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Medical Product Distribution Agreement

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MEDICAL PRODUCTS DISTRIBUTION AGREEMENT





ASPECT MEDICAL SYSTEMS, INC.

has requested that the marked portions of this agreements be granted

confidential treatment pursuant to Rule 406 under the Securities Act of 1933





_______________________________________________________________





_______________________________________________________________









MEDICAL PRODUCTS DISTRIBUTION AGREEMENT







BETWEEN ASPECT MEDICAL SYSTEMS













HEWLETT-PACKARD COMPANY







Effective Date: Oct 01, 1999















Agreement # CP-99-00004



Page 1 of 21



MEDICAL PRODUCTS DISTRIBUTION AGREEMENT







GENERAL



This Distribution Agreement between Aspect Medical Systems (referred to

herein as "AMS"), with its principal offices at 2 Vision Drive, Natick, MA

01760-2059 and Hewlett-Packard Company (referred to herein as "HP") with

its offices at 3000 Minuteman Rd. Andover, MA 01810 (the "Parties") is

effective Oct 01, 1999 ("Effective Date").



WHEREAS AMS manufactures medical products and seeks to establish a

distribution channel in certain territories, and,



WHEREAS HP manufactures and distributes medical products and seeks to

distribute additional products to its customers; and,



WHEREAS AMS desires to appoint HP as an authorized Distributor in certain

territories of certain medical products, accessories and related goods to

be supplied by AMS and HP desires to accept such appointment.



THEREFORE HP agrees to purchase and AMS agrees to sell such Products upon

the following terms and conditions:



ARTICLE 1. DEFINITIONS



The following terms have the meaning indicated here when used in this

Agreement:



"AFFILIATE": Any person, firm, corporation, other legal entity which

controls or is controlled by or under common control with either AMS or HP.



"DISTRIBUTOR": HP.



"EXHIBITS": Documents attached to, incorporated by reference in, or added

to this Agreement at a later date.



"PRICES": Net US$ prices at which AMS shall sell Products to HP as set

forth in EXHIBIT 1.



"PRODUCTS": All medical products, supplies, accessories, parts and related

goods listed in EXHIBIT 1 as well as any and all updates, enhancements,

follow-on or related products that the parties mutually agree to add to

Exhibit 1.



"TERRITORIES": Countries and locations as set forth in EXHIBIT 2.



ARTICLE 2. APPOINTMENT



2.1 AMS hereby appoints HP as a non-exclusive Distributor for the Products

in the Territories.



2.2 Distributor may make sales outside the Territories if, and only if,

prior written permission is given by AMS, which shall not be unreasonably

withheld, and the product meets the regulatory requirements of the



2.3 AMS agrees and confirms that Distributor may sub-contract any or all of

its obligations hereunder pursuant to ARTICLE 7.







Agreement # CP-99-00004



Page 2 of 21



MEDICAL PRODUCTS DISTRIBUTION AGREEMENT





2.4 Distributor agrees to exert its reasonable commercial efforts to

promote, sell and support the Products to ultimate users of the Products.



2.5 The obligations set forth herein are in lieu of any "best efforts" or

similar obligation.



ARTICLE 3. RELATIONSHIP



3.1 The relationship of Distributor to AMS shall be that of an independent

contractor engaged in purchasing Products from AMS for resale to

Distributor's customers.



3.2 Nothing contained in this Agreement shall be deemed to create a

partnership or joint venture between the Parties. Neither the making nor

the performance of this Agreement shall be construed in any manner to have

established a joint venture or partnership.



3.3 Neither Party shall hold itself out as the agent of the other, nor

shall they incur any indebtedness or obligations in the name of, or which

shall be binding on the other, without the prior written consent of the

other. Each Party assumes full responsibility for its own personnel under

laws and regulations of the governmental authorities of the competent



ARTICLE 4. AGREEMENT PRECEDENCE AND DOCUMENTS



4.1 This Agreement supersedes any previous communication, representations,

or agreements between the Parties, whether oral or written, regarding

transactions hereunder.



4.2 All Exhibits attached to the Agreement shall be deemed a part of this

Agreement and incorporated herein. Terms that are defined in this

Agreement, and used in any Exhibit, have the same meaning in the Exhibit as

in this Agreement. The following Exhibits are hereby made a part of this

Agreement:



Exhibit 1 - Products and Prices

Exhibit 2 - Territories

Exhibit 3 - General Provisions

Exhibit 4 - Product Support Requirements



ARTICLE 5. TERM OF AGREEMENT



The term of this Agreement shall be for the period October 01, 1999 to

September 30, 2001 inclusive. This Agreement will remain in effect until

expiry unless terminated earlier as provided in ARTICLE 6. In the event of

such expiration or any early termination, this Agreement shall continue to

apply to all orders previously accepted by AMS unless cancelled by

Distributor pursuant to ARTICLE 6.



ARTICLE 6. TERMINATION



6.1 Not withstanding ARTICLE 5 above, this Agreement is terminable by

either party at any time after the expiry of the first year with or without

cause upon six months prior written notice.



6.2 To the extent permitted by law, if either Party becomes insolvent, is

unable to pay its debts when due, files for bankruptcy, is subject of

involuntary bankruptcy, has a receiver appointed, or has its assets

assigned, the other Party may terminate this Agreement immediately upon

notice to the other party and may cancel any unfulfilled obligations.







Agreement # CP-99-00004



Page 3 of 21



Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.



MEDICAL PRODUCTS DISTRIBUTION AGREEMENT





6.3 If either Party hereto shall fail to perform any of the obligations

imposed upon it under the terms of this Agreement, the other Party may

terminate the Agreement upon three months written notice. Such termination

shall be effective three months after deposit of the notice in the mail

unless the other Party cures the breach within such three month period.



6.4 Distributor shall immediately cease to be an authorized AMS distributor

upon the effective date of termination of this Agreement. Distributor shall

thereafter refrain from representing itself as an authorized AMS

distributor and from using any AMS trademark or trade name.



6.5 Upon termination of the Agreement, [**] any or all of the AMS Products

which [**] may have [**], are in [**] are on the [**] and are [**] (if

there is a [**] the [**] for such Products or the [**] for such Products

[**].



ARTICLE 7. ASSIGNMENT AND MODIFICATION OF AGREEMENT



7.1 During the term of this Agreement, the rights of the Distributor under

this Agreement shall not be assigned nor shall the performance of

Distributor's duties hereunder be delegated, without the other AMS's prior

written consent which shall not be unreasonably withheld except either

Distributor may assign this Agreement (i) to an Affiliate that is an

Affiliate as of date of execution of this Agreement or (ii) to an Affiliate

whose assets consist entirely of the assets of an Affiliate or Affiliates

that were Affiliates as of the date of execution of this Agreement

(collectively the "permitted assignees").



7.2 An assignment of such rights for purpose of Section 7.1 shall include

any transaction including but not limited to, any merger, consolidation or

purchase of stock that results in a third party that is not a permitted

assignee controlling, directly or indirectly, a legal entity that holds

such rights. For purpose of this provision, the term "control" shall mean

the beneficial ownership, directly or indirectly, of fifty per cent (50%)

or more of voting shares of such entity. In the event of a change in

control by AMS, AMS shall give HP prompt notice and this Distribution

Agreement shall survive the change in control.



7.3 No sale, assignment or other transfer of any rights of a Party

hereunder shall be effective unless the purchaser, assignee or transferee

assumes such Party's obligations under this Agreement. Any assignment shall

not relieve the assigning Party of its responsibility for obligations



7.4 Except as set forth in Article 7.5 below, modifications of this

Agreement shall be effective and binding only if agreed in writing and

executed by respective duly authorized representative of each of the

Parties hereto.



7.5 Distributor may, at its option, delete Products from individual



7.6 Neither Party's failure to exercise any of its rights under this

Agreement will constitute or be deemed a waiver or forfeiture of those



7.7 This Agreement may be assigned by HP to any new company that is formed

which essentially contains the elements of HP's measurement businesses.



ARTICLE 8. PRICES AND PAYMENTS



8.1 Distributor sets the end user selling prices at the sole judgement of

the Distributor.



8.2 Prices, which Distributor shall pay AMS for the Products purchased,

shall be the prices appearing in the EXHIBIT 1.







Agreement # CP-99-00004



Page 4 of 21



Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.



MEDICAL PRODUCTS DISTRIBUTION AGREEMENT





Demonstration Prices for the AS2000 System will be $[**]. Demonstration

Prices for the BIS Sensor will be [**] for a maximum quantity of [**]/

Case for quantities from [**] cases. AMS [**] of the [**] to other parties

[**] of the [**] in any agreement [**] of this Agreement. If there are

additions or changes to Products, Distributor will have the right to

purchase these products and prices will be established and Exhibits so



8.3 Prices include the Product, labeling, packaging, freight, duties and

insurance to the F.O.B point of Leiden, Netherlands.



8.4 The prices set forth in EXHIBIT 1 may be revised based on market

conditions, supplier costs and the expected unit volume of Products

purchased under this Agreement. If [**] then [**] to the [**] prices.



8.5 Orders issued by Distributor with requested or acknowledged delivery

dates within thirty (30) days after the effective date of any price change

will be billed at the lower price. This includes backlog and orders already

placed but have not received acknowledged delivery dates.



8.6 Payment shall be in U.S. dollars with a [**] discount if paid within

[**] days fully payable without discount in net thirty days, after the

later of receipt by Distributor of an invoice or the corresponding

Products. Invoices must include details such as HP order number, HP product

numbers and quantities as reference. Distributor may deduct from AMS

invoices any monies owned to Distributor.



8.7 In competitive situations or as part of a large order, Distributor and

AMS may agree on a special price arrangement and split the cost of

additional discounts.



ARTICLE 9. SHIPMENT AND DELIVERY



9.1 Distributor will submit written (fax or electronic) orders to AMS after

receipt from the customer. Acknowledgment of delivery date will be received

by Distributor within no more than five work days. Distributor will not be

obligated to stock Products. Distributor may without charge postpone,

decrease, increase or cancel any order by notice to AMS, if such notice is

given at least [**] prior to the delivery date. Distributor may

without charge decrease any order by a maximum of [**] by notice to AMS, if

such notice is given within ninety days prior to the delivery date.



9.2 AMS will make every reasonable effort to meet delivery within [**] days

or the date quoted or acknowledged. AMS shall give Distributor prompt

notice of any prospective failure to meet the acknowledged delivery date.

If AMS fails to deliver Products for [**] days beyond the agreed delivery

date, Distributor may cancel such orders without charge.



9.3 Distributor may request changes in delivery dates, quantity and

configuration for Products appearing on its orders at no charge provided

written notice of said changes is received by AMS at least [**] working

days prior to requested date.



9.4 Upon Distributor's request with the necessary information, AMS shall

evaluate special requests for suitability of software or suitability of a

particular hardware interface between Products and hardware/software used

by Distributor's customers and inform Distributor of the result within a

reasonable time.



9.5 AMS shall provide a packing list with Distributor's purchase order

number, HP product numbers (the HP equivalent of AMS's part numbers),

serial numbers, quantity shipped and date shipped with each unit shipped.

If applicable, the packing list should also provide lot number, batch

number or any shelf life information (ie. datecode).







Agreement # CP-99-00004



Page 5 of 21



Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.



MEDICAL PRODUCTS DISTRIBUTION AGREEMENT





9.6 AMS shall preserve, package, handle, and pack Products so as to protect

the Products from loss or damage, in conformance with good commercial

practice, government regulations, and other applicable requirements. AMS

shall mark the exterior of the boxes with the associated Product and serial

numbers of the contents. AMS shall be responsible for any loss or damage

due to its failure to properly preserve, package, handle, or pack Products.

Distributor shall not be required to assert any claims for such loss or

damage against the common carrier involved. AMS will ship Products in the

final packaging as intended to be received by the end user as ordered



9.7 Title to Products and risk of loss or damage will pass to Distributor

when Products are delivered to the defined Distributor location specified

in EXHIBIT 3- General Provisions.



9.8 Distributor will be the exporter of record and obtains duty drawback

rights to Products. If Products delivered under this Agreement are

imported, AMS shall when possible allow Distributor to be the importer of

record. If Distributor is not the importer of record and AMS obtains duty

drawback rights to the Products, AMS shall, upon Distributor's request,

provide Distributor with documents required by the customs authorities of

the country of receipt to prove importation and transfer duty drawback

rights to Distributor



9.9 Items missing in shipment will be promptly replaced and shipped at no

charge to Distributor.



ARTICLE 10. ADVERTISING, PROMOTIONS, TRADEMARKS AND COPYRIGHTED MATERIAL



10.1 AMS agrees to provide sample quantities of current or new sales

literature, artwork, advertising materials, promotional plans and other

information or programs reasonably related to this Agreement. Distributor

specific literature and advertising will be the responsibility of



10.2 AMS together with Distributor will evaluate requirements and define

promotional plans to which both will adhere. AMS will also provide

recommended reference sites and will actively pursue clinical evaluations

and the development of local/country reference sites and clinical trials.



10.3 AMS hereby grants Distributor a revocable license to use any AMS

trademark or trade name associated with the Products solely in the

advertisement and promotion of the Products during the term of this

Agreement. Except as provided in this paragraph, Distributor shall have no

right, title or interest in or to any patent, trademark of trade name

belonging to AMS.



10.4 AMS hereby grants Distributor a revocable license to reproduce

materials provided to Distributor by AMS as is reasonable for promotion,

demonstration, sale and support of AMS Products, including but not limited

to posting such materials on the Internet, Intranet, or web.



ARTICLE 11. SALES AND SUPPORT



11.1 HP will provide AMS with a forecast of [**] projected sales unit

volumes. Quantities listed in such correspondence between the Parties are

only estimates made as an accommodation for planning purposes and do not

constitute a commitment to purchase such quantity. Distributor may revise

any forecasts in its sole discretion. The arrangements provided herein are

[**] within this Agreement.



11.2 Distributor agrees to purchase demonstration Product and to maintain

trained staff capable of demonstrating and selling the Products. AMS agrees

to provide, at its costs, reasonable sales training and material and

support to the Distributor. Distributor agrees to participate in AMS's

sales and marketing meetings, Product and competi
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