfer 
agent appointed with respect to the class of stock affected, specifying the 
name and address or the names and addresses of the stockholder or 
stockholders, or Director or Directors, to whom any such notice or notices 
was or were given, and the time and method of giving the same, shall be 
conclusive evidence of the statements therein contained.  (Del. Code Ann., 
tit. 8, Section  222)

           (e) TIME NOTICES DEEMED GIVEN.  All notices given by mail, as 
above provided, shall be deemed to have been given as at the time of mailing 
and all notices given by facsimile, telex or telegram shall be deemed to have 
been given as of the sending time recorded at time of transmission.

           (f) METHODS OF NOTICE.  It shall not be necessary that the same
method of giving notice be employed in respect of all Directors, but one
permissible method may be

                                       19

<PAGE>

employed in respect of any one or more, and any other permissible method or 
methods may be employed in respect of any other or others.

           (g) FAILURE TO RECEIVE NOTICE.  The period or limitation of time 
within which any stockholder may exercise any option or right, or enjoy any 
privilege or benefit, or be required to act, or within which any Director may 
exercise any power or right, or enjoy any privilege, pursuant to any notice 
sent him in the manner above provided, shall not be affected or extended in 
any manner by the failure of such stockholder or such Director to receive 
such notice.

           (h) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever 
notice is required to be given, under any provision of law or of the 
Certificate of Incorporation or Bylaws of the corporation, to any person with 
whom communication is unlawful, the giving of such notice to such person 
shall not be required and there shall be no duty to apply to any governmental 
authority or agency for a license or permit to give such notice to such 
person. Any action or meeting which shall be taken or held without notice to 
any such person with whom communication is unlawful shall have the same force 
and effect as if such notice had been duly given.  In the event that the 
action taken by the corporation is such as to require the filing of a 
certificate under any provision of the Delaware General Corporation Law, the 
certificate shall state, if such is the fact and if notice is required, that 
notice was given to all persons entitled to receive notice except such 
persons with whom communication is unlawful.

           (i) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS.  Whenever notice 
is required to be given, under any provision of law or the Certificate of 
Incorporation or Bylaws of the corporation, to any stockholder to whom (i) 
notice of two consecutive annual meetings, and all notices of meetings or of 
the taking of action by written consent without a meeting to such person 
during the period between such two consecutive annual meetings, or (ii) all, 
and at least two, payments (if sent by first class mail) of dividends or 
interest on securities during a twelve month period, have been mailed 
addressed to such person at his address as shown on the records of the 
Corporation and have been returned undeliverable, the giving of such notice 
to such person shall not be required.  Any action or meeting which shall be 
taken or held without notice to such person shall have the same force and 
effect as if such notice had been duly given.  If any such person shall 
deliver to the corporation a written notice setting forth his then current 
address, the requirement that notice be given to such person shall be 
reinstated.  In the event that the action taken by the corporation is such as 
to require the filing of a certificate under any provision of the Delaware 
General Corporation Law, the certificate need not state that notice was not 
given to persons to whom notice was not required to be given pursuant to this 
paragraph. (Del. Code Ann, tit. 8, Section  230)

                                          
                                    ARTICLE XIII
                                          
                                     AMENDMENTS

     SECTION 44.    AMENDMENTS.  Except as otherwise set forth in paragraph (i)
of Section 42 of these Bylaws, these Bylaws may be amended or repealed and new
Bylaws adopted by the stockholders entitled to vote.  The Board of Directors
shall also have the power, if such power is

                                       20

<PAGE>

conferred upon the Board of Directors by the Certificate of Incorporation, to 
adopt, amend or repeal Bylaws (including, without limitation, the amendment 
of any Bylaw setting forth the number of Directors who shall constitute the 
whole Board of Directors).  (Del. Code Ann., tit. 8, Sections  109(a), 122(6))

                                          
                                    ARTICLE XIV
                                          
                               RIGHT OF FIRST REFUSAL

     SECTION 45.    RIGHT OF FIRST REFUSAL.  No stockholder shall sell, 
assign, pledge, or in any manner transfer any of the shares of common stock 
of the corporation or any right or interest therein (excluding, however, any 
preferred stock of the corporation), whether voluntarily or by operation of 
law, or by gift or otherwise, except by a transfer which meets the 
requirements hereinafter set forth in this Bylaw:

           (a) If the stockholder receives from anyone a bona fide offer 
acceptable to the stockholder to purchase any of his shares of common stock, 
then the stockholder shall first give written notice thereof to the 
corporation. The notice shall name the proposed transferee and state the 
number of shares to be transferred, the price per share and all other terms 
and conditions of the offer.

           (b) For fifteen (15) days following receipt of such notice, the 
corporation shall have the option to purchase all or any lesser part of the 
shares specified in the notice at the price and upon the terms set forth in 
such bona fide offer.  In the event the corporation elects to purchase all 
the shares, it shall give written notice to the selling stockholder of its 
election and settlement for said shares shall be made as provided below in 
paragraph (d).

           (c) In the event the corporation does not elect to acquire all of 
the shares specified in the selling stockholder's notice, the Secretary of 
the corporation shall, within fifteen (15) days of receipt of said selling 
stockholder's notice, give written notice thereof to the stockholders of the 
corporation other than the selling stockholder.  Said written notice shall 
state the number of shares that the corporation has elected to purchase and 
the number of shares remaining available for purchase (which shall be the 
same as the number contained in said selling stockholder's notice, less any 
such shares that the corporation has elected to purchase).  Each of the other 
stockholders shall have the option to purchase that proportion of the shares 
available for purchase as the number of shares owned by each of said other 
stockholders bears to the total issued and outstanding shares of the 
corporation, excepting those shares owned by the selling stockholder.  A 
stockholder electing to exercise such option shall, within ten (10) days 
after mailing of the corporation's notice, give notice to the corporation 
specifying the number of shares such stockholder will purchase.  Within such 
ten-day period, each of said other stockholders shall give written notice 
stating how many additional shares such stockholder will purchase if 
additional shares are made available.  Failure to respond in writing within 
said ten- day period to the notice given by the Secretary of the corporation 
shall be deemed a rejection of such stockholder's right to acquire a 
proportionate part of the shares of the selling stockholder.  In the event 
one or more stockholders do not elect to acquire the shares available to 
them, said 

                                       21

<PAGE>

shares shall be allocated on a pro rata basis to the stockholders who requested
shares in addition to their pro rata allotment.

           (d) In the event the corporation and/or stockholders, other than 
the selling stockholder, elect to acquire any of the shares of the selling 
stockholder as specified in said selling stockholder's notice, the Secretary 
of the corporation shall so notify the selling stockholder and settlement 
thereof shall be made in cash within thirty (30) days after the Secretary of 
the corporation receives said selling stockholder's notice; provided that if 
the terms of payment set forth in said selling stockholder's notice were 
other than cash against delivery, the corporation and/or its other 
stockholders shall pay for said shares on the same terms and conditions set 
forth in said selling stockholder's notice.

           (e) In the event the corporation and/or its other stockholders do 
not elect to acquire all of the shares specified in the selling stockholder's 
notice, said selling stockholder may, within the sixty-day period following 
the expiration of the option rights granted to the corporation and other 
stockholders herein, sell elsewhere the shares specified in said selling 
stockholder's notice which were not acquired by the corporation and/or its 
other stockholders, in accordance with the provisions of paragraph (d) of 
this bylaw, provided that said sale shall not be on terms and conditions more 
favorable to the purchaser than those contained in the bona fide offer set 
forth in said selling stockholder's notice.  All shares so sold by said 
selling stockholder shall continue to be subject to the provisions of this 
Bylaw in the same manner as before said transfer.

           (f) Anything to the contrary contained herein notwithstanding, the 
following transactions shall be exempt from the provisions of this Bylaw:

                    (1)    A stockholder's transfer of any or all shares held 
either during such stockholder's lifetime or on death by will or intestacy to 
such stockholder's immediate family.  "Immediate family" as used herein shall 
mean spouse, lineal descendant, father, mother, brother, or sister of the 
stockholder making such transfer and shall include any trust established 
primarily for the benefit of the stockholder or his immediate family.

                    (2)    A stockholder's bona fide pledge or mortgage of 
any shares with a commercial lending institution, provided that any 
subsequent transfer of said shares by said institution shall be conducted in 
the manner set forth in this Section 45.

                    (3)    A stockholder's transfer of any or all of such 
stockholder's shares to the corporation or to any other stockholder of the 
corporation.

                    (4)    A stockholder's transfer of any or all of such 
stockholder's shares to a person who, at the time of such transfer, is an 
officer or director of the corporation.

                    (5)    A corporate stockholder's transfer of any or all 
of its shares pursuant to and in accordance with the terms of any merger, 
consolidation, reclassification of shares or capital reorganization of the 
corporate stockholder, or pursuant to a sale of all or substantially all of 
the stock or assets of a corporate stockholder.

                                       22

<PAGE>

                    (6)    A corporate stockholder's transfer of any or all 
of its shares to any or all of its stockholders.

                    (7)    A transfer by a stockholder which is a limited or 
general partnership to any or all of its partners.

     In any such case, the transferee, assignee, or other recipient shall 
receive and hold such stock subject to the provisions of this Bylaw, and 
there shall be no further transfer of such stock except in accordance with 
this Bylaw.

           (g) The provisions of this Section 45 may be waived with respect 
to any transfer either by the corporation, upon duly authorized action of its 
Board of Directors, or by the stockholders, upon the express written consent 
of the owners of a majority of the voting power of the corporation (excluding 
the votes represented by those shares to be sold by the selling stockholder). 
This Section 45 may be amended or repealed either by a duly authorized 
action of the Board of Directors or by the stockholders, upon the express 
vote or written consent of the owners of a majority of the voting power of 
the corporation.

           (h) Any sale or transfer, or purported sale or transfer, of 
securities of the corporation shall be null and void unless the terms, 
conditions, and provisions of this Bylaw are strictly observed and followed.

           (i) The foregoing right of first refusal shall terminate on either 
of the following dates, whichever shall first occur:

                    (1)    On November 17, 2005; or

                    (2)    Upon the date securities of the corporation are 
first offered to the public pursuant to a registration statement filed with, 
and declared effective by, the United States Securities and Exchange 
Commission under the Securities Act of 1933, as amended.

           (j) The certificates representing shares of stock of the 
corporation shall bear on their face the following legend so long as the 
foregoing right of first refusal remains in effect:

           "The shares represented by this certificate are subject to a
     right of first refusal option in favor of the corporation and its
     other stockholders, as provided in the bylaws of the corporation."

(Del. Code Ann., tit. 8, Section  160(a))


                                          
                                     ARTICLE XV
                                          
                                 LOANS TO OFFICERS

     SECTION 46.    LOANS TO OFFICERS.  The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its

                                       23

<PAGE>

subsidiaries, including any officer or employee who is a Director of the 
corporation or its subsidiaries, whenever, in the judgment of the Board of 
Directors, such loan, guarantee or assistance may reasonably be expected to 
benefit the corporation.  The loan, guarantee or other assistance may be with 
or without interest and may be unsecured, or secured in such manner as the 
Board of Directors shall approve, including, without limitation, a pledge of 
shares of stock of the corporation.  Nothing in this Section 46 shall be 
deemed to deny, limit or restrict the powers of guaranty or warranty of the 
corporation at common law or under any statute.  (Del. Code Ann., tit. 8, 
Section  143)

                                          
                                    ARTICLE XVI
                                          
                                   MISCELLANEOUS

     SECTION 47.    ANNUAL REPORT.

           (a) Subject to the provisions of Section 47(b) below, the Board
of Directors shall cause an annual report to be sent to each stockholder of the
corporation not later than one hundred twenty (120) days after the close of the
corporation's fiscal year.  Such report shall include a balance sheet as of the
end of such fiscal year and an income statement and statement of changes in
financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation.  When there are more than
100 stockholders of record of the corporation's shares, as determined by
Section 605 of the California Corporations Code, additional information as
required by Section 1501(b) of the California Corporations Code shall also be
contained in such report, provided that if the corporation has a class of
securities registered under Section 12 of the United States Securities Exchange
Act of 1934, that Act shall take precedence.  Such report shall be sent to
stockholders at least fifteen (15) days prior to the next annual meeting of
stockholders after the end of the fiscal year to which it relates.

           (b) If and so long as there are fewer than 100 holders of
record of the corporation's shares, the requirement of sending of an annual
report to the stockholders of the corporation is hereby expressly waived.

                                       24



<PAGE>


                             AMENDED AND RESTATED BYLAWS
                                          OF
                               INTUITIVE SURGICAL, INC.
                              (A DELAWARE CORPORATION)


                                          1.

<PAGE>

                                  TABLE OF CONTENTS

                                                                            PAGE
Article I  Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
     Section 1.     Registered Office. . . . . . . . . . . . . . . . . . . .  1
     Section 2.     Other Offices. . . . . . . . . . . . . . . . . . . . . .  1
Article II  Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . .  1
     Section 3.     Corporate Seal . . . . . . . . . . . . . . . . . . . . .  1
Article III  Stockholders' Meetings. . . . . . . . . . . . . . . . . . . . .  1
     Section 4.     Place Of Meetings. . . . . . . . . . . . . . . . . . . .  1
     Section 5.     Annual Meetings. . . . . . . . . . . . . . . . . . . . .  1
     Section 6.     Special Meetings . . . . . . . . . . . . . . . . . . . .  3
     Section 7.     Notice Of Meetings . . . . . . . . . . . . . . . . . . .  4
     Section 8.     Quorum.. . . . . . . . . . . . . . . . . . . . . . . . .  4
     Section 9.     Adjournment And Notice Of Adjourned Meetings.. . . . . .  5
     Section 10.    Voting Rights. . . . . . . . . . . . . . . . . . . . . .  5
     Section 11.    Joint Owners Of Stock. . . . . . . . . . . . . . . . . .  5
     Section 12.    List Of Stockholders.. . . . . . . . . . . . . . . . . .  5
     Section 13.    Action Without Meeting.. . . . . . . . . . . . . . . . .  6
     Section 14.    Organization.. . . . . . . . . . . . . . . . . . . . . .  6
Article IV  Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
     Section 15.    Number And Term Of Office. . . . . . . . . . . . . . . .  7
     Section 16.    Powers.. . . . . . . . . . . . . . . . . . . . . . . . .  7
     Section 17.    Classes Of Directors.. . . . . . . . . . . . . . . . . .  7
     Section 18.    Vacancies. . . . . . . . . . . . . . . . . . . . . . . .  8
     Section 19.    Resignation. . . . . . . . . . . . . . . . . . . . . . .  8
     Section 20.    Removal. . . . . . . . . . . . . . . . . . . . . . . . .  8
     Section 21.    Meetings.. . . . . . . . . . . . . . . . . . . . . . . .  9
            (a)     Annual Meetings.. . . . . . . . . . . . . . . . . . . . . 9
            (b)     Regular Meetings. . . . . . . . . . . . . . . . . . . . . 9
            (c)     Special Meetings. . . . . . . . . . . . . . . . . . . . . 9
            (d)     Telephone Meetings. . . . . . . . . . . . . . . . . . . . 9


                                          i.

<PAGE>

                                  TABLE OF CONTENTS
                                     (CONTINUED)

                                                                            PAGE

            (e)     Notice Of Meetings. . . . . . . . . . . . . . . . . . . . 9
            (f)     Waiver Of Notice. . . . . . . . . . . . . . . . . . . . .10
     Section 22.    Quorum And Voting.. . . . . . . . . . . . . . . . . . . .10
     Section 23.    Action Without Meeting. . . . . . . . . . . . . . . . . .10
     Section 24.    Fees And Compensation.. . . . . . . . . . . . . . . . . .10
     Section 25.    Committees. . . . . . . . . . . . . . . . . . . . . . . .11
            (a)     Executive Committee.. . . . . . . . . . . . . . . . . . .11
            (b)     Other Committees. . . . . . . . . . . . . . . . . . . . .11
            (c)     Term. . . . . . . . . . . . . . . . . . . . . . . . . . .11
            (d)     Meetings. . . . . . . . . . . . . . . . . . . . . . . . .11
     Section 26.
    Organization. . . . . . . . . . . . . . . . . . . . . . .12
Article V  Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
     Section 27.    Officers Designated.. . . . . . . . . . . . . . . . . . .12
     Section 28.    Tenure And Duties Of Officers.. . . . . . . . . . . . . .12
            (a)     General.. . . . . . . . . . . . . . . . . . . . . . . . .12
            (b)     Duties Of Chairman Of The Board Of Directors. . . . . . .12
            (c)     Duties Of President.. . . . . . . . . . . . . . . . . . .13
            (d)     Duties Of Vice Presidents.. . . . . . . . . . . . . . . .13
            (e)     Duties Of Secretary.. . . . . . . . . . . . . . . . . . .13
            (f)     Duties Of Chief Financial Officer.. . . . . . . . . . . .13
     Section 29.    Delegation Of Authority.. . . . . . . . . . . . . . . . .14
     Section 30.    Resignations. . . . . . . . . . . . . . . . . . . . . . .14
     Section 31.    Removal.. . . . . . . . . . . . . . . . . . . . . . . . .14
Article VI  Execution Of Corporate Instruments And Voting Of Securities 
     Owned By The Corporation . . . . . . . . . . . . . . . . . . . . . . . .14
     Section 32.    Execution Of Corporate Instruments. . . . . . . . . . . .14
     Section 33.    Voting Of Securities Owned By The Corporation.. . . . . .15
Article VII  Shares Of Stock. . . . . . . . . . . . . . . . . . . . . . . . .15
     Section 34.    Form And Execution Of Certificates. . . . . . . . . . . .15


                                         ii.

<PAGE>

                                  TABLE OF CONTENTS
                                     (CONTINUED)

                                                                            PAGE

     Section 35.    Lost Certificates.. . . . . . . . . . . . . . . . . . . .15
     Section 36.    Transfers.. . . . . . . . . . . . . . . . . . . . . . . .16
     Section 37.    Fixing Record Dates.. . . . . . . . . . . . . . . . . . .16
     Section 38.    Registered Stockholders.. . . . . . . . . . . . . . . . .17
Article VIII  Other Securities Of The Corporation . . . . . . . . . . . . . .17
     Section 39.    Execution Of Other Securities.. . . . . . . . . . . . . .17
Article IX  Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
     Section 40.    Declaration Of Dividends . . . . . . . . . . . . . . . . 18
     Section 41.    Dividend Reserve. . . . . . . . . . . . . . . . . . . . .18
Article X  Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
     Section 42.    Fiscal Year.. . . . . . . . . . . . . . . . . . . . . . .18
Article XI  Indemnification . . . . . . . . . . . . . . . . . . . . . . . . .18
     Section 43.    Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents. . . . . . . . . . . . . . . . . . . . .18
            (a)     Directors [And Executive Officers]. . . . . . . . . . . .18
            (b)     Expenses. . . . . . . . . . . . . . . . . . . . . . . . .19
            (c)     Enforcement.. . . . . . . . . . . . . . . . . . . . . . .19
            (d)     Non-Exclusivity Of Rights.. . . . . . . . . . . . . . . .20
            (e)     Survival Of Rights. . . . . . . . . . . . . . . . . . . .20
            (f)     Insurance.. . . . . . . . . . . . . . . . . . . . . . . .20
            (g)     Amendments. . . . . . . . . . . . . . . . . . . . . . . .20
            (h)     Saving Clause.. . . . . . . . . . . . . . . . . . . . . .20
            (i)     Certain Definitions.. . . . . . . . . . . . . . . . . . .20
Article XII  Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
     Section 44.    Notices.. . . . . . . . . . . . . . . . . . . . . . . . .21
            (a)     Notice To Stockholders. . . . . . . . . . . . . . . . . .21
            (b)     Notice To Directors.. . . . . . . . . . . . . . . . . . .22
            (c)     Affidavit Of Mailing. . . . . . . . . . . . . . . . . . .22
            (d)     Time Notices Deemed Given.. . . . . . . . . . . . . . . .22


                                         iii.

<PAGE>

                                  TABLE OF CONTENTS
                                     (CONTINUED)

                                                                            PAGE
            (e)     Methods Of Notice.. . . . . . . . . . . . . . . . . . . .22
            (f)     Failure To Receive Notice.. . . . . . . . . . . . . . . .22
            (g)     Notice To Person With Whom Communication Is Unlawful. . .22
            (h)     Notice To Person With Undeliverable Address.. . . . . . .23
Article XIII  Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . .23
     Section 45.    Amendments. . . . . . . . . . . . . . . . . . . . . . . .23
Article XIV  Loans To Officers. . . . . . . . . . . . . . . . . . . . . . . .23
     Section 46.    Loans To Officers.. . . . . . . . . . . . . . . . . . . .23


                                         iv.

<PAGE>


                             AMENDED AND RESTATED BYLAWS

                                          OF

                               INTUITIVE SURGICAL, INC.

                               (A DELAWARE CORPORATION)

                                      ARTICLE I


                                       OFFICES

     SECTION 1.     REGISTERED OFFICE  The registered office of the corporation
in the State of Delaware shall be in the City of Dover, County of Kent.  

     SECTION 2.     OTHER OFFICES  The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.

                                      ARTICLE II

                                    CORPORATE SEAL

     SECTION 3.     CORPORATE SEAL  The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware."  Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.

                                     ARTICLE III

                                STOCKHOLDERS' MEETINGS

     SECTION 4.     PLACE OF MEETINGS  Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof. 

     SECTION 5.     ANNUAL MEETINGS

          (a)  The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.

          (b)  At an annual meeting of the stockholders, only such business 
shall be conducted as shall have been properly brought before the meeting.  
To be properly brought 

                                          1

<PAGE>

before an annual meeting, business must be:  (A) specified in the notice of 
meeting (or any supplement thereto) given by or at the direction of the Board 
of Directors, (B) otherwise properly brought before the meeting by or at the 
direction of the Board of Directors, or (C) otherwise properly brought before 
the meeting by a stockholder.  For business to be properly brought before an 
annual meeting by a stockholder, the stockholder must have given timely 
notice thereof in writing to the Secretary of the corporation.  To be timely, 
a stockholder's notice must be delivered to or mailed and received at the 
principal executive offices of the corporation not later than the close of 
business on the sixtieth (60th) day nor earlier than the close of business on 
the ninetieth (90th) day prior to the first anniversary of the preceding 
year's annual meeting; PROVIDED, HOWEVER, that in the event that no annual 
meeting was held in the previous year or the date of the annual meeting has 
been changed by more than thirty (30) days from the date contemplated at the 
time of the previous year's proxy statement, notice by the stockholder to be 
timely must be so received not earlier than the close of business on the 
ninetieth (90th) day prior to such annual meeting and not later than the 
close of business on the later of the sixtieth (60th) day prior to such 
annual meeting or, in the event public announcement of the date of such 
annual meeting is first made by the corporation fewer than seventy (70) days 
prior to the date of such annual meeting, the close of business on the tenth 
(10th) day following the day on which public announcement of the date of such 
meeting is first made by the corporation. A stockholder's notice to the 
Secretary shall set forth as to each matter the stockholder proposes to bring 
before the annual meeting:  (i) a brief description of the business desired 
to be brought before the annual meeting and the reasons for conducting such 
business at the annual meeting, (ii) the name and address, as they appear on 
the corporation's books, of the stockholder proposing such business, (iii) 
the class and number of shares of the corporation which are beneficially 
owned by the stockholder, (iv) any material interest of the stockholder in 
such business and (v) any other information that is required to be provided 
by the stockholder pursuant to Regulation 14A under the Securities Exchange 
Act of 1934, as amended (the "1934 Act"), in his capacity as a proponent to a 
stockholder proposal. Notwithstanding the foregoing, in order to include 
information with respect to a stockholder proposal in the proxy statement and 
form of proxy for a stockholder's meeting, stockholders must provide notice 
as required by the regulations promulgated under the 1934 Act.  
Notwithstanding anything in these Bylaws to the contrary, no business shall 
be conducted at any annual meeting except in accordance with the procedures 
set forth in this paragraph (b).  The chairman of the annual meeting shall, 
if the facts warrant, determine and declare at the meeting that business was 
not properly brought before the meeting and in accordance with the provisions 
of this paragraph (b), and, if he should so determine, he shall so declare at 
the meeting that any such business not properly brought before the meeting 
shall not be transacted.  

          (c)  Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors. 
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c).  Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the


                                          2

<PAGE>

corporation in accordance with the provisions of paragraph (b) of this
Section 5.  Such stockholder's notice shall set forth (i) as to each person, if
any, whom the stockholder proposes to nominate for election or re-election as a
director:  (A) the name, age, business address and residence address of such
person, (B) the principal occupation or employment of such person, (C) the class
and number of shares of the corporation which are beneficially owned by such
person, (D) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nominations are to be made by the stockholder,
and (E) any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the 1934 Act (including
without limitation such person's written consent to being named in the proxy
statement, if any, as a nominee and to serving as a director if elected); and
(ii) as to such stockholder giving notice, the information required to be
provided pursuant to paragraph (b) of this Section 5.  At the request of the
Board of Directors, any person nominated by a stockholder for election as a
director shall furnish to the Secretary of the corporation that information
required to be set forth in the stockholder's notice of nomination which
pertains to the nominee.  No person shall be eligible for election as a director
of the corporation unless nominated in accordance with the procedures set forth
in this paragraph (c).  The chairman of the meeting shall, if the facts warrant,
determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective nomination
shall be disregarded.

          (d)  For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.

     SECTION 6.     SPECIAL MEETINGS

          (a)  Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors shall fix.

          (b)  If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing, specifying the
general nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation.  No business may be transacted at
such special meeting otherwise than specified in such notice.  The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request.  Upon determination of
the time and place of the meeting, the officer receiving the request shall cause


                                          3

<PAGE>

notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws.  If the notice is not given within
sixty (60) days after the receipt of the request, the person or persons
requesting the meeting may set the time and place of the meeting and give the
notice.  Nothing contained in this paragraph (b) shall be construed as limiting,
fixing, or affecting the time when a meeting of stockholders called by action of
the Board of Directors may be held.

     SECTION 7.     NOTICE OF MEETINGS  Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting.  Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.  Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.  

     SECTION 8.     QUORUM.  At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business.  In the absence of a
quorum, any meeting of stockholders may be adjourned, from time to time, either
by the chairman of the meeting or by vote of the holders of a majority of the
shares represented thereat, but no other business shall be transacted at such
meeting.  The stockholders present at a duly called or convened meeting, at
which a quorum is present, may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.  Except as otherwise provided by law, the Certificate of Incorporation
or these Bylaws, all action taken by the holders of a majority of the vote cast,
excluding abstentions, at any meeting at which a quorum is present shall be
valid and binding upon the corporation; PROVIDED, HOWEVER, that directors shall
be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors.  Where a separate vote by a class or classes or series is required,
except where otherwise provided by the statute or by the Certificate of
Incorporation or these Bylaws, a majority of the outstanding shares of such
class or classes or series, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter and, except where otherwise provided by the statute or by the Certificate
of Incorporation or these Bylaws, the affirmative vote of the majority
(plurality, in the case of the election of directors) of the votes cast,
including abstentions, by the holders of shares of such class or classes or
series shall be the act of such class or classes or series.  


                                          4

<PAGE>

     SECTION 9.     ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS.  Any meeting
of stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions.  When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. 
At the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting.  If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. 

     SECTION 10.    VOTING RIGHTS.  For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders.  Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law.  An agent so appointed need not be a stockholder.  No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period. 

     SECTION 11.    JOINT OWNERS OF STOCK.  If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect:  (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b). 
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest. 

     SECTION 12.    LIST OF STOCKHOLDERS.  The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder.  Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held.  The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present. 


                                          5

<PAGE>

     SECTION 13.    ACTION WITHOUT MEETING.  

          (a)  Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.

          (b)  Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded.  Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.

          (c)  Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.  If the action which is
consented to is such as would have required the filing of a certificate under
any section of the General Corporation Law of the State of Delaware if such
action had been voted on by stockholders at a meeting thereof, then the
certificate filed under such section shall state, in lieu of any statement
required by such section concerning any vote of stockholders, that written
consent has been given in accordance with Section 228 of the General Corporation
Law of Delaware.

          (d)  Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").

     SECTION 14.    ORGANIZATION.  

          (a)  At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman.  The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.

          (b)  The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient.  Subject to such rules and
regulations of the Board of Directors, if


                                          6

<PAGE>

any, the chairman of the meeting shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such acts as, in the
judgment of such chairman, are necessary, appropriate or convenient for the
proper conduct of the meeting, including, without limitation, establishing an
agenda or order of business for the meeting, rules and procedures for
maintaining order at the meeting and the safety of those present, limitations on
participation in such meeting to stockholders of record of the corporation and
their duly authorized and constituted proxies and such other persons as the
chairman shall permit, restrictions on entry to the meeting after the time fixed
for the commencement thereof, limitations on the time allotted to questions or
comments by participants and regulation of the opening and closing of the polls
for balloting on matters which are to be voted on by ballot.  Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.

                                      ARTICLE IV

                                      DIRECTORS

     SECTION 15.    NUMBER AND TERM OF OFFICE.  The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation.  Directors need not be stockholders unless so required by the
Certificate of Incorporation.  If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws. 

     SECTION 16.    POWERS.  The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.  

     SECTION 17.    CLASSES OF DIRECTORS.  

          (a)  Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the Initial Public Offering and during such time or times that the
corporation is not subject to Section 2115 of the California Corporations Code
("Section 2115"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively.  Directors shall be assigned
to each class in accordance with a resolution or resolutions adopted by the
Board of Directors.  At the first annual meeting of stockholders following the
Initial Public Offering (assuming the corporation is not subject to Section
2115), the term of office of the Class I directors shall expire and Class I
directors shall be elected for a full term of three years.  At the second annual
meeting of stockholders following the Initial Public Offering (assuming the
corporation is not subject to Section 2115), the term of office of the Class II
directors shall expire and Class II directors shall be elected for a full term
of three years.  At the third annual meeting of stockholders following the
(assuming the corporation is not subject to Section 2115), the term of office of
the Class III directors shall expire and Class III directors shall be elected
for a full term of three years.  At


                                          7

<PAGE>

each succeeding annual meeting of stockholders, directors shall be elected for a
full term of three years to succeed the directors of the class whose terms
expire at such annual meeting.

          (b)  Prior to the Initial Public Offering and in the event that the
corporation is subject to Section 2115 at any time, or from time to time,
subsection (a) of this Bylaw shall not apply and all directors shall be
designated of the same class, each director shall hold office until the next
annual meeting and the directors shall be elected at each annual meeting of the
stockholders to hold office until the next annual meeting.

     Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal.  No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director. 

     SECTION 18.    VACANCIES.  Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors.  Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified.  A
vacancy in the Board of Directors shall be deemed to exist under this Bylaw in
the case of the death, removal or resignation of any director. 

     SECTION 19.    RESIGNATION.  Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors.  If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors.  When
one or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.  

     SECTION 20.    REMOVAL.  

               (a)  During such time or times that the corporation is subject to
Section 2115, subject to the rights of the holders of any series of Preferred
Stock and the limitations imposed by law, the Board of Directors or any
individual director may be removed from office at any time with or without cause
by the affirmative vote of the holders of at least a majority of the voting
power of all the then-outstanding shares of voting stock of the corporation,
entitled to vote at an election of directors (the "Voting Stock"); provided,
however, that unless the entire board is


                                          8

<PAGE>

removed, no individual director may be removed when the votes last against such
director's removal, or not consenting in writing to such removal, would be
sufficient to elect that director if voted cumulatively at an election at which
the same total number of votes were cast (or, if such action is taken by written
consent, all shares entitled to vote were voted) and the entire number of
directors authorized at the time of such director's most recent election were
then being elected.

               (b)  Following any date on which the corporation is no longer
subject to Section 2115(b) of the CGCL, subject to the rights of the holders of
any series of Preferred Stock and any limitations imposed by law, subsection (a)
of this Bylaw shall no longer apply and no director shall be removed without
cause.  Subject to the rights of the holders of any series of Preferred Stock
and any limitations imposed by law, the Board of Directors or any individual
director may be removed from office at any time with cause by the affirmative
vote of the holders of a majority of the voting power of all then-outstanding
shares of Voting Stock. 

     SECTION 21.    MEETINGS.  

          (a)  ANNUAL MEETINGS.  The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held.  No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.

          (b)  REGULAR MEETINGS.  Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof.  Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.  

          (c)  SPECIAL MEETINGS.  Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors.  

          (d)  TELEPHONE MEETINGS.  Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.  

          (e)  NOTICE OF MEETINGS.  Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each


                                          9

<PAGE>

director by first class mail, charges prepaid, at least three (3) days before
the date of the meeting.  Notice of any meeting may be waived in writing at any
time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.

          (f)  WAIVER OF NOTICE.  The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice.  All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting. 

     SECTION 22.    QUORUM AND VOTING.  

          (a)  Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; PROVIDED, HOWEVER, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.  

          (b)  At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.  

     SECTION 23.    ACTION WITHOUT MEETING.  Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.  

     SECTION 24.    FEES AND COMPENSATION.  Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors.  Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.


                                          10

<PAGE>

     SECTION 25.    COMMITTEES.  

          (a)  EXECUTIVE COMMITTEE.  The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors.  The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by
Delaware the General Corporation Law to be submitted to stockholders for
approval, or (ii) adopting, amending or repealing any bylaw of the corporation.

          (b)  OTHER COMMITTEES.  The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law.  Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.  

          (c)  TERM.  Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors.  The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee.  The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors.  The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee.  The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.  

          (d)  MEETINGS.  Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter.  Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of


                                          11

<PAGE>

Directors of the time and place of special meetings of the Board of Directors. 
Notice of any special meeting of any committee may be waived in writing at any
time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends such special meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.  A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee.  

     SECTION 26.    ORGANIZATION.  At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting. 
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.

                                      ARTICLE V

                                       OFFICERS

     SECTION 27.    OFFICERS DESIGNATED.  The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors.  The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary.  The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate.  Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law.  The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by the
Board of Directors. 

     SECTION 28.    TENURE AND DUTIES OF OFFICERS.  

          (a)  GENERAL.  All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed.  Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors.  If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors. 

          (b)  DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS.  The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors.  The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.  If there is no President, then the Chairman


                                          12

<PAGE>

of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28. 

          (c)  DUTIES OF PRESIDENT.  The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present.  Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation.  The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. 

          (d)  DUTIES OF VICE PRESIDENTS.  The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant.  The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.  

          (e)  DUTIES OF SECRETARY.  The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation.  The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice.  The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.  The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.  

          (f)  DUTIES OF CHIEF FINANCIAL OFFICER.  The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President.  The Chief Financial Officer, subject to the order
of the Board of Directors, shall have the custody of all funds and securities of
the corporation.  The Chief Financial Officer shall perform other duties
commonly incident to his office and shall also perform such other duties and
have such other powers as the Board of Directors or the President shall
designate from time to time.  The President may direct the Treasurer or any
Assistant Treasurer, or the Controller or any Assistant Controller to assume and
perform the duties of the Chief Financial Officer in the absence or disability
of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and
each Controller and Assistant Controller shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time.


                                          13

<PAGE>

     SECTION 29.    DELEGATION OF AUTHORITY.  The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.

     SECTION 30.    RESIGNATIONS.  Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary.  Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time.  Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective.  Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.  

     SECTION 31.    REMOVAL.  Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.

                                      ARTICLE VI

       EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
                                     CORPORATION

     SECTION 32.    EXECUTION OF CORPORATE INSTRUMENTS.  The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation. 

     Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer.  All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors. 

     All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.

     Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation


                                          14

<PAGE>

by any contract or engagement or to pledge its credit or to render it liable for
any purpose or for any amount. 

     SECTION 33.    VOTING OF SECURITIES OWNED BY THE CORPORATION.  All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.

                                     ARTICLE VII

                                   SHARES OF STOCK

     SECTION 34.    FORM AND EXECUTION OF CERTIFICATES.  Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law.  Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation.  Any or all of the signatures on the certificate may be
facsimiles.  In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.  Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.  Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferenes and/or rights.  Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical. 

     SECTION 35.    LOST CERTIFICATES.  A new certificate or certificates 
shall be issued in place of any certificate or certificates theretofore 
issued by the corporation alleged to have been lost, stolen, or destroyed, 
upon the making of an affidavit of that fact by the person claiming the 
certificate of stock to be lost, stolen, or destroyed.  The corporation may 
require, as a condition precedent to the issuance of a new certificate or 
certificates, the owner of such lost, stolen, or 

                                          15

<PAGE>

destroyed certificate or certificates, or his legal representative, to 
advertise the same in such manner as it shall require or to give the 
corporation a surety bond in such form and amount as it may direct as 
indemnity against any claim that may be made against the corporation with 
respect to the certificate alleged to have been lost, stolen, or destroyed.  

     SECTION 36.    TRANSFERS.  

          (a)  Transfers of record of shares of stock of the corporation shall
be made only upon its books by the holders thereof, in person or by attorney
duly authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.  

          (b)  The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.  

     SECTION 37.    FIXING RECORD DATES.  

          (a)  In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting.  If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held.  A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER,
that the Board of Directors may fix a new record date for the adjourned meeting.

          (b)  Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors.  Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date.  The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date.  If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is


                                          16

<PAGE>

delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded.  Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested. 
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.

          (c)  In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action.  If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.  

     SECTION 38.    REGISTERED STOCKHOLDERS.  The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.  

                                     ARTICLE VIII

                         OTHER SECURITIES OF THE CORPORATION

     SECTION 39.    EXECUTION OF OTHER SECURITIES.  All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; PROVIDED, HOWEVER, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons.  Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person.  In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile


                                          17

<PAGE>

signature shall appear thereon or on any such interest coupon, shall have ceased
to be such officer before the bond, debenture or other corporate security so
signed or attested shall have been delivered, such bond, debenture or other
corporate security nevertheless may be adopted by the corporation and issued and
delivered as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the
corporation.

                                      ARTICLE IX

                                      DIVIDENDS

     SECTION 40.    DECLARATION OF DIVIDENDS.  Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting.  Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation. 

     SECTION 41.    DIVIDEND RESERVE.  Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.  

                                      ARTICLE X

                                     FISCAL YEAR

     SECTION 42.    FISCAL YEAR.  The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.

                                      ARTICLE XI

                                   INDEMNIFICATION

     SECTION 43.    INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
                    OFFICERS, EMPLOYEES AND OTHER AGENTS.

          (a)  DIRECTORS AND OFFICERS.  The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the Delaware
General Corporation Law; PROVIDED, HOWEVER, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
officers; and, PROVIDED, FURTHER, that the corporation shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be


                                          18

<PAGE>

made by law, (ii) the proceeding was authorized by the Board of Directors of the
corporation, (iii) such indemnification is provided by the corporation, in its
sole discretion, pursuant to the powers vested in the corporation under the
Delaware General Corporation Law or (iv) such indemnification is required to be
made under subsection (d).

          (b)  EXPENSES.  The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or executive officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Bylaw or otherwise.

     Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
officer of the corporation (except by reason of the fact that such officer is or
was a director of the corporation in which event this paragraph shall not apply)
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding, or (ii) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate clearly
and convincingly that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation.

          (c)  ENFORCEMENT.  Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director or officer.  Any right to indemnification or advances granted by
this Bylaw to a director or officer shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor. 
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim.  In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed.  In connection with any claim by an officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such executive officer is or was a
director of the corporation) for advances, the corporation shall be entitled to
raise a defense as to any such action clear and


                                          19

<PAGE>

convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct. In any suit
brought by a director or officer to enforce a right to indemnification or to an
advancement of expenses hereunder, the burden of proving that the director or
officer is not entitled to be indemnified, or to such advancement of expenses,
under this Article XI or otherwise shall be on the corporation.

          (d)  NON-EXCLUSIVITY OF RIGHTS.  The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office.  The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law.

          (e)  SURVIVAL OF RIGHTS.  The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.

          (f)  INSURANCE.  To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.

          (g)  AMENDMENTS.  Any repeal or modification of this Bylaw shall only
be prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.

          (h)  SAVING CLAUSE.  If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.

          (i)  CERTAIN DEFINITIONS.  For the purposes of this Bylaw, the
following definitions shall apply:


                                          20

<PAGE>

               (1)  The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.

               (2)  The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.

               (3)  The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.

               (4)  References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.

               (5)  References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.

                                     ARTICLE XII

                                       NOTICES

     SECTION 44.    NOTICES.

          (a)  NOTICE TO STOCKHOLDERS.  Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and


                                          21

<PAGE>

duly deposited in the United States mail, postage prepaid, and addressed to
his last known post office address as shown by the stock record of the
corporation or its transfer agent. 

          (b)  NOTICE TO DIRECTORS.  Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.

          (c)  AFFIDAVIT OF MAILING.  An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained. 

          (d)  TIME NOTICES DEEMED GIVEN.  All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.

          (e)  METHODS OF NOTICE.  It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.

          (f)  FAILURE TO RECEIVE NOTICE.  The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.

          (g)  NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.  Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person.  Any action
or meeting which shall be taken or held without notice to any such person with
whom communication is unlawful shall have the same force and effect as if such
notice had been duly given.  In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.


                                          22

<PAGE>

          (h)  NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS.  Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom
(i) notice of two consecutive annual meetings, and all notices of meetings or of
the taking of action by written consent without a meeting to such person during
the period between such two consecutive annual meetings, or (ii) all, and at
least two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required.  Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given.  If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated.  In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.  

                                     ARTICLE XIII

                                      AMENDMENTS

     SECTION 45.    AMENDMENTS.  Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the Voting Stock.  The
Board of Directors shall also have the power to adopt, amend, or repeal Bylaws.

                                     ARTICLE XIV

                                  LOANS TO OFFICERS

     SECTION 46.    LOANS TO OFFICERS.  The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation.  The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the corporation.  Nothing in these Bylaws  shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.  


                                          23



<PAGE>

                                INDEMNITY AGREEMENT


     THIS AGREEMENT is made and entered into this ____ day of _________, 1998 
by and between INTUITIVE SURGICAL, INC., a Delaware corporation (the 
"Corporation"), and ____________ ("Agent").
                                          
                                      RECITALS

     WHEREAS, Agent performs a valuable service to the Corporation in his/her 
capacity as _______________ of the Corporation; 

     WHEREAS, the stockholders of the Corporation have adopted bylaws (the 
"Bylaws") providing for the indemnification of the directors, officers, 
employees and other agents of the Corporation, including persons serving at 
the request of the Corporation in such capacities with other corporations or 
enterprises, as authorized by the Delaware General Corporation Law, as 
amended (the "Code"); 

     WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit 
contracts between the Corporation and its agents, officers, employees and 
other agents with respect to indemnification of such persons; and 

     WHEREAS, in order to induce Agent to continue to serve as ______________ 
of the Corporation, the Corporation has determined and agreed to enter into 
this Agreement with Agent;

     NOW, THEREFORE, in consideration of Agent's continued service as 
_______________ after the date hereof, the parties hereto agree as follows:  
                                          
                                     AGREEMENT

     1.   SERVICES TO THE CORPORATION.  Agent will
 serve, at the will of the 
Corporation or under separate contract, if any such contract exists, as 
______________ of the Corporation or as a director, officer or other 
fiduciary of an affiliate of the Corporation (including any employee benefit 
plan of the Corporation) faithfully and to the best of his ability so long as 
he is duly elected and qualified in accordance with the provisions of the 
Bylaws or other applicable charter documents of the Corporation or such 
affiliate; PROVIDED, HOWEVER, that Agent may at any time and for any reason 
resign from such position (subject to any contractual obligation that Agent 
may have assumed apart from this Agreement) and that the Corporation or any 
affiliate shall have no obligation under this Agreement to continue Agent in 
any such position.

     2.   INDEMNITY OF AGENT.  The Corporation hereby agrees to hold harmless 
and indemnify Agent to the fullest extent authorized or permitted by the 
provisions of the Bylaws and the Code, as the same may be amended from time 
to time (but, only to the extent that such amendment permits the Corporation 
to provide broader indemnification rights than the Bylaws or the Code 
permitted prior to adoption of such amendment).



                                      

<PAGE>

     3.   ADDITIONAL INDEMNITY.  In addition to and not in limitation of the 
indemnification otherwise provided for herein, and subject only to the 
exclusions set forth in Section 4 hereof, the Corporation hereby further 
agrees to hold harmless and indemnify Agent:

          (a)  against any and all expenses (including attorneys' fees), 
witness fees, damages, judgments, fines and amounts paid in settlement and 
any other amounts that Agent becomes legally obligated to pay because of any 
claim or claims made against or by him in connection with any threatened, 
pending or completed action, suit or proceeding, whether civil, criminal, 
arbitrational, administrative or investigative (including an action by or in 
the right of the Corporation) to which Agent is, was or at any time becomes a 
party, or is threatened to be made a party, by reason of the fact that Agent 
is, was or at any time becomes a director, officer, employee or other agent 
of Corporation, or is or was serving or at any time serves at the request of 
the Corporation as a director, officer, employee or other agent of another 
corporation, partnership, joint venture, trust, employee benefit plan or 
other enterprise; and

          (b)  otherwise to the fullest extent as may be provided to Agent by 
the Corporation under the non-exclusivity provisions of the Code and Section 
43 of the Bylaws.

     4.   LIMITATIONS ON ADDITIONAL INDEMNITY.  No indemnity pursuant to 
Section 3 hereof shall be paid by the Corporation:

          (a)  on account of any claim against Agent for an accounting of 
profits made from the purchase or sale by Agent of securities of the 
Corporation pursuant to the provisions of Section 16(b) of the Securities 
Exchange Act of 1934 and amendments thereto or similar provisions of any 
federal, state or local statutory law;

          (b)  on account of Agent's conduct that was knowingly fraudulent or 
deliberately dishonest or that constituted willful misconduct; 

          (c)  on account of Agent's conduct that constituted a breach of 
Agent's duty of loyalty to the Corporation or resulted in any personal profit 
or advantage to which Agent was not legally entitled;

          (d)  for which payment is actually made to Agent under a valid and 
collectible insurance policy or under a valid and enforceable indemnity 
clause, bylaw or agreement, except in respect of any excess beyond payment 
under such insurance, clause, bylaw or agreement;

          (e)  if indemnification is not lawful (and, in this respect, both 
the Corporation and Agent have been advised that the Securities and Exchange 
Commission believes that indemnification for liabilities arising under the 
federal securities laws is against public policy and is, therefore, 
unenforceable and that claims for indemnification should be submitted to 
appropriate courts for adjudication); or 

          (f)  in connection with any proceeding (or part thereof) initiated 
by Agent, or any proceeding by Agent against the Corporation or its 
directors, officers, employees or other agents, unless (i) such 
indemnification is expressly required to be made by law, (ii) the proceeding 
was authorized by the Board of Directors of the Corporation, (iii) such 


                                      2

<PAGE>

indemnification is provided by the Corporation, in its sole discretion, 
pursuant to the powers vested in the Corporation under the Code, or (iv) the 
proceeding is initiated pursuant to Section 9 hereof.

     5.   CONTINUATION OF INDEMNITY.  All agreements and obligations of the 
Corporation contained herein shall continue during the period Agent is a 
director, officer, employee or other agent of the Corporation (or is or was 
serving at the request of the Corporation as a director, officer, employee or 
other agent of another corporation, partnership, joint venture, trust, 
employee benefit plan or other enterprise) and shall continue thereafter so 
long as Agent shall be subject to any possible claim or threatened, pending 
or completed action, suit or proceeding, whether civil, criminal, 
arbitrational, administrative or investigative, by reason of the fact that 
Agent was serving in the capacity referred to herein.

     6.   PARTIAL INDEMNIFICATION.  Agent shall be entitled under this 
Agreement to indemnification by the Corporation for a portion of the expenses 
(including attorneys' fees), witness fees, damages, judgments, fines and 
amounts paid in settlement and any other amounts that Agent becomes legally 
obligated to pay in connection with any action, suit or proceeding referred 
to in Section 3 hereof even if not entitled hereunder to indemnification for 
the total amount thereof, and the Corporation shall indemnify Agent for the 
portion thereof to which Agent is entitled.

     7.   NOTIFICATION AND DEFENSE OF CLAIM.  Not later than thirty (30) days 
after receipt by Agent of notice of the commencement of any action, suit or 
proceeding, Agent will, if a claim in respect thereof is to be made against 
the Corporation under this Agreement, notify the Corporation of the 
commencement thereof; but the omission so to notify the Corporation will not 
relieve it from any liability which it may have to Agent otherwise than under 
this Agreement. With respect to any such action, suit or proceeding as to 
which Agent notifies the Corporation of the commencement thereof:

          (a)  the Corporation will be entitled to participate therein at its 
own expense;

          (b)  except as otherwise provided below, the Corporation may, at 
its option and jointly with any other indemnifying party similarly notified 
and electing to assume such defense, assume the defense thereof, with counsel 
reasonably satisfactory to Agent.  After notice from the Corporation to Agent 
of its election to assume the defense thereof, the Corporation will not be 
liable to Agent under this Agreement for any legal or other expenses 
subsequently incurred by Agent in connection with the defense thereof except 
for reasonable costs of investigation or otherwise as provided below.  Agent 
shall have the right to employ separate counsel in such action, suit or 
proceeding but the fees and expenses of such counsel incurred after notice 
from the Corporation of its assumption of the defense thereof shall be at the 
expense of Agent unless (i) the employment of counsel by Agent has been 
authorized by the Corporation, (ii) Agent shall have reasonably concluded 
that there may be a conflict of interest between the Corporation and Agent in 
the conduct of the defense of such action or (iii) the Corporation shall not 
in fact have employed counsel to assume the defense of such action, in each 
of which cases the fees and expenses of Agent's separate counsel shall be at 
the expense of the Corporation.  The Corporation shall not be entitled to 
assume the defense of any action, suit or proceeding 


                                      3

<PAGE>

brought by or on behalf of the Corporation or as to which Agent shall have 
made the conclusion provided for in clause (ii) above; and

          (c)  the Corporation shall not be liable to indemnify Agent under 
this Agreement for any amounts paid in settlement of any action or claim 
effected without its written consent, which shall not be unreasonably 
withheld.  The Corporation shall be permitted to settle any action except 
that it shall not settle any action or claim in any manner which would impose 
any penalty or limitation on Agent without Agent's written consent, which may 
be given or withheld in Agent's sole discretion.

     8.   EXPENSES.  The Corporation shall advance, prior to the final 
disposition of any proceeding, promptly following request therefor, all 
expenses incurred by Agent in connection with such proceeding upon receipt of 
an undertaking by or on behalf of Agent to repay said amounts if it shall be 
determined ultimately that Agent is not entitled to be indemnified under the 
provisions of this Agreement, the Bylaws, the Code or otherwise.

     9.   ENFORCEMENT.  Any right to indemnification or advances granted by 
this Agreement to Agent shall be enforceable by or on behalf of Agent in any 
court of competent jurisdiction if (i) the claim for indemnification or 
advances is denied, in whole or in part, or (ii) no disposition of such claim 
is made within ninety (90) days of request therefor.  Agent, in such 
enforcement action, if successful in whole or in part, shall be entitled to 
be paid also the expense of prosecuting his claim.  It shall be a defense to 
any action for which a claim for indemnification is made under Section 3 
hereof (other than an action brought to enforce a claim for expenses pursuant 
to Section 8 hereof, provided that the required undertaking has been tendered 
to the Corporation) that Agent is not entitled to indemnification because of 
the limitations set forth in Section 4 hereof.  Neither the failure of the 
Corporation (including its Board of Directors or its stockholders) to have 
made a determination prior to the commencement of such enforcement action 
that indemnification of Agent is proper in the circumstances, nor an actual 
determination by the Corporation (including its Board of Directors or its 
stockholders) that such indemnification is improper shall be a defense to the 
action or create a presumption that Agent is not entitled to indemnification 
under this Agreement or otherwise.

     10.  SUBROGATION.  In the event of payment under this Agreement, the 
Corporation shall be subrogated to the extent of such payment to all of the 
rights of recovery of Agent, who shall execute all documents required and 
shall do all acts that may be necessary to secure such rights and to enable 
the Corporation effectively to bring suit to enforce such rights. 

     11.  NON-EXCLUSIVITY OF RIGHTS.  The rights conferred on Agent by this 
Agreement shall not be exclusive of any other right which Agent may have or 
hereafter acquire under any statute, provision of the Corporation's 
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or 
directors, or otherwise, both as to action in his official capacity and as to 
action in another capacity while holding office.

     12.  SURVIVAL OF RIGHTS. 

          (a)  The rights conferred on Agent by this Agreement shall continue 
after Agent has ceased to be a director, officer, employee or other agent of 
the Corporation or to serve 


                                      4

<PAGE>

at the request of the Corporation as a director, officer, employee or other 
agent of another corporation, partnership, joint venture, trust, employee 
benefit plan or other enterprise and shall inure to the benefit of Agent's 
heirs, executors and administrators.  

          (b)  The Corporation shall require any successor (whether direct or 
indirect, by purchase, merger, consolidation or otherwise) to all or 
substantially all of the business or assets of the Corporation, expressly to 
assume and agree to perform this Agreement in the same manner and to the same 
extent that the Corporation would be required to perform if no such 
succession had taken place.

     13.  SEPARABILITY.  Each of the provisions of this Agreement is a 
separate and distinct agreement and independent of the others, so that if any 
provision hereof shall be held to be invalid for any reason, such invalidity 
or unenforceability shall not affect the validity or enforceability of the 
other provisions hereof.  Furthermore, if this Agreement shall be invalidated 
in its entirety on any ground, then the Corporation shall nevertheless 
indemnify Agent to the fullest extent provided by the Bylaws, the Code or any 
other applicable law.

     14.  GOVERNING LAW.  This Agreement shall be interpreted and enforced in 
accordance with the laws of the State of Delaware.

     15.  AMENDMENT AND TERMINATION.  No amendment, modification, termination 
or cancellation of this Agreement shall be effective unless in writing signed 
by both parties hereto.

     16.  IDENTICAL COUNTERPARTS.  This Agreement may be executed in one or 
more counterparts, each of which shall for all purposes be deemed to be an 
original but all of which together shall constitute but one and the same 
Agreement.  Only one such counterpart need be produced to evidence the 
existence of this Agreement.

     17.  HEADINGS.  The headings of the sections of this Agreement are 
inserted for convenience only and shall not be deemed to constitute part of 
this Agreement or to affect the construction hereof.

     18.  NOTICES.  All notices, requests, demands and other communications 
hereunder shall be in writing and shall be deemed to have been duly given (i) 
upon delivery if delivered by hand to the party to whom such communication 
was directed or (ii) upon the third business day after the date on which such 
communication was mailed if mailed by certified or registered mail with 
postage prepaid:  

          (a)  If to Agent, at the address indicated on the signature page
               hereof.

          (b)  If to the Corporation, to

               Intuitive Surgical, Inc.
               1340 West Middlefield Road
               Mountain View, CA 94043

or to such other address as may have been furnished to Agent by the 
Corporation.



                                      5

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on 
and as of the day and year first above written.


                                        INTUITIVE SURGICAL, INC.


                                        By:                                   
                                           -------------------------------------
                                        Title:
                                              ----------------------------------

                              
                                        AGENT




                                        ----------------------------------------

                                        Address:

                                        ----------------------------------------

                                        ----------------------------------------



                                       6




<PAGE>

                              INTUITIVE SURGICAL, INC.

                             1998 EQUITY INCENTIVE PLAN

                              ADOPTED JANUARY 31, 1996
                              AMENDED FEBRUARY 4, 1997
                                AMENDED MAY 9, 1997
                               AMENDED JULY 11, 1997
                        AMENDED AND RESTATED APRIL 18, 1998
                    APPROVED BY STOCKHOLDERS _____________, 1998

                       PLAN TERMINATION DATE:  APRIL 17, 2008

1.   PURPOSES.

     (a)  The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock appreciation rights, (iv) stock bonuses
and (v) rights to acquire restricted stock.

     (b)  The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

2.   DEFINITIONS.

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

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

     (c)  "CAUSE" means misconduct, including:  (i) conviction of any felony or
any crime involving moral turpitude or dishonesty; (ii) participation in a fraud
or act of dishonesty against the Company; (iii) willful and material breach of
the Company's policies; (iv) intentional and material damage to the Company's
property; or (v) material breach of the Stock Award holder's Proprietary
Information and Inventions Agreement.

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

     (e)  "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.

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



<PAGE>

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

     (h)  "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting services and who is compensated
for such services or (ii) who is a member of the Board of Directors of an
Affiliate.  However, the term "Consultant" shall not include Directors who are
paid only a director's fee by the Company or who are not compensated by the
Company for their services as Directors.

     (i)  "CONTINUOUS SERVICE" means the Stock Award holder's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant is not
interrupted or terminated.  The Board or the chief executive officer of the
Company may determine, in that party's sole discretion, whether Continuous
Service shall be considered interrupted in the case of:  (i) any leave of
absence approved by the Board or the chief executive officer of the Company,
including sick leave, military leave, or any other personal leave; or
(ii) transfers between locations of the Company or between the Company,
Affiliates or their successors.

     (j)  "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.

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

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

     (m)  "EMPLOYEE" means any person employed by the Company or any Affiliate.
Neither service as a Director nor payment of a director's fee by the Company or
an Affiliate shall be sufficient to constitute "employment" by the Company or an
Affiliate.

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

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

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

          (2)  In the absence of an established market for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.


                                          2

<PAGE>

     (p)  "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

     (q)  "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system.

     (r)  "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, AND is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.

     (s)  "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.

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

     (u)  "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.

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

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

     (x)  "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, AND is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

     (y)  "PLAN" means this 1998 Equity Incentive Plan.


                                          3

<PAGE>

     (z)  "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.

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

     (bb) "STOCK AWARD" means any right granted under the Plan, including any
Option, a stock appreciation right, a stock bonus and any right to acquire
restricted stock.

     (cc) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant.  Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.

3.   ADMINISTRATION.

     (a)  The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).

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

          (1)  To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type of Stock Award shall be granted; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; and the number of shares with respect to which a Stock Award shall be
granted to each such person.

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

          (3)  To amend the Plan or a Stock Award as provided in Section 13.

     (c)  The Board may delegate administration of the Plan to a committee
composed of two (2) or more members (the "Committee"), all of the members of
which Committee may be Non-Employee Directors and/or Outside Directors.  If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board including the power to delegate to a subcommittee of two or more
Directors (who may or may not be Outside Directors or Non-Employee Directors)
any of the administrative powers to the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter mean the Committee or such
a subcommittee), subject, however, to such resolutions, not inconsistent with
the provisions of the Plan, as may be adopted from time to time by the Board.
The Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.  Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of


                                          4

<PAGE>

the Board the authority to grant Stock Awards to eligible persons who (x) are
not then subject to Section 16 of the Exchange Act and/or (y) are either (i) not
then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Stock Award, or (ii) not persons
with respect to whom the Company wishes to comply with Section 162(m) of the
Code.

     (d)  All actions taken and all interpretations and determinations made by
the Board or Committee in good faith (including determinations of Fair Market
Value) shall be final and binding upon all Optionees, the Company and all other
interested persons.  No member of the Board or Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan, and all members of the Board and Committee shall, in
addition to their right as directors, be fully protected by the Company with
respect to any such action, determination or interpretation.

4.   SHARES SUBJECT TO THE PLAN.

     (a)  Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate seven million three hundred forty thousand
(7,340,000) shares of Common Stock (the "Share Reserve"); PROVIDED, HOWEVER,
that such Share Reserve shall be increased on January 1 of each year, beginning
with January 1, 1999, by an amount equal to three percent (3%) of the total
outstanding shares of Common Stock (calculated on a fully diluted, fully
converted basis) measured as of the immediately preceding December 31.  In
addition, the number of shares granted pursuant to stock bonuses shall at no
time exceed ten percent (10%) of the then current Share Reserve.

     (b)  If any Stock Award shall for any reason expire or otherwise terminate,
in whole or in part, without having been exercised in full, the stock not
acquired under such Stock Award shall revert to and again become available for
issuance under the Plan.  Shares subject to stock appreciation rights exercised
in accordance with the Plan shall not be available for subsequent issuance under
the Plan.  If any shares of Common Stock acquired pursuant to the exercise of an
Stock Awards shall for any reason be repurchased by the Company under a
repurchase option provided under the Plan, the stock repurchased by the Company
under such repurchase option shall revert to and again become available for
issuance under the Plan.

     (c)  The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

5.   ELIGIBILITY.

     (a)  Incentive Stock Options may be granted only to Employees.  Stock
Awards other than Incentive Stock Options may be granted only to Employees,
Directors or Consultants.

     (b)  No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Incentive


                                          5

<PAGE>

Stock Option is at least one hundred ten percent (110%) of the Fair Market Value
of such stock at the date of grant and the Incentive Stock Option is not
exercisable after the expiration of five (5) years from the date of grant.

     (c)  Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than one million (1,000,000) shares of Common Stock in any calendar year.
This subsection 5(c) shall not apply prior to the Listing Date and, following
the Listing Date, shall not apply until (i) the earliest of:  (A) the first
material modification of the Plan (including any increase to the number of
shares reserved for issuance under the Plan in accordance with Section 4); (B)
the issuance of all of the shares of Common Stock reserved for issuance under
the Plan; (C) the expiration of the Plan; or (D) the first meeting of
stockholders at which directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the first
registration of an equity security under section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.

6.   OPTION PROVISIONS.

     Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate.  All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option.  The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

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

     (b)  PRICE.  The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Incentive Stock Option on the date the Incentive Stock Option is
granted or such greater amount as required by Section 5(b).  The exercise price
of each Nonstatutory Stock Option shall be determined by the Board.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory Stock Option) may be granted with an exercise price lower than that
set forth in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.

     (c)  CONSIDERATION.  The purchase price of stock acquired pursuant to an
Option shall be paid at the time the Option is exercised, to the extent
permitted by applicable statutes and regulations, either (i) in cash or by check
or (ii) at the discretion of the Board, at the time of the grant of the Option,
under one of the following alternatives:

          (1)  Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in THE WALL STREET JOURNAL, pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which, prior to the issuance of Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of


                                          6

<PAGE>

irrevocable instructions to pay the aggregate exercise price to the Company from
the sales proceeds;

          (2)  Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in THE WALL STREET JOURNAL, by delivery of
already-owned shares of Common Stock, held for the period required to avoid a
charge to the Company's reported earnings, and owned free and clear of any
liens, claims, encumbrances or security interests, which Common Stock shall be
valued at its fair market value on the date of exercise;

          (3)  Pursuant to a deferred payment alternative as described in the
Option Agreement, PROVIDED THAT, at any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value" (as defined in the Delaware
General Corporation Law) shall not be made by deferred payment;

          (4)  In any other form of legal consideration that may be acceptable
to the Board; or

          (5)  By any combination of the above methods.

     (d)  TRANSFERABILITY.  An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Option is granted only
by such person.  A Nonstatutory Stock Option may be transferable to the extent
expressly provided in the Option Agreement; PROVIDED, HOWEVER, that if the
Option Agreement does not specifically provide for transferability, then such
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution or pursuant to a domestic relations order, and
shall be exercisable during the lifetime of the person to whom the Nonstatutory
Stock Option is granted only by such person or any transferee pursuant to a
domestic relations order.  Notwithstanding the foregoing, the person to whom the
Option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionee, shall thereafter be entitled to exercise the Option.

     (e)  VESTING.  The total number of shares of stock subject to an Option
shall vest and become exercisable as provided in the Option Agreement.

     (f)  TERMINATION OF CONTINUOUS SERVICE.  In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
Disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months after
the termination of the Optionee's Continuous Service (or such longer or shorter
period specified in the Option Agreement) or (ii) the expiration of the term of
the Option as set forth in the Option Agreement provided, however, if the
Optionee is terminated for Cause, then the Option shall terminate on the date
Optionee's Continuous Service ceases (or such longer period specified in the
Option Agreement).  If, after termination, the Optionee does not exercise his or
her Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.


                                          7

<PAGE>

     An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or Disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act or any material regulatory requirements of
any foreign jurisdiction, then the Option shall terminate on the earlier of (i)
the expiration of the term of the Option as set forth in the Option Agreement,
or (ii) the expiration of a period of three (3) months after the termination of
the Optionee's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.

     (g)  DISABILITY OF OPTIONEE.  In the event an Optionee's Continuous Service
terminates as a result of the Optionee's Disability, the Optionee may exercise
his or her Option (to the extent that the Optionee was entitled to exercise it
at the date of termination, taking into account any post-termination amendments
to the Option Agreement), but only within such period of time ending on the
earlier of (i) the date twelve (12) months following such termination (or such
longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement.  If,
at the date of termination, the Optionee is not entitled to exercise the entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan no later than
thirty (30) days following the date of termination.  If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.

     (h)  DEATH OF OPTIONEE.  In the event of the death of an Optionee during,
or within the three (3) month or twelve (12) month periods referred to above
after the termination of, the Optionee's Continuous Service, the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option at the
date of death, taking into account any post-termination amendments to the Option
Agreement) by the Optionee's estate, by a person who acquired the right to
exercise the Option by bequest or inheritance or by a person designated to
exercise the option upon the Optionee's death pursuant to subsection 6(d), but
only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement.  If, at the time of death, the Optionee was
not entitled to exercise the entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan no later than thirty (30) days following the date of
termination.  If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.

     (i)  EARLY EXERCISE.  The Option may, but need not, include a provision
whereby the Optionee may elect at any time before the Optionee's Continuous
Service terminates to exercise the Option as to any part or all of the shares
subject to the Option prior to the full vesting of the Option.  Any unvested
shares so purchased shall be subject to a repurchase right in favor of the
Company or any other restriction the Board determines appropriate.

     (j)  RE-LOAD OPTIONS.  Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall


                                          8

<PAGE>

have the authority (but not an obligation) to include as part of any Option
Agreement a provision entitling the Optionee to a further Option (a "Re-Load
Option") in the event the Optionee exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option (i) shall be for a number of shares equal to the number
of shares surrendered as part or all of the exercise price of such Option; (ii)
shall have an expiration date which is the same as the expiration date of the
Option the exercise of which gave rise to such Re-Load Option; and (iii) shall
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option
shall be subject to the same exercise price and term provisions heretofore
described for Options under the Plan.

     Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board may designate at the time of the grant of the
original Option; PROVIDED, HOWEVER, that the designation of any Re-Load Option
as an Incentive Stock Option shall be subject to the one hundred thousand dollar
($100,000) annual limitation on exercisability of Incentive Stock Options
described in subsection 11(d) of the Plan and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option.  Any such Re-Load Option
shall be subject to the availability of sufficient shares under subsection 4(a)
and the "Section 162(m) Limitation" or grants of Options under subsection 5(c)
and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.

7.   TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

     (a)  Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate.  The terms and conditions of stock bonus or restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate agreements need not be identical, but each stock bonus or restricted
stock purchase agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions as appropriate:

          (1)  PURCHASE PRICE.  The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such agreement, but in no event shall the purchase price be less
than eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made.  Notwithstanding the foregoing, the Board may determine that
eligible participants in the Plan may be awarded stock pursuant to a stock bonus
agreement in consideration for past services actually rendered to the Company
for its benefit.

          (2)  TRANSFERABILITY.  A stock bonus or restricted stock purchase
agreement may be transferable to the extent expressly provided in the Stock
Award Agreement; PROVIDED, HOWEVER, that if the Stock Award Agreement does not
specifically provide for transferability, then such stock bonus or restricted
stock purchase award shall not be transferable except by will or the laws of
descent and distribution or pursuant to a domestic relations order, and shall be
exercisable during the lifetime of the person to whom the stock bonus or
restricted stock


                                          9

<PAGE>

purchase award is granted only by such person or any transferee pursuant to a
domestic relations order, so long as stock awarded under such agreement remains
subject to any restrictions pursuant to the agreement.

          (3)  CONSIDERATION.  The purchase price of stock acquired pursuant to
a restricted stock purchase agreement shall be paid either:  (i) in cash at the
time of purchase; (ii) at the discretion of the Board, according to a deferred
payment or other arrangement with the person to whom the stock is sold; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion.  Notwithstanding the foregoing, the Board may award stock
pursuant to a stock bonus agreement in consideration for past services actually
rendered to the Company or for its benefit.

          (4)  VESTING.  Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option or reacquisition right in favor of
the Company in accordance with a vesting schedule to be determined by the Board.

          (5)  TERMINATION OF CONTINUOUS SERVICE.  In the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of stock held by that person which have not vested as
of the date of termination under the terms of the stock bonus or restricted
stock purchase agreement between the Company and such person, subject to the
provisions of Section 12.

          (6)  STOCK APPRECIATION RIGHTS.

               (i)  AUTHORIZED RIGHTS.  The following three types of stock
appreciation rights shall be authorized for issuance under the Plan:

                    a.   TANDEM RIGHTS.  A "Tandem Right" means a stock
appreciation right granted appurtenant to an Option which is subject to the same
terms and conditions applicable to the particular Option grant to which it
pertains with the following exceptions:  The Tandem Right shall require the
holder to elect between the exercise of the underlying Option for shares of
Common Stock and the surrender, in whole or in part, of such Option for an
appreciation distribution.  The appreciation distribution payable on the
exercised the Tandem Right shall be in cash (or, if so provided, in an
equivalent number of shares of Common Stock based on Fair Market Value on the
date of the Option surrender) in an amount up to the excess of (A) the Fair
Market Value (on the date of the Option surrender) of the number of shares of
Common Stock covered by that portion of the surrendered Option in which the
Optionee is vested over (B) the aggregate exercise price payable for such vested
shares.

                    b.   CONCURRENT RIGHTS.  A "Concurrent Right" means a stock
appreciation right granted appurtenant to an Option which applies to all or a
portion of the shares of Common Stock subject to the underlying Option and which
is subject to the same terms and conditions applicable to the particular Option
grant to which it pertains with the following exceptions:  A Concurrent Right
shall be exercised automatically at the same time the underlying Option is
exercised with respect to the particular shares of Common Stock to which the
Concurrent Right pertains.  The appreciation distribution payable on an
exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of Common Stock


                                          10

<PAGE>

based on Fair Market Value on the date of the exercise of the Concurrent Right)
in an amount equal to such portion as determined by the Board at the time of the
grant of the excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Concurrent Right) of the vested shares of Common Stock purchased
under the underlying Option which have Concurrent Rights appurtenant to them
over (B) the aggregate exercise price paid for such shares.

                    c.   INDEPENDENT RIGHTS.  An "Independent Right" means a
stock appreciation right granted independently of any Option but which is
subject to the same terms and conditions applicable to a Nonstatutory Stock
Option with the following exceptions:  An Independent Right shall be denominated
in share equivalents.  The appreciation distribution payable on the exercised
Independent Right shall be not greater than an amount equal to the excess of (a)
the aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Common Stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (b) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Common Stock.  The appreciation
distribution payable on the exercised Independent Right shall be in cash or, if
so provided, in an equivalent number of shares of Common Stock based on Fair
Market Value on the date of the exercise of the Independent Right.

               (II)      RELATIONSHIP TO OPTIONS.  Stock appreciation rights
appurtenant to Incentive Stock Options may be granted only to Employees.  The
"Section 162(m) Limitation" provided in subsection 5(c) and any authority to
reprice Options shall apply as well to the grant of stock appreciation rights.

               (III)     EXERCISE.  To exercise any outstanding stock
appreciation right, the holder shall provide written notice of exercise to the
Company in compliance with the provisions of the Stock Award Agreement
evidencing such right.   Except as provided in subsection 5(c) regarding the
"Section 162(m) Limitation," no limitation shall exist on the aggregate amount
of cash payments that the Company may make under the Plan in connection with the
exercise of a stock appreciation right.

8.   CANCELLATION AND RE-GRANT OF OPTIONS.

     (A)  The Board shall have the authority to effect, at any time and from
time to time,  (i) the repricing of any outstanding Options and/or (ii) with the
consent of the affected holders of Options the cancellation of any outstanding
Options under the Plan and the grant in substitution therefor of new Options
under the Plan covering the same or different numbers of shares of Common Stock.
The exercise price per share shall be not less than that specified under the
Plan for newly granted Stock Awards.  Notwithstanding the foregoing, the Board
may grant an Option with an exercise price lower than that set forth above if
such Option is granted as part of a transaction to which Section 424(a) of the
Code applies.

     (B)  Shares subject to an Option canceled under this Section 8 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(c) of the Plan.  The repricing of an Option
under this Section 8, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a


                                          11

<PAGE>

substitute Option; in the event of such repricing, both the original and the
substituted Options shall be counted against the maximum awards of Options
permitted to be granted pursuant to subsection 5(c) of the Plan.  The provisions
of this Section 8 shall be applicable only to the extent required by Section
162(m) of the Code.

9.   COVENANTS OF THE COMPANY.

     (A)  During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.

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

10.  USE OF PROCEEDS FROM STOCK.

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

11.  MISCELLANEOUS.

     (A)  The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.

     (B)  No Optionee shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Stock Award
unless and until such person has satisfied all requirements for exercise of the
Stock Award pursuant to its terms.

     (C)  Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Optionee any right to continue in the
employ of the Company or any Affiliate (or to continue acting as a Director or
Consultant) or shall affect the right of the Company or any Affiliate to
terminate the employment of any Employee with or without Cause, the right of the
Company's Board of Directors and/or the Company's stockholders to remove any
Director pursuant to the terms of the Company's Bylaws and the provisions of
applicable laws, or the right to terminate the relationship of any Consultant
pursuant to the terms of such Consultant's agreement with the Company or
Affiliate to which such Consultant is providing services.


                                          12

<PAGE>

     (D)  To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.

     (E)  The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(d)
or 7(a)(2), as a condition of exercising or acquiring stock under any Stock
Award, (1) to give written assurances satisfactory to the Company as to such
person's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws.  The Company may require the Optionee to
provide such other representations, written assurances or information which the
Company shall determine is necessary, desirable or appropriate to comply with
applicable securities and other laws as a condition of granting an Option to
such Optionee or permitting the Optionee to exercise such Option.  The Company
may, upon advice of counsel to the Company, place legends on stock certificates
issued under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.

     (F)  To the extent provided by the terms of a Stock Award Agreement, the
Optionee may satisfy any federal, state or local tax withholding obligation
relating to the exercise or acquisition of stock under a Stock Award by any of
the following means or by a combination of such means (in addition to the
Company's right to withhold from any compensation paid to the Optionee by the
Company):  (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the Common Stock otherwise issuable to the Optionee as
a result of the exercise or acquisition of stock under the Stock Award; or (3)
delivering to the Company owned and unencumbered shares of the Common Stock of
the Company.

12.  ADJUSTMENTS UPON CHANGES IN STOCK.

     (A)  If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the


                                          13

<PAGE>

Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the maximum
number of shares subject to award to any person pursuant to subsection 5(c), and
the outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding Stock
Awards.  Such adjustments shall be made by the Board, the determination of which
shall be final, binding and conclusive.  (The conversion of any convertible
securities of the Company shall not be treated as a "transaction not involving
the receipt of consideration by the Company".)

     (B)  In the event of a Change in Control (as defined herein) any surviving
corporation or acquiring corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the shareholders in the transaction
described in this subsection 12(b)) for those outstanding under the Plan.  In
the event any surviving or acquiring corporation refuses to assume such Stock
Awards or to substitute similar stock awards for those outstanding under the
Plan, then with respect to persons whose Continuous Service has not terminated
prior to such Change in Control: (i) the vesting (and, if applicable, the
exercisability) of Stock Awards held by such persons shall be accelerated
immediately prior to such event, and the Stock Awards terminated if not
exercised at or prior to such event, and (ii) any Company repurchase option or
reacquisition right with respect to shares acquired by such persons under a
Stock Award shall lapse immediately prior to such event and the shares held by
such persons shall be fully vested. With respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall terminate if not exercised
prior to such event.

     In addition, and only if explicitly provided for in the Stock Award
Agreement, with respect to any person whose Continuous Service has not
terminated prior to the consummation of a Change in Control, if upon or within
twenty-four (24) months following a Change in Control one of the following
events occurs:  (i) such person's Continuous Service is terminated by the
acquiror or successor without Cause; (ii) the principal place of the performance
of such person's responsibilities (the "Principal Location") is changed to a
location more than twenty-five (25) miles from such person's Principal Location
immediately prior to the Change in Control and such person voluntarily
terminates Continuous Service with the successor or acquiror; or (iii) there is
a material reduction in such person's compensation or responsibilities (not
involving a termination of Continuous Service for Cause) and such person
voluntarily terminates Continuous Service with the successor or acquirer; then
the unvested portion of such person's Options shall immediately become fully
vested and exercisable and any Company repurchase option or reacquisition right
with respect to shares acquired by such persons under a Stock Award shall
immediately lapse and the shares held by such persons shall be fully vested. The
Board shall have the ability to alter the terms of this paragraph with respect
to one or more Stock Award Agreements in its sole discretion.

     For purposes of this subsection 12(b), Cause shall be defined to include
(in addition to those items set forth in Section 2(c)) death and physical or
mental disability.

     For purposes of this Plan, a "Change in Control" shall mean:  (i) a sale of
all or substantially all of the assets of the Company; (ii) a merger or
consolidation in which the Company is not the surviving corporation or a reverse
merger in which the Company is the


                                          14

<PAGE>

surviving corporation but the shares of the Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise (other than (a) a merger or
consolidation in which stockholders immediately before the merger or
consolidation have, immediately after the merger or consolidation, greater stock
voting power of the acquiring or controlling corporation, and in no event less
than a majority of such stock voting power, (b) a transaction the principal
purpose of which is to change the State of the Company's incorporation, or (c) a
merger of the Company into any of its wholly owned subsidiaries); or (iii) an
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or an Affiliate) of the beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors.

     (C)  In the event of a dissolution or liquidation of the Company, any Stock
Awards outstanding under the Plan shall terminate if not exercised prior to such
event.

13.  AMENDMENT OF THE PLAN AND STOCK AWARDS.

     (A)  The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.

     (B)  The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.

     (C)  It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.

     (D)  Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.

     (E)  The Board at any time, and from time to time, may amend the terms of
any one or more Stock Awards; provided, however, that the rights under any Stock
Award shall not be impaired by any such amendment unless (i) the Company
requests the consent of the person to whom the Stock Award was granted and (ii)
such person consents in writing.


                                          15

<PAGE>

14.  TERMINATION OR SUSPENSION OF THE PLAN.

     (A)  The Board may suspend or terminate the Plan at any time.  Unless
sooner terminated, the Plan shall terminate on the day before the tenth (10th)
anniversary of the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier.  No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

     (B)  Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted.

15.  EFFECTIVE DATE OF PLAN.

     The Plan shall become effective as of the Listing Date, but no Stock Awards
granted under the Plan shall be exercised (or, in the case of a stock bonus,
shall be granted) unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.

16.  CHOICE OF LAW.

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


                                          16





<PAGE>


                              INTUITIVE SURGICAL, INC.
                             STOCK OPTION GRANT NOTICE

INTUITIVE SURGICAL, INC. (the "Company"), pursuant to its 1998 Equity Incentive
Plan (the "Plan"), hereby grants to Optionee an option to purchase the number of
shares of the Company's common stock set forth below.  This option is subject to
all of the terms and conditions as set forth herein and in Attachments I, II,
and III, which are incorporated herein in their entirety.

Optionee:
                                   -----------------------------------
Date of Grant:
                                   -----------------------------------
Vesting Commencement Date:
                                   -----------------------------------
Shares Subject to Option:
                                   -----------------------------------
Exercise Price Per Share:
                                   -----------------------------------
Expiration Date:
                                   -----------------------------------

TYPE OF GRANT:      / /  Incentive Stock Option   / /  Nonstatutory Stock Option

EXERCISE SCHEDULE:  [Immediately exercisable.][Same as vesting schedule.]

VESTING SCHEDULE:   [1/8th] vested on the [six month] anniversary of the Vesting
                    Commencement Date; [1/42th] vests on each monthly
                    anniversary thereafter.

PAYMENT:            By one or a combination of the checked items (as described
                    in section 6(c) of the Plan):

/ / By cash or check     / / Pursuant to a Regulation T program  / / By delivery
of already-owned shares
[/ / By deferred payment PROVIDED THAT:
        (i)    At least ____ percent of the exercise price shall be due at
     the time of exercise, [representing the "par value" of the shares
     under Delaware corporate law,] at least ____ percent of the exercise
     price
 plus accrued interest shall be due each anniversary of the date
     of exercise, with final payment of the remainder of the exercise
     price, plus accrued interest, due ____ years from the date of exercise
     or, at the Company's election, upon termination of your Continuous
     Service;
        (ii)   Interest shall be payable [at least annually][on or before
     the term of the note] and shall be charged at the minimum rate of
     interest necessary to avoid the treatment as interest, under any
     applicable provisions of the Internal Revenue Code of 1986, as amended
     (the "Code"), of any portion of any amounts other than amounts stated
     to be interest under the deferred payment arrangement; and
        (iii)  To elect the deferred payment alternative, your written
     notice of exercise must state that you are electing this payment
     alternative and, if the Company so requests, you must tender to the
     Company a promissory note and a security agreement covering the
     purchased shares, both in form and substance satisfactory to the
     Company, or such other or additional documentation as the Company may
     require.]

ADDITIONAL TERMS/ACKNOWLEDGEMENTS:  The undersigned Optionee acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan.  Optionee further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the
entire understanding between Optionee and the Company regarding the acquisition
of stock in the Company and supersede all prior oral and written agreements on
that subject with the exception of (i) options previously granted and delivered
to Optionee under the Plan, and (ii) the following agreements only:

          OTHER AGREEMENTS:
                                   ---------------------------------------------

                                   ---------------------------------------------

                                   ---------------------------------------------

INTUITIVE SURGICAL, INC.                     OPTIONEE:

By:
   ---------------------------------         -----------------------------------
                                             Signature

Title:
      ------------------------------
Date:                                        Date:
     -------------------------------              ------------------------------

Attachment I:       Stock Option Agreement
Attachment II:      1998 Equity Incentive Plan
Attachment III:     Notice of Exercise



<PAGE>

                              INTUITIVE SURGICAL, INC.
                               STOCK OPTION AGREEMENT


     Pursuant to the Grant Notice and this Stock Option Agreement, which
together shall be defined as the "Option Agreement" under the Plan, the Company
has granted you an option to purchase the number of shares of the Company's
common stock ("Common Stock") indicated in the Grant Notice at the exercise
price indicated in the Grant Notice.  Defined terms not explicitly defined in
this Stock Option Agreement but defined in the Plan shall have the same
definitions as in the Plan.

     The details of your option are as follows:

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

     Notwithstanding the foregoing, if prior to the consummation of a Change in
Control your Continuous Service has not terminated AND if within twenty-four
(24) months following a Change in Control one of the following events occurs:
(i) your Continuous Service is terminated by the acquiror or successor without
Cause; (ii) the principal place of the performance of your responsibilities (the
"Principal Location") is changed to a location more than twenty-five (25) miles

from your Principal Location immediately prior to the Change in Control and you
voluntarily terminate your Continuous Service with the successor or acquiror; or
(iii) there is a material reduction in your compensation or responsibilities
(not involving a termination of Continuous Service for Cause) and you
voluntarily terminate your Continuous Service with the successor or acquiror;
then the unvested portion of this option shall immediately become fully vested
and exercisable and any Company repurchase option or reacquisition right with
respect to shares acquired by you under this option shall immediately lapse and
such shares shall be fully vested. For purposes of this Section 1, Cause shall
be defined to include (in addition to those items set forth in Section 2(c) of
the Plan) death and severe physical or mental disability.

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

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

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

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



<PAGE>

     (d)  your option shall not be exercisable with respect to any unvested
installment to the extent such exercise would cause the aggregate fair market
value of any shares subject to incentive stock options granted you by the
Company (valued as of their grant date) which would become exercisable for the
first time during any calendar year to exceed $100,000.

3.   METHOD OF PAYMENT.  Payment of the exercise price is due in full upon
exercise of all or any part of your option.  You may elect to make payment of
the exercise price in any manner that is permitted by the Grant Notice.

4.   WHOLE SHARES.  Your option may only be exercised for whole shares.

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

6.   TERM.  The term of your option commences on the Date of Grant and expires
upon the earliest of:

     (a)  the Expiration Date indicated in the Grant Notice;

     (b)  the tenth (10th) anniversary of the Date of Grant;

     (c)  eighteen (18) months after your death, if you die during, or within
three (3) months after, the termination of your Continuous Service; or

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

     (e)  the termination of your Continuous Service for Cause; or

     (f)  three (3) months after the termination of your Continuous Service for
any other reason, provided that if during any part of such three (3) month
period the option is not exercisable solely because of the condition set forth
in paragraph 5, in which event the option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of Continuous Service.

          To obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or an
Affiliate of the Company, except in the event of your death or Disability.  The
Company has provided for extended exercisability of your option under certain
circumstances for your benefit, but cannot guarantee that your option will
necessarily be treated


                                          2

<PAGE>

as an "incentive stock option" if you provide services to the Company or an
Affiliate of the Company as a Consultant or if you exercise your option more
than three (3) months after the date your employment with the Company
terminates.

7.   EXERCISE.

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

     (b)  By exercising your option you agree that:

          (i)    as a condition to any exercise of your option, the Company may
require you to enter an arrangement providing for the payment by you to the
Company of any tax withholding obligation of the Company arising by reason of
(1) the exercise of your option; (2) the lapse of any substantial risk of
forfeiture to which the shares are subject at the time of exercise; or (3) the
disposition of shares acquired upon such exercise;

          (ii)   you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of an incentive stock option that occurs within two (2)
years after the date of your option grant or within one (1) year after such
shares of Common Stock are transferred upon exercise of your option; and

          (iii)  the Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that you not sell,
dispose of, transfer, make any short sale of, grant any option for the purchase
of, or enter into any hedging or similar transaction with the same economic
effect as a sale, any shares of Common Stock or other securities of the Company
held by you, for a period of time specified by the underwriter(s) (not to exceed
one hundred eighty (180) days) following the effective date of the registration
statement of the Company filed under the Securities Act.  You further agree to
execute and deliver such other agreements as may be reasonably requested by the
Company and/or the underwriter(s) which are consistent with the foregoing or
which are necessary to give further effect thereto.  In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to your Common Stock until the end of such period.

8.   TRANSFERABILITY.  Your option is not transferable, except by will or by the
laws of descent and distribution, and is exercisable during your life only by
you.  Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.

9.   OPTION NOT A SERVICE CONTRACT.  Your option is not an employment contract
and nothing in your option shall be deemed to create in any way whatsoever any
obligation on your


                                          3

<PAGE>

part to continue in the employ of the Company or an Affiliate, or of the Company
or an Affiliate to continue your employment.  In addition, nothing in your
option shall obligate the Company or an Affiliate of the Company, or their
respective stockholders, Board of Directors, Officers or Employees to continue
any relationship that you might have as a Director or Consultant for the Company
or an Affiliate.

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

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


                                          4






<PAGE>


                              INTUITIVE SURGICAL, INC.

                  1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                             ADOPTED ON APRIL 18, 1998

                  APPROVED BY STOCKHOLDERS ON _____________, 1998

1.   PURPOSE.

     (a)  The purpose of the 1998 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of INTUITIVE SURGICAL, INC.
(the "Company") who is not otherwise at the time of grant an employee of or
consultant to the Company or of any Affiliate of the Company (each such person
being hereafter referred to as a "Non-Employee Director") will be given an
opportunity to purchase stock of the Company.

     (b)  The word "AFFILIATE" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").

     (c)  The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.

2.   ADMINISTRATION.

     (a)  The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless
 and until the Board delegates administration to a
committee of the Board, as provided in subparagraph 2(b).

     (b)  The Board may delegate administration of the Plan to a committee
composed of two (2) or more members of the Board (the "Committee").  If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.  The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

3.   SHARES SUBJECT TO THE PLAN.

     (a)  Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to options granted under
the Plan shall not exceed in the aggregate two hundred thousand (200,000) shares
of the Company's common stock.  If any option granted under the Plan shall for
any reason expire or otherwise terminate without having


                                          1.

<PAGE>

been exercised in full, the stock not purchased under such option shall again
become available for the Plan.  If any shares of the Company's common stock
acquired pursuant to the exercise of an option shall for any reason be
repurchased by the Company under a repurchase option provided under the Plan,
the stock repurchased by the Company under such repurchase option shall revert
to and again become available for issuance under the Plan.

     (b)  The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

4.   ELIGIBILITY.

     Options shall be granted only to Non-Employee Directors of the Company.

5.   NON-DISCRETIONARY GRANTS.

     (a)  Each person who is first elected or appointed to the Board as a
Non-Employee Director after the Effective Date shall automatically be granted,
on the date of such initial election or appointment, an option to purchase
twenty-five thousand (25,000) shares of common stock of the Company on the terms
and conditions set forth herein (hereinafter, an "Initial Grant").

     (b)  Each Non-Employee Director who is serving as a Non-Employee Director
immediately following each Annual Meeting of Stockholders, commencing with the
Annual Meeting of Stockholders occurring in calendar year 1999, shall
automatically be granted, on such date, an option to purchase two thousand five
hundred (2,500) shares of common stock of the Company, which amount shall be
pro-rated for any Non-Employee Director who has not continuously served as a
Non-Employee Director for the twelve (12)-month period prior to the date of such
Annual Meeting of Stockholders, on the terms and conditions set forth herein
(hereinafter, an "Annual Grant").

6.   OPTION PROVISIONS.

Each option shall be subject to the following terms and conditions:

     (a)  The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant.  If the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate terminates for any reason or for no reason, the option shall terminate
on the earlier of the Expiration Date or the date three (3) months following the
date of  termination of such service; PROVIDED, HOWEVER, that (i) if such
termination of service is due to the optionee's death, the option shall
terminate on the earlier of the Expiration Date or eighteen (18) months
following the date of the optionee's death or (ii) if such termination of
service is due to the optionee's permanent and total disability within the
meaning of Section 22(e)(3) of the Code ("Disability"), the option shall
terminate on the earlier of the Expiration Date or twelve (12) months following
the date of the optionee's Disability.  In any and all circumstances, an option
may be exercised following termination of the optionee's service as a
Non-Employee


                                          2.

<PAGE>

Director of the Company or any Affiliate only as to that number of shares as to
which it was exercisable as of the date of termination of such service under the
provisions of subparagraph 6(e).

     (b)  The exercise price of each option shall be one hundred percent (100%)
of the Fair Market Value of the stock (as defined in subsection 9(d)) subject to
such option on the date such option is granted.

     (c)  The optionee may elect to make payment of the exercise price under one
of the following alternatives:

          (i)    In cash (or check) at the time of exercise;

          (ii)   Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in THE WALL STREET JOURNAL,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at its Fair Market
Value on the date immediately preceding the date of exercise;

          (iii)  Pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company either prior to the issuance of shares of the
Company's common stock or pursuant to the terms of irrevocable instructions
issued by the optionee prior to the issuance of shares of the Company's common
stock; or

          (iv)   Payment by a combination of the methods of payment specified
in subparagraph 6(c)(i) through 6(c)(iii) above.

     (d)  An option shall be transferable only to the extent specifically
provided in the option agreement; PROVIDED, HOWEVER, that if the option
agreement does not specifically provide for the transferability of the option,
then the option shall not be transferable except by will or by the laws of
descent and distribution, or pursuant to a domestic relations order, and shall
be exercisable during the lifetime of the person to whom the option is granted
only by such person or transferee pursuant to a domestic relations order.
Notwithstanding the foregoing, the optionee may, by delivering written notice to
the Company in a form satisfactory to the Company, designate a third party who,
in the event of the death of the optionee, shall thereafter be entitled to
exercise the option.

     (e)  (i) An Initial Grant shall vest (i.e., become exercisable) in
installments as follows:  6/48th of the option shares shall vest on the six
(6)-month anniversary of the date of grant of the option and the remaining
shares shall then vest in equal monthly installments over the next forty-two
(42) months, and (ii) an Annual Grant shall vest in thirty-six (36) equal
monthly installments over a three (3)-year period measured from the date of
grant of the option, PROVIDED THAT, with respect to any grant under the Plan,
the optionee has, during the entire period prior to such


                                          3.

<PAGE>

vesting date, continuously served as a Non-Employee Director or employee of or
consultant to the Company or any Affiliate of the Company.

     (f)  The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option:  (i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock.  These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (x) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (y), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws.  The Company may
require any optionee to provide such other representations, written assurances
or information which the Company shall determine is necessary, desirable or
appropriate to comply with applicable securities laws as a condition of granting
an option to the optionee or permitting the optionee to exercise the option.
The Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.

     (g)  Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.

     (h)  The option may, but need not, include a provision whereby the optionee
may elect at any time before the optionee's service as a Non-Employee Director
or employee of or consultant to the Company or any Affiliate terminates to
exercise the option as to any part or all of the shares subject to the option
prior to the full vesting of the option. Any unvested shares so purchased shall
be subject to a repurchase right in favor of the Company or any other
restriction the Board determines appropriate.

7.   COVENANTS OF THE COMPANY.

     (a)  During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of common stock required
to satisfy such options.

     (b)  The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; PROVIDED, HOWEVER, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option.  If, after
reasonable efforts, the Company is unable to obtain from any such regulatory


                                          4.

<PAGE>

commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.

8.   USE OF PROCEEDS FROM STOCK.

     Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.

9.   MISCELLANEOUS.

     (a)  Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.

     (b)  Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate in any capacity or shall affect any right of the
Company, its Board or stockholders or any Affiliate to remove any Non-Employee
Director pursuant to the Company's Bylaws and the provisions of the Delaware
General Corporation Law (or the applicable laws of the Company's state of
incorporation if the Company's state of incorporation should change in the
future).

     (c)  No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.

     (d)  As used in this Plan, "Fair Market Value" means, as of any date, the
value of the common stock of the Company determined as follows:

          (i)    If the common stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market, the Fair Market Value of a share
of common stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or market (or the
exchange or market with the greatest volume of trading in common stock) on the
last market trading day prior to the day of determination, as reported in THE
WALL STREET JOURNAL or such other source as the Board deems reliable; or

          (ii)   In the absence of an established market for the common stock,
the Fair Market Value shall be determined in good faith by the Board.

10.  ADJUSTMENTS UPON CHANGES IN STOCK.

     (a)  If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock


                                          5.

<PAGE>

dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan and outstanding options will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan and the class(es) and
number of shares and price per share of stock subject to outstanding options.
Such adjustments shall be made by the Board, the determination of which shall be
final, binding and conclusive.  (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")

     (b)  In the event of a Change in Control (as defined herein) AND if during
the twenty four (24) months upon or following a Change in Control any
Non-Employee Director ceases to serve on the Board of the Company (or the Board
of a successor or acquiror) that qualifies as a "parent corporation" within the
meaning of Section 424(e) of the Code, then the unvested portion of such
Non-Employee Director's options shall immediately become fully vested and
exercisable.

     For purposes of this Plan, a "Change in Control" shall mean:  (i) a sale of
all or substantially all of the assets of the Company; (ii) a merger or
consolidation in which the Company is not the surviving corporation or a reverse
merger in which the Company is the surviving corporation but the shares of the
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise (other than (a) a merger or consolidation in which
stockholders immediately before the merger or consolidation have, immediately
after the merger or consolidation, greater stock voting power of the acquiring
or controlling corporation, and in no event less than a majority of such stock
voting power, (b) a transaction the principal purpose of which is to change the
State of the Company's incorporation, or (c) a merger of the Company into any of
its wholly owned subsidiaries); or (iii) an acquisition by any person, entity or
group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or an Affiliate) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors.

     (c)  In the event of a dissolution or liquidation of the Company, any
options outstanding under the Plan shall terminate if not exercised prior to
such event.

11.  AMENDMENT OF THE PLAN OR OPTIONS.

     (a)  The Board at any time, and from time to time, may amend the Plan
and/or some or all outstanding options granted under the Plan. However, no
amendment to the Plan, including an amendment to increase the size of the share
reserve (except as provided in paragraph 10 relating to adjustments upon changes
in stock), shall be effective unless approved by the stockholders of the Company
to the extent stockholder approval is necessary for the Plan to


                                          6.

<PAGE>

satisfy the requirements of Rule 16b-3 promulgated under the Exchange Act or any
Nasdaq or securities exchange listing requirements.

     (b)  Rights and obligations under any option granted before any amendment
of the Plan or the agreement documenting such option shall not be impaired by
such amendment unless (i) the Company requests the consent of the person to whom
the option was granted and (ii) such person consents in writing.

12.  TERMINATION OR SUSPENSION OF THE PLAN.

     (a)  The Board may suspend or terminate the Plan at any time.  Unless
sooner terminated, the Plan shall terminate on December 31, 2008.

     (b)  The Plan shall terminate upon the occurrence of a Change in Control.

     (c)  Rights and obligations under any option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.

13.  EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.

     (a)  The Plan shall become effective on the first date upon which any
security of the Company is listed (or approved for listing) upon notice of
issuance on any securities exchange, or designated (or approved for designation)
upon notice of issuance as a national market security on an interdealer
quotation system (the "Effective Date").

     (b)  Notwithstanding any other provision in the Plan to the contrary, no
option otherwise authorized under the Plan shall be granted unless and until
sufficient shares of the Company's common stock to be issued under the Plan have
been approved by the stockholders of the Company.

14.  CHOICE OF LAW.

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


                                          7.





<PAGE>

                              INTUITIVE SURGICAL, INC.
                   1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                             NONSTATUTORY STOCK OPTION

__________, Optionee:


     On __________________, 19___, an option was automatically granted to you 
 (the "Optionee") pursuant to the Intuitive Surgical, Inc. (the "Company") 
1998 Non-Employee Directors' Stock Option Plan (the "Plan") to purchase 
shares of the Company's common stock ("Common Stock").  This option is NOT 
intended to qualify and will not be treated as an "incentive stock option" 
within the meaning of Section 422 of the Internal Revenue Code of 1986, as 
amended (the "Code").

     The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for Non-Employee Directors (as defined in
the Plan).

     The details of your option are as follows:

     1.   The total number of shares of Common Stock subject to this option is
[__________________ (     )].
 

     2.   The exercise price of this option is ____________ ($____ ) per 
share, such amount being equal to the Fair Market Value (as defined in the 
Plan) of the Common Stock on the date of grant of this option.

     3.   (a)  Subject to the limitations contained herein:

               (i)    if this option is exercisable for 25,000 shares, then
this option shall vest (i.e., become exercisable) in installments as follows:
6/48th of the option shares shall vest on the six (6)-month anniversary of the

date of grant of the option and the remaining shares shall then vest equally
over the next forty two (42) months; or

               (ii)   if this option is exercisable for 2,500 shares, then this
option shall vest (i.e., become exercisable) in thirty six (36) equal monthly
installments over a three (3)-year period measured from the date of grant of the
option;

PROVIDED, HOWEVER, that you have, during the period from the date of grant to
such vesting date, continuously served as a Non-Employee Director or employee of
or consultant to the Company or any Affiliate (as defined in the Plan).

          (b)  Notwithstanding anything to the foregoing, this option shall NOT
be exercisable in whole or in part unless and until sufficient shares of the
Company's common stock to be issued under the Plan has been approved by the
Company's stockholders.

     4.   (a)  This option may be exercised, to the extent specified above, by
delivering a Notice of Exercise (in the form attached hereto or such other form
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require pursuant to Section 6 of the Plan.

          (b)  This option may only be exercised for whole shares.



<PAGE>

          (c)  You may elect to pay the exercise price under one of the
following alternatives:

               (i)    In cash (or check) at the time of exercise;

               (ii)   Provided that at the time of the exercise the Common
Stock is publicly traded and quoted regularly in THE WALL STREET JOURNAL,
payment by delivery of shares of Common Stock already owned by you, held for the
period required to avoid a charge to the Company's reported earnings, and owned
free and clear of any liens, claims, encumbrances or security interest, which
Common Stock shall be valued at its Fair Market Value on the date immediately
preceding the date of exercise;

               (iii)  Payment pursuant to a program developed under Regulation
T as promulgated by the Federal Reserve Board which results in the receipt of
cash (or check) by the Company either prior to the issuance of shares of the
Common Stock or pursuant to the terms of irrevocable instructions issued by you
prior to the issuance of shares of the Common Stock; or

               (iv)   Payment by a combination of the methods of payment
specified in subparagraphs (i) through (iii) above.

          (d)  By exercising this option you agree that the Company may require
you to enter an arrangement providing for the cash payment by you to the Company
of any tax withholding obligation of the Company arising by reason of the
exercise of this option.

     5.   The term of this option is ten (10) years measured from the date of
grant, subject, however, to earlier termination upon your termination of
service, as set forth in Section 6(a) of the Plan.

     6.   Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.

     7.   This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of Section 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan.  In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.

     Dated the _____ day of __________, 19____.

                                             Very truly yours,
                                             INTUITIVE SURGICAL, INC.


                                                  Duly authorized on behalf
                                                  of the Board of Directors

ATTACHMENTS:   Notice of Exercise
               Prospectus-1998 Non-Employee Directors' Stock Option Plan


                                          2

<PAGE>

The undersigned:

     (A)   Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and

     (B)   Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned Optionee and the Company
and its Affiliates regarding the acquisition of Common Stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options and any other stock awards previously granted and
delivered to the undersigned under stock award plans of the Company, and (ii)
the following agreements only:

           NONE:
                ______________
                  (Initial)

           OTHER:
                 __________________________-

                 __________________________-

                 __________________________-

                              __________________________-
                              Optionee


                                          3

<PAGE>

                              INTUITIVE SURGICAL, INC.
                   1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                                 NOTICE OF EXERCISE

Intuitive Surgical, Inc.

________________________
                                                  Date of Exercise:
________________________                                           __________

Ladies and Gentlemen:

     This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.

     Type of option:               Nonstatutory
                                                         
     Stock option dated:           _____________________ 
                                                         
     Number of shares for                                
     which option is exercised:    _____________________ 
                                                         
     Certificates to be                                  
     issued in name of:            _____________________ 
                                                         
     Total exercise price:         $                     
                                    ____________________ 
                                                         
     Cash payment delivered                             
     herewith:                     $                     
                                    ____________________ 
                                   
     Value of______ shares of 

     common stock delivered                              
     herewith (1):                 $____________________ 


     By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the Company's 1998 Non-Employee Directors'
Stock Option Plan and (ii) to provide for the payment by me to you (in the
manner designated by you) of your withholding obligation, if any, relating to
the exercise of this option.

                                             Very truly yours,


                                             __________________________
                                             Optionee


____________________
(1)  Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests.  Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.


                                       1





<PAGE>
                              INTUITIVE SURGICAL, INC.

                         1998 EMPLOYEE STOCK PURCHASE PLAN

                ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 18, 1998
                  APPROVED BY THE STOCKHOLDERS ON ___________, 1998



1.   PURPOSE.

     (a)  The purpose of this 1998 Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of Intuitive Surgical, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.

     (b)  The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").

     (c)  The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.

     (d)  The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.

2.   ADMINISTRATION.

     (a)  The Plan shall be administered
 by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(c).  Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.

     (b)  The Board or the Committee shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

          (i)       To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).

          (ii)      To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.

          (iii)     To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration.  The Board or the Committee, in the exercise of this power, may
correct any defect, omission or inconsistency in



<PAGE>


the Plan, in a manner and to the extent it shall deem necessary or expedient to
make the Plan fully effective.

          (iv)      To amend the Plan as provided in paragraph 13.

          (v)       Generally, to exercise such powers and to perform such acts
as the Board or the Committee deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the intent that the
Plan be treated as an "employee stock purchase plan" within the meaning of
Section 423 of the Code.

     (c)  The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee").  If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.  The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

3.   SHARES SUBJECT TO THE PLAN.

     (a)  Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate one million five hundred thousand
(1,500,000) shares of the Company's common stock (the "Common Stock").  If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for issuance under the Plan.

     (b)  The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

4.   GRANT OF RIGHTS; OFFERING.

     (a)  The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee.  Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges.  The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan.  The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.

                                          2

<PAGE>

     (b)  If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder, a right with a lower exercise price (or an earlier-granted right, if
two rights have identical exercise prices), will be exercised to the fullest
possible extent before a right with a higher exercise price (or a later-granted
right, if two rights have identical exercise prices) will be exercised.

5.   ELIGIBILITY.

     (a)  Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company.  Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years.  In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.

     (b)  The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering.  Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:

          (i)       the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;

          (ii)      the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and

          (iii)     the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that Offering.

     (c)  No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate.  For purposes of
this subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.

                                          3

<PAGE>

     (d)  An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.

     (e)  Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board or
the Committee may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.

6.   RIGHTS; PURCHASE PRICE.

     (a)  On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering.  The Board
or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.

     (b)  In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering.  In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering.  If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.

     (c)  The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:

          (i)       an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or

          (ii)      an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.

                                          4

<PAGE>

7.   PARTICIPATION; WITHDRAWAL; TERMINATION.

     (a)  An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering an enrollment agreement to the Company within the time
specified in the Offering, in such form as the Company provides.  Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering.  "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company that
is intended to comply with Section 125, Section 401(k), Section 402(e)(3),
Section 402(h) or section 403(b) of the Code, and also including any deferrals
under a non-qualified deferred compensation plan or arrangement established by
the Company), and also, if determined by the Board or the Committee and set
forth in the terms of the Offering, may include any or all of the following: (i)
overtime pay, (ii) commissions, (iii) bonuses, incentive pay, profit sharing and
other remuneration paid directly to the employee, and/or (iv) other items of
remuneration not specifically excluded pursuant to the Plan. Earnings shall not
include the cost of employee benefits paid for by the Company or an Affiliate,
education or tuition reimbursements, imputed income arising under any group
insurance or benefit program, traveling expenses, business and moving expense
reimbursements, income received in connection with stock options, contributions
made by the Company or an Affiliate under any employee benefit plan, and similar
items of compensation, as determined by the Board or the Committee.  The payroll
deductions made for each participant shall be credited to an account for such
participant under the Plan and shall be deposited with the general funds of the
Company.  A participant may reduce (including to zero) or increase such payroll
deductions, and an eligible employee may begin such payroll deductions, after
the beginning of any Offering only as provided for in the Offering.  A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Offering.

     (b)  At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board or the Committee in the Offering.  Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's right
to acquire Common Stock under that Offering shall be automatically terminated.
A participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new enrollment agreement in
order to participate in subsequent Offerings under the Plan.

     (c)  Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of a participant's employment with the Company and
any designated Affiliate, for any reason, and the Company shall distribute to
such terminated employee all of his


                                          5

<PAGE>

or her accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire stock for the terminated employee), under
the Offering, without interest.

     (d)  Rights granted under the Plan shall not be transferable by a
participant other than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14, and during a participant's
lifetime, shall be exercisable only by such participant.

8.   EXERCISE.

     (a)  On each Purchase Date specified in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering.  Unless
otherwise provided for in the applicable Offering, no fractional shares shall be
issued upon the exercise of rights granted under the Plan.  The amount, if any,
of accumulated payroll deductions remaining in each participant's account after
the purchase of shares which is less than the amount required to purchase one
share of stock on the final Purchase Date of an Offering shall be held in each
such participant's account for the purchase of shares under the next Offering
under the Plan, unless such participant withdraws from such next Offering, as
provided in subparagraph 7(b), or is no longer eligible to be granted rights
under the Plan, as provided in paragraph 5, in which case such amount shall be
distributed to the participant after such final Purchase Date, without interest.
The amount, if any, of accumulated payroll deductions remaining in any
participant's account on the final Purchase Date of an Offering after the
purchase of shares which is equal to or in excess of the value of one whole
share of common stock shall be distributed in full to the participant after such
Purchase Date, without interest.

     (b)  No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan.  If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date.  If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.

                                          6

<PAGE>

9.   COVENANTS OF THE COMPANY.

     (a)  During the terms of the rights granted under the Plan, the Company
shall at all times keep available as authorized but unissued shares or treasury
shares that number of shares of stock required to satisfy such rights.

     (b)  The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan.  If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.

10.  USE OF PROCEEDS FROM STOCK.

     Proceeds from the sale of stock to participants pursuant to rights granted
under the Plan shall constitute general funds of the Company.

11.  RIGHTS AS A STOCKHOLDER.

     A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shares acquired upon exercise
of rights hereunder are recorded in the books of the Company (or its transfer
agent).

12.  ADJUSTMENTS UPON CHANGES IN STOCK.

     (a)  If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights.  Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive.  (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")

     (b)  In the event of:  (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) the acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company


                                          7

<PAGE>

or any Affiliate of the Company) of the beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule)
of securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors, then, as
determined by the Board in its sole discretion (i) any surviving or acquiring
corporation may assume outstanding rights or substitute similar rights for those
under the Plan, (ii) such rights may continue in full force and effect, or
(iii) participants' accumulated payroll deductions may be used to purchase
Common Stock immediately prior to the transaction described above and the
participants' rights under the ongoing Offering terminated.

13.  AMENDMENT OF THE PLAN.

     (a)  The Board or the Committee at any time, and from time to time, may
amend the Plan.  However, except as provided in paragraph 12 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company within twelve (12) months before or
after the adoption of the amendment if such amendment requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act or any Nasdaq or securities exchange
requirements.

     (b)  The Board or the Committee may amend the Plan in any respect the Board
or the Committee deems necessary or advisable to provide eligible employees with
the maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to employee stock purchase
plans and/or to bring the Plan and/or rights granted under it into compliance
therewith.

     (c)  Rights and obligations under any rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or rights granted under the Plan comply with the
requirements of Section 423 of the Code.

14.  DESIGNATION OF BENEFICIARY.

     (a)  A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash.  In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.

     (b)  Such designation of beneficiary may be changed by the participant at
any time by written notice in the form prescribed by the Company.  In the event
of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its sole discretion, may deliver


                                          8

<PAGE>

such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.

15.  TERMINATION OR SUSPENSION OF THE PLAN.

     (a)  The Board or the Committee in its discretion, may suspend or terminate
the Plan at any time.  No rights may be granted under the Plan while the Plan is
suspended or after it is terminated.

     (b)  Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under the Plan comply with the requirements of Section 423 of the
Code.

16.  EFFECTIVE DATE OF PLAN.

     The Plan shall become effective on the first date upon which any security
of the Company is listed (or approved for listing) upon notice of issuance on
any securities exchange, or designated (or approved for designation) upon notice
of issuance as a national market security on an interdealer quotation system
(the "Effective Date"), but no rights granted under the Plan shall be exercised
unless and until the Plan had been approved by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board or the Committee, which date may be prior to the Effective Date.

17.  CHOICE OF LAW.

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

                                          9




<PAGE>

                               INTUITIVE SURGICAL, INC.


                   AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT


                                 NOVEMBER 14, 1997












































                                      1

<PAGE>
                                          
                                 TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                 PAGE
                                                                                 ----
<S>                                                                              <C>

1.   GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2
     1.1    Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2

2.   REGISTRATION; RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . . . . . . .  3
     2.1    Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . .  3
     2.2    Demand Registration. . . . . . . . . . . . . . . . . . . . . . . . . .  4
     2.3    Piggyback Registrations. . . . . . . . . . . . . . . . . . . . . . . .  6
     2.4    Form S-3 Registration. . . . . . . . . . . . . . . . . . . . . . . . .  7
     2.5    Expenses of Registration . . . . . . . . . . . . . . . . . . . . . . .  8
     2.6    Obligations of the Company . . . . . . . . . . . . . . . . . . . . . .  8
     2.7    Termination of Registration Rights . . . . . . . . . . . . . . . . . .  9
     2.8    Delay of Registration; Furnishing Information. . . . . . . . . . . . . 10
     2.9    Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
     2.10   Assignment of Registration Rights. . . . . . . . . . . . . . . . . . . 12
     2.11   Amendment of Registration Rights . . . . . . . . . . . . . . . . . . . 12
     2.12   Limitation on Subsequent Registration Rights . . . . . . . . . . . . . 12
     2.13   "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . . . 13

3.   COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
     3.1    Basic Financial Information and Reporting. . . . . . . . . . . . . . . 14
     3.2    Inspection Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
     3.3    Confidentiality of Records . . . . . . . . . . . . . . . . . . . . . . 15
     3.4    Proprietary Information. . . . . . . . . . . . . . . . . . . . . . . . 16
     3.5    Stock Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
     3.6    Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . 16
     3.7    Visitation Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
     3.8    Reservation of Common Stock. . . . . . . . . . . . . . . . . . . . . . 18
     3.9    Termination of Covenants . . . . . . . . . . . . . . . . . . . . . . . 18

4.   MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
     4.1    Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
     4.2    Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
     4.3    Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 19
     4.4    Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
     4.5    Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 19
     4.6    Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . . . 19
     4.7    Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
     4.8    Attorney's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
     4.9    Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . 20
     4.10   Counterparts
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
     4.11   Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

SCHEDULES

Schedule of Investors
</TABLE>

                                       1

<PAGE>
                                          
                   AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT


     
     This AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement") is 
entered into as of the 14th day of November 1997, by and among INTUITIVE 
SURGICAL, INC., a Delaware corporation (the "Company"), Robert G. Younge, 
Frederic H. Moll and John G. Freund (the "Founders"), and the holders of the 
Company's Preferred Stock set forth on Exhibit A attached hereto.  Such 
holders shall be referred to hereinafter as the "Investors" and each 
individually as an "Investor."
                                          
                                  R E C I T A L S

     WHEREAS, the Company proposes to sell and issue shares of its Preferred
Stock from time to time, including the sale and issuance of Series D Preferred
Stock pursuant to that certain Series D Preferred Stock Purchase Agreement dated
as of the date hereof (the "Purchase Agreement"); 

     WHEREAS, as a condition of entering into the Purchase Agreement, the
purchaser of Series D Preferred Stock under the Purchase Agreement (the
"Purchaser") has requested that the Company extend to it registration rights and
other rights as set forth below; 

     WHEREAS, the Company, the Founders and those undersigned Investors holding
the Company's Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock desire to grant such rights to the Purchaser by substituting
this Agreement, to which the Purchaser is a party, for that Investors Rights
Agreement entered into as of the 20th day of December 1995 and amended on the
31st day of January 1996 and the 29th day of January 1997 by and among the
Company, the Founders and the holders of all of the then outstanding shares of
the Company's Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock (collectively the "Prior Agreements"); and

     WHEREAS, the Company and the Investors wish to grant certain rights to and
impose certain restrictions on the Founders, as set forth below;

     NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree (i) that effective upon the
closing of the sale and issuance of the Series D Preferred Stock pursuant to the
Series D Stock Purchase Agreement, and execution of this Agreement by Investors
holding at least fifty percent (50%) of the Company's Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock all provisions of, rights
granted by, and covenants made in the Prior Agreements are hereby waived,
released and terminated in their entirety and shall have no further force or
effect whatsoever and (ii) as follows:

     1.   GENERAL

          1.1    DEFINITIONS.  As used in this Agreement the following terms
shall have the following respective meanings:


<PAGE>

          "Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

          "Holder" means any Investor owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 2.10 hereof.

          "Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.

          "Registrable Securities" means (i) Common Stock of the Company issued
or issuable upon conversion of the Shares; and (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities.  Notwithstanding the foregoing, Registrable Securities shall not
include any securities (i) sold by a person to the public either pursuant to a
registration statement or Rule 144, or (ii) sold in a private transaction in
which the transferror's rights under Article II of this Agreement are not
assigned.

          "Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.

          "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed Ten Thousand Dollars ($10,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).

          "SEC" or "Commission" means the Securities and Exchange Commission.

          "Securities Act" shall mean the Securities Act of 1933, as amended.

          "Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes, if any, applicable to the sale of
Registrable Securities.

          "Shares" shall mean shares of the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.


     2.   REGISTRATION; RESTRICTIONS ON TRANSFER

                                       2

<PAGE>

         2.1    RESTRICTIONS ON TRANSFER. 

                (a)      Each Holder agrees not to make any disposition of 
all or any portion of the Registrable Securities (or the Common Stock 
issuable upon the conversion thereof) unless and until the transferee has 
agreed in writing for the benefit of the Company to be bound by this Section 
2.1, provided and to the extent such Section is then applicable and:

                         (i)    There is then in effect a registration 
statement under the Securities Act covering such proposed disposition and 
such disposition is made in accordance with such registration statement; or

                         (ii)   (A) Such Holder shall have notified the 
Company of the proposed disposition and shall have furnished the Company with 
a detailed statement of the circumstances surrounding the proposed 
disposition, and (B) if reasonably requested by the Company, such Holder 
shall have furnished the Company with an opinion of counsel, reasonably 
satisfactory to the Company, that such disposition will not require 
registration of such shares under the Securities Act.  It is agreed that the 
Company will not require opinions of counsel for transactions made pursuant 
to Rule 144 except in unusual circumstances.

                         (iii)  Notwithstanding the provisions of paragraphs 
(i) and (ii) above, no such registration statement or opinion of counsel 
shall be necessary for a transfer by a Holder which is (A) a partnership to 
its partners or former partners in accordance with partnership interests, or 
a corporation to its affiliates, (B) a corporation to its shareholders in 
accordance with their interest in the corporation or (C) to the Holder's 
family member or trust for the benefit of an individual Holder, provided the 
transferee will be subject to the terms of this Section 2.1 to the same 
extent as if he were an original Holder hereunder.

                (b)      Each certificate representing Shares or Registrable 
Securities shall (unless otherwise permitted by the provisions of this 
Agreement) be stamped or otherwise imprinted with a legend substantially 
similar to the following (in addition to any legend required under applicable 
state securities laws or as provided elsewhere in this Agreement and except 
that the Regulation S legend shall be applied only to those securities issued 
to Regulation S Purchasers):

     THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") AND MAY NOT BE
     OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
     AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR
     BASED ON OTHER WRITTEN EVIDENCE IN FORM AND SUBSTANCE SATISFACTORY TO
     THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE
     OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
     PURSUANT TO REGULATION S OF THE SECURITIES ACT OF 1933, AS AMENDED,
     (THE "ACT") AND MAY NOT BE SOLD, 


                                      3

<PAGE>

     MORTGAGED, PLEDGED, HYPOTHETICATED OR OTHERWISE TRANSFERRED EXCEPT IN
     ACCORDANCE THEREWITH.

                (c)      The Company shall be obligated to reissue promptly 
unlegended certificates at the request of any holder thereof if the holder 
shall have obtained an opinion of counsel (which counsel may be counsel to 
the Company) reasonably acceptable to the Company to the effect that the 
securities proposed to be disposed of may lawfully be so disposed of without 
registration, qualification or legend.  Upon removal of such legend, the 
provisions of Section 2.1(a) shall no longer apply.

                (d)      Each Regulation S Purchaser is aware that the 
Company will, and the Company agrees that the Company shall, to the extent 
required by Regulation S, refuse to register any transfer of the Shares 
purchased by such Regulation S Purchaser that is not made in accordance with 
Regulation S.

                (e)      Any legend endorsed on an instrument pursuant to 
applicable state securities laws and the stop-transfer instructions with 
respect to such securities shall be removed upon receipt by the Company of an 
order of the appropriate blue sky authority authorizing such removal.

         2.2    DEMAND REGISTRATION.

                2.2.1    Subject to the conditions of this Section 2.2, if 
the Company shall receive at any time after the earlier of either (i) January 
29, 2000 or (ii) ninety (90) days after the effective date of the 
registration statement pertaining to the initial public offering of the 
Company's Common Stock (the "Initial Offering"), a written request from the 
Holders of at least thirty percent (30%) of the Registrable Securities then 
outstanding (the "Initiating Holders") that the Company file a registration 
statement under the Securities Act covering the registration of (i) at least 
twenty percent (20%) of Registrable Securities or (ii) less than twenty 
percent (20%) of the Registrable Securities provided such lesser percentage 
of Registrable Securities have an aggregate offering price to the public of 
not less than $7,500,000, then the Company shall, within thirty (30) days of 
the receipt thereof, give written notice of such request to all Holders, and 
subject to the limitations of this Section 2.2, shall use its best efforts to 
effect, as soon as practicable, the registration under the Securities Act of 
all Registrable Securities that the Holders request to be registered.

                2.2.2    If the Initiating Holders intend to distribute the 
Registrable Securities covered by their request by means of an underwriting, 
they shall so advise the Company as a part of their request made pursuant to 
this Section 2.2 and the Company shall include such information in the 
written notice referred to in Section 2.2.1.  In such event, the right of any 
Holder to include his Registrable Securities in such registration shall be 
conditioned upon such Holder's participation in such underwriting and the 
inclusion of such Holder's Registrable Securities in the underwriting (unless 
otherwise mutually agreed by a majority in interest of the Initiating Holders 
and such Holder) to the extent provided herein.  All Holders proposing to 
distribute their securities through such underwriting shall enter into an 
underwriting agreement in customary form with the underwriter or underwriters 
selected for such underwriting by a majority in interest of the Initiating 
Holders (which underwriter or underwriters shall be 


                                      4

<PAGE>

reasonably acceptable to the Company). Notwithstanding any other provision of 
this Section 2.2, if the underwriter advises the Company in writing that 
marketing factors require a limitation of the number of securities to be 
underwritten (including Registrable Securities) then the Company shall so 
advise all Holders of Registrable Securities which would otherwise be 
underwritten pursuant hereto, and the number of shares that may be included 
in the underwriting shall be allocated to the Holders of such Registrable 
Securities on a pro rata basis based on the number of Registrable Securities 
held by all such Holders (including the Initiating Holders).  Any Registrable 
Securities excluded or withdrawn from such underwriting shall be withdrawn 
from the registration.

                2.2.3    The Company shall not be required to effect a 
registration pursuant to this Section 2.2:

                         (i)    after the Company has effected two (2) 
registrations pursuant to this Section 2.2 and such registrations have been 
declared or ordered effective; or

                         (ii)   during the period starting with the date of 
filing of, and ending on the date ninety (90) days following the effective 
date of the Initial Offering, provided that the Company is making reasonable 
and good faith efforts to cause such registration statement to become 
effective; or

                         (iii)  if within thirty (30) days of receipt of a 
written request from Initiating Holders pursuant to Section 2.2.1, the 
Company gives notice to the Holders of the Company's bona fide good faith 
intention to make its Initial Offering within ninety (90) days; or

                         (iv)   if the Company shall furnish to Holders 
requesting a registration statement pursuant to this Section 2.2, a 
certificate signed by the Chairman of the Board stating that in the good 
faith judgment of the Board of Directors of the Company, it would be 
seriously detrimental to the Company and its shareholders for such 
registration statement to be filed and it is therefore essential to defer the 
filing of such registration statement, in which event the Company shall have 
the right to defer such filing for a period of not more than ninety (90) days 
after receipt of the request of the Initiating Holders; provided that such 
right to delay a request shall be exercised by the Company no more than twice 
in any one-year period.

         2.3    PIGGYBACK REGISTRATIONS.  The Company promptly shall notify 
all Holders in writing of the Company's determination to file any 
registration statement under the Securities Act for purposes of a public 
offering of securities of the Company (including, but not limited to, 
registration statements relating to secondary offerings of securities of the 
Company, but excluding registration statements relating to employee benefit 
plans and corporate reorganizations) and will afford each such Holder an 
opportunity to include in such registration statement all or part of such 
Registrable Securities held by such Holder.  Each Holder desiring to include 
in any such registration statement all or any part of the Registrable 
Securities held by it shall, within twenty (20) days after mailing of the 
above-described notice from the Company, so notify the Company in writing.  
Such notice shall state the intended method of disposition of the Registrable 
Securities by such Holder. If a Holder decides not to include all of its 
Registrable Securities in any registration statement thereafter filed by the 
Company, such Holder shall nevertheless continue to have the right to include 
any Registrable Securities in any subsequent 


                                      5

<PAGE>

registration statement or registration statements as may be filed by the 
Company with respect to offerings of its securities, all upon the terms and 
conditions set forth herein.

                2.3.1    UNDERWRITING.  If the registration statement under 
which the Company gives notice under this Section 2.3 is for an underwritten 
offering, the Company shall so advise the Holders of Registrable Securities.  
In such event, the right of any such Holder to be included in a registration 
pursuant to this Section 2.3 shall be conditioned upon such Holder's 
participation in such underwriting and the inclusion of such Holder's 
Registrable Securities in the underwriting to the extent provided herein.  
All Holders proposing to distribute their Registrable Securities through such 
underwriting shall enter into an underwriting agreement in customary form 
with the underwriter or underwriters selected for such underwriting.  
Notwithstanding any other provision of the Agreement, if the underwriter 
determines in good faith that marketing factors require a limitation of the 
number of shares to be underwritten, the number of shares that may be 
included in the underwriting shall be allocated, first, to the Company; 
second, to the Holders on a pro rata basis based on the total number of 
Registrable Securities held by the Holders; and third, to any shareholder of 
the Company (other than a Holder) on a pro rata basis.  No such reduction 
shall reduce the securities being offered by the Company for its own account 
to be included in the registration and underwriting, and in no event shall 
the amount of securities of the selling Holders included in the registration 
be reduced below thirty percent (30%) of the total amount of securities 
included in such registration, unless such offering is the Initial Offering 
and such registration does not include shares of any other selling 
shareholders, in which event any or all of the Registrable Securities of the 
Holders may be excluded in accordance with the immediately preceding 
sentence. In no event will shares of any other selling shareholder be 
included in such registration which would reduce the number of shares which 
may be included by Holders without the written consent of Holders of not less 
than a majority of the Registrable Securities proposed to be sold in the 
offering.

                2.3.1.1  RIGHT TO TERMINATE REGISTRATION.  The Company shall 
have the right to terminate or withdraw any registration initiated or 
withdraw any registration initiated by it under this Section 2.3 prior to the 
effectiveness of such registration whether or not any Holder has elected to 
include securities in such registration.  The Registration Expenses of such 
withdrawn registration shall be borne by the Company in accordance with 
Section 2.5 hereof.

         2.4    FORM S-3 REGISTRATION.  In case the Company shall receive 
from any Holder or Holders a written request or requests that the Company 
effect a registration on Form S-3 (or any successor to Form S-3) or any 
similar short-form registration statement and any related qualification or 
compliance with respect to all or a part of the Registrable Securities owned 
by such Holder or Holders, the Company will:

                2.4.1    Promptly give written notice of the proposed 
registration, and any related qualification or compliance, to all other 
Holders of Registrable Securities; and

                2.4.2    As soon as practicable, effect such registration and 
all such qualifications and compliances as may be so requested and as would 
permit or facilitate the sale and distribution of all or such portion of such 
Holder's or Holders' Registrable Securities as are specified in such request, 
together with all or such portion of the Registrable Securities of any other 
Holder or Holders joining in such request as are specified in a written 
request given within 


                                      6

<PAGE>

twenty (20) days after mailing of such written notice from the Company; 
provided, however, that the Company shall not be obligated to effect any such 
registration, qualification or compliance pursuant to this Section 2.4:

                         (i)    if Form S-3 (or such successor or similar 
form) is not available for such offering by the Holders; or

                         (ii)   if the Holders, together with the holders of 
any other securities of the Company entitled to inclusion in such 
registration, propose to sell Registrable Securities and such other 
securities (if any) at an aggregate price to the public of less than 
$750,000; or

                         (iii)  if the Company shall furnish to the Holders a 
certificate signed by the Chairman of the Board of Directors of the Company 
stating that in the good faith judgment of the Board of Directors of the 
Company, it would be seriously detrimental to the Company and its 
shareholders for such Form S-3 Registration to be effected at such time, in 
which event the Company shall have the right to defer the filing of the Form 
S-3 registration statement for a period of not more than ninety (90) days 
after receipt of the request of the Holder or Holders under this Section 2.4, 
provided that the Company may exercise such right only once in each 12-month 
period; 

                         (iv)   after the Company has effected two (2) 
registrations pursuant to this Section 2.4 in any twelve (12) month period; or

                         (v)    in any particular jurisdiction in which the 
Company would be required to qualify to do business or to execute a general 
consent to service of process in effecting such registration, qualification 
or compliance.

                2.4.3    Subject to the foregoing, the Company shall file a 
Form S-3 registration statement covering the Registrable Securities and other 
securities so requested to be registered as soon as practicable after receipt 
of the request or requests of the Holders.

         2.5    EXPENSES OF REGISTRATION.  All Registration Expenses incurred 
in connection with any registration, qualification or compliance pursuant to 
Section 2.2 or any registration under Section 2.3 or Section 2.4 herein shall 
be borne by the Company.  All Selling Expenses incurred in connection with 
any registrations hereunder, shall be borne by the holders of the securities 
so registered pro rata on the basis of the number of shares so registered.  
The Company shall not, however, be required to pay for expenses of any 
registration proceeding begun pursuant to Section 2.2 or 2.4, the request of 
which has been subsequently withdrawn by the Initiating Holders unless the 
withdrawal is based upon material adverse information concerning the Company 
of which the Initiating Holders were not aware at the time of such request.  
If the Holders are required to pay the Registration Expenses, such expenses 
shall be borne by the holders of securities (including Registrable 
Securities) requesting such registration in proportion to the number of 
shares for which registration was requested.

         2.6    OBLIGATIONS OF THE COMPANY.  Whenever required to effect the 
registration of any Registrable Securities, the Company shall use its best 
efforts, as expeditiously as reasonably possible, to:



                                      7

<PAGE>

                2.6.1    Prepare and file with the SEC a registration 
statement with respect to such Registrable Securities and use its best 
efforts to cause such registration statement to become effective, and, upon 
the request of the Holders of a majority of the Registrable Securities 
registered thereunder, keep such registration statement effective for up to 
one hundred eighty (180) days or, if earlier, until the Holder or Holders 
have completed the distribution related thereto.

                2.6.2    Prepare and file with the SEC such amendments and 
supplements to such registration statement and the prospectus used in 
connection with such registration statement as may be necessary to comply 
with the provisions of the Securities Act with respect to the disposition of 
all securities covered by such registration statement.

                2.6.3    Furnish to the Holders such number of copies of a 
prospectus, including a preliminary prospectus, in conformity with the 
requirements of the Securities Act, and such other documents as they may 
reasonably request in order to facilitate the disposition of Registrable 
Securities owned by them.

                2.6.4    Use its best efforts to register and qualify the 
securities covered by such registration statement under such other securities 
or Blue Sky laws of such jurisdictions as shall be reasonably requested by 
the Holders, provided that the Company shall not be required in connection 
therewith or as a condition thereto to qualify to do business or to file a 
general consent to service of process in any such states or jurisdictions.

                2.6.5    In the event of any underwritten public offering, 
enter into and perform its obligations under an underwriting agreement, in 
usual and customary form, with the managing underwriter(s) of such offering.  
Each Holder participating in such underwriting shall also enter into and 
perform its obligations under such an agreement.

                2.6.6    Notify each Holder of Registrable Securities covered 
by such registration statement at any time when a prospectus relating thereto 
is required to be delivered under the Securities Act of the happening of any 
event as a result of which the prospectus included in such registration 
statement, as then in effect, includes an untrue statement of a material fact 
or omits to state a material fact required to be stated therein or necessary 
to make the statements therein not misleading in the light of the 
circumstances then existing.

                2.6.7    Furnish, at the request of a majority of the Holders 
participating in the registration, on the date that such Registrable 
Securities are delivered to the underwriters for sale, if such securities are 
being sold through underwriters, or, if such securities are not being sold 
through underwriters, on the date that the registration statement with 
respect to such securities becomes effective, (i) an opinion, dated as of 
such date, of the counsel representing the Company for the purposes of such 
registration, in form and substance as is customarily given to underwriters 
in an underwritten public offering and reasonably satisfactory to a majority 
in interest of the Holders requesting registration, addressed to the 
underwriters, if any, and to the Holders requesting registration of 
Registrable Securities and (ii) a letter dated as of such date, from the 
independent certified public accountants of the Company, in form and 
substance as is customarily given by independent certified public accountants 
to underwriters in an underwritten public offering and reasonably 
satisfactory to a majority in interest of the Holders requesting 

                                      8

<PAGE>

registration, addressed to the underwriters, if any, and if permitted by 
applicable accounting standards, to the Holders requesting registration of 
Registrable Securities.

                2.6.8    Cause all such Registrable Securities registered 
pursuant hereunder to be listed on each securities exchange on which similar 
securities issued by the Company are then listed.

                2.6.9    Provide a transfer agent and registrar for all 
Registrable Securities registered pursuant to such registration statement and 
a CUSIP number for all such Registrable Securities, in each case not later 
than the effective date of such registration.

         2.7    TERMINATION OF REGISTRATION RIGHTS.  All registration rights 
granted under this Article II shall terminate and be of no further force and 
effect five (5) years after the closing of the Company's Initial Offering.  
In addition, a Holder's registration rights shall expire if all Registrable 
Securities held by and issuable to such Holder may be sold under Rule 144 
during any ninety (90) day period.

         2.8    DELAY OF REGISTRATION; FURNISHING INFORMATION.

                (a)      No Holder shall have any right to obtain or seek an 
injunction restraining or otherwise delaying any such registration as the 
result of any controversy that might arise with respect to the interpretation 
or implementation of this Article II.

                (b)      It shall be a condition precedent to the obligations 
of the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that 
the selling Holders shall furnish to the Company such information regarding 
themselves, the Registrable Securities held by them, and the intended method 
of disposition of such securities as shall be required to effect the 
registration of their Registrable Securities.

         2.9    INDEMNIFICATION.  In the event any Registrable Securities are 
included in a registration statement under Sections 2.2, 2.3 or 2.4:

                2.9.1    To the extent permitted by law, the Company will 
indemnify and hold harmless each Holder, the partners, officers and directors 
of each Holder, any underwriter (as defined in the Securities Act) for such 
Holder and each person, if any, who controls such Holder or underwriter 
within the meaning of the Securities Act or the Securities Exchange Act of 
1934, as amended, (the "1934 Act"), against any losses, claims, damages, or 
liabilities (joint or several) to which they may become subject under the 
Securities Act, the 1934 Act or other federal or state law, insofar as such 
losses, claims, damages or liabilities (or actions in respect thereof) arise 
out of or are based upon any of the following statements, omissions or 
violations (collectively a "Violation") by the Company: (i) any untrue 
statement or alleged untrue statement of a material fact contained in such 
registration statement, including any preliminary prospectus or final 
prospectus contained therein or any amendments or supplements thereto, (ii) 
the omission or alleged omission to state therein a material fact required to 
be stated therein, or necessary to make the statements therein not 
misleading, or (iii) any violation or alleged violation by the Company of the 
Securities Act, the 1934 Act, any state securities law or any rule or 
regulation promulgated under the Securities Act, the 1934 Act or any state 
securities law in connection with the offering covered by such registration 
statement; and the Company will, as 


                                      9

<PAGE>

incurred, reimburse each such Holder, partner, officer or director, 
underwriter or controlling person for any legal or other expenses reasonably 
incurred by them in connection with investigating or defending any such loss, 
claim, damage, liability or action; provided however, that the indemnity 
agreement contained in this Section 2.9.1 shall not apply to amounts paid in 
settlement of any such loss, claim, damage, liability or action if such 
settlement is effected without the consent of the Company (which consent 
shall not be unreasonably withheld), nor shall the Company be liable in any 
such case for any such loss, claim, damage, liability or action to the extent 
that it arises out of or is based upon a Violation which occurs in reliance 
upon and in conformity with written information furnished expressly for use 
in connection with such registration by such Holder, partner, officer, 
director, underwriter or controlling person of such Holder.

                2.9.2    To the extent permitted by law, each selling Holder, 
if Registrable Securities held by such Holder are included in the securities 
as to which such registration is being effected, will indemnify and hold 
harmless the Company, each of its directors, each of its officers, each 
person, if any, who controls the Company within the meaning of the Securities 
Act, any underwriter and any other Holder selling securities under such 
registration statement or any of such other Holder's partners, directors or 
officers or any person who controls such Holder, against any losses, claims, 
damages or liabilities (joint or several) to which the Company or any such 
director, officer, controlling person, underwriter or other such Holder, or 
partner, director, officer or controlling person of such other Holder may 
become subject under the Securities Act, the 1934 Act or other federal or 
state law, insofar as such losses, claims, damages or liabilities (or actions 
in respect thereto) arise out of or are based upon any Violation, in each 
case to the extent (and only to the extent) that such Violation occurs in 
reliance upon and in conformity with written information furnished by such 
Holder under an instrument duly executed by such Holder and stated to be 
specifically for use in connection with such registration; and each such 
Holder will reimburse, as incurred, any legal or other expenses reasonably 
incurred by the Company or any such director, officer, controlling person, 
underwriter or other Holder, or partner, officer, director or controlling 
person of such other Holder in connection with investigating or defending any 
such loss, claim, damage, liability or action if it is judicially determined 
that there was such a Violation; provided, however, that the indemnity 
agreement contained in this Section 2.9.2 shall not apply to amounts paid in 
settlement of any such loss, claim, damage, liability or action if such 
settlement is effected without the consent of the Holder, which consent shall 
not be unreasonably withheld; provided further, that in no event shall any 
indemnity under this Section 2.9 exceed the gross proceeds from the offering 
received by such Holder.

                2.9.3    Promptly after receipt by an indemnified party under 
this Section 2.9 of notice of the commencement of any action (including any 
governmental action), such indemnified party will, if a claim in respect 
thereof is to be made against any indemnifying party under this Section 2.9, 
deliver to the indemnifying party a written notice of the commencement 
thereof and the indemnifying party shall have the right to participate in, 
and, to the extent the indemnifying party so desires, jointly with any other 
indemnifying party similarly noticed, to assume the defense thereof with 
counsel mutually satisfactory to the parties; provided, however, that an 
indemnified party shall have the right to retain its own counsel, with the 
fees and expenses to be paid by the indemnifying party, if representation of 
such indemnified party by the counsel retained by the indemnifying party 
would be inappropriate due to actual or



                                      10


<PAGE>

potential differing interests between such indemnified party and any other 
party represented by such counsel in such proceeding.  The failure to deliver 
written notice to the indemnifying party within a reasonable time of the 
commencement of any such action, if materially prejudicial to its ability to 
defend such action, shall relieve such indemnifying party of any liability to 
the indemnified party under this Section 2.9, but the omission so to deliver 
written notice to the indemnifying party will not relieve it of any liability 
that it may have to any indemnified party otherwise than under this Section 
2.9.

                2.9.4  If the indemnification provided for in this Section 2.9 
is held by a court of competent jurisdiction to be unavailable to an 
indemnified party with respect to any losses, claims, damages or liabilities 
referred to herein, the indemnifying party, in lieu of indemnifying such 
indemnified party thereunder, shall to the extent permitted by applicable law 
contribute to the amount paid or payable by such indemnified party as a 
result of such loss, claim, damage or liability in such proportion as is 
appropriate to reflect the relative fault of the indemnifying party on the 
one hand and of the indemnified party on the other in connection with the 
Violation(s) that resulted in such loss, claim, damage or liability, as well 
as any other relevant equitable considerations.  The relative fault of the 
indemnifying party and of the indemnified party shall be determined by a 
court of law by reference to, among other things, whether the untrue or 
alleged untrue statement of a material fact or the omission to state a 
material fact relates to information supplied by the indemnifying party or by 
the indemnified party and the parties' relative intent, knowledge, access to 
information and opportunity to correct or prevent such statement or omission.

                2.9.5  Notwithstanding the foregoing, to the extent that the 
provisions on indemnification and contribution contained in the underwriting 
agreement entered into in connection with the underwritten public offering 
are in conflict with the foregoing provisions, the provisions in the 
underwriting agreement shall control. 

                2.9.6  The obligations of the Company and Holders under this 
Section 2.9 shall survive the completion of any offering of Registrable 
Securities in a registration statement, and otherwise.

          2.10  ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the 
Company to register Registrable Securities pursuant to this Article II may be 
assigned by a Holder to a transferee or assignee of Registrable Securities 
which (i) is a subsidiary, parent, general partner, limited partner or 
retired partner of a Holder, (ii) is a Holder's family member or trust for 
the benefit of an individual Holder, or (iii) acquires at least one hundred 
thousand (100,000) shares of Registrable Securities (as adjusted for stock 
splits and combinations); provided, however, (A) the transferor shall, within 
ten (10) days after such transfer, furnish to the Company written notice of 
the name and address of such transferee or assignee and the securities with 
respect to which such registration rights are being assigned and (B) such 
transferee shall agree to be subject to all restrictions set forth in this 
Agreement.

          2.11  AMENDMENT OF REGISTRATION RIGHTS.  Any provision of this 
Article II may be amended and the observance thereof may be waived (either 
generally or in a particular instance and either retroactively or 
prospectively), only with the written consent of the Company and the Holders 
of not less than fifty percent (50%) of the Registrable Securities.  Any


                                       11


<PAGE>
 
amendment or waiver effected in accordance with this Section 2.11 shall be 
binding upon each Holder and the Company.  By acceptance of any benefits 
under this Article II, Holders of Registrable Securities hereby agree to be 
bound by the provisions hereunder.

          2.12  LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date 
of this Agreement, the Company shall not, without the prior written consent 
of the Holders not less than fifty percent (50%) of the Registrable 
Securities, enter into any agreement with any holder or prospective holder of 
any securities of the Company that would grant such holder registration 
rights senior to those granted to the Holders hereunder.  

          2.13  "MARKET STAND-OFF" AGREEMENT.  If requested by a representative
of the underwriters of Common Stock (or other securities) of the Company, each
Holder and Founder shall not sell or otherwise transfer or dispose of any Common
Stock (or other securities) of the Company held by such Holder or Founder (other
than those included in the registration) for a period specified by the
representative of the underwriters, not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act (the "Effective Date"), provided that:

                (a)  such agreement shall apply only to the Company's Initial 
Offering; and

                (b)  all officers and directors of the Company enter into 
similar agreements.

     The obligations described in this Section 2.13 shall not apply to a 
registration relating solely to employee benefit plans on Form S-1 or Form 
S-8 or similar forms that may be promulgated in the future, or a registration 
relating solely to a Commission Rule 145 transaction on Form S-4 or similar 
forms that may be promulgated in the future.  The Company may impose 
stop-transfer instructions with respect to the shares of Common Stock (or 
other securities) subject to the foregoing restriction until the end of said 
one hundred eighty (180) day period.

          2.14  RULE 144 REPORTING.  With a view to making available to the 
Holders the benefits of certain rules and regulations of the SEC which may 
permit the sale of the Registrable Securities to the public without 
registration, the Company agrees to use its best efforts to:

                (a)  Make and keep public information available, as those 
terms are understood and defined in SEC Rule 144 or any similar or analogous 
rule promulgated under the Securities Act, at all times after the effective 
date of the first registration filed by the Company for an offering of its 
securities to the general public;

                (b)  File with the SEC, in a timely manner, all reports and 
other documents required of the Company under the Securities Act and the 1934 
Act; and

                (c)  So long as a Holder owns any Registrable Securities, 
furnish to such Holder forthwith upon request:  a written statement by the 
Company as to its compliance with the reporting requirements of said Rule 144 
of the Securities Act, and of the Exchange Act (at any time after it has 
become subject to such reporting requirements); a copy of the most recent 
annual or quarterly report of the Company; and such other reports and 
documents as a 


                                       12


<PAGE>

Holder may reasonably request in availing itself of any rule or regulation of 
the SEC allowing it to sell any such securities without registration.

     3.   COVENANTS OF THE COMPANY

          3.1  BASIC FINANCIAL INFORMATION AND REPORTING.

               3.1.1  The Company will maintain true books and records of 
account in which full and correct entries will be made of all its business 
transactions pursuant to a system of accounting established and administered 
in accordance with generally accepted accounting principles consistently 
applied, and will set aside on its books all such proper accruals and 
reserves as shall be required under generally accepted accounting principles 
consistently applied.

               3.1.2  So long as an Investor (with its affiliates) shall own 
not less than (i) two million (2,000,000) shares of Registrable Securities 
(as adjusted for stock splits and combinations), (ii) two hundred thousand 
(200,000) shares of Series C Preferred Stock (as adjusted for stock splits 
and combinations), or (iii) two hundred thousand (200,000) shares of Series D 
Preferred Stock (as adjusted for stock splits and combinations) (a "Major 
Investor" which term shall include each Founder regardless of the number of 
shares such Founder holds) as soon as practicable after the end of each 
fiscal year of the Company, and in any event within ninety (90) days 
thereafter, the Company will furnish each Major Investor a consolidated 
balance sheet of the Company, as at the end of such fiscal year, and a 
consolidated statement of income and a consolidated statement of cash flows 
of the Company, for such year, all prepared in accordance with generally 
accepted accounting principles and setting forth in each case in comparative 
form the figures for the previous fiscal year, all in reasonable detail.  
Such financial statements shall be accompanied by a report and opinion 
thereon by independent public accountants of national standing selected by 
the Company's Board of Directors.

               3.1.3  The Company will furnish each Major Investor as soon as 
practicable after the end of the first, second and third quarterly accounting 
periods in each fiscal year of the Company, and in any event within 
forty-five (45) days thereafter, a consolidated balance sheet of the Company 
as of the end of each such quarterly period, and a consolidated statement of 
income and a consolidated statement of cash flows of the Company for such 
period and for the current fiscal year to date, prepared in accordance with 
generally accepted accounting principles, with the exception that no notes 
need be attached to such statements and year-end audit adjustments may not 
have been made.

               3.1.4  The Company will furnish each such Major Investor (i) 
at least thirty (30) days prior to the beginning of each fiscal year an 
annual budget and operating plans for such fiscal year (and as soon as 
available, any subsequent revisions thereto); and (ii) as soon as practicable 
after the end of each month, and in any event within twenty (20) days 
thereafter, a consolidated balance sheet of the Company as of the end of each 
such month, and a consolidated statement of income and a consolidated 
statement of cash flows of the Company for such month and for the current 
fiscal year to date, including a comparison to plan figures for such period, 
prepared in accordance with generally accepted accounting principles, with 
the exception that no notes need be attached to such statements and year-end 
audit adjustments may not have been made.


                                       13


<PAGE>

          3.2  INSPECTION RIGHTS.  Each Major Investor shall have the right 
to visit and inspect any of the properties of the Company or any of its 
subsidiaries, to discuss the affairs, finances and accounts of the Company or 
any of its subsidiaries with its officers, and to review such information 
regarding the Company as is reasonably requested all at such reasonable times 
and as often as may be reasonably requested; provided, however, that the 
Company shall not be obligated under this Section 3.2 with respect to a 
competitor of the Company or with respect to information which the Board of 
Directors determines in good faith is confidential and should not, therefore, 
be disclosed.

          3.3  CONFIDENTIALITY OF RECORDS.

               3.3.1  Each Investor agrees not to use Confidential 
Information (as hereinafter defined) of the Company for its own use or for 
any purpose except to evaluate and enforce its equity investment in the 
Company. Except as permitted under subsection (b) below, each Investor agrees 
to use its best efforts not to disclose such Confidential Information to any 
third parties. Each Investor shall undertake to treat such Confidential 
Information in a manner consistent with the treatment of its own information 
of such proprietary nature and agrees that it shall protect the 
confidentiality of and use reasonable best efforts to prevent disclosure of 
the Confidential Information to prevent it from falling into the public 
domain or the possession of unauthorized persons.  Each transferee of any 
Investor who receives Confidential Information shall agree to be bound by 
such provisions.  For purposes of this Section, "Confidential Information" 
means any information, technical data, or know-how, including, but not 
limited to, the Company's licenses, research, products, software, services, 
development, inventions, consultants' identities, processes, designs, 
drawings, engineering, marketing, finances, or business partners disclosed by 
the Company either directly or indirectly in writing, orally or by drawings 
or inspection of parts or equipment.

               3.3.2  Confidential Information does not include information, 
technical data or know-how which (i) is in the Investor's possession at the 
time of disclosure as shown by Investor's files and records immediately prior 
to the time of disclosure; (ii) before or after it has been disclosed to the 
Investor, it is part of the public knowledge or literature, not as a result 
of any action or inaction of the Investor; (iii) is approved for release by 
written authorization of Company; or (iv) is rightfully disclosed to Investor 
by a third party without restriction.  The provisions of this Section shall 
not apply (i) to the extent that an Investor is required to disclose 
Confidential Information pursuant to any law, statute, rule or regulation or 
any order of any court or jurisdiction process or pursuant to any direction, 
request or requirement (whether or not having the force of law but if not 
having the force of law being of a type with which institutional investors in 
the relevant jurisdiction are accustomed to comply) of any self-regulating 
organization or any governmental, fiscal, monetary or other authority; (ii) 
to the disclosure of Confidential Information to an Investor's employees, 
counsel, accountants or other professional advisors; (iii) to the extent that 
an Investor needs to disclose Confidential Information for the protection of 
any of such Investor's rights or interest against the Company, whether under 
this Agreement or otherwise; or (iv) to the disclosure of Confidential 
Information to a prospective transferee of securities which agrees to be 
bound by the provisions of this Section in connection with the receipt of 
such Confidential Information.


                                       14


<PAGE>

          3.4  PROPRIETARY INFORMATION.  The Company shall require all 
employees of and consultants to the Company who have access to proprietary 
information of the Company to enter into agreements in the Company's standard 
form providing for the protection of proprietary information and inventions.

          3.5  STOCK VESTING.  Unless otherwise approved by the Board of 
Directors, all stock options and other stock equivalents issued after the 
date of this Agreement to employees, directors, consultants and other service 
providers, except with respect to the Founders, shall be subject to vesting 
monthly over a four (4) year period.  With respect to any shares of stock 
purchased by any such person, the Company's repurchase option shall provide 
that (i) upon such person's termination of employment or service with the 
Company, with or without cause, the Company or its assignee (to the extent 
permissible under applicable securities laws and other laws) shall have the 
option to purchase at cost any unvested shares of stock held by such person, 
(ii) no such stock may be transferred prior to vesting, and (iii) the sale of 
all such stock shall be subject to a right of first refusal in favor of the 
Company or its assignees.

          3.6  RIGHT OF FIRST REFUSAL.  The Company hereby grants to each 
Major Investor, unless waived by the holders of at least a majority of the 
shares held by the Major Investors, the right of first refusal to purchase a 
pro rata share of New Securities (as defined below) that the Company may, 
from time to time, propose to sell and issue.  For purposes of this Section 
3.6 only, the term "Major Investor" shall include Guidant Corporation 
("Guidant").  The Company shall provide such information to a mutually-agreed 
upon Guidant employee ("Guidant Reviewer") in connection with the exercise of 
Guidant's rights under this Section 3.6, as Guidant may reasonably request.  
The Company and Guidant acknowledge and agree that any information delivered 
in accordance with this Section 3.6 is (i) Confidential Information, (ii) 
subject to the confidentiality provisions as set forth in Section 3.3 hereof 
and (iii) is to be provided to the Guidant Reviewer only and is not to be 
disclosed to any other employee, agent or affiliate of Guidant.  Each Major 
Investor's pro rata share, for purposes of this right of first refusal, is 
the ratio of (X) the number of shares of Registrable Securities then owned by 
such Major Investor to (Y) the total number of shares of Common Stock of the 
Company outstanding immediately prior to the issuance of the New Securities, 
assuming full conversion of all shares of outstanding Preferred Stock of the 
Company and exercise of all outstanding options and warrants to purchase 
securities of the Company.  This right of first refusal shall be subject to 
the following provisions:

               3.6.1  "New Securities" shall mean any offering by the Company 
of any Common Stock or Preferred Stock of the Company, whether now authorized 
or not, and rights, options, or warrants to purchase said Common Stock or 
Preferred Stock, and securities of any type whatsoever that are, or may 
become, convertible into said Common Stock or Preferred Stock; provided, 
however, that "New Securities" does not include (i) securities issuable upon 
conversion of the Shares; (ii) securities issued upon conversion or exchange 
of currently outstanding securities, (iii) securities offered to the public 
pursuant to a registration statement filed under the Securities Act; (iv) 
securities issued pursuant to the acquisition of another corporation by the 
Company by merger, purchase of substantially all of the assets, or other 
reorganization whereby the Company owns more than 50% of the voting power of 
such corporation; (v) shares of the Company's Common Stock (or related 
options) issued or issuable at any time to employees, directors or 
consultants of the Company, or any subsidiary, pursuant to 


                                       15


<PAGE>

any employee stock offering, plan, or arrangement approved by the Board of 
Directors; (vi) shares of the Company's Common Stock or Preferred Stock 
issued in connection with any stock split, stock dividend, or 
recapitalization by the Company; (vii) securities issued in connection with 
equipment lease financings or other financings with commercial lenders; 
(viii) shares of the Company's Common Stock or Preferred Stock issued in 
connection with strategic transactions involving the Company and other 
entities, including (A) joint ventures, manufacturing, marketing or 
distribution arrangements or (B) technology transfer or development 
arrangements; provided that such strategic transactions and the issuance of 
shares therein, has been approved by the Company's Board of Directors.

               3.6.2  In the event that the Company proposes to undertake an 
issuance of New Securities, it shall give each Holder written notice of its 
intention, describing the type of New Securities, the price, and the general 
terms upon which the Company proposes to issue the same.  Each Holder shall 
have twenty (20) business days from the date of mailing of any such notice to 
agree to purchase its pro rata share of such New Securities for the price and 
upon the general terms specified in the notice by giving written notice to 
the Company and stating therein the quantity of New Securities to be 
purchased. Notwithstanding the foregoing, the Company shall not be required 
to offer or sell New Securities to any Holder who would cause the Company to 
be in violation of applicable federal or state securities laws by virtue of 
such offer or sale.

               3.6.3  In the event that any Holder fails or Holders fail to 
exercise in full the right of first refusal within said twenty (20) business 
day period, the Company shall give written notice of such failure to every 
other Holder who gave timely notice to the Company of its exercise in full of 
its first refusal rights (a "Fully Participating Holder").  Any such Fully 
Participating Holder may then elect to purchase the New Securities respecting 
which the Holders' rights were not exercised ("Available New Securities"), at 
a price and upon general terms materially no more favorable to the purchasers 
thereof than specified in the Company's notice, by notifying the Company in 
writing within ten (10) business days from the date of mailing of any such 
notice.  In the event that the Fully Participating Holders give timely notice 
of elections to purchase, in addition to their original pro rata share of the 
New Securities, an aggregate of more than the Available New Securities 
available, such Fully Participating Holders shall purchase that percentage of 
the total of Available New Securities as each such Fully Participating 
Holder's present ownership of Registrable Securities bears to the total 
number of shares of all Fully Participating Holders who have given timely 
notice of their election to purchase additional shares.

               3.6.4  In the event (i) there are no Fully Participating 
Holders or (ii) the Fully Participating Holders do not timely elect to 
purchase all Available New Securities, the Company shall have one hundred and 
twenty (120) days thereafter to sell (or enter into an agreement pursuant to 
which the sale of Available New Securities covered thereby shall be closed, 
if at all, within thirty (30) days from the date of said agreement) the 
Available New Securities respecting which the Fully Participating Holders' 
rights were not exercised at a price and upon general terms materially no 
more favorable to the purchasers thereof than specified in the Company's 
notice.  In the event the Company has not sold the Available New Securities 
within said one hundred and twenty (120) day period (or sold and issued 
Available New Securities in accordance with the foregoing within one hundred 
and twenty (120) days from the 


                                       16


<PAGE>

date of said agreement), the Company shall not thereafter issue or sell any 
Available New Securities without first offering such securities to the 
Holders in the manner provided above.

               3.6.5  The right of first refusal of each Holder under this 
Section 3.6 may be transferred to any transferee who is or becomes a Holder. 
For purposes of this Section 3.6, Holder includes any general partner or 
affiliate of Holder.  A Holder shall be entitled to apportion the right of 
first refusal granted it among itself and its partners and affiliates in such 
proportions as it deems appropriate.

               3.6.6  Notwithstanding the foregoing, the consent of Guidant 
shall be required for any amendment or waiver of this Section 3.6.

          3.7  VISITATION RIGHTS.  To the extent a Founder is not a member of 
the board of directors, the Company shall allow one representative designated 
by each of the Founders to attend all meetings of the Company's board of 
directors in a nonvoting capacity, and in connection therewith, the Company 
shall give such representative copies of all notices, minutes, consents and 
other materials, financial or otherwise, which the Company provides to its 
board of directors.

          3.8  RESERVATION OF COMMON STOCK.  The Company will at all times 
reserve and keep available, solely for issuance and delivery upon the 
conversion of the Preferred Stock, all Common Stock issuable from time to 
time upon such conversion.

          3.9  TERMINATION OF COVENANTS.  All covenants of the Company 
contained in Article III of this Agreement shall expire and terminate as to 
each Investor and the Founders on the Effective Date of the Company's first 
firm commitment underwritten public offering registered under the Securities 
Act.

     4.  MISCELLANEOUS

         4.1   GOVERNING LAW.  This Agreement shall be governed by and 
construed under the laws of the State of California as applied to agreements 
among California residents entered into and to be performed entirely within 
California.

         4.2   SURVIVAL.  The representations, warranties, covenants, and 
agreements made herein shall survive any investigation made by any Holder and 
the closing of the transactions contemplated hereby.  All statements as to 
factual matters contained in any certificate or other instrument delivered by 
or on behalf of the Company pursuant hereto in connection with the 
transactions contemplated hereby shall be deemed to be representations and 
warranties by the Company hereunder solely as of the date of such certificate 
or instrument.

         4.3   SUCCESSORS AND ASSIGNS.  Except as otherwise expressly 
provided herein, the provisions hereof shall inure to the benefit of, and be 
binding upon, the successors, assigns, heirs, executors, and administrators 
of the parties hereto and shall inure to the benefit of and be enforceable by 
each person who shall be a holder of Registrable Securities from time to 
time; provided, however, that prior to the receipt by the Company of adequate 
written notice of the transfer of any Registrable Securities specifying the 
full name and address of the transferee, the Company may deem and treat the 
person listed as the holder of such shares in its records as the


                                       17



<PAGE>

absolute owner and holder of such shares for all purposes, including the 
payment of dividends or any redemption price.

         4.4    SEVERABILITY.  In case any provision of the Agreement shall 
be invalid, illegal, or unenforceable, the validity, legality, and 
enforceability of the remaining provisions shall not in any way be affected 
or impaired thereby.

         4.5    AMENDMENT AND WAIVER.

                4.5.1    Except as otherwise expressly provided, this 
Agreement may be amended or modified only upon the written consent of the 
Company and the holders of not less than fifty percent (50%) of the 
Registrable Securities.

                4.5.2    Except as otherwise expressly provided, the 
obligations of the Company and the rights of the Holders under this Agreement 
may be waived only with the written consent of the holders of not less than 
fifty percent (50%) of the Registrable Securities.

                4.5.3    Notwithstanding the foregoing, subject to Section 
2.12, this Agreement may be amended with only the written consent of the 
Company to modify Exhibit A to include additional purchasers of Shares as 
"Investors," "Holders" and parties hereto.

                4.5.4    Notwithstanding the foregoing, the consent of the 
Founder shall be required for any amendment or waiver of this Agreement which 
materially increases such Founder's obligations or diminishes such Founder's 
rights hereunder.

         4.6    DELAYS OR OMISSIONS.  It is agreed that no delay or omission 
to exercise any right, power, or remedy accruing to any Holder, upon any 
breach, default or noncompliance of the Company under this Agreement shall 
impair any such right, power, or remedy, nor shall it be construed to be a 
waiver of any such breach, default or noncompliance, or any acquiescence 
therein, or of any similar breach, default or noncompliance thereafter 
occurring.  It is further agreed that any waiver, permit, consent, or 
approval of any kind or character on any Holder's part of any breach, default 
or noncompliance under the Agreement or any waiver on such Holder's part of 
any provisions or conditions of this Agreement must be in writing and shall 
be effective only to the extent specifically set forth in such writing.  All 
remedies, either under this Agreement, by law, or otherwise afforded to 
Holders, shall be cumulative and not alternative.

         4.7    NOTICES.  All notices required or permitted hereunder shall 
be in writing and shall be deemed effectively given: (i) upon personal 
delivery to the party to be notified, (ii) when sent by confirmed telex or 
facsimile if sent during normal business hours of the recipient; if not, then 
on the next business day, (iii) five (5) days after having been sent by 
registered or certified mail, return receipt requested, postage prepaid, or 
(iv) one (1) day after deposit with a nationally recognized overnight 
courier, having specified next day delivery, with written verification of 
receipt.  All communications shall be sent to the Company or a Founder at the 
address as set forth on the signature page hereof and to the Investors at the 
address set forth on the Schedule of Investors or at such other address as 
any party may designate by ten (10) days advance written notice to the other 
parties hereto.


                                       18


<PAGE>

         4.8    ATTORNEY'S FEES.  In the event that any dispute among the 
parties to this Agreement should result in litigation, the prevailing party 
in such dispute shall be entitled to recover from the losing party all fees, 
costs and expenses of enforcing any right of such prevailing party under or 
with respect to this Agreement, including without limitation, such reasonable 
fees and expenses of attorneys and accountants, which shall include, without 
limitation, all fees, costs and expenses of appeals.

         4.9    TITLES AND SUBTITLES.  The titles of the sections and 
subsections of this Agreement are for convenience of reference only and are 
not to be considered in construing this Agreement.

         4.10   COUNTERPARTS.  This Agreement may be executed in any number 
of counterparts, each of which shall be an original, but all of which 
together shall constitute one instrument.

         4.11   ENTIRE AGREEMENT.  This Agreement constitutes the full and 
entire understanding and agreement between the parties with regard to the 
subjects hereof.  The Prior Agreements are hereby amended and restated in 
their entirety by this Agreement and the Company, the Founders and the 
Investors agree that this Agreement shall supersede and replace the rights 
and obligations of the Company, the Founders and the Investors granted to 
them under the Prior Agreements.


                                       19


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Amended and 
Restated Investor Rights Agreement as of the date set forth in the first 
paragraph hereof.


COMPANY:                            INVESTORS:

INTUITIVE SURGICAL, INC.            MAYFIELD VIII
                                    a California Limited Partnership
                                    By:  Mayfield VIII Management, L.L.C.
                                         a Delaware Limited Liability
By: /s/ Lonnie M. Smith                  Company, its General Partner
   -----------------------------
    Lonnie M. Smith
    Chief Executive Officer
                                    By:/s/ Russell C. Hirsch           
                                       -----------------------------------------
                                    Its:                               
                                        ----------------------------------------
FOUNDERS:

FREDERIC H. MOLL                    MAYFIELD ASSOCIATES FUND II
                                    a California Limited Partnership


/s/ Frederic H. Moll              
- --------------------------------
                                    By:/s/ George A. Pavlov            
                                       -----------------------------------------
                                    Its:                               
                                        ----------------------------------------
ROBERT G. YOUNGE

                                    SIERRA VENTURES V, L.P.
                                    By:  SV Associates V, L.P.,
/s/ Robert G. Younge                     its General Partner
- --------------------------------

JOHN G. FREUND

                                    By:/s/ Petri T. Vainio             
                                       -----------------------------------------
                                           Petri T. Vainio, General Partner
/s/ John G. Freund                 
- --------------------------------

                                    ALLAN G. LOZIER



                                    /s/ Allan G. Lozier                
                                    --------------------------------------------


                                       20


<PAGE>

                                   GC&H INVESTMENTS



                                   By:/s/ John L. Cardoza                     
                                      ------------------------------------------
                                          John L. Cardoza, Executive Partner



                                   ALLAN JOHNSTON



                                   /s/ Allan Johnston                           
                                   ---------------------------------------------

                                   GUIDANT CORPORATION



                                   By:/s/ Jay Watkins                           
                                      ------------------------------------------
                                          Jay Watkins, Vice President


                                   RWI GROUP, L.P.
  
  
  
                                   By:/s/ Donald A. Lucas
                                      ------------------------------------------
                                          Donald A. Lucas
  
  
                                   WILLIAM H. ABBOTT, TRUSTEE FOR THE
                                   ABBOTT LIVING TRUST DATED 08/20/87
  
  
  
                                   By:/s/ William H. Abbott
                                      ------------------------------------------
                                          William H. Abbott, Trustee
  
                                   PAUL A. BROOKE
  
  
  
    
                                   /s/ Paul A. Brooke
                                   ---------------------------------------------


                                       21


<PAGE>

                                   STANFORD UNIVERSITY
  
  
  
                                   By:/s/ Carol Gilmer
                                      ------------------------------------------
                                   Its: Assistant Secretary
  
                                   JOSEPH M. MANDATO AND ELIZABETH R.
                                   MANDATO TTEES OF THE MANDATO
                                   FAMILY TRUST
  
  
  
                                   By:/s/ Joseph M. Mandato
                                      ------------------------------------------
                                          Joseph M. Mandato, Trustee
  
  
                                   ROBERT OKUN
  
  
  
                                   /s/ Robert Okun
                                   ---------------------------------------------



                                   HOWARD M. HOLSTEIN
  
  
                                   /s/ Howard M. Holstein
                                   ---------------------------------------------
  
                                   PETER DICKSTEIN
  
  
  
                                   /s/ Peter Dickstein
                                   ---------------------------------------------
  
                                   WILLIAM JENKINS
  
  
  
                                   /s/ William Jenkins
                                   ---------------------------------------------


                                       22


<PAGE>

                                   MORGAN STANLEY VENTURE PARTNERS III, L.P.
  
                                   By:  Morgan Stanley Venture Partners
                                        III, L.L.C.
                                        Its General Partner
                                   By:  Morgan Stanley Venture Capital III, Inc.
                                        Institutional Managing Member



                                   By:/s/ Scott Halsted
                                      ------------------------------------------
                                   Its: General Partner
                                       -----------------------------------------

                                   MORGAN STANLEY VENTURE INVESTORS III, L.P.

                                   By:  Morgan Stanley Venture Partners
                                        III, L.L.C.
                                        Its General Partner
                                   By:  Morgan Stanley Venture Capital III, Inc.
                                        Institutional Managing Member
  
  
  
                                   By:/s/ Scott Halsted
                                      ------------------------------------------
                                   Its: General Partner
                                       -----------------------------------------


                                       23


<PAGE>

                                   PATMARK COMPANY, INC.
  
  
  
                                   By:/s/ James D. Van De Velde
                                      ------------------------------------------
                                   Its: President
                                       -----------------------------------------
  
  
                                    HUNTERSVILLE ROAD INVESTORS L.P.
  
  
  
                                   By: /s/ W. August Hillenbrand
                                      ------------------------------------------
                                   Its:
                                       -----------------------------------------
  
  
                                   WESTWOOD ASSOCIATES, L.P.
  
  
  
                                   By:
                                      ------------------------------------------
                                   Its:
                                       -----------------------------------------


                                       24


<PAGE>

                                   PRICE BROTHERS INVESTMENT PARTNERSHIP

                                   By:   Price Brothers Investment Corp.,
                                         its General Partner
  
  
                                   By:/s/ John Price
                                      ------------------------------------------
                                   Its: Vice President
                                       -----------------------------------------


                                       25


<PAGE>

                                   ROSE REVOCABLE TRUST
  
  
  
                                   By:/s/ G. Lynn Rose
                                      ------------------------------------------
                                   Its: Trustee
                                       -----------------------------------------


                                       26


<PAGE>

                                   HARRY S. ROBBINS AND SUSAN K. ROBBINS,
                                   TRUSTEES OF THE ROBBINS FAMILY TRUST
                                   D/T/D 4/15/91
  
  
                                   By:/s/ Harry S. Robbins
                                      ------------------------------------------
                                          Harry S. Robbins, Trustee
  
  
                                   By:/s/ Susan K. Robbins
                                      ------------------------------------------
                                          Susan K. Robbins, Trustee


                                       27


<PAGE>

                                        JUDD MELTZER



                                        /s/ Judd Meltzer
                                        ---------------------------------------

                                        WENDY MELTZER



                                        /s/ Wendy Meltzer
                                        ---------------------------------------

                                        SEELIG FREUND



                                        /s/ Seelig Freund
                                        ---------------------------------------

                                        CHARMIAN FREUND



                                        /s/ Charmian Freund
                                        ---------------------------------------

                                        BERNARD WEISS



                                        /s/ Bernard Weiss
                                        ---------------------------------------

                                        DORIS WEISS



                                        /s/ Doris Weiss
                                        ---------------------------------------

                                       28


<PAGE>

                                        STAR BAY PARTNERS, L.P.,
                                        a California Limited Partnership

                                        By:   APH Capital Management LLC,
                                              a California Limited Liability
                                              Company,
                                              its General Partner

                                        By:   Levensohn Capital Management LLC,
                                              a California Limited Liability
                                              Company, 
                                              its Managing Member



                                        By: /s/ Pascal N. Levnsohn
                                            -----------------------------------
                                              Pascal N. Levensohn
                                              Managing Member

                                       29

<PAGE>

                                        TRIAXIS TRUST AG



                                        By: /s/ H.P. John
                                            -----------------------------------
                                        Its: Chairman
                                             ----------------------------------

                                       30

<PAGE>

                                        BANK JULIUS BAER & CO. LTD.



                                        By: /s/ M. Jukotic        /s/ S. Newson
                                            -----------------------------------
                                        Its: Dep. Member          Vice President
                                             ----------------------------------

                                       31

<PAGE>

                                        CBG COMPAGNIE BANCAIRE GENEVE



                                        By: /s/ Michele Streuli /s/ Thierry Mory
                                            ------------------------------------
                                        Its: Vice President      Mandatory
                                            ------------------------------------

                                       32

<PAGE>

                                        RICHARD C. BLUM



                                        /s/ Richard C. Blum
                                        ---------------------------------------

                                        N. COLIN LIND



                                        /s/ N. Colin Lind
                                        ---------------------------------------

                                        JEFFREY W. UBBEN



                                        /s/ Jeffrey W. Ubben
                                        ---------------------------------------

                                        MURRAY A. INDICK



                                        /s/ Murray A. Indick
                                        ---------------------------------------

                                        GEORGE F. HAMEL, JR.



                                        /s/ George F. Hamel, Jr.
                                        ---------------------------------------

                                        MARC T. SCHOLVINCK



                                        /s/ Marc T. Scholvinck
                                        ---------------------------------------

                                        R. CRAIG LIND



                                        /s/ R. Craig Lind
                                        ---------------------------------------

                                       33

<PAGE>

                                        INSURANCE COMPANY SUPPORTED
                                        ORGANIZATIONS PENSION PLAN



                                        By:
                                            -----------------------------------
                                        Its:
                                            -----------------------------------

                                       34

<PAGE>

                                        BK CAPITAL PARTNERS, IV, L.P.

                                        By:   Richard C. Blum & Associates, L.P.
                                              Its General Partner


                                        By: /s/ Marc T. Scholvinck
                                            -----------------------------------
                                        Its: Managing Director
                                             ----------------------------------

                                       35

<PAGE>

                                        PRISM PARTNERS I, L.P.



         
                                        By: /s/ Jerald M. Weintrab
                                            -----------------------------------
                                        Its: Managing General Partner
                                             ----------------------------------

                                       36

<PAGE>

                                        RICHARD C. BLUM & ASSOCIATES, L.P.



         
                                        By: /s/ Marc T. Scholvinck
                                            -----------------------------------
                                        Its: Managing Director
                                             ----------------------------------

                                       37

<PAGE>

                                        TIMOTHY H. UBBEN



                                        /s/ Timothy H. Ubben
                                        ---------------------------------------

                                       38

<PAGE>


                             SCHEDULE OF INVESTORS


<TABLE>
<CAPTION>

                                                          Series A         Series B            Series C               Series D
 Name and Address                                        Preferred        Preferred           Preferred              Preferred

- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>                 <C>                    <C>

 Mayfield VIII                                           2,565,000           ---               912,000                337,630
 2800 Sand Hill Road
 Menlo Park, CA 94025
 Attn: A. Grant Heidrich, III
 Attn: Russell C. Hirsch

 Mayfield Associates Fund II                               135,000           ---                48,000                 17,770
 2800 Sand Hill Road
 Menlo Park, CA 94025
 Attn: A. Grant Heidrich, III
 Attn: Russell C. Hirsch

 Sierra Ventures V, L.P.                                 2,300,000           ---               600,000                125,000
 3000 Sand Hill Road
 Building 4, Suite 210
 Attn: Petri T. Vainio

 Frederic H. Moll                                          150,000           ---                 ---                    ---
 P.O. Box 620635
 Woodside, CA 94062

 Robert G. Younge                                          100,000           ---                 ---                    ---
 550 Westridge Drive
 Portola Valley, CA 94028

 John G. Freund and Linda G.                                50,000           ---                 ---                    ---
 Sexton, Trustees of the Freund/
 Sexton Living Trust Dated February 8, 1991
 86 Alejandra Avenue
 Atherton, CA 94027

 William H. Abbott, Trustee                                 25,000           ---                 ---                    ---
 for the Abbott Living Trust
 dated 08/20/87
 1507 Louisa Court
 Palo Alto, CA 94303

 Paul A. Brooke                                             25,000           ---                 ---                    ---
 Tower Hill Road
 Tuxedo Park, NY 10987

</TABLE>

                                       39


<PAGE>


                             SCHEDULE OF INVESTORS


<TABLE>
<CAPTION>

                                                          Series A         Series B            Series C               Series D
 Name and Address                                        Preferred        Preferred           Preferred              Preferred

- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>                <C>                     <C>

 Stanford University                                       25,000            ---                 ---                    ---
 c/o Stanford Management Company
 2770 Sand Hill Road
 Menlo Park, CA 94025
 Attn: Carol Gilmer

 GC&H Investments                                          20,000            ---                10,000                  ---
 One Maritime Plaza, 20th Floor
 San Francisco, CA 94111

 Joseph M. Mandato and Elizabeth R. Mandato                20,000            ---                10,000                  ---
 TTEES of the Mandato Family Trust
 82 Monte Vista Avenue
 Atherton, CA 94027

 Harry S. Robbins & Susan K. Robbins                       20,000            ---                 ---                    ---
 Trustees of the Robbins Family Trust 
 D/T/D 4/15/91
 15244 Montalvo Heights Court
 Saratoga, CA 95070

 Howard M. Holstein                                         7,500            ---                 ---                    ---
 850 Potomac School Terrace
 Potomac, MD 20854

 Guidant Corporation                                        ---            470,000             290,000                  ---
 c/o Origin Medsystems, Inc.
 135 Constitution Drive
 Menlo Park, CA 94025
 Attn: Jay Watkins

 Allan G. Lozier                                            ---              ---             1,200,000                116,000
 c/o Lozier Corporation
 6226 Pershing Drive
 Omaha, NE 678110

 RWI Group, L.P.                                            ---              ---               100,000                  ---
 72o University Avenue, Suite 103
 Palo Alto, CA 94301
 Attn: Donald A. Lucas

</TABLE>

                                       40


<PAGE>


                             SCHEDULE OF INVESTORS


<TABLE>
<CAPTION>

                                                          Series A         Series B            Series C               Series D
 Name and Address                                        Preferred        Preferred           Preferred              Preferred

- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>                <C>                     <C>

 Allan Johnston                                             ---              ---                 5,000                  ---
 c/o Synergy Partners International
 1010 El Camino Real, Suite 300
 Menlo Park, CA 94025

 Robert Okun                                                ---              ---                 5,000                  ---
 c/o Synergy Partners International
 1010 El Camino Real, Suite 300
 Menlo Park, CA 94025

 William M. Jenkins                                         ---              ---                 4,000                  ---
 2208 16th Avenue East
 Seattle, WA 98112

 Peter M. Dickstein                                         ---              ---                 1,000                  ---
 3746 Sacramento Street
 San Francisco, CA 94118

 Morgan Stanley Venture                                     ---              ---             1,368,600                  ---
  Partners III, L.P.
 3000 Sand Hill Road
 Building 4, Suite 250
 Menlo Park, CA 94025
 Attn: John F. Ryan

 Morgan Stanley Venture                                     ---              ---               131,400                  ---
  Investors III, L.P.
 3000 Sand Hill Road
 Building 4, Suite 250
 Menlo Park, CA 94025
 Attn: John F. Ryan

 PaTMarK Company, Inc.                                      ---              ---             1,000,000                37,500
 c/o Hillenbrand Industries, Inc.
 700 State Route, 46 East
 Batesville, IN 47006
 Attn: Thomas E. Brewer

 Huntersville Road Investors L.P.                           ---              ---               250,000                87,500
 c/o Hillenbrand Industries, Inc.
 700 State Route, 46 East
 Batesville, IN 47006
 Attn: Thomas E. Brewer

</TABLE>

                                       41


<PAGE>


                             SCHEDULE OF INVESTORS


<TABLE>
<CAPTION>

                                                          Series A         Series B            Series C               Series D
 Name and Address                                        Preferred        Preferred           Preferred              Preferred

- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>                 <C>                    <C>

 Rose Revocable Trust                                       ---              ---                 ---                   28,600
 c/o Goldman, Sachs & Co.
 555 California Street, 44th Floor
 San Francisco, Ca  94104
 Attn:  G. Lynn Rose

 Westwood Associates, L.P.                                  ---              ---                33,000                  ---
 c/o Hillenbrand Industries, Inc.
 700 State Route, 46 East
 Batesville, IN 47006
 Attn: Thomas E. Brewer

 Price Brothers Investment Partnership                      ---              ---                12,000                  ---
 1218 Third Avenue, #1115
 Seattle, WA 98101
 Attn: John Price

 Mr. Judd Meltzer                                           ---              ---                10,000                  ---
 Mrs. Wendy Meltzer
 900 Park Avenue
 New York, NY 10028

 Dr. Seelig Freund                                          ---              ---                 5,000                  ---
 Mrs. Charmian Freund
 1185 Park Avenue, Apt. 3F
 New York, NY 10128

 Dr. Bernard Weiss                                          ---              ---                 5,000                  ---
 Mrs. Doris Weiss
 119 East 84th Street, Apt. 8A
 New York, NY 10028

 Star Bay Partners, L.P.                                    ---              ---                 ---                  375,000
 c/o Levensohn Capital Management
 44 Montgomery Street
 Suite 2000
 San Francisco, CA 94104
 Attn:  Pascal N. Levensohn

 Triaxis Trust AG                                           ---              ---                 ---                  212,500
 Buerglistrasse 6
 8027 Zuerich
 Attn: Hans-Peter John

</TABLE>

                                       42


<PAGE>


                             SCHEDULE OF INVESTORS


<TABLE>
<CAPTION>

                                                          Series A         Series B            Series C               Series D
 Name and Address                                        Preferred        Preferred           Preferred              Preferred

- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>                 <C>                    <C>

 Bank Julius Baer & Co. Ltd.                                ---              ---                 ---                  162,500
 Bahmhoifstmasse 36
 8010 Zuerich
 Switzerland
 Attn: Simon Newson

 CBG Compagnie Bancaire Geneve                              ---              ---                 ---                  125,000
 Avenue de Rumine 20
 Case postale 220
 CH-1005 LAUSANNE
 Switzerland
 Attn: Thierry Mory

 Insurance Company Supported                                ---              ---                 ---                   75,000
 Organizations Pension Plan
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133

 BK Capital Partners IV, L.P.                               ---              ---                 ---                  187,500
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133

 Prism Partners I, L.P.                                     ---              ---                 ---                   62,500
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133

 Richard C. Blum & Associates, L.P.                         ---              ---                 ---                  120,625
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133

 Richard C. Blum                                            ---              ---                 ---                   18,750
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133

</TABLE>

                                       43


<PAGE>


                             SCHEDULE OF INVESTORS


<TABLE>
<CAPTION>

                                                          Series A         Series B            Series C               Series D
 Name and Address                                        Preferred        Preferred           Preferred              Preferred

- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>                 <C>                    <C>

 N. Colin Lind                                              ---              ---                 ---                    8,750
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133

 Jeffrey W. Ubben                                           ---              ---                 ---                    2,500
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133

 Timothy H. Ubben                                           ---              ---                 ---                   18,750
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133

 Murray A. Indick                                           ---              ---                 ---                    1,250
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133

 George F. Hamel, Jr.                                       ---              ---                 ---                      625
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133

 Marc T. Scholvinck                                         ---              ---                 ---                    2,500
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133

</TABLE>

                                       44


<PAGE>


<TABLE>

<S>                                                      <C>               <C>                <C>                    <C>

 R. Craig Lind                                              ---              ---                 ---                     1,250
 c/o Richard C. Blum & Associates, L.P.
 909 Montgomery Street, Suite 400
 San Francisco, CA  94133


 TOTAL                                                   5,442,500         470,000            6,000,000              2,125,000

</TABLE>


                                       45





<PAGE>

[LMSI LOGO]  LEASE MANAGEMENT SERVICES, INC.

                           EQUIPMENT FINANCING AGREEMENT
                                  (Number 10809)

THIS EQUIPMENT FINANCING AGREEMENT NUMBER 10809 ("Agreement") is dated as of 
the date set forth at the foot hereof and is between LEASE MANAGEMENT 
SERVICES, INC., ("Secured Party") and INTUITIVE SURGICAL, INC., ("Debtor").

1.     EQUIPMENT; SECURITY INTEREST.  The terms and conditions of this 
Agreement cover each item of machinery, equipment and other property 
(individually an "Item" or "Item of Equipment" and collectively the 
"Equipment") described in a schedule now or hereafter executed by the parties 
hereto and made a part hereof (individually a "Schedule" and collectively the 
"Schedules"). Debtor hereby grants Secured Party a security interest in and 
to all Debtor's right, title and interest in and to the Equipment under the 
Uniform Commercial Code, such grant with respect to an Item of Equipment to 
be as of Debtor's execution of a related Equipment Financing Commitment 
referencing this Agreement or, if Debtor then has no interest in such Item, 
as of such subsequent time as Debtor acquires an interest in the Item. Such 
security interest is granted by Debtor to secure performance by Debtor of 
Debtor's obligations to Secured Party hereunder
 and under any other 
agreements under which Debtor has or may hereafter have obligations to 
Secured Party. Debtor will ensure that such security interest will be and 
remain a sole and valid first lien security interest subject only to the lien 
of current taxes and assessment not in default but only if such taxes are 
entitled to priority as a matter of law.

2.     DEBTOR'S OBLIGATIONS.  The obligations of Debtor under this Agreement 
respecting an Item of Equipment, except the obligation to pay installment 
payments with respect thereto which will commence as set forth in Paragraph 3 
below, commence upon the grant to Secured Party of a security interest in the 
Item. Debtor's obligations hereunder with respect to an Item of Equipment and 
Secured Party's security interest therein will continue until payment of all 
amounts due, and performance of all terms and conditions required hereunder 
provided, however, that if this Agreement is in default said obligations and 
security interest will continue during the continuance of said default. Upon 
termination of Secured Party's security interest in an Item of Equipment, 
Secured Party will execute such release of interest with respect thereto as 
Debtor reasonably requests.

3.     INSTALLMENT PAYMENTS AND OTHER PAYMENTS.  Debtor will repay advances 
Secured Party makes on account of the Equipment in installment payments in 
the amounts and at the times set forth in the Schedules, whether or not 
Secured Party has rendered an invoice therefor, at the office of Secured 
Party set forth at the foot hereof, or to such person and/or at such other 
place as Secured Party may from time to time designate by notice to Debtor. 
Any other amounts required to be paid Secured Party by Debtor hereunder are 
due upon Debtor's receipt of Secured Party's invoice therefor and will be 
payable as directed in the invoice. Payments under this Agreement may be 
applied to Debtor's then accrued obligations to Secured Party in such order 
as Secured Party may choose.

4.     NET AGREEMENT; NO OFFSET, SURVIVAL.  This Agreement is a net 
agreement, and Debtor will not be entitled to any abatement of installment 
payments or other payments due hereunder or any reduction thereof under any 
circumstance or for any reason whatsoever. Debtor hereby waives any and all 
existing and future claims, as offsets, against any installment payments or 
other payment due hereunder and agrees to pay the installment payments and 
other amounts due hereunder as and when due regardless of any offset or claim 
which may be asserted by Debtor or on its behalf. The obligations and 
liabilities of Debtor hereunder will survive the termination of the Agreement.

5.     FINANCING AGREEMENT.  THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT.
DEBTOR ACKNOWLEDGES THAT THE EQUIPMENT HAS OR WILL HAVE BEEN SELECTED AND 
ACQUIRED SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT SECURED PARTY IS NOT 
AND WILL NOT BE THE VENDOR OF ANY


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INTUITIVE SURGICAL, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10809
PAGE 2 OF 8

EQUIPMENT AND THAT SECURED PARTY HAS NOT MADE AND WILL NOT MAKE ANY AGREEMENT, 
REPRESENTATION OR WARRANTY WITH RESPECT TO THE MERCHANTABILITY, CONDITION, 
QUALIFICATION OR FITNESS FOR A PARTICULAR PURPOSE OR VALUE OF THE EQUIPMENT 
OR ANY OTHER MATTER WITH RESPECT THERETO IN ANY RESPECT WHATSOEVER.

6.     NO AGENCY.  DEBTOR ACKNOWLEDGES THAT NO AGENT OF THE MANUFACTURER OR 
OTHER SUPPLIER OF AN ITEM OF EQUIPMENT OR OF ANY FINANCIAL INTERMEDIARY IN 
CONNECTION WITH THIS AGREEMENT IS AN AGENT OF SECURED PARTY. SECURED PARTY IS 
NOT BOUND BY A REPRESENTATION OF ANY SUCH PARTY AND, AS CONTEMPLATED IN 
PARAGRAPH 27 BELOW, THE ENTIRE AGREEMENT OF SECURED PARTY AND DEBTOR 
CONCERNING THE FINANCING OF THE EQUIPMENT IS CONTAINED IN THIS AGREEMENT AS IT 
MAY BE AMENDED ONLY AS PROVIDED IN THAT PARAGRAPH.

7.     ACCEPTANCE.  Execution by Debtor and Secured Party of a Schedule 
covering the Equipment or any Items thereof will conclusively establish that 
such Equipment has been included under and will be subject to all the terms
and conditions of this Agreement. If Debtor has not furnished Secured Party 
with an executed Schedule by the earlier of fourteen (14) days after receipt 
thereof or expiration of the commitment period set forth in the applicable 
Equipment Financing Agreement, Secured Party may terminate its obligation to 
advance funds as to the applicable Equipment.

8.     LOCATION; INSPECTION; USE.  Debtor will keep, or in the case of motor 
vehicles, permanently garage and not remove from the United States, as 
appropriate, each Item of Equipment in Debtor's possession and control at the 
Equipment Location designated in the applicable Schedule, or at such other 
location to which such Item may have been moved with the prior written 
consent of Secured Party. Whenever requested by Secured Party, Debtor will 
advise Secured Party as to the exact location of an Item of Equipment. Secured
Party will have the right to inspect the Equipment and observe its use during 
normal business hours, subject to Debtor's security procedures and to enter 
into and upon the premises where the Equipment may be located for such 
purpose. The Equipment will at all times be used solely for commercial or 
business purposes and operated in a careful and proper manner and in 
compliance with all applicable laws, ordinances, rules and regulations, all 
conditions and requirements of the policy or policies of insurance required 
to be carried by Debtor under the terms of this Agreement and all 
manufacturer's instructions and warranty requirements. Any modifications or 
additions to the Equipment required by any such governmental edict or 
insurance policy will be promptly made by Debtor.

9.    ALTERATIONS; SECURITY INTEREST COVERAGE.  Without the prior written 
consent of Secured Party, Debtor will not make any alterations, additions or 
improvements to any Item of Equipment which detract form its economic value 
or functional utility, except as may be required pursuant to Paragraph 8 
above. Secured Party's security interest in the Equipment will include all 
modifications and additions thereto and replacements and substitutions 
therefor, in whole or in part. Such reference to replacements and 
substitutions will not grant Debtor greater rights to replace or substitute 
than are provided in Paragraph 11 below or as may be allowed upon the prior 
written consent of Secured Party.

10.    MAINTENANCE.  Debtor will maintain the Equipment in good repair, 
condition and working order. Debtor will also cause each Item of Equipment 
for which a service contract is generally available to be covered by such a 
contract which provides coverages typical to property of the type involved 
and is issued by a competent servicing entity.

11.    LOSS AND DAMAGE; CASUALTY VALUE.  In the event of the loss of, theft 
of, requisition of, damage to or destruction of an Item of Equipment 
("Casualty Occurrence"), Debtor will give Secured Party prompt notice 
thereof and will thereafter place such Item in good repair,


<PAGE>

INTUITIVE SURGICAL, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10809
PAGE 3 OF 8

condition and working order, provided, however, that if such Item is 
determined by Secured Party to be lost, stolen, destroyed or damaged beyond 
repair, is requisitioned or suffers a constructive total loss as defined in 
any applicable insurance policy carried by Debtor in accordance with 
Paragraph 14 below, Debtor, at Secured Party's option, will (a) replace such 
Item with like Equipment in good repair, condition and working order 
whereupon such replacement equipment will be deemed such Item for all 
purposes hereof or (b) pay Secured Party the "Casualty Value" of such Item 
which will equal the total of (i) all installment payments and other amounts 
due from Debtor to Secured Party at the time of such payment and (ii) future 
installment payments due with respect to such Item with each such payment 
including any final uneven payment discounted at a rate equal to the discount 
rate of the Federal Reserve Bank of San Francisco from the date due to the 
date of such payment.

Upon such replacement or payment, as appropriate, this Agreement and Secured 
Party's security interest will terminate with, and only with, respect to the  
Item of Equipment so replaced or as to which such payment is made in 
accordance with Paragraph 2 above.

12.    TITLING; REGISTRATION.  Each item of Equipment subject to title 
registration laws will at all times be titled and/or registered by Debtor as 
Secured Party's agent and attorney-in-fact with full power and authority to 
register (but without power to affect title to) the Equipment in such manner 
and in such jurisdiction or jurisdictions as Secured Party directs. Debtor 
will promptly notify Secured Party of any necessary or advisable retitling 
and/or registration of an Item of Equipment in a jurisdiction other than 
the one in which such Item is then titled and/or registered. Any and all 
documents of title will be furnished or caused to be furnished Secured Party 
by Debtor within sixty (60) days of the date any titling or registering or 
restating or deregistering, as appropriate, is directed by Secured Party.

13.    TAXES.  Debtor will make all filings as to and pay when due all 
personal property and other ad valorem taxes and all other taxes, fees, 
charges and assessments based on the ownership or use of the Equipment and 
will pay as directed by Secured Party or reimburse Secured Party for all 
other taxes, including, but not limited to, gross receipt taxes (exclusive of 
federal and state taxes based on Secured Party's net income, unless such net 
income taxes are in substitution for or relieve Debtor from any taxes which 
Debtor would otherwise be obligated to pay under the terms of this Paragraph 
13), fees, charges and assessments whatsoever, however designated, whether 
based on the installment payments or other amounts due hereunder, levied, 
assessed or imposed upon the Equipment or otherwise related hereto or to the 
Equipment, now or hereafter levied, assessed or imposed under the authority 
of a federal, state, or local taxing jurisdiction, regardless of when and by 
whom payable. Filings with respect to such other amounts will, at Secured 
Party's option, be made by Secured Party or by Debtor as directed by Secured 
Party.

14.    INSURANCE.  Debtor will procure and continuously maintain all risk 
insurance against loss or damage to the Equipment from any cause whatsoever 
for not less than the full replacement value thereof naming Secured Party as 
Loss Payee. Such insurance must be in a form and with companies approved by 
Secured Party, must provide at least thirty (30) days advance written notice 
to Secured Party of cancellation, change or modification in any term, 
condition, or amount of protection provided therein, must provide full breach 
of warranty protection and must provide that the coverage is "primary 
coverage" (does not require contribution from any other applicable coverage). 
Debtor will provide Secured Party with an original policy or certificate 
evidencing such insurance. In the event of an assignment of this Agreement of 
which Debtor has notice, Debtor will cause such insurance to provide the same 
protection to the assignee as its interests may appear. The proceeds of such 
insurance, at the option of the Secured Party or such assignee, as 
appropriate, will be applied toward (a) repair or replacement of the 
appropriate Item or Items of Equipment, (b) payment of the Casualty Value 
thereof and/or (c) payment of, or as provision for, satisfaction of any other 
accrued obligations of Debtor hereunder. Debtor hereby appoints Secured Party 
as Debtor's attorney-in-fact with full power and authority to do all things, 
including, but not limited to, making claims, receiving payments and 
endorsing documents, checks or drafts, necessary to secure payments due under 
any policy contemplated hereby on account of a Casualty


<PAGE>

INTUITIVE SURGICAL, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10809
PAGE 4 OF 8

Occurrence. Debtor and Secured Party contemplate that the jurisdictions where 
the Equipment will be located will not impose any liability upon Secured 
Party for personal injury and/or property damage resulting out of the 
possession, use, operation or condition of the Equipment. In the event 
Secured Party determines that such is not or may not be the case with respect 
to a given jurisdiction, Debtor will provide Secured Party with public 
liability and property damage coverage applicable to the Equipment in such 
amounts and in such form as Secured Party requires.

15.  SECURED PARTY'S PAYMENT. If Debtor fails to pay any amounts due 
hereunder or to perform any of its other obligations under this Agreement, 
Secured Party may, at its option, but without any obligation to do so, pay 
such amounts or perform such obligations, and Debtor will reimburse Secured 
Party the amount of such payment or cost of such performance, plus interest at 
1.5% per month.

16.  INDEMNITY. Debtor does hereby assume liability for and does agree to 
indemnify, defend, protect, save and keep harmless Secured Party from and 
against any and all liabilities, losses, damages, penalties, claims, actions, 
suits, costs, expenses and disbursements, including court costs and legal 
expenses, of whatever kind and nature, imposed on, incurred by or asserted 
against Secured Party (whether or not also indemnified against by any other 
person) in any way relating to or arising out of this Agreement or the 
manufacture, financing, ownership, delivery, possession, use, operation, 
condition or disposition of the Equipment by Secured Party or Debtor, 
including, without limitation, any claim alleging latent and other defects, 
whether or not discoverable by Secured Party or Debtor, and any other claim 
arising out of strict liability in tort, whether or not in either instance 
relating to an event occurring while Debtor remains obligated under this 
Agreement, and any claim for patent, trademark or copyright infringement. 
Debtor agrees to give Secured Party and Secured Party agrees to give Debtor 
notice of any claim or liability hereby indemnified against promptly 
following learning thereof.

17.  DEFAULT. Any of the following will constitute an event of default 
hereunder: (a) Debtor's failure to pay when due any installment payment or 
other amount due hereunder, which failure continues for ten (10) days after 
the due date thereof; (b) Debtor's default in performing any other 
obligation, term or condition of this Agreement or any other agreement 
between Debtor and Secured Party or default under any further agreement 
providing security for the performance by Debtor of its obligations hereunder 
provided such default has continued for more than twenty (20) days, except as 
provided in (c) and (d) hereinbelow, or, without limiting the generality of 
subparagraph (l) hereinbelow, default under any lease or any mortgage or 
other instrument contemplating the provision of financial accommodation 
applicable to the real property where an Item of Equipment is located; (c) 
any writ or order of attachment or execution or other legal process being 
levied on or charged against any Item of Equipment and not being released or 
satisfied within ten (10) days; (d) Debtor's failure to comply with its 
obligations under Paragraph 14 above or any transfer by Debtor in violation 
of Paragraph 21 below; (e) a non-appealable judgment for the payment of 
money in excess of $100,000 being rendered by a court of record against 
Debtor which Debtor does not discharge or make provision for discharge in 
accordance with the terms thereof within ninety (90) days from the date of 
entry thereof; (f) death or judicial declaration of incompetency of Debtor, 
if an individual; (g) the filing by Debtor of a petition under the Bankruptcy 
Code or any amendment thereto or under any other insolvency law or law 
providing for the relief of debtors, including, without limitation, a petition 
for reorganization, arrangement or extension, or the commission by Debtor of 
an act of bankruptcy; (h) the filing against Debtor of any such petition not 
dismissed or permanently stayed within thirty (30) days of the filing 
thereof; (i) the voluntary or involuntary making of an assignment of 
substantial portion of its assets by Debtor for the benefit of creditors, 
appointment of a receiver or trustee for Debtor or for any of Debtor's 
assets, institution by or against Debtor or any other type of insolvency 
proceeding (under the Bankruptcy Code or otherwise) or of any formal or 
informal proceeding for dissolution, liquidation, settlement of claims 
against or winding up of the affairs of Debtor, Debtor's cessation of 
business activities or the making by Debtor of a transfer of all or a 
material portion of Debtor's assets or inventory not in the ordinary course 
of business; (j) the occurrence of any event described in parts (e), (f), 
(g), (h) or (i) hereinabove with respect to any guarantor or


<PAGE>

INTUITIVE SURGICAL, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10809
PAGE 5 OF 8

other party liable for payment or performance of this Agreement; (k) any 
certificate, statement, representation, warranty or audit heretofore or 
hereafter furnished with respect hereto by or on behalf of Debtor or any 
guarantor or other party liable for payment or performance of this Agreement 
proving to have been false in any material respect at the time as of which 
the facts therein set forth were stated or certified or having omitted any 
substantial contingent or unliquidated liability or claim against Debtor or 
any such guarantor or other party; (l) breach by Debtor of any lease or other 
agreement providing financial accommodation under which Debtor or its property 
is bound; or (m) a transfer of effective control of Debtor, if an 
organization.

18.  REMEDIES.  Upon the occurrence of an event of default, Secured Party 
will have the rights, options, duties and remedies of a Secured Party, and 
Debtor will have the rights and duties of a debtor, under the Uniform 
Commercial Code (regardless of whether such Code or a law similar thereto has 
been enacted in a jurisdiction wherein the rights or remedies are asserted) 
and, without limiting the foregoing, Secured Party may exercise any one or 
more of the following remedies:  (a) declare the Casualty Value or such 
lesser amount as may be set by law immediately due and payable with respect 
to any or all Items of Equipment without notice or demand to Debtor;  (b) sue 
from time to time for and recover all installment payments and other 
payments then accrued and which accrue during the pendency of such action 
with respect to any or all Items of Equipment;  (c) take possession of and, 
if deemed appropriate, render unusable any or all Items of Equipment, without 
demand or notice, wherever same may be located, without any court order or 
other process of law and without liability for any damages occasioned by such 
taking of possession and remove, keep and store the same or use and operate 
or lease the same until sold;  (d) require Debtor to assemble any or all 
Items of Equipment at the Equipment Location therefor, or at such location 
to which such Equipment may have been moved with the written consent of 
Secured Party or such other location in reasonable proximity to either of the 
foregoing as Secured Party designates;  (e) upon ten (10) days notice to 
Debtor or such other notice as may be required by law, sell or otherwise 
dispose of any Item of Equipment, whether or not in Secured Party's 
possession, in a commercially reasonable manner at public or private sale at 
any place deemed appropriate and apply the new proceeds of such sale, after 
deducting all costs of such sale, including, but not limited to, costs of 
transportation, repossession, storage, refurbishing, advertising and brokers' 
fees, to the obligations of Debtor to Secured Party hereunder or otherwise, 
with Debtor remaining liable for any deficiency and with any excess being 
returned to Debtor;  (f) upon thirty (30) days notice to Debtor, retain any 
repossessed or assembled Items of Equipment as Secured Party's own property 
in full satisfaction of Debtor's liability for the installment payments due 
hereunder with respect thereto, provided that Debtor will have the right to 
redeem such Items by payment in full of its obligations to Secured Party 
hereunder or otherwise or to require Secured Party to sell or otherwise 
dispose of such Items in the manner set forth in subparagraph (e) hereinabove 
upon notice to Secured Party within such thirty (30) day period; or (g) 
utilize any other remedy available to Secured Party under the Uniform 
Commercial Code or similar provision of law or otherwise at law or in equity.

No right or remedy conferred herein is exclusive of any other right or remedy 
conferred herein or by law; but all such remedies are cumulative of every 
other right or remedy conferred hereunder or at law or in equity, by statute 
or otherwise, and may be exercised concurrently or separately from time to 
time.  Any sale contemplated by subparagraph (e) of this Paragraph 18 may be 
adjourned from time to time by announcement at the time and place appointed 
for such sale, or for any such adjourned sale, without further published 
notice, Secured Party may bid and become the purchaser at any such sale.  Any 
sale of an Item of Equipment, whether under said subparagraph or by virtue of 
judicial proceedings, will operate to divest all right, title, interest, 
claim and demand whatsoever; either at law or in equity, of Debtor in and to 
said item and will be a perpetual bar to any claim against such Item, both at 
law and in equity, against Debtor and all persons claiming by, through or 
under Debtor.

19.  DISCONTINUANCE OF REMEDIES.  If Secured Party proceeds to enforce any 
right under this Agreement and such proceedings are discontinued or abandoned 
for any reason or are 


<PAGE>

INTUITIVE SURGICAL, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10809
PAGE 6 OF 8

determined adversely, then and in every such case Debtor and Secured Party 
will be restored to their former positions and rights hereunder.

20.  SECURED PARTY'S EXPENSES.  Debtor will pay Secured Party all costs and 
expenses, including attorney's fees and court costs and sales costs not 
offset against sales proceeds under Paragraph 18 above, incurred by Secured 
Party in exercising any of its rights or remedies hereunder or enforcing any 
of the terms, conditions or provisions hereof.  This obligation includes the 
payment or reimbursement of all such amounts whether an action is ultimately 
filed and whether an action is ultimately dismissed.

21.  ASSIGNMENT.  Without the prior written consent of Secured Party, Debtor 
will not sell, lease, pledge or hypothecate, except as provided in this 
Agreement, any Item of Equipment or any interest therein or assign, transfer, 
pledge, or hypothecate this Agreement or any interest in this Agreement or 
permit the Equipment to be subject to any lien, charge or encumbrance of any 
nature except the security interest of Secured Party contemplated hereby.  
Debtor's interest herein is not assignable and will not be assigned or 
transferred by operation of law.  Consent to any of the foregoing prohibited 
acts applies only in the given instance and is not a consent to any 
subsequent like act by Debtor or any other person.

All rights of Secured Party hereunder may be assigned, pledged, mortgaged, 
transferred or otherwise disposed of, either in whole or in part, without 
notice to Debtor but always, however, subject to the rights of Debtor under 
this Agreement.  If Debtor is given notice of any such assignment, Debtor 
will acknowledge receipt thereof in writing.  In the event Secured Party 
assigns this Agreement or the installment payments due or to become due 
hereunder or any other interest herein, whether as security for any of its 
indebtedness or otherwise, no breach or default by Secured Party hereunder or 
pursuant to any other agreement between Secured Party and Debtor, should 
there be one, will excuse performance by Debtor of any provision hereof, it 
being understood that in the event of such default or breach by Secured Party 
that Debtor will pursue any rights on account thereof solely against Secured 
Party.  No such assignee, unless such assignee agrees in writing, will be 
obligated to perform any duty, covenant or condition required to be performed 
by Secured Party in connection with this Agreement. 

Subject always to the foregoing, this Agreement inures to the benefit of, and 
is binding upon, the heirs, legatees, personal representative, successors and 
assigns of the parties hereto.

22.  MARKINGS; PERSONAL PROPERTY. If Secured Party supplies Debtor with 
labels, plates, decals or other markings stating that Secured Party has an 
interest in the Equipment, Debtor will affix and keep the same prominently 
displayed on the Equipment or will otherwise mark the Equipment or its then 
location or locations, as appropriate, at Secured Party's request to indicate 
Secured Party's security interest in the Equipment. The Equipment is, and at 
all times will remain, personal property notwithstanding that the Equipment 
or any Item thereof may now be, or hereafter become, in any manner affixed or 
attached to, or embedded in, or permanently resting upon real property or any 
improvement thereof or attached in any manner to what is permanent as by 
means of cement, plaster, nails, bolts, screws or otherwise. If requested by 
Secured Party, Debtor will obtain and deliver to Secured Party waivers of 
interest or liens in recordable form satisfactory to Secured Party from all 
persons claiming any interest in the real property on which an Item of 
Equipment is or is to be installed or located.

23.  LATE CHARGES. Time is of the essence in this Agreement and if any 
Installment Payment is not paid within ten (10) days after the due date 
thereof, Secured Party shall have the right to add and collect, and Debtor 
agrees to pay: (a) a late charge on and in addition to, such Installment 
Payment equal to five percent (5%) of such Installment Payment or a lesser 
amount if established by any state or federal statute applicable thereto, and 
(b) interest on such Installment Payment from thirty (30) days after the due 
date until paid at the highest contract rate enforceable against Debtor under 
applicable law but never to exceed eighteen percent (18%) per annum.


<PAGE>

INTUITIVE SURGICAL, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10809
PAGE 7 OF 8

24.  NON-WAIVER.  No covenant or condition of this Agreement can be waived 
except by the written consent of Secured Party.  Forbearance or indulgence by 
Secured Party in regard to any breach hereunder will not constitute a waiver 
of the related covenant or condition to be performed by Debtor.

25.  ADDITIONAL DOCUMENTS.  In connection with and in order to perfect and 
evidence the security interest in the Equipment granted Secured Party 
hereunder Debtor will execute and deliver to Secured Party such financing 
statements and similar documents as Secured Party requests.  Debtor 
authorizes Secured Party where permitted by law to make filings of such 
financing statements without Debtor's signature.  Debtor further will furnish 
Secured Party (a) on a timely basis, Debtor's future financial statements, 
including Debtor's most recent annual report, balance sheet and income 
statement, prepared in accordance with generally accepted accounting 
principles, which reports, Debtor warrants, shall fully and fairly represent 
the true financial condition of Debtor (b) any other information normally 
provided by Debtor to the public and (c) such other financial data or 
information relative to this Agreement and the Equipment, including, without 
limitation, copies of vendor proposals and purchase orders and agreements, 
listings of serial numbers or other identification data and confirmations of 
such information, as Secured Party may from time to time reasonably request.  
Debtor will procure and/or execute, have executed, acknowledge, have 
acknowledged, deliver to Secured Party, record and file such other documents 
and showings as Secured Party deems necessary or desirable to protect its 
interest in and rights under this Agreement and interest in the Equipment.  
Debtor will pay as directed by Secured Party or reimburse Secured Party for 
all filing, search, title report, legal and other fees incurred by Secured 
Party in connection with any documents to be provided by Debtor pursuant to 
this Paragraph or Paragraph 22 and any further similar documents Secured 
Party may procure. 

26.  DEBTOR'S WARRANTIES.  Debtor certifies and warrants that the financial 
data and other information which Debtor has submitted, or will submit, to 
Secured Party in connection with this Agreement is, or will be at time of 
delivery, as appropriate, a true and complete statement of the matters 
therein contained.  Debtor further certifies and warrants:  (a) this 
Agreement has been duly authorized by Debtor and when executed and delivered 
by the person signing on behalf of Debtor below will constitute the legal, 
valid and binding obligation, contract and agreement of Debtor enforceable 
against Debtor in accordance with its respective terms;  (b) this Agreement 
and each and every showing provided by or on behalf of Debtor in connection 
herewith may be relied upon by Secured Party in accordance with the terms 
thereof notwithstanding the failure of Debtor or other applicable party to 
ensure proper attestation thereto, whether by absence of a seal or 
acknowledgement or otherwise;  (c) Debtor has the right, power and authority 
to grant a security interest in the Equipment to Secured Party for the uses 
and purposes herein set forth and  (d) each Item of Equipment will, at the 
time such Item becomes subject hereto, be in good repair, condition and 
working order.

27.  ADDITIONAL SECURITY.  As additional security to secure the performance 
of the Debtor's obligations under this Agreement and the Schedules hereto, 
Debtor grants to the Secured Party a security interest in all of its fixed 
assets, including, but not limited to, lab, test, computer and office 
equipment and modifications and additions thereto and replacements and 
substitutions therefor and the proceeds thereof including insurance proceeds, 
now owned or hereafter acquired between the date of this Agreement and the 
later of (a) January 31, 1998 or (b) the expiration of the funding period 
under the credit approval dated February 14, 1997 (collectively, the 
"Additional Equipment").

The Debtor shall have all of the obligations with respect to the Additional 
Equipment as it has with respect to the Equipment as set forth in this 
Agreement. 

28.  ENTIRE AGREEMENT.  This instrument with exhibits and related 
documentation constitutes the entire agreement between Secured Party and 
Debtor and will not be amended, altered or changed except by a written 
agreement signed by the parties.


<PAGE>

INTUITIVE SURGICAL, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10809
PAGE 8 OF 8

29.  NOTICES.  Notices under this Agreement must be in writing and must be 
mailed by United States mail, certified mail with return receipt requested, 
duly addressed, with postage prepaid, to the party involved at its respective 
address set forth at the foot hereof or at such other address as each party 
may provide on notice to the other from time to time.  Notices will be 
effective when deposited.  Each party will promptly notify the other of any 
change in that party's address.

30.  GENDER, NUMBER:  JOINT AND SEVERAL LIABILITY.  Whenever the context of 
this Agreement requires, the neuter gender includes the feminine or masculine 
and the singular number includes the plural;  and whenever the words "Secured 
Party" are used herein, they include all assignees of Secured Party, it being 
understood that specific reference to "assignee" in Paragraph 14 above is for 
further emphasis.  If there is more than one Debtor named in this Agreement, 
the liability of each will be joint and several.

31.  TITLES.  The titles to the Paragraphs of this Agreement are solely for 
the convenience of the parties and are not an aid in the interpretation of 
the instrument.

32.  GOVERNING LAW; VENUE.  This Agreement will be governed by and construed 
in accordance with the laws of the State of California.  Venue for any action 
related to the Agreement will be in an appropriate court in San Mateo County, 
California, to which Debtor consents, or in another court selected by Secured 
Party which has jurisdiction over the parties.  In the event any provision 
hereof is declared invalid, such provision will be deemed severable from the 
remaining provisions of this Agreement, which will remain in full force and 
effect.

33.  TIME.  Time is of the essence of this Agreement and for each and all of 
its provisions.

In WITNESS WHEREOF, the undersigned have executed this Agreement as of
4/2, 1997.

DEBTOR:
INTUITIVE SURGICAL, INC.
1340 W. Middlefield Road
Mountain View, CA  94043

By:     /s/ W.H. Abbott
        _________________________________________

Title:  Consultant
        _________________________________________

SECURED PARTY:
LEASE MANAGEMENT SERVICES, INC.
2500 Sand HIll Road, Suite 101
Menlo Park, CA  94025

By:     /s/ Barbara B. Kaiser
        _________________________________________

Title:  EVP/General Manager
        _________________________________________


<PAGE>

           ADDENDUM TO EQUIPMENT FINANCING AGREEMENT NUMBER #10809
                                 BETWEEN
                       INTUITIVE SURGICAL, INC. ("DEBTOR")
                                   AND
               LEASE MANAGEMENT SERVICES, INC. ("SECURED PARTY")


    The printed form of Equipment Financing Agreement #10809 between the 
parties dated April 2, 1997 is amended as follows:


    1.  In Section 1, line 11 before the word "agreement" insert "equipment 
lease or equipment financing."

    2.  In Section 4, line 3, before "Debtor" insert  "To the extent not 
prohibited by law."

    3.  In Section 7, change "fourteen (14) days" to "thirty (30) days" in the 
second sentence.

    4.  In Section 8, line 5, after the first occurrence of "Secured Party." 
insert ", except that Secured Party's consent shall not be required when 
Debtor's principle place of business is relocated within the continental 
United States.  Debtor shall give Secured Party thirty (30) days advance 
written notice of Debtor's intent to relocate an Item of Equipment within the 
continental United States.  If Debtor is in default as defined in Section 17 
herein, Debtor may not relocate an Item of Equipment without the prior 
written consent of Secured Party, such consent shall not be unreasonably 
withheld."

    5.  In Section 8, line 6, before the second occurrence of "Secured Party." 
insert "Upon Prior reasonable notice,".

    6.  In Section 8, line 9, after "commercial" insert ",research and 
development."

    7.  In Section 10, line 2, after "also" insert "either."

    8.  At the end of Section 10, after "entity" insert "or provide 
comparable maintenance and repair services."

    9.  In Section 11, line 7, after the word "below" insert "Secured Party 
shall first consult with Debtor and then.", and in line 13, replace "the 
Federal Reserve Bank of San Francisco" with nine percent (9%)."

                                       1.



<PAGE>

     10.     Section 14, delete section in its entirety and replace with 
"14. INSURANCE  Debtor will procure and continuously maintain insurance against
loss (other than by reason of war, acts of God, riot, earthquake, flood or 
the like) or damage to the Equipment from any reasonable risk whatsoever for 
not less than the full replacement value thereof naming Secured Party as Loss 
Payee as its interest may appear. Such insurance must be in a form and with 
companies reasonably approved by Secured Party, must provide at least thirty 
(10) days advance written notice to Secured Party of cancellation, change or 
modification in any term, condition, or amount of protection provided 
therein, must provide full breach of warranty protection and must provide 
that the coverage is "primary coverage" (does not require contribution from 
any other applicable coverage). Debtor will provide Secured Party with an 
original policy or certificate evidencing such insurance. In the event of an 
assignment of this Agreement of which Debtor has notice, Debtor will cause 
such insurance to provide the same protection to the assignee as its interest 
may appear. The proceeds of such insurance, at the option of the Secured 
Party or such assignee (after consultation with Debtor), as appropriate, will 
be applied toward (a) repair or replacement of the appropriate Item or items 
of Equipment (b) payment of the Casualty Value thereof and/or (c) payment of, 
or as provision for, satisfaction of any other accrued obligations of Debtor 
hereunder. Debtor hereby appoints Secured Party as Debtor's attorney-in-fact 
will full power and authority, if an Event of Default has occurred and is 
continuing, to do all things, including, but not limited to, making claims, 
receiving payments and endorsing documents, checks or drafts, necessary to 
secure payments due under any policy contemplated hereby on account of a 
Casualty Occurrence. Debtor and Secured Party contemplate that the 
jurisdictions where the Equipment will be located will not impose any 
liability upon Secured Party for personal injury and/or property damage 
resulting out of the possession, use, operation or condition of the 
Equipment. In the event Secured Party determines that such is not or may not 
be the case with respect to a given jurisdiction, Debtor will provide Secured 
Party with public liability and property damage coverage applicable to the 
Equipment in such amounts and in such form as Secured Party reasonably 
requires, PROVIDED, HOWEVER, that public liability insurance with primary 
limits of $1,000,000 per occurrence with an excess policy of $2,000,000, 
shall be deemed to satisfy this requirement."

     11.     Section 15, at the beginning of the section insert "Subject to 
Section 23 below,".

     12.     Section 16, line 4, after the phrase "kind and nature" insert, 
", except any of the foregoing resulting from Secured Party's gross negligence 
or willful misconduct,".

     13.     In Section 17(h), change "thirty (30) days" to "sixty (60) days."

     14.     In Section 17(i), at the end of the clause insert ", except for 
the purposes of a change in Debtor's state of incorporation."

     15.     Section 17(k), at the end of the clause insert "in excess of 
$50,000 per item or in the aggregate."


                                      2.


<PAGE>

     16.     In Section 17(k), after the words "or having" insert "knowingly."

     17.     In Section 17(m), insert "subject to Section 21," at the 
beginning of the clause.

     18.     Section 17(l), delete the section and replace it with "breach, 
in excess of $50,000 per item or in the aggregate, by Debtor of any lease or 
other agreement providing financial accommodation under which Debtor or its 
property is bound, which breach is not cured or with respect to which no 
provision has been made to cure within twenty (20) days;".

     19.     Section 18, line 1, insert the following in front of the 
beginning of the first sentence of the section:  "Except as provided 
otherwise in this Agreement (as amended by this Addendum)."

     20.     In Section 18, (e) change "ten (10) days" to "fifteen (15) days."

     21.     In Section 18, second paragraph,  line 4, after "Any" insert 
"lawful."

     22.     In Section 19, line 2, delete "or are determined adversely."

     23.     Section 20, line 1, insert "reasonable" between "all" and "cost."

     24.     Section 20, line 2, "reasonable" between "including" and 
"attorney's."

     25.     Section 20, line 6, after "dismissed" insert ", provided that 
the cost and expenses were incurred in the good faith exercise of Secured 
Party's rights and remedies hereunder."

     26.     Section 21, line 4, after "Agreement" insert "(except in each 
such case, for purposes of changing Debtor's state of incorporation)."

     27.     Section 21, line 5, before "Debtor's" insert "Except as provided 
in the previous sentence."

     28.     Section 24, line 1, after "condition" insert "to be performed by 
Debtor."

     29.     Section 25, line 4, insert "reasonably" before "requests."

     30.     Section 25, line 17, insert "reasonable" between "report," and 
"legal" and between "other" and "fees."

     31.     Section 25(b), after "other" insert "financial."

     32.     Section 25, line 15, delete "or desirable."


                                      3.

<PAGE>


     33.     Section 25(c), delete the last sentence and replace it with 
"Debtor will pay as directed by Secured Party or reimburse Secured Party for 
all Uniform Commercial Code filings by Secured Party against Debtor and all 
search reports conducted with respect to the debtor."

     34.     Section 27 append after last sentence to first paragraph 
"Notwithstanding the foregoing, in no event shall Secured Party have any 
right or interests in any intellectual property incorporated, associated or 
related to the Additional Equipment."

     35.     Section 29, line 5, after "effective" replace "when" with "upon 
the earlier of receipt or three days after."

     36.     Section 32, line 4, after "Secured Party" insert", to which Debtor 
consents."

     IN WITNESS WHEREOF, the undersigned have executed this Addendum this 2nd 
day of April, 1997.

DEBTOR                                   SECURED PARTY:

INTUITIVE SURGICAL, INC.                 LEASE MANAGEMENT SERVICES, INC.

By:  /s/ W.H. Abbott                    By: /s/ Barbara B. Kaiser
   ----------------------------             -------------------------

Title:  Consultant                       Title:  EVP/GM
      -------------------------                ----------------------


                                      4.


<PAGE>
[LMSI LOGO] LEASE MANAGEMENT SERVICES, INC.


                                 ADDENDUM TO

                        EQUIPMENT FINANCING AGREEMENT

                                NUMBER 10809

                               BY AND BETWEEN

                     INTUITIVE SURGICAL, INC., AS DEBTOR

                                    AND

              LEASE MANAGEMENT SERVICES, INC., AS SECURED PARTY


INTUITIVE SURGICAL, INC., as Debtor, hereby acknowledges its responsibility 
to pay, and agrees to pay any taxes which may be due to the State of 
California or where applicable, for the collateral covered under the above 
referenced agreement.




DEBTOR:
INTUITIVE SURGICAL, INC.

By:    /s/ W.H. Abbott
       ------------------------

Title: Consultant
       ------------------------

Date:  4/2/97
       ------------------------




<PAGE>

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS 
AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH 
RULE 144 UNDER SAID ACT OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT 
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE 
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A 
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.


                            -----------------------

              WARRANT TO PURCHASE 11,000 SHARES OF COMMON STOCK

                                                   April 15, 1997

THIS CERTIFIES THAT, for value received, Lease Management Services, Inc., 
("Holder") is entitled to subscribe for and purchase Eleven Thousand (11,000) 
shares of the fully paid and nonassessable Common Stock ("the Shares") of 
Intuitive Surgical, Inc., a Delaware corporation (the "Company"), at the 
Warrant Price (as hereinafter defined), subject to the provisions and upon 
the terms and conditions hereinafter set forth. As used herein, the term 
"Common Stock" shall mean the Company's presently authorized Common Stock, 
and any stock into which such Common Stock may hereafter be exchanged.

1.  WARRANT PRICE.  The Warrant Price shall initially be Five and 00/100 
dollars ($5.00) per share, subject to adjustment as provided in Section 7 
below.


2.  CONDITIONS TO EXERCISE.  The purchase right represented by this Warrant 
may be exercised at any time, or from time to time, in whole or in part 
during the term commencing on the date hereof and ending on the earlier of:

      (a) 5:00 P.M. California time on the sixth annual anniversary of this 
      Warrant Agreement; or

      (b) the effective date of the merger of the Company with or into, the 
      consolidation of the Company with, or the sale by the Company of all or 
      substantially all of its assets to another corporation or other entity 
      (other than such a transaction wherein the shareholders of the Company 
      retain or obtain a majority of the voting capital stock of the 
      surviving, resulting, or purchasing corporation); provided that the 
      Company shall notify the registered Holder of this Warrant of the 
      proposed effective date of the merger, consolidation, or sale at least 
      30 days prior to the effectiveness thereof.

      In the event that, although the Company shall have given notice of a 
      transaction pursuant to subparagraph (b) hereof, the transaction does 
      not close on approximately the day specified by the Company, unless 
      otherwise elected by the Holder any exercise of the Warrant subsequent 
      to the giving of such notice shall be rescinded and the Warrant shall 
      again be exercisable until terminated in accordance with this Paragraph 
      2.

3.  METHOD OF EXERCISE; PAYMENT; ISSUANCE OF SHARES; ISSUANCE OF NEW WARRANT.

(a) CASH EXERCISE. Subject to Section 2 hereof, the purchase right 
represented by this Warrant may be exercised by the Holder hereof, in whole 
or in part, by the surrender of this



<PAGE>

Page 2 of 10

Warrant (with a duly executed Notice of Exercise in the form attached hereto) 
at the principal office of the Company (as set forth in Section 18 below) and 
by payment to the Company, by check, of an amount equal to the then 
applicable Warrant Price per share multiplied by the number of shares then 
being purchased. In the event of any exercise of the rights represented by 
this Warrant, certificates for the shares of stock so purchased shall be in 
the name of, and delivered to, the Holder hereof, or as such Holder may 
direct (subject to the terms of transfer contained herein and upon payment by 
such Holder hereof of any applicable transfer taxes). Such delivery shall be 
made within 10 days after exercise of the Warrant and at the Company's 
expense and, unless this Warrant has been fully exercised or expired, a new 
Warrant having terms and conditions substantially identical to this Warrant 
and representing the portion of the Shares, if any, with respect to which 
this Warrant shall not have been exercised, shall also be issued to the 
Holder hereof within 10 days after exercise of the Warrant.

(b) NET ISSUE EXERCISE. In lieu of exercising this Warrant pursuant to 
Section 3(a), Holder may elect to receive shares equal to the value of this 
Warrant (or of any portion thereof remaining unexercised) by surrender of 
this Warrant at the principal office of the Company together with notice of 
such election, in which event the Company shall issue to Holder the number of 
shares of the Company's Common Stock computed using the following formula:

      X = Y (A-B)
          -------
          A

      Where X = the number of shares of Common Stock to be issued to Holder.

      Y = the number of shares of Common Stock purchasable under this Warrant 
            (at the date of such calculation).

      A = the fair market value of one share of the Company's Common Stock 
            (at the date of such calculation).

      B = Warrant exercise price (as adjusted to the date of such 
            calculation).

(c) FAIR MARKET VALUE. For purposes of this Section 3, Fair Market Value of 
one share of the Company's Common Stock shall mean:

      (i)    In the event of an Initial Public Offering, the per share Fair 
      Market Value for the Common Stock shall be the Offering Price at which 
      the underwriters sell Common Stock to the public; or

      (ii)   The average of the closing bid and asked prices of the Common 
      Stock quoted in the Over-The-Counter Market Summary, the last reported 
      sale price of the Common Stock or the closing price quoted on the 
      Nasdaq National Market System ("NMS") or on any exchange on which the 
      Common Stock is listed, whichever is applicable, as published in the 
      Western Edition of The Wall Street Journal for the ten (10) trading 
      days prior to the date of determination of fair market value; or

      (iii)  If the Company shall be subject to a merger, acquisition or other 
      consolidation in which the Company is not the surviving entity, 
      pursuant to Section 2(b), the per share Fair Market Value for the 
      Common Stock shall be the value received per share of Common Stock by 
      all holders of the Common Stock as determined by the Board of 
      Directors; or

      (iv)   If the Common Stock is not publicly traded, the per share fair 
      market value of the Common Stock shall be as determined in good faith 
      by the Company's Board of


                                      2


<PAGE>

Page 3 of 10

      Directors unless Holder electes to have such fair market value 
      determined by an appraiser, which election must be made by Holder 
      within ten (10) business days of the date the Company notifies Holder 
      of the fair market value as determined by its Board of Directors. In 
      the event of such an appraisal, the cost thereof shall be borne by the 
      Holder unless such appraisal results in a fair market value in excess 
      of 115% of that determined by the Company's Board of Directors, in 
      which event the Company shall bear the cost of such appraisal.

      In the event of 3(c)(iii) or 3(c)(iv), above, the Company's Board of 
      Directors shall prepare a certificate, to be signed by an authorized 
      Officer of the Company, setting forth in reasonable detail the basis 
      for and method of determination of the per share Fair Market Value of 
      the Common Stock. The Board will also certify to the Holder that this 
      per share Fair Market Value will be applicable to all holders of the 
      Company's Common Stock. Such certification must be made to Holder at 
      least thirty (30) business days prior to the proposed effective date of 
      the merger, consolidation, sale, or other triggering event as defined 
      in 3(c)(iii) and 3(c)(iv).

(d) AUTOMATIC EXERCISE. To the extent this Warrant is not previously 
exercised, it shall be automatically exercised in accordance with Sections 
3(b) and 3(c) hereof (even if not surrendered) immediately before: (i) its 
expiration or (ii) the consummation of any consolidation or merger of the 
Company, or any sale or transfer of a majority of a company's assets 
pursuant to Section 2(b).

4.  REPRESENTATIONS AND WARRANTIES OF HOLDER AND RESTRICTIONS ON TRANSFER 
IMPOSED BY THE SECURITIES ACT OF 1933.

(a) Representations and Warranties by Holder. The Holder represents and 
warrants to the Company with respect to this purchase as follows:

      (i)    The Holder has substantial experience in evaluating and 
      investing in private placement transactions of securities of companies 
      similar to the Company so that the Holder is capable of evaluating the 
      merits and risks of its investment in the Company and has the capacity 
      to protect its interests.

      (ii)   The Holder is acquiring the Warrant and the Shares of Common 
      Stock issuable upon exercise of the Warrant (collectively the 
      "Securities") for investment for its own account and not with a view 
      to, or for resale in connection with, any distribution thereof. The 
      Holder understands that the Securities have not been registered under 
      the Act by reason of a specific exemption from the registration 
      provisions of the Act which depends upon, among other things, the bona 
      fide nature of the investment intent as expressed herein. In this 
      connection, the Holder understands that, in the view of the Securities 
      and Exchange Commission (the "SEC"), the statutory basis for such 
      exemption may be unavailable if this representation was predicated 
      solely upon a present intention to hold the Securities for the minimum 
      capital gains period specified under tax statutes, for a deferred sale, 
      for or until an increase or decrease in the market price of the 
      Securities or for a period of one year or any other fixed period in the 
      future.

      (iii)  The Holder acknowledges that the Securities must be held 
      indefinitely unless subsequently registered under the Act or an 
      exemption from such registration is available. The Holder is aware of 
      the provisions of Rule 144 promulgated under the Act ("Rule 144") which 
      permits limited resale of securities purchased in a private placement 
      subject to the satisfaction of certain conditions, including, in case 
      the securities have been held for less than three years, the existence 
      of a public market for


                                       3

<PAGE>

Page 4 of 10

      the shares, the availability of certain public information about the 
      Company, the resale occurring not less than two years after a party has 
      purchased and paid for the security to be sold, the sale being through 
      a "broker's transaction" or in a transaction directly with a "market 
      maker" (as provided by Rule 144(f)) and the number of shares or other 
      securities being sold during any three-month period not exceeding 
      specified limitations. 

      (iv)  The Holder further understands that at the time the Holder wishes 
      to sell the Securities there may be no public market upon which such a 
      such a sale may be effected, and that even if such a public market 
      exists, the Company may not be satisfying the current public information
      requirements of Rule 144, and that in such event, the Holder may be 
      precluded from selling the Securities under Rule 144 unless a) a 
      three-year minimum holding period has been satisfied and b) the Holder 
      was not at the time of the sale nor at any time during the three-month 
      period prior to such sale an affiliate of the Company.

      (v)  The Holder has had an opportunity to discuss the Company's 
      business, management and financial affairs with its management and an 
      opportunity to review the Company's facilities.  The Holder understands 
      that such discussions, as well as the written information issued by the 
      Company, were intended to describe the aspects of the Company's 
      business and prospects which it believes to be material but were not 
      necessarily a thorough or exhaustive description.

(b) LEGENDS.  Each certificate representing the Securities shall be endorsed 
with the following legend:

          THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT 
          OF 1933 AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE 
          REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION" LETTER FROM 
          THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH 
          TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE 
          SECURITIES AND EXCHANGE COMMISSION, OR (IF REASONABLY REQUIRED BY 
          THE COMPANY) AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO 
          THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

The Company need not register a transfer of Securities unless the conditions 
specified in the foregoing legend are satisfied.  The Company may also 
instruct its transfer agent not to register the transfer of any of the Shares 
unless the conditions specified in the foregoing legend are satisfied.

(c)  REMOVAL OF LEGEND AND TRANSFER RESTRICTIONS.  The legend relating to the 
Act endorsed on a certificate pursuant to paragraph 4(b) of this Warrant and 
the stop transfer instructions with respect to the Securities represented by 
such certificate shall be removed and the Company shall issue a certificate 
without such legend to the Holder of the Securities if (i) the Securities are 
registered under the Act and a prospectus meeting the requirements of Section 
10 of the Act is available or (ii) the Holder provides to the Company an 
opinion of counsel for the Holder reasonably satisfactory to the Company, or 
a no-action letter or interpretive opinion of the staff of the SEC reasonably 
satisfactory to the Company, to the effect that public sale, transfer or 
assignment of the Securities may be without registration and without 
compliance with any restriction such as Rule 144.

5.  CONDITION OF TRANSFER OR EXERCISE OF WARRANT.  It shall be a condition to 
any transfer or exercise of this Warrant that at the time of such transfer or 
exercise, the Holder shall provide 

                                       4


<PAGE>

Page 5 of 10

the Company with a representation in writing that the Holder or transferee is 
acquiring this Warrant and the shares of Common Stock to be issued upon 
exercise, for investment purposes only and not with a view to any sale or 
distribution, or a statement of pertinent facts covering any proposed 
distribution.  As a further condition to any transfer of this Warrant or any 
or all of the shares of Common Stock issuable upon exercise of this Warrant, 
other than a transfer registered under the Act, the Company must have 
received a legal opinion, in form and substance satisfactory to the Company 
and its counsel, reciting the pertinent circumstances surrounding the 
proposed transfer and stating that such transfer is exempt from the 
registration and prospectus delivery requirements of the Act.  Each 
certificate evidencing the shares issued upon exercise of the Warrant or upon 
any transfer of the shares (other than a transfer registered under the Act or 
any subsequent transfer of shares so registered) shall, at the Company's 
option, contain a legend in form and substance satisfactory to the Company 
and its counsel, restricting the transfer of the shares to sales or other 
dispositions exempt from the requirements of the Act.

      As further condition to each transfer, the transferee shall receive and 
accept a Warrant, of like tenor and date, executed by the Company.

6.  STOCK FULLY PAID; RESERVATION OF SHARES.  All Shares which may be issued 
upon the exercise of the rights represented by this Warrant will, upon 
issuance, be fully paid and nonassessable, and free from all taxes, liens, 
and charges with respect to the issue thereof.  During the period within 
which the rights represented by this Warrant may be exercised, the Company 
will at all times have authorized, and reserved for issuance upon exercise of 
the purchase rights evidenced by this Warrant, a sufficient number of shares 
of its Common Stock to provide for the exercise of the rights represented by 
this Warrant.

7.  ANTI-DILUTION PROVISIONS, ADJUSTMENTS ETC.

      7.1  ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS.  If the Company, at 
      any time or from time to time, effects a subdivision of, or combines, 
      the outstanding shares of Common Stock, by stock split or stock 
      dividend or by reverse stock split, respectively, then, and in each 
      such event, the Warrant Price in effect immediately prior thereto shall 
      immediately be proportionately decreased or increased, as the case may 
      be, and the number of shares of Common Stock issuable at the time upon 
      exercise of this warrant shall be proportionately increased or 
      decreased, as the case may be.

      7.2  ADJUSTMENT FOR RECAPITALIZATION, RECLASSIFICATION, OR EXCHANGE.  
      If, at any time or from time to time, the Common Stock issuable upon 
      exercise of this Warrant is changed into the same or a different number 
      of shares of any other class or classes of stock of the Company, 
      whether by recapitalization, reclassification or other exchange (other 
      than as provided for elsewhere in this Section 7), then, and in each 
      such event, the Holder shall have the right thereafter to purchase the 
      kind and amount of stock and other securities and property receivable 
      upon such recapitalization, reclassification or other exchange, by 
      holders of the number of shares of Common Stock with respect to which 
      this Warrant might have been exercised immediately prior to such 
      recapitalization, reclassification or other exchange, all subject to 
      further adjustment as provided herein.

      7.3  REORGANIZATION, MERGERS, CONSOLIDATIONS OR TRANSFER OF ASSETS.  If, 
      at any time or from time to time, there is a capital reorganization of 
      the Common Stock (other that as provided for elsewhere in this Section 
      7) or a merger or consolidation of the Company with or into another 
      corporation, or a transfer of all or substantially all of the Company's 
      assets to any other person, then, and in, and as a part of, each such 
      event, 

                                       5


<PAGE>

Page 6 of 10

      provision shall be made so that the Holder shall thereafter be entitled 
      to receive upon exercise of this Warrant the number of shares of stock 
      or other securities or property of the Company, or, if applicable, of 
      the resulting successor corporation, to which a holder of the number of 
      shares of Common Stock issuable upon exercise of this Warrant would 
      have been entitled on such capital reorganization, merger, 
      consolidation or transfer, all subject to further adjustment as 
      provided herein, and in, and as a part of, each such event, in any such 
      case, appropriate adjustment shall be made in the application of the 
      provisions of this Section 7 with respect to the rights of the Holder 
      after the reorganization, merger, consolidation or transfer to the end 
      that the provisions of this Section 7 (including adjustment of the 
      Warrant Price then in effect and the number of shares issuable upon 
      exercise of this Warrant) shall be applicable after that event and 
      shall be as nearly equivalent to the provisions hereof as may be 
      practicable.

      7.4  ADJUSTMENTS FOR SALES OF SECURITIES BELOW WARRANT PRICE.

           7.4.1  If at any time or from time to time after the date hereof, 
           the Company issues or sells, or is deemed by the provisions of 
           this Section 7.4 to have issued or sold, Additional Shares of 
           Common Stock (as hereinafter defined), other than as provided 
           elsewhere in this Section 7, for an Effective Price (as 
           hereinafter defined) less than the Warrant Price, then, and in 
           each such event, the Warrant Price shall be reduced, as of the 
           opening of business on the date of such issue or sale, to a price 
           determined by multiplying the Warrant Price by a fraction (i) the 
           numerator of which shall be (A) the number of shares of Common 
           Stock outstanding on an as-converted basis assuming the exercise 
           of all outstanding options, warrants, and convertible securities 
           at the close of the business on the date next preceding the date 
           of such issue or sale, plus (B) the number of shares of Common 
           Stock which the aggregate consideration received (or by express 
           provision hereof deemed to have been received) by the Company for 
           the total number of Additional Shares of Common Stock so issued 
           would purchase at the Warrant Price, and (ii) the denominator of 
           which shall be the number of shares of Common Stock outstanding on 
           an as-converted basis assuming the exercise of all outstanding 
           options, warrants and convertible securities at the close of 
           business on the date of such issue or sale after giving effect to 
           such issue or sale of Additional Shares of Common Stock.

           7.4.2 For the purposes of making any adjustment required under 
           this Section 7.4, the consideration received by the Company for 
           any issue or sale of securities shall (i) to the extent it 
           consists of cash, be computed at the net amount of cash received 
           by the Company after deduction of any underwriting or similar 
           commissions, compensation, or concessions paid or allowed by the 
           Company in connection with such issue or sale, (ii) to the extent 
           it consists of property other than cash, be computed at the fair 
           value of that property as reasonably determined by the Board of 
           Directors of the Company in good faith as of the date of such 
           issuance and sale, and (iii) if Additional Shares of Common Stock, 
           Convertible Securities (as hereinafter defined) or rights or 
           options to Additional Shares of Common Stock or Convertible 
           Securities are issued or sold together with other stock or 
           securities or other assets of the Company for a consideration 
           which covers both, be computed as the portion of the consideration 
           so received that may be reasonably determined in good faith by the 
           Board of Directors of the Company to be allocable to such 
           Additional Shares of Common Stock, Convertible Securities or 
           rights or options.

           7.4.3 For the purpose of the adjustment required under this 
           Section 7.4, if, at any time or from time to time after the date 
           hereof, the Company issues or sells any rights or options for the 
           purchase of, or stock or other securities convertible into, 
           Additional Shares of Common Stock (such convertible stock of 
           securities being

                                       6

      

<PAGE>

Page 7 of 10

hereinafter referred to as "Convertible Securities"), then, and in each such 
event, the Company shall be deemed to have issued at the time of the issuance 
of sale of such rights or options or Convertible Securities the maximum 
number of Additional Shares of Common Stock issuable upon exercise or 
conversion thereof and to have received as consideration for the ISSUANCE OF 
SUCH SHARES AN AMOUNT EQUAL TO (i) THE TOTAL AMOUNT OF THE CONSIDERATION, if 
any, received by the Company for the issuance of such rights or options or 
Convertible Securities, plus (ii) in the case of such options or rights, the 
minimum amounts of consideration, if any, payable to the Company upon the 
exercise or such options or rights, and, in the case Convertible Securities, 
the minimum amounts of consideration, if any, payable to the Company (other 
than by cancellation of liabilities or obligations evidenced by such 
Convertible Securities) upon the conversion of such Convertible Securities. 
No further adjustment of the Warrant Price adjusted upon the issuance of such 
rights, options or Convertible Securities shall be made as a result of the 
actual issuance of Additional Shares of Common Stock upon the exercise of any 
such rights or options or the conversion of any such Convertible Securities. 
If any such rights or options or the conversion privilege represented by any 
such Convertible Securities shall expire without having been exercised in 
full, the Warrant Price adjusted upon the issuance of such rights or options 
or Convertible Securities shall be readjusted to the Warrant Price or Prices 
which would have been in effect had an adjustment been required under this 
Section 7.4 and made on the basis that only the Additional Shares of Common 
Stock, if any, actually issued or sold upon the exercise of such rights or 
options or conversion of such Convertible Securities were issued or sold, and 
such Additonal Shares of Common Stock, if any, were issued or sold for (i) in 
the case of rights or options, the consideration actually received by the 
Company upon such exercise plus the consideration, if any, actually received 
by the Company for the granting of all such rights or options, whether or not 
exercised, and (ii) in the case of Convertible Securities, the consideration 
received for issuing or selling all such Covertible Securities plus the 
considration, if any, actually received by the Company (other than by 
cancellation of liabilities or obligations evidenced by such Convertible 
Securities) upon the conversion of such Convertible Securities.

7.4.4 For the purpose of the adjustment required under this Section 7.4, if, 
at any time or from time to time after the date hereof, the Company issues or 
sells any rights or options for the purchase of, or convertible securities 
convertible into, Convertible Securities, then, and in each such event, the 
Company shall be deemed to have issued, at the time of the issuance or sale 
of such rights or options or such covertible securities, the maximum number 
of Additional Shares of Common Stock issuable upon conversion of all of the 
Convertible Securities covered by such rights or options or such convertible 
securities and to have received as Consideration for the issuance of such 
Additional Shares of Common Stock an amount equal to (i) the amount of 
consideration, if any, received by the Company for the issuance of such 
rights or options or such convertible securities, plus (ii) the minimum 
amount of consideration, if any, payable to the Company upon the exercise of 
such rights or options (other than by cancellation of liabilities or 
obligations evidenced by such convertible securities), and plus (iii) the 
minimum amount of consideration, if any, payable to the Company (other than 
by cancellation of liabilities or obligations evidenced by such Convertible 
Securities) upon the conversion of such Convertible Securities. No further 
adjustment of the Warrant Price adjusted upon the issuance of such rights or 
options or such convertible securities shall be made as a result of the 
actual issuance of the Convertible Securities upon the exercise of such 
rights or options or conversion of such convertible securities or upon the 
actual issuance of additional shares of Common Stock upon the conversion of 
such Convertible Securities. The provisions of

                                       7

<PAGE>

Page 8 of 10

paragraph 7.3 above with respect to the readjustment of the Warrant Price 
upon the expiration of rights or options or the rights of conversion of 
Convertible Securities shall apply MUTATIS MUTANDIS to the rights or options, 
convertible securities and Convertible Securities referred to in this 
paragraph 7.4.

7.4.5  "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common 
Stock issued by the Company after the date hereof, whether or not 
subsequently reacquired or retired by the Company, other than (1) shares of 
Common Stock issued upon conversion of the Series A Preferred Stock, Series B 
Preferred Stock, and Series C Preferred Stock; (2) shares of Common Stock 
and/or options, warrants, or other Common Stock purchase rights (as adjusted 
for any stock dividends, combinations, splits, recapitalizations and the 
like) issued or to be issued to employees, officers or directors of, or 
consultants or advisors to the Company or any subsidiary pursuant to stock 
purchase or stock option plans or other arrangements that are approved by the 
Board; (3) shares of Common Stock issued pursuant to the exercise options, 
warrants or convertible securities outstanding as of the date hereof. The 
"Effective Price" of Additional Shares of Common Stock shall mean the 
quotient determined by dividing the total number of Additional Shares of 
Common Stock issued or sold, or deemed to have been issued or sold by the 
Company under this Section 7.4, into the aggregate consideration received, or 
deemed to have been received by the Company for such issue or sale under this 
Section 7.4, for such Additional Shares of Common Stock."

7.5  NOTICES OF RECORD DATE.  In the event of (a) any taking by the Company 
of a record of the holders of any class of securities for the purpose of 
determining the holders thereof who are entitled to receive any dividend or 
other distribution, or (b) any capital reorganization of the Company, any 
reclassification, recapitalization or exchange of the capital stock of the 
Company, or any merger or consolidation of the Company with or into another 
corporation, or any transfer of all or substantially all of the assets of the 
Company to any other person, or any voluntary or involuntary dissolution, 
liquidation or winding up of the Company, the Company shall mail to the 
Holder, at least 10 days prior to the record date specified therein, a notice 
specifying (x) the date on which any such record is to be taken for the 
purpose of such dividend or distribution, (y) the date on which any such 
reorganization, recapitalization, reclassification, exchange, consolidation, 
merger, transfer, dissolution, liquidation or winding up is expected to 
become effective, and (z) the time, if any, that is to be fixed, as to when 
the holders of record of Common Stock (or other securities) shall be entitled 
to exchange their shares of Common Stock (or other securities) for securities 
or other property deliverable upon such reorganization, recapitalization, 
reclassification, exchange, consolidation, merger, transfer, dissolution, 
liquidation or winding up.

7.6  RESERVATION OF STOCK ISSUABLE UPON EXERCISE.  The Company at all times 
reserve and keep available out of its authorized but unissued shares of 
Common Stock such number of its shares of Common Stock as shall from time to 
time be sufficient to effect the exercise of this Warrant and all other 
rights or options to purchase Common Stock, and to permit the conversion of 
all stock or other securities convertible into Common Stock, as may be 
outstanding from time to time.  If at any time the number of authorized but 
unissued shares of Common Stock shall not be sufficient for such purposes, 
the Company will take such corporate action as may, in the opinion of its 
counsel, be necessary to increase its authorized but unissued shares of 
Common Stock to such number of shares as shall be sufficient for such 
purposes.

8.   NOTICE OF ADJUSTMENTS.  Whenever any Warrant Price shall be adjusted 
pursuant to Section 7 hereof, the Company shall prepare a certificate signed 
by its chief financial officer

                                       8

<PAGE>

Page 9 of 10

setting forth, in reasonable detail, the event requiring the adjustment, the 
amount of the adjustment, the method by which such adjustment was calculated, 
and the Warrant Price and number of shares issuable upon exercise of the 
Warrant after giving effect to such adjustment, and shall cause copies of 
such certificate to be mailed (by certified or registered mail, return 
receipt required, postage prepaid) within thirty (30) days of such adjustment 
to the Holder of this warrant as set forth in Section 18 hereof.

9.  "MARKET STAND-OFF" AGREEMENT.  Holder hereby agrees that for a period of 
up to 180 days following the effective date of the first registration 
statement of the Company covering common stock (or other securities) to be 
sold on its behalf in an underwritten public offering, it will not, to the 
extent requested by the Company and any underwriter, sell or otherwise 
transfer or dispose of (other than to donees or transferees who agree to be 
similarly bound) any of the Shares at any time during such period except 
common stock included in such registration; provided, however, that all 
officers and directors of the Company who hold securities of the Company or 
options to acquire securities of the Company and all other persons with 
registration rights enter into similar agreements.

10.  TRANSFERABILITY OF WARRANT.  This Warrant is transferable on the books 
of the Company at its principal office by the registered Holder hereof upon 
surrender of this Warrant properly endorsed, subject to compliance with 
applicable federal and state securities laws.  The Company shall issue and 
deliver to the transferee a new Warrant representing the Warrant so 
transferred.  Upon any partial transfer, the Company will issue and deliver 
to Holder a new Warrant with respect to the Warrant not so transferred.  
Holder shall not have any right to transfer any portion of this Warrant to 
any direct competitor of the Company.

11.  NO FRACTIONAL SHARES.  No fractional share of Common Stock will be 
issued in connection with any exercise hereunder, but in lieu of such 
fractional share the Company shall make a cash payment therefor upon the 
basis of the Warrant Price then in effect.

12.  CHARGES, TAXES AND EXPENSES.  Issuance of certificates for shares of 
Common Stock upon the exercise of this Warrant shall be made without charge 
to the Holder for any United States or state of the United States documentary 
stamp tax or other incidental expense in respect of the issuance of such 
certificate, all of which taxes and expenses shall be paid by the Company, 
and such certificates shall be issued in the name of the Holder.

13.  NO STOCKHOLDER RIGHTS UNTIL EXERCISE.  This Warrant does not entitle the 
Holder hereof to any voting rights or other rights as a stockholder of the 
Company prior to the exercise hereof.

14.  REGISTRY OF WARRANT.  The Company shall maintain a registry showing the 
name and address of the registered Holder of this Warrant.  This Warrant may 
be surrendered for exchange or exercise, in accordance with its terms, at 
such office or agency of the Company, and the Company and Holder shall be 
entitled to rely in all respects, prior to written notice to the contrary, 
upon such registry.

15.  LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT.  Upon receipt by the 
Company of evidence reasonably satisfactory to it of the loss, theft, 
destruction or mutilation of this Warrant, and, in this case of loss, theft, 
or destruction, of indemnity reasonably satisfactory to it, and, if 
mutilated, upon surrender and cancellation of this Warrant, the Company will 
execute and deliver a new Warrant, having terms and conditions substantially 
identical to this Warrant, in lieu hereof.

16.  MISCELLANEOUS.

                                       9


<PAGE>

Page 10 of 10

       (a)  ISSUE DATE.  The provisions of this Warrant shall be construed and 
            shall be given effect in all respect as if it had been issued and 
            delivered by the Company on the date hereof.

       (b)  SUCCESSORS.  This Warrant shall be binding upon any successors or 
            assigns of the Company.

       (c)  GOVERNING LAW.  This Warrant shall be governed by and construed 
            in accordance with the laws of the State of California.

       (d)  HEADINGS.  The headings used in this Warrant are used for 
            convenience only and are not to be considered in construing or 
            interpreting this Warrant.

       (e)  SATURDAYS, SUNDAYS, HOLIDAYS.  If the last or appointed day for 
            the taking of any action or the expiration of any right required 
            or granted herein shall be a Saturday or a Sunday or shall be a 
            legal holiday in the State of California, then such action may be 
            taken or such right may be exercised on the next succeeding day 
            not a legal holiday.

17.  NO IMPAIRMENT.  The Company will not, by amendment of its Articles of 
Incorporation or any other voluntary action, avoid or seek to avoid the 
observance or performance of any of the terms of this Warrant, but will at 
all times in good faith assist in the carrying out of all such terms and in 
the taking of all such action as may be necessary or appropriate in order to 
protect the rights of the Holder hereof against impairment.

18.  ADDRESSES.  Any notice required or permitted hereunder shall be in 
writing and shall be mailed by overnight courier, registered or certified 
mail, return receipt required, and postage pre-paid, or otherwise delivered 
by hand or by messenger, addressed as set forth below, or at such other 
address as the Company or the Holder hereof shall have furnished to the other 
party.

            If to the Company:         Intuitive Surgical, Inc.
                                       1340 W. Middlefield Road
                                       Mountain View, CA 94043
                                       Attn: William H. Abbott

            If to the Holder:          Lease Management Services, Inc.
                                       2500 Sand Hill Road, Ste 101
                                       Menlo Park, CA 94025
                                       Attn: Barbara B. Kaiser, EVP/GM

IN WITNESS WHEREOF, Intuitive Surgical has caused this Warrant to be executed 
by its officers thereunto duly authorized.

Dated as of April 15th, 1997.

                                       /s/ Lonnie M. Smith
                                       -------------------------------

                                       BY:
                                           ---------------------------

                                       TITLE:  CEO
                                              ------------------------


                                       10


<PAGE>

                              NOTICE OF EXERCISE

TO:

1.   The undersigned Warrantholder ("Holder") elects to acquire shares of the 
     Common Stock of __________________________ (the "Company"), pursuant to 
     the terms of the Stock Purchase Warrant dated ____________, 199_ (the 
     "Warrant").

2.   The Holder exercises its rights under the Warrant as set forth below:

            (     )  The Holder elects to purchase _________ shares of Common 
                     Stock as provided in Section 3(a), (c) and tenders 
                     herewith a check in the amount of $________ as payment 
                     of the purchase price.

            (     )  The Holder elects to convert the purchase rights into 
                     shares of Common Stock as provided in Section 3(b), (c) 
                     of the Warrant.

3.   The Holder surrenders the Warrant with this Notice of Exercise.

4.   The Holder represents that it is acquiring the aforesaid shares of 
     Common Stock for investment and not with a view to, or for resale in 
     connection with, distribution and that the Holder has no present 
     intention of distributing or reselling the shares.

5.   Please issue a certificate representing the shares of Common Stock in 
     the name of the Holder or in such other name as is specified below:

            Name:
            Address:


            Taxpayer I.D.:

                                       -------------------------------
                                       (Holder)

                                       By:
                                           ---------------------------

                                       Title:
                                              ------------------------

                                       Date:
                                             -------------------------




<PAGE>

           RENAULT & HANDLEY
           INDUSTRIAL & COMMERCIAL REAL ESTATE



           This LEASE, executed in duplicate at Palo Alto, California, this 9th
PARTIES    day of September, 1996, by and between

           Zappettini Investment Co.

           and

           Intuitive Surgical

           hereinafter called respectively Lessor and Lessee, without regard 
           to number or gender,

PREMISES      1.  WITNESSETH:  That Lessor hereby leases to Lessee, and Lessee 
           hires from Lessor, those certain premises, hereinafter in this 
           lease designated as "the Premises", with the appurtenances, 
           situated in the City of Mountain View, County of Santa Clara, State 
           of California, and more particularly described as follows, to-wit:

           Approximate 25,000 square feet of R & D buildings commonly referred 
           to as 1340 Middlefield Road, Mountain View, California together 
           with landscaped areas and parking lot and further described in 
           Exhibit A attached hereto.

USE           2.  The Premises shall be used and occupied by Lessee for the 
           development of technology in the field of minimum evasive surgery 
           and for no other purpose without the prior written consent of 
           Lessor.

TERM          3.  The term shall be for five (5) years, commencing on the 1st 
           day of January, 1997, and ending on the 31st day of December 2001.

RENTAL        4.  Rent shall be payable to the Lessor
 without deduction or 
           offset at such place or places as may be designated from time to 
           time by the Lessor as follows:

           Thirty-Eight Thousand and Seven Hundred Fifty Dollars ($38,750.00) 
           shall be due upon the execution of this Lease representing rental 
           due January 1, 1997.  $38,750.00 shall be due on February 1, 1997 
           and on the 1st day of each and every succeeding month through 
           December 2001.


<PAGE>

SECURITY
DEPOSIT       5.  Lessee has deposited with Lessor $38,750.00 as security for 
           the full and faithful performance of each and every term, 
           provision, covenant and condition of this Lease.  In the event 
           Lessee defaults in respect of any of the terms, provisions, 
           covenants or conditions of this Lease, including, but not limited 
           to the payment of rent, Lessor may use, apply or retain the whole 
           or any part of such security for the payment of any rent in 
           default or for any other sum which Lessor may spend or be required 
           to spend by reason of Lessee's default.  Should Lessee faithfully 
           and fully comply with all of the terms, provisions, covenants and 
           conditions of this Lease, the security of any balance thereof 
           shall be returned to Lessee or, at the option of Lessor, to the 
           last assignee of Lessee's interest in this Lease at the expiration 
           of the term hereof.  Lessee shall not be entitled to any interest 
           on said security deposit.

POSSESSION    6.  If Lessor, for any reason whatsoever, cannot deliver 
           possession of the Premises to Lessee at the commencement of the 
           said term, as hereinbefore specified, this Lease shall not be void 
           or voidable, nor shall Lessor, or Lessor's agents, be liable to 
           Lessee for any loss or damage resulting therefrom; but in that 
           event the commencement and termination dates of the Lease and all 
           other dates affected thereby shall be revised to conform to the 
           date of Lessor's delivery of possession.  The above is, however, 
           subject to the provision that the period of delay of delivery of 
           the Premises shall not exceed 30 (thirty) days from the 
           commencement date herein.  If the period of delay of delivery 
           exceeds the foregoing, Lessee, at his or its option, may declare 
           this Lease null and void.  If such a delay occurs, and Lessee 
           agrees to extend possession date, rent will commence on tenant 
           occupancy.

ACCEPTANCE    7.  By entry hereunder, the Lessee accepts and Lessor warrants 
OF         the Premises as being in good and satisfactory working condition, 
PREMISES   including all HVAC, electrical and mechanical systems unless 
AND        within fifteen (15) days after such entry Lessee shall give 
CONSENT TO Lessor written notice specifying in reasonable detail the respects 
SURRENDER  in which the Premises were not in satisfactory condition.  The 
           Lessee agrees on the last day of the term hereof, or on sooner 
           termination of this Lease, to surrender the premises, together with 
           all alterations, additions, and improvements which may have been 
           made in, to, or on the Premises by Lessor or Lessee, including all 
           HVAC, electrical and mechanical systems unto Lessor in the same 
           good condition as at Lessee's entry into the Premises excepting 
           for such wear and tear as would be normal for the period of the 
           Lessee's occupancy.  The Lessee, on or before the end of the term 
           or sooner termination of this Lease, shall remove all Lessee's 
           personal property and trade fixtures from the premises and all 
           property not so removed shall be deemed to be abandoned by the 
           Lessee.  If the Premises be not surrendered at the end of the term 
           or sooner termination of this Lease, the Lessee shall indemnify 
           the Lessor against loss or liability resulting from delay by the 
           Lessee in so surrendering the Premises including, without 
           limitation, any claims made by any succeeding tenant founded on 
           such delay. 
           

USES          8.  Lessee shall not commit, or suffer to be committed, any 
PROHIBITED waste upon the Premises, or any nuisance, or other act or thing 
           which may disturb the quiet enjoyment of any other tenant in or 
           around the buildings in which the Premises may be located, or allow 
           any sale by auction upon the Premises, or allow the Premises to be 
           used for any improper, immoral, unlawful or objectionable purpose, 
           or place any loads upon the floor, walls, or roof which endanger 
           the structure, or place any harmful liquids in the drainage system 
           of the building.  No waste materials or refuse shall be dumped upon 
           or permitted to remain upon any part of the Premises outside of the 
           building proper.  No materials, supplies, equipment, finished 
           products or semi-finished products, raw materials or articles of 
           any nature shall be stored upon or permitted to remain on any 
           portion of the Premises outside of the buildings proper, unless 
           they are in approved enclosures.

ALTERATIONS   9.  The Lessee shall make no alterations, additions or 
AND        improvements in excess of $10,000.00 to the Premises or any part 
ADDITIONS  thereof without first obtaining the prior written consent of the 
           Lessor.  The Lessor may impose as a condition to the aforesaid 
           consent such requirements as Lessor may deem necessary in Lessor's 
           sole discretion, including without limitation thereto, the manner 
           in which the work is done, a right of approval of the contractor 
           by whom the work is to be performed, the times during which it is 
           to be accomplished, and the requirement that upon written request 
           of Lessor prior to the expiration or earlier termination of the 
           Lease, Lessee will remove any or all improvements or additions to 
           the Premises installed at Lessee's expense.  All such alterations, 
           additions or improvements not specified to be removed shall at the 
           expiration of earlier termination of the lease become the property 
           of the Lessor and remain upon and be surrendered with the 
           Premises.  All movable furniture, business and trade fixtures, and 
           machinery, equipment and all special electrical, mechanical or 
           HVAC systems installed by Lessee and used solely for the purpose 
           of Lessee's manufacturing process shall remain the property of the 
           Lessee and may be removed by the Lessee at any time during the 
           Lease term when Lessee is not in default hereunder.  Items which 
           are not to be deemed as movable furniture, business and trade 
           fixtures, or machinery and equipment shall include heating, 
           lighting, electrical systems, air conditioning, partitioning, 
           carpeting, or any other installation which has become an integral 
           part of the Premises.  The Lessee will at all times permit notices 
           of non-responsibility to be posted and to remain posted until the 
           completion of alterations or additions which have been approved by 
           the Lessor. 

MAINTE-       10.  Lessee shall, at Lessee's sole cost, keep and maintain the 
NANCE OF   Premises and appurtenances and every part thereof, including but 
PREMISES   not limited to, glazing, sidewalks, parking areas, including 
           resealing when necessary except for initial resealing to be 
           performed by Lessor prior to January 1, 1997, plumbing, electrical 
           systems, heating and air conditioning installations, any store 
           front, roof covering--unless it is not feasible to repair the 
           existing roof covering and a new roof covering is required, and 
           the interior of the Premises in good order, condition, and repair. 
           Lessor at Lessor's sole cost and expense shall maintain the 
           exterior of the walls, and structural portions of the roof, 
           foundations, walls, and floors except for any repairs caused by 
           the wrongful act of the Lessee and Lessee's agents.  The Lessor 
           will replace the roof covering if repairs to said covering are no 
           longer economically feasible in the judgment of roofing experts, 
           and provided that said replacement is not made necessary by acts 
           of the Lessee and Lessee's agents.  The Lessee shall water, 
           maintain and replace, when necessary, any shrubbery and 
           landscaping provided by the Lessor on the Premises.  The Lessee 
           expressly waives the benefits of any statute now or hereafter in 
           effect which would otherwise afford the Lessee the right to make 
           repairs at Lessor's expense or to terminate this lease because of 
           Lessor's failure to keep the Premises in good order, conditions or 
           repair. 

FIRE AND      11.  
EXTENDED
COVERAGE
INSURANCE
AND
SUBROGATION

                                     2 of 5

<PAGE>

                           REVISED INSURANCE CLAUSE

                This Lease Clause replaces the Insurance Clause (11.) in the 
                Renault & Handley Net Lease Form.

                    11.  Lessee shall not use, or permit the Premises, or any 
                part thereof, to be used, for any purposes other than that 
                for which the Premises are hereby leased; and no use shall be 
                made or permitted to be made on the Premises, nor acts done, 
                which will cause a cancellation of any insurance policy 
                covering said building, or any part thereof, nor shall Lessee 
                sell or permit to be kept, used or sold, in or about the 
                Premises, any article which may be prohibited by the standard 
                form of fire insurance policies. Lessee shall, at his sole 
                cost and expense, comply with any and all requirements, 
                pertaining to the Lessee's use and occupancy of the Premises, 
                of any insurance organization or company, necessary for the 
                maintenance of reasonable fire and public liability 
                insurance, covering said building and appurtenances.

                    11.1  Lessee shall, at its expense, obtain and keep in 
                force during the term of this Lease a policy of comprehensive 
                public liability insurance insuring Lessee, Lessor, agents, 
                invitees, and contractors, including Lessor's lender, against 
                any liability arising out of the Lessee's use, occupancy or 
                maintenance of the Premises. Such insurance policy shall have 
                a combined single limit for both bodily injury and property 
                damage in an amount not less than One Million Dollars 
                ($1,000,000.00). The limits of said insurance shall not limit 
                the liability of Lessee hereunder.

INSURANCE           11.2  Lessee shall, at its expense, keep in force during 
                the term of this Lease, a policy of fire and property damage 
                insurance in an "all risk" form with a sprinkler leakage 
                endorsement, insuring Lessee's inventory, fixtures, equipment 
                and personal property within the Premises for the full 
                replacement value thereof.

                    11.3  Lessor shall maintain a policy or policies of fire 
                and property damage insurance in an "all risk" form, with 
                sprinkler and, at the option of the Lessor, earthquake 
                endorsements, covering loss or damage to the building, 
                including Lessee's leasehold improvements installed with the 
                written consent of the Lessor, in such amounts and with such 
                coverage as Lessor deems advisable.

                    11.4  Lessee shall pay to Lessor as additional rent, 
                during the term hereof within 10 days after receipt of an 
                invoice therefore, 100 percent of the premiums for any 
                insurance obtained by Lessor pursuant to 11.3 above. Lessor 
                may obtain such insurance for the Building separately, or 
                together with other buildings and improvements which Lessor 
                elects to insure together under blanket policies of 
                insurance. In such case Lessee shall be liable for only such 
                portion of the premiums for such blanket policies as are 
                allocable to the Premises. It is understood and agreed that 
                Lessee's obligation under this paragraph shall be prorated to 
                reflect the Commencement Date and Expiration Date of the 
                Lease.

                    11.5  Lessee and Lessor each hereby waives any and all 
                rights of recovery against the other, or against the 
                officers, directors, employees, partners, agents and 
                representatives of the other, for loss of or damage to the 
                property of the waiving party or the property of others under 
                its control, to the extent such loss or damage is insured 
                against under any insurance policy carried by Lessor or 
                Lessee hereunder. Each party shall notify their respective 
                insurance carriers of this waiver and obtain from the 
                respective insurer, a waiver by such insurer of all rights of 
                subrogation or assignment of claims in connection with a 
                claim against Lessor or Lessee, as the case may be, covered 
                by such insurance.


<PAGE>

                  SEE REVISED INSURANCE CLAUSE ATTACHED

ABANDONMENT         12.  Lessee shall not vacate or abandon the Premises at 
                any time during the term; and if Lessee shall abandon, vacate 
                or surrender the premises, or be dispossessed by process of 
                law, or otherwise, any personal property belonging to Lessee 
                and left on the Premises shall be deemed to be abandoned, at 
                the option of Lessor, except such property as may be 
                mortgaged to Lessor. Abandonment shall be defined as outlined 
                in section 1951.3 of the California Civil Code.

FREE FROM           13.  Lessee shall keep the Premises and the property in 
LIENS           which the Premises are situated, free from any liens arising 
                out of any work performed, materials furnished, or 
                obligations incurred by Lessee. 

COMPLIANCE          14.  Lessee shall, at his sole cost and expense, comply 
WITH            with all of the requirements of all Municipal, State and 
GOVERN-         Federal authorities now in force, or which may hereafter be 
MENTAL          in force, pertaining to the Lessee's specific use, and shall 
REGULATIONS     faithfully observe in the use of the Premises all Municipal 
                ordinances and State and Federal statutes now in force or 
                which may hereafter be in force. The judgment of any court of 
                competent jurisdiction, or the admission of Lessee in any 
                action or proceeding against Lessee, whether Lessor be a 
                party thereto or not, that Lessee has violated any such 
                ordinance or statute in the use of the Premises, shall be 
                conclusive of that fact as between Lessor and Lessee.

INDEMNI-            15.  The Lessee, as a material part of the consideration 
FICATION OF     to be rendered to the Lessor, hereby waives all claims 
LESSOR AND      against the Lessor for damages to goods, wares and 
LESSEE'S        merchandise, and all other personal property in, upon, or 
LIABILITY       about the Premises and for injuries to persons in or about 
INSURANCE       the Premises, from any cause arising at any time, excepting 
                claims arising from the Lessor's negligence, and the Lessee 
                will hold the Lessor exempt and harmless from any damage or 
                injury to any person, or to the goods, wares and merchandise 
                and all other personal property of any person, arising from 
                the use of the Premises by the Lessee, or from the failure of 
                the Lessee to keep the Premises in good condition and repair, 
                as herein provided.

                      SEE REVISED INSURANCE CLAUSE ATTACHED

ADVERTISE-          16.  Lessee will not place or permit to be placed, in, 
MENTS AND       upon or about the Premises any unusual or extraordinary 
SIGNS           signs, or any signs not approved by the city or other 
                governing authority. The Lessee will not place, or permit to 
                be placed, upon the Premises, any signs, advertisements or 
                notices without the written consent of the Lessor first had 
                and obtained. Any sign so placed on the Premises shall be so 
                placed upon the understanding and agreement that Lessee will 
                remove same at the termination of the tenancy herein created 
                and repair any damage or injury to the Premises caused 
                thereby, and if not so removed by Lessee then Lessor may have 
                same so removed at Lessee's expense.

UTILITIES           17.  Lessee shall pay for all water, gas, heat, light, 
                power, telephone service and all other service supplied to 
                the Premises. If the premises are not served by a separate 
                water meter, the Lessee shall pay to the Lessor 100 percent 
                of the water bill for the entire property covered by said 
                bill and of which the Premises are a part.

ATTORNEY'S          18.  In case suit should be brought for the possession of 
FEES            the Premises, for the recovery of any sum due hereunder, or 
                because of the breach of any other covenant herein, the 
                losing party shall pay to the prevailing party a reasonable 
                attorney's fee, which shall be deemed to have accrued on the 
                commencement of such action and shall be enforceable whether 
                or not such action is prosecuted to judgment.

DEFAULT             19.  In the event of any breach of this Lease by the 
                Lessee, or an abandonment of the Premises by the Lessee, the 
                Lessor has the option of 1) removing all persons and property 
                from the Premises and repossessing the Premises in which case 
                any of the Lessee's property which the Lessor removes from 
                the Premises may be stored in a public warehouse or elsewhere 
                at the cost of, and for the account of Lessee, or 2) allowing 
                the Lessee to remain in full possession and control of the 
                Premises. If the Lessor chooses to repossess the Premises, 
                the Lease will automatically terminate in accordance with 
                provisions of the California Civil Code, Section 1951.2. In 
                the event of such termination of the Lease, the Lessor may 
                recover from the Lessee: 1) the worth at the time of award of 
                the unpaid rent which had been earned at the time of 
                termination including interest at 7% per annum; 2) the worth 
                at the time of award of the amount by which the unpaid rent 
                which would have been earned after termination until the time 
                of award exceeds the amount of such rental loss that the 
                Lessee proves could have been reasonably avoided including 
                interest at 7% per annum; 3) the worth at the time of award 
                of the amount by which the unpaid rent for the balance of the 
                term after the time of award exceeds the amount of such 
                rental loss that the Lessee proves could be reasonably 
                avoided; and 4) any other amount necessary to compensate the 
                Lessor for all the detriment proximately caused by the 
                Lessee's failure to perform his obligations under the Lease 
                or which in the ordinary course of things would be likely to 
                result therefrom. If the Lessor chooses not to repossess the 
                premises, but allows the Lessee to remain in full possession 
                and control of the Premises, then in accordance with 
                provisions of the California Civil Code, Section 1951.4, the 
                Lessor may treat the Lease as being in full force and effect, 
                and may collect from the Lessee all rents as they become due 
                through the termination date of the lease as specified in the 
                lease. For the purposes of this paragraph, the following do 
                not constitute a termination of Lessee's right to possession: 

                a) Acts of maintenance or preservation or efforts to relet 
                the property.

                b) The appointment of a receiver on the initiative of the 
                Lessor to protect his interest under this Lease.

LATE                20.  Lessee hereby acknowledges that late payment by 
CHARGES         Lessee to Lessor of rent and other sums due hereunder will 
                cause Lessor to incur costs not contemplated by this lease, 
                the exact amount of which will be extremely difficult to 
                ascertain. Such costs include, but are not limited to, 
                processing and accounting charges, and late charges which may 
                be imposed on Lessor by the terms of any mortgage or trust 
                deed covering the Premises. Accordingly, if any installment 
                of rent or any other sum due from Lessee shall not be 
                received by Lessor or Lessor's designee within ten (10) days 
                after such amount shall be due, Lessee shall pay to Lessor a 
                late charge equal to ten percent (10%) of such overdue 
                amount. The parties hereby agree that such late charge 
                represents a fair and reasonable estimate of the costs Lessor 
                will incur by reason of late payment by Lessee. Acceptance of 
                such late charge by Lessor shall in no event constitute a 
                waiver of


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                   Lessee's default with respect to such overdue amount, nor 
                   prevent Lessor from exercising any of the other rights and 
                   remedies granted hereunder.

SURRENDER OF LEASE   21.  The voluntary or other surrender of this Lease by 
                   Lessee, or a mutual cancellation thereof, shall not work a 
                   merger, and shall, at the option of Lessor, terminate all 
                   or any existing subleases or subtenancies, or may, at the 
                   option of Lessor, operate as an assignment to him of any 
                   or all such subleases or subtenancies.

TAXES                22.  The Lessee shall be liable for all taxes levied 
                   against personal property and trade or business fixtures. 
                   The Lessee also agrees to pay, as additional rental, 
                   during the term of this Lease and any extensions thereof, 
                   all real estate taxes plus the yearly installments of any 
                   special assessments which are of record or which may 
                   become of record during the term of this lease. If said 
                   taxes and assessments are assessed against the entire 
                   building and building site, and this Lease does not cover 
                   the entire building or building site, the taxes and 
                   assessment installments allocated to the Premises shall be 
                   pro-rated on a square footage or other equitable basis, as 
                   calculated by the Lessor. It is understood and agreed that 
                   the Lessee's obligation under this paragraph will be 
                   pro-rated to reflect the commencement and termination 
                   dates of this Lease.

NOTICES              23.  All notices to be given to Lessee may be given in 
                   writing personally or by depositing the same in the United 
                   States mail, postage prepaid, and addressed to Lessee at 
                   the said Premises, whether or not Lessee has departed 
                   from, abandoned or vacated the Premises.

ENTRY BY             24.  Lessee shall permit Lessor and his agents to enter 
LESSOR             into and upon and with prior notice the Premises at all 
                   reasonable times for the purpose of inspecting the same or 
                   for the purpose of maintaining the building in which the 
                   Premises are situated, or for the purpose of making 
                   repairs, alterations or additions to any other portion of 
                   said building, including the erection and maintenance of 
                   such scaffolding, canopies, fences and props as may be 
                   required without any rebate of rent and without any 
                   liability to Lessee for any loss of occupation or quiet 
                   enjoyment of the Premises thereby occasioned; and shall 
                   permit Lessor and his agents, at any time within ninety 
                   days prior to the expiration of this Lease, to place upon 
                   the Premises any usual or ordinary "For Sale" or "To 
                   Lease" signs and exhibit the Premises to prospective 
                   tenants at reasonable hours.

DESTRUCTION OF       25.  In the event of a partial destruction of the 
PREMISES           Premises during the said term from any cause, Lessor shall 
                   forthwith repair the same, provided such repairs can be 
                   made within ninety (90) days from date of destruction 
                   under the laws and regulations of State, Federal, County 
                   or Municipal authorities, but such partial destruction 
                   shall in no way annul or void this Lease, except that 
                   Lessee shall be entitled to a proportionate reduction of 
                   rent while such repairs are being made, such proportionate 
                   reduction to be based upon the extent to which the making 
                   of such repairs shall interfere with the business carried 
                   on by Lessee in the Premises. If such repairs cannot be 
                   made in ninety (90) days from date of destruction Lessor 
                   may, at his option, make same within a reasonable time, 
                   this Lease continuing in full force and effect and the 
                   rent to be proportionately reduced as aforesaid in this 
                   paragraph provided. In the event that Lessor does not so 
                   elect to make such repairs which cannot be made in ninety 
                   (90) days, or such repairs cannot be made under such laws 
                   and regulations, this Lease may be terminated at the 
                   option of either party. In respect to any partial 
                   destruction which Lessor is obligated to repair or may 
                   elect to repair under the terms of this paragraph, the 
                   provision of Section 1932, Subdivision 2, and of Section 
                   1933, Subdivision 4, of the Civil Code of the State of 
                   California are waived by Lessee. In the event that the 
                   building in which the Premises may be situated be 
                   destroyed to the extent of not less than 33 1/3% of the 
                   replacement cost thereof, Lessor may elect to terminate 
                   this Lease, whether the Premises be injured or not. A 
                   total destruction of the building in which the Premises 
                   may be situated shall terminate this Lease. In the event 
                   of any dispute between Lessor and Lessee relative to the 
                   provisions of this paragraph, they shall each select an 
                   arbitrator, the two arbitrators so selected shall select a 
                   third arbitrator and the three arbitrators so selected 
                   shall hear and determine the controversy and their 
                   decision thereon shall be final and binding upon both 
                   Lessor and Lessee, who shall bear the cost of such 
                   arbitration equally between them.

ASSIGNMENT AND       26.  The Lessee shall not assign, transfer, or 
SUBLETTING         hypothecate the leasehold estate under this Lease, or any 
                   interest therein, and shall not sublet the Premises, or 
                   any part thereof, or any right or privilege appurtenant 
                   thereto, or suffer any other person or entity to occupy or 
                   use the Premises, or any portion thereof, without, in each 
                   case, the prior written consent of the Lessor. Lessor 
                   agrees not to unreasonably withhold consent to sublet or 
                   assign. As a condition for granting its consent to any 
                   subletting the Lessor may require the Lessee to agree to 
                   pay to the Lessor, as additional rental, all rents 
                   received by the Lessee from its Sublessee which are in 
                   excess of the amount payable by the Lessee to the Lessor 
                   hereunder. The Lessee shall, by sixty (60) days written 
                   notice, advise the Lessor of its intent to sublet the 
                   Premises or any portion thereof for any part of the term 
                   hereof. Within thirty (30) days after receipt of Lessee's 
                   notice, Lessor shall either give approval to Lessee to 
                   sublease the portion of the Premises described in Lessee's 
                   notice, or Lessor shall terminate this Lease as to the 
                   portion of the Premises described in Lessee's notice on 
                   the date specified in Lessee's notice. If Lessee intends 
                   to sublet the entire Premises and Lessor elects to 
                   terminate this Lease, this Lease shall be terminated on 
                   the date specified in Lessee's notice. If, however, this 
                   Lease shall terminate pursuant to the foregoing with 
                   respect to less than all the Premises, the rent, as 
                   defined and reserved herein above shall be adjusted on a 
                   prorata basis to the number of square feet retained by 
                   Lessee, and this Lease as so amended shall continue in 
                   full force and effect. If the Lessor approves a subletting, 
                   the Lessee may sublet immediately after receipt of the 
                   Lessor's written approval. In the event Lessee is allowed 
                   to assign, transfer or sublet the whole or any part of the 
                   Premises, with the prior written consent of Lessor, no 
                   assignee, transferee or sublessee shall assign or transfer 
                   this Lease, either in whole or in part, or sublet the 
                   whole or any part of the Premises, without also having 
                   obtained the prior written consent of the Lessor. A 
                   consent of Lessor to one assignment, transfer, 
                   hypothecation, subletting, occupation or use by any other 
                   person shall not release Lessee from any of Lessee's 
                   obligations hereunder or be deemed to be a consent to any 
                   subsequent similar or dissimilar assignment, transfer, 
                   hypothecation, subletting, occupation or use by any other 
                   person. Any such assignment, transfer, hypothecation, 
                   subletting, occupation or use without such consent shall 
                   be void and shall constitute a breach of this Lease by 
                   Lessee and shall, at the option of Lessor exercised by 
                   written notice to Lessee, terminate this Lease. The 
                   leasehold estate under this Lease shall not, nor shall any 
                   interest therein, be assignable for any purpose by 
                   operation of law without the written consent of Lessor. As 
                   a condition to its consent, Lessor may require Lessee to 
                   pay all expense in connection with the assignment, and 
                   Lessor may require Lessee's assignee or transferee (or 
                   other assignees or transferees) to assume in writing all 
                   of the obligations under this Lease. 

CONDEMNATION         27.  If any part of the premises shall be taken for any 
                   public or quasi-public use, under any statute or by right 
                   of eminent domain or private purchase in lieu thereof, and 
                   a part thereof remains which is susceptible of occupation 
                   hereunder, this Lease shall, as to the part so taken, 
                   terminate as of the date title shall vest in the condemnor 
                   or purchaser, and the rent payable hereunder shall be 
                   adjusted so that the Lessee shall be required to pay for 
                   the remainder of the term