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                                                                    EXHIBIT 10.3

                          Aspect Medical Systems, Inc.
has requested that the marked portions of this agreement be granted confidential
  treatment pursuant to Rule 406 under the Securities Act of 1933, as amended.

                         INTERNATIONAL LICENSE AGREEMENT

      THIS AGREEMENT is made and entered into as of January 21, 1998 (the
"Effective Date"), by and between ASPECT MEDICAL SYSTEMS, INC. ("Aspect"), a
Delaware, U.S.A. corporation having offices at 2 Vision Drive, Natick,
Massachusetts 01760-2059, U.S.A., Attention: J. Breckenridge Eagle, Telecopy
No.: 1-508-647-2059, and NIHON KOHDEN CORPORATION ("NK"), a Japanese company
having offices at 31-4 Nishiochiai, 1-chome, Shinjuku-ku, Tokyo 161 Japan,
Attention: Hajime Yasuda, Telecopy No.: 81-3-5996-8097.

      WHEREAS, Aspect possesses certain intellectual and industrial property
rights; and

      WHEREAS, Aspect is willing to grant, and NK desires to acquire,
non-exclusive worldwide rights to use such rights in accordance with the terms
and conditions hereinafter set forth.

      NOW, THEREFORE, in consideration of the premises and mutual promises,
terms and conditions hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Aspect and NK (the "Parties") do hereby agree as follows:

1.    DEFINITIONS

As used herein, the following terms shall have the following definitions.

1.1   AFFILIATES. "Affiliates" of a Party hereto shall mean companies which are
controlled by, control or under common control with such Party. A company shall
be considered an "Affiliate" for only so long as such control exists. For the
purposes of this definition, partnerships or similar entities where a
majority-in-interest of its partners or owners are a Party hereto and/or
Affiliates of such Party shall also be deemed to be Affiliates of such Party.

1.2   AGREEMENT TERM. "Agreement Term" shall mean the period beginning on the
Effective Date and ending on the date of termination or expiration of this
Agreement, as the case may be.

1.3   BIS. "BIS"(TM) shall mean the Bispectral Index,(TM) which is Aspect's
proprietary processed EEG parameter that directly measures the hypnotic effects
of anesthetic and sedative agents on the brain.

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1.4   BUSINESS DAY. "Business Day" shall mean a day on which banks are open for
business in Natick, Massachusetts, U.S.A.

1.5   COMMENCEMENT DATE. "Commencement Date" shall mean the earlier of: (a)
May 1, 1999 (unless through no fault of NK, the MHW Approval has been delayed);
and (b) the MHW Approval Date.

1.6   CONTRACT YEAR. "Contract Year" shall mean the 12-month period commencing
on the Commencement Date, and then each 12-month period thereafter.

1.7   KIT. "Kit" shall mean Aspect's BIS Module Kit, as further described in
Exhibit A attached hereto and made a part hereof.

1.8   LICENSED TECHNOLOGY. "Licensed Technology" shall mean the Rights, the
Products and the Technical Information.

1.9   LICENSE TERM. "License Term" shall mean the period beginning on the
Commencement Date and ending on the date of termination or expiration of this
Agreement, as the case may be.

1.10  MHW APPROVAL DATE. "MHW Approval Date" shall mean the date on which NK
receives the approval of the Japanese Ministry of Health and Welfare to market
the Product in Japan.

1.11  PRODUCT. "Product" shall mean a BIS module.

1.12  RIGHTS. "Rights" shall mean:

(a)   the patents listed on Exhibit B attached hereto and made a part hereof,
and all continuations, divisions, extensions and reissues thereof;

(b)   the patent applications listed on Exhibit B hereto, and all continuations,
divisions, extensions and reissues thereof;

(c)   any and all continuations, divisions, reissues, extensions and other
filings that Aspect may file with the governmental agency which issues patents
in any jurisdiction with respect to such patents and/or patent applications
described in parts (a) and (b) above of this definition; and

(d)   all relevant copyrights and circuitry relating to the Software (as defined
in Section 2.6 below) or the Kits; and



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(e)   any and all patents, patent applications, copyrights, mask work rights and
other intellectual property rights with respect to any inventions, which
patents, patent applications, copyrights, mask work rights and other rights (i)
are granted or to be granted to Aspect (either directly or through its
Affiliates, successors, assigns, agents or employees) and (ii) with respect to
which Aspect (either directly or through its Affiliates, successors, assigns,
agents or employees) shall have the right to grant licenses, sublicenses and
rights of the type described in Article 2 below;

PROVIDED, HOWEVER, that with respect to this definition, if any patents,
copyrights, mask work rights or other intellectual property rights have been or
are in the future issued, granted or registered based on or embodied in any
Product or any part of the Technical Information, such patents, copyrights, mask
work rights and other rights shall be deemed included in this definition.

1.13  TECHNICAL INFORMATION. "Technical Information" shall mean all trade
secrets, know-how, computer programs (including copyrights in said software),
knowledge, technology, means, methods, processes, practices, formulas,
techniques, procedures, technical assistance, designs, drawings, apparatus,
written and oral rectifications of data, specifications, assembly procedures,
schematics and other valuable information of whatever nature, whether
confidential or not, and whether proprietary or not, which is now in (or
hereafter, during the Agreement Term, comes into) the possession of Aspect and
which is necessary to the manufacture, assembly, sale, distribution, use,
installation, servicing or testing of the Product.

1.14  U.S. DOLLARS. "U.S. Dollars" shall mean lawful money of the United States
of America, in immediately available funds.



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            Confidential Materials omitted and filed separately with
      the Securities and Exchange Commission. Asterisks denote omissions.



2.    GRANT OF RIGHTS AND LICENSES

Subject to all of the terms and conditions set forth in this Agreement:

2.1   USE OF RIGHTS.

(a)   Aspect hereby grants to NK a non-exclusive, worldwide right and license
during the Agreement Term to practice the Rights in order to manufacture, use
and sell the Product as a component of multi-parameter module patient monitoring
systems manufactured by or for NK. Specifically, but without limitation, the
Rights may not be used to make, use or distribute the Product for incorporation
into stand-alone EEG/BIS monitors.

(b)   During the Agreement Term, Aspect shall not grant, directly or indirectly,
the right and license described in Section 2.1(a) above [**].

(c)   For the rights and licenses granted hereunder, NK shall pay Aspect a
license fee of [**] within thirty (30) days of the execution of this Agreement.
NK may [**] of said license fee in order to pay withholding tax levied by the
Government of Japan. NK agrees to send to Aspect tax payment certificates
indicating payment of such withholding tax so that Aspect can be allowed by the
tax authorities of the United States a tax credit in the amount of such
withholding tax deducted in Japan.

2.2   USE OF TECHNICAL INFORMATION.

(a)   Aspect grants to NK a non-exclusive worldwide right and license during the
Agreement Term to use the Technical Information in connection with NK's exercise
of its rights and licenses granted in Section 2.1, and for no other purpose.

(b)   As soon as practical after the Effective Date, Aspect shall provide to NK,
at no additional cost to NK, all of the Technical Information.

2.3   TRADEMARKS, SERVICE MARKS AND TRADE NAMES.

(a)   NK shall be required to mark the Products with Aspect's trademarks,
service marks and trade names listed in Exhibit C hereto (the "Trademarks").
Aspect hereby grants NK the right to use the Trademarks on a non-exclusive basis
only for the License Term and solely for display or advertising purposes in
connection with the Products manufactured and sold in accordance with this
Agreement. During the License Term, NK may use, without Aspect's prior written
consent, trademarks, service marks and trade names in connection with the
Products other than the Trademarks; PROVIDED, HOWEVER, that the Trademarks are
always used in a manner which makes them at least as large and at least as
prominent as any other such trademarks, service marks or trade names appearing
on any such label, display or advertisement. Any use by NK of the Trademarks
shall be deemed to be a use of the same by Aspect. NK shall not at any time do
or permit any act to be done (including



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without limitation registering any of the Trademarks in its own name or the name
of any entity other than Aspect) which may in any way impair the rights of
Aspect in the Trademarks. Except as provided above, NK has no rights in the
Trademarks or of any goodwill associated therewith and NK agrees that, except as
expressly provided in this Agreement, it shall not acquire any rights in respect
thereof and that all such rights and goodwill are, and shall remain, vested in
Aspect.

(b)   In order to comply with Aspect's quality control standards, NK shall: (i)
whenever it uses the Trademarks, include a statement that the Trademarks are
trademarks of Aspect; (ii) use the Trademarks in compliance with all relevant
laws and regulations; (iii) at Aspect's request, provide Aspect with samples of
the Products, so that Aspect can confirm that such Products are being
manufactured hereunder in a manner consistent with the quality standards which
Aspect applies in manufacturing BIS modules itself; and (iv) not modify any of
the Trademarks in any way and not use any of the Trademarks on or in connection
with any goods or services other than the Products.

2.4   RIGHT TO SUBLICENSE. NK shall not have the right to sublicense any of the
rights or licenses granted hereunder without Aspect's prior written consent,
which consent shall be withheld in Aspect's absolute discretion; PROVIDED,
HOWEVER, it is understood that NK shall have the right to grant sublicenses to
NK's Affiliates without Aspect's prior written consent. All sublicenses shall
not become effective until the sublicensee confirms in writing to Aspect that it
agrees to be bound by all of the terms and conditions contained in this
Agreement.

2.5   NO RIGHTS BY IMPLICATION. No rights or licenses with respect to Licensed
Technology are granted or deemed granted hereunder or in connection herewith,
other than those rights or licenses expressly granted in this Agreement.

2.6   SOFTWARE AND COMPUTER PROGRAMS. The Product includes circuitry and
software programs in binary code form which are designed for use with the
Product (the "Circuitry" and the "Software"). For the purpose of this Agreement,
the Circuitry and the Software shall not include any portion of the Product
which is proprietary to NK or which is developed by or licensed to NK,
independently of Rights and Technical Information provided by Aspect hereunder.
Aspect hereby grants to NK a non-exclusive and non-transferable worldwide
license, without the right to sublicense (except to purchasers of the Product
and NK's Affiliates which become sublicensees pursuant to Section 2.4 above),
during the Agreement Term to use the Circuitry, the Software and related
documentation provided by Aspect (the "Documentation") solely in connection with
operation of the Product. NK shall not disclose, furnish, transfer or otherwise
make available the Circuitry, the Software, the Documentation or any portion
thereof in any form to any third party (other than to purchasers of the Product
and NK's Affiliates which becomes sublicensees pursuant to Section 2.4 above)
and shall not duplicate the Circuitry, the Software, the Documentation or any



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<PAGE>   6



part thereof, except in connection with NK's manufacture and assembly of the
Product in accordance with this Agreement. Title to and ownership of and all
proprietary rights in or related to the Circuitry, the Software, the
Documentation and all partial or complete copies thereof shall at all times
remain with Aspect or its licensor(s). This Agreement shall not be construed as
a sale of any rights in the Circuitry, the Software, the Documentation, any
copies thereof or any part thereof. All references in this Agreement to sale,
resale or purchase of the Products, or references of like effect, shall, with
respect to the Circuitry, the Software and the Documentation mean licenses or
sublicenses of the Circuitry, the Software and the Documentation pursuant to
this Section 2.6. NK shall not disassemble, decompile or reverse engineer the
Circuitry, the Software or any part thereof (except in the European Union and
Norway, and only to the extent that it has the right to do so pursuant to
applicable law in order to ensure interoperability with other software
programs). NK shall retain and shall not alter or obscure any notices, markings
or other insignia which are affixed to the Software, the Documentation or any
part thereof at the time of delivery of such Software or such Documentation.

2.7   NON-COMPETITION. NK confirms that is has not previously, directly or
indirectly, marketed or manufactured monitoring equipment, either as stand-alone
monitors or as modules for monitors, which were designed to monitor the depth of
anesthesia. NK confirms that it has not previously, directly or indirectly,
developed monitoring equipment, either as stand-alone monitors or as modules for
monitors, which was designed to: (i) monitor the depth or effects of anesthesia
being administered to patients; and (ii) indicate any index of the depth or
effects of anesthesia to assist anesthesiologists to evaluate the depth or
effects of anesthesia using EEG (electroencephalogram). Until the first (1st)
anniversary of the termination or expiration of this Agreement, as the case may
be, PROVIDED, HOWEVER that: (I) NK shall be permitted, at any time, to develop
monitoring equipment designed to monitor the depth or effects of anesthesia
using physiological measures other than EEG; (II) NK shall be permitted, at any
time, to market and manufacture monitoring equipment designed to monitor the
depth or effects of anesthesia using physiological measures other than EEG, so
long as such equipment has been developed and manufactured by NK; (III) NK shall
be permitted after the expiration or termination of this Agreement to
manufacture and market monitoring equipment developed and manufactured by NK or
by any third party that is designed to monitor the depth or effects of
anesthesia using physiological measures other than EEG; and (IV) NK shall be
permitted to continue to market and improve its existing EEG monitors and
modules. Specifically, it will not be considered a violation of this Section
3(f) for NK to market and improve its existing EEG monitors or modules that
display any of the following parameters of brain function: EEG, EEG trends, CSA,
DSA, EP, EMG, or NCV, subject to the terms and conditions of this Section 2.7.

2.8   CHANGES TO KITS AND PRODUCTS.

(a)   From time to time during the Agreement Term, Aspect may introduce
improvements and modifications to the Kit. Aspect shall promptly deliver to NK
one reproducible copy of manufacturing drawings and engineering specifications
relating to such modification and improvement. NK may use, at its sole
discretion, each such modification or improvement under the terms and conditions
of this Agreement, without paying any additional amounts to Aspect. If NK
determines not to use such modification or improvement, Aspect shall continue to
supply NK with the Kit, but not as so modified or improved.

(b)   Notwithstanding anything contained in this Agreement to the contrary,
Aspect reserves the right from time to time during the License Term to require
NK, after consulting with NK, to modify or improve the Product (including
without limitation the software programs used in connection with the Product) if
the modification or improvement reasonably relates to efficacy or patient
safety. NK shall implement those changes to the Products being manufactured or
to be manufactured and to modify and improve Products previously manufactured
and shipped to customers in



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<PAGE>   7

order to incorporate such changes. In that event, Aspect agrees to repair or
replace Kits previously provided to NK or collected by NK from its customers,
free of charge, whether or not such repair or replacement occurs during the
relevant Warranty Period.

(c)   Aspect shall immediately provide NK with a written notice upon Aspect
becoming aware of the occurrence of any of the following events: (i) Aspect
recalls any Kit, or ceases or suspends the sale of any Kit due to any problem
which relates to such Kit's efficacy or patient safety in any country outside
Japan; (ii) any defect of any Kit or the Licensed Technology, which relates to
such Kit's efficacy or patient safety, is published, reported or made known to
the public by any third party, or found by Aspect; or (iii) any Kit or the
Licensed Technology contributed to or caused a death or serious injury, or any
Kit or the Licensed Technology malfunctioned and if that malfunction occurred
again, it would be likely to contribute or cause a death or serious injury.

2.9   INTELLECTUAL PROPERTY MAINTENANCE FEES. Aspect shall keep current all
Rights relevant to the Products, and shall pay all fees and expenses in
connection therewith promptly as such fees and expenses become due and payable.

2.10   NO KNOWLEDGE OF THIRD PARTY CLAIMS. Aspect represents and warrants to NK
that Aspect knows of no claim by any third party of infringement by Aspect on
such party's patent, trademark, copyright, trade secret or other intellectual
property rights.

2.11   DISCLAIMER OF LIABILITY. ASPECT MAKES NO EXPRESS OR IMPLIED WARRANTY,
STATUTORY OR OTHERWISE, CONCERNING THE LICENSED TECHNOLOGY OR ANY OTHER
INFORMATION COMMUNICATED TO NK, INCLUDING WITHOUT LIMITATION NO WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, OR NO WARRANTIES AS TO QUALITY OR THE
USEFULNESS OF THE LICENSED TECHNOLOGY FOR ITS INTENDED PURPOSE; PROVIDED,
HOWEVER, if Aspect or NK shall discover any errors in the Licensed Technology
during the License Term, Aspect shall use commercially reasonable efforts to
correct such errors in the Licensed Technology without cost to NK.

IN NO EVENT, HOWEVER, SHALL ASPECT BE LIABLE TO NK FOR ANY SPECIAL,
CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR INDIRECT LOSSES OR DAMAGES RESULTING
FROM SUCH ERRORS IN THE LICENSED TECHNOLOGY.



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<PAGE>   8

            Confidential Materials omitted and filed separately with
      the Securities and Exchange Commission. Asterisks denote omissions.



3.    SALES BY ASPECT TO NK

3.1   OFFER AND ACCEPTANCE; PRICING.

(a)   NK shall have the right to purchase from Aspect Kits at a transfer price
of US[**] per Kit. For each proposed purchase by NK from Aspect, NK shall
present a purchase order to Aspect (a "Purchase Order"). Each Purchase Order
shall be deemed an offer to purchase and, unless NK is notified in writing to
the contrary within five (5) Business Days after Aspect receives it, such
Purchase Order shall be deemed accepted by Aspect.

(b)   Aspect's transfer prices shall be FCA (FREE CARRIER) Natick,
Massachusetts, U.S.A. Starting with the second (2nd) Contract Year, Aspect may
change those transfer prices; PROVIDED, HOWEVER, that: (i) such change may be
made only once a year effective as of the first day of April with the prior
written notice to be given by Aspect no later than the last day of December of
the preceding year, after consulting with NK; (ii) the annual increase shall be
no more than [**]; and (iii) no price change shall affect purchase orders
offered by NK and accepted by Aspect prior to the date such price change becomes
effective.

3.2   DELIVERY. Unless NK requests otherwise, all Kits ordered by NK shall be
packed for shipment and storage in accordance with Aspect's standard commercial
practices. It is NK's obligation to notify Aspect of any special packaging
requirements (which shall be at NK's expense if such requirement is in excess of
the scope of normal and necessary packaging for export). Aspect shall deliver
Kits into the possession of a common carrier designated by NK in Natick,
Massachusetts, U.S.A. no later than the date specified for such delivery on the
relevant purchase order. Risk of loss and damage to a Kit shall pass to NK upon
the delivery thereof to the common carrier designated by NK. If NK does not
designate a common carrier by the specified delivery date, then Aspect may do so
on NK's behalf. All claims for non-conforming shipments must be made in writing
to Aspect within thirty (30) days of the passing of risk of loss and damage.

3.3   METHOD OF PAYMENT

(a)   All amounts due and payable with respect to Kits delivered by Aspect in
accordance with this Article 3 shall be paid in full within 30 days after the
date of Aspect's invoice therefor. All such amounts shall be paid in U.S.
Dollars by wire transfer, to such bank or account as Aspect may from time to
time designate in writing. All costs incurred in connection with such wire
transfer shall be the



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responsibility of NK. Whenever any amount hereunder is due on a day which is not
a day on which banks in Natick, Massachusetts, U.S.A. are open for business (a
"Business Day"), such amount shall be paid on the next such Business Day.
Amounts hereunder shall be considered to be paid as of the day on which funds
are received by Aspect's bank. No part of any amount payable to Aspect hereunder
may be reduced due to any counterclaim, set-off, adjustment or other right which
NK might have or assert against Aspect, any other party or otherwise.

(b)   All amounts due and owing to Aspect hereunder but not paid by NK on the
due date thereof shall bear interest (in U.S. Dollars) at the rate 18 per cent
per annum. Such interest shall accrue on the balance of unpaid amounts from time
to time outstanding from the date on which portions of such amounts become due
and owing until payment thereof in full.

3.4   LIMITED WARRANTY.

(a)   With respect to the Kit, Aspect makes the warranties set forth in
Exhibit D attached hereto and made a part hereof. Under no circumstances shall
the warranties set forth in Exhibit D hereto apply to a Kit which has been
customized, modified, damaged or misused by NK or any third party without
Aspect's authorization. NK's sole remedy for a non-conforming Kit is, at
Aspect's election, the repair or replacement thereof.

(b)   THE PROVISIONS OF THE FOREGOING WARRANTIES ARE IN LIEU OF ANY OTHER
WARRANTY, WHETHER EXPRESS OR IMPLIED, WRITTEN OR ORAL (INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE).

(c)   EXCEPT AS PROVIDED IN SECTION 5.2 HEREIN, ASPECT'S LIABILITY ARISING OUT
OF THE MANUFACTURE, SALE OR SUPPLYING OF KITS OR THEIR USE OR DISPOSITION,
WHETHER BASED UPON WARRANTY, CONTRACT, TORT OR OTHERWISE, SHALL NOT EXCEED THE
ACTUAL PURCHASE PRICE PAID BY NK FOR SUCH KITS.

(d)   After expiration of the Warranty Period, Aspect shall undertake repairs of
Kits or shall provide parts for repairs by NK, at reasonable cost to NK. Both
parties shall agree on the charge for such repairs and parts.

3.5   PRIORITY OF AGREEMENT. In the event of any discrepancy between any
Purchase Order and this Agreement, the terms of this Agreement shall govern.



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            Confidential Materials omitted and filed separately with
      the Securities and Exchange Commission. Asterisks denote omissions.



3.6   MINIMUM PURCHASE REQUIREMENTS WITH RESPECT TO BIS SENSORS.

(a)   NK' s minimum purchase of BIS sensors from Aspect under the international
distribution agreement between the Parties dated as of the date hereof for the
first (1st) Contract Year (as defined in this Agreement) shall be [**] per year
for each Product sold by NK hereunder. For the purpose of this provision, such
one year period for the minimum purchase of BIS sensors for each Product shall
separately commence on the first day of the month following the month when NK
resells such Product to NK's customers. To administer this provision, NK shall
inform Aspect from time to time (but no less frequently than quarterly), to the
extent such information is available to NK, of the names and addresses of
hospitals purchasing Products from NK and the number of Products sold by NK. On
or before the end of the first (1st) Contract Year, the Parties shall review
minimum sensor usage based on the actual experience during such Contract Year,
and shall adjust this requirement accordingly for subsequent Contract Years. For
the purposes of this provision, a "purchase" of sensors within a Contract Year
shall mean paying Aspect for such sensors on or before the last day of such
Contract Year.

(b)   Failure to meet the minimum purchase requirement described in
Section 3.6(a) above shall constitute a material breach of this Agreement for
the purposes of Section 6.2 below. Termination shall be the only consequence of
NK failing to satisfy this minimum purchase requirement.

4.    CONFIDENTIAL INFORMATION

4.1   CONFIDENTIALITY OBLIGATIONS. Each Party (the "disclosing Party") has a
proprietary interest in information which it discloses to the other Party (the
"receiving Party"), whether in connection with this Agreement or otherwise,
which is (a) a trade secret, confidential or proprietary information, (b) not
publicly known, and (c) annotated by a legend, stamp or other written
identification as confidential or proprietary information, or if disclosed
orally, is identified as confidential or proprietary by a written instrument
within 30 days of such disclosure (hereinafter referred to as "Proprietary
Information"). The receiving Party shall disclose the Proprietary Information of
the disclosing Party only to those of its agents and employees to whom it is
necessary in order properly to carry out their duties as limited by the terms
and conditions hereof. Both during and after the Agreement Term, all disclosures
by the receiving Party to its agents and employees shall be held in strict
confidence by such agents and employees. During and after the Agreement Term,
the receiving Party, its agents and employees shall not use the Proprietary
Information for any purpose other than in connection with discharging its duties
pursuant to this Agreement. The receiving Party shall, at its expense, return to
the



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<PAGE>   11

disclosing Party the Proprietary Information of the disclosing Party as soon as
practicable after the termination or expiration of this Agreement. During the
Agreement Term and thereafter, all such Proprietary Information shall remain the
exclusive property of the disclosing Party. This Article 4 shall also apply to
any consultants or subcontractors that the receiving Party may engage in
connection with its obligations under this Agreement.

4.2   EXCEPTIONS. Notwithstanding anything contained in this Agreement to the
contrary, the receiving Party shall not be liable for a disclosure of the
Proprietary Information of the disclosing Party if the information so disclosed:
(a) was in the public domain at the time of disclosure without breach of this
Agreement; or (b) was known to or contained in the records of the receiving
Party from a source other than the disclosing Party at the time of disclosure by
the disclosing Party to the receiving Party and can be so demonstrated; or (c)
becomes known to the receiving Party from a source other than the disclosing
Party without breach of this Agreement by the receiving Party and can be so
demonstrated; or (d) was disclosed pursuant to court order or as otherwise
compelled by law.

5.    INDEMNIFICATIONS

5.1   IN FAVOR OF ASPECT. NK hereby agrees to indemnify, defend and hold
harmless Aspect, its Affiliates and all officers, directors, employees and
agents thereof from all liabilities, claims, damages, losses, costs, expenses,
demands, suits and actions (including without limitation attorneys' fees,
expenses and settlement costs) (collectively, "Damages") arising out of: (i)
NK's failure to comply with relevant laws and regulations; (ii) personal
injuries and/or property damages resulting from the Product which relate to the
portion of the Product developed and manufactured by NK or which relate to the
failure of NK to incorporate the Kit within the Product in accordance with the
Technical Information provided by Aspect hereunder; or (iii) NK's making
representations or warranties with respect to the Kits which are not authorized
by Aspect hereunder.

5.2   IN FAVOR OF NK. Aspect hereby agrees to indemnify, defend and hold
harmless NK, its Affiliates and all officers, directors, employees and agents
thereof from all Damages arising out of: (i) the Products or the Kits infringing
on the intellectual property rights of third parties; (ii) use of the Trademarks
in accordance with Section 2.3(a) above which infringes on the trademark,
service mark or trade name rights of third parties; or (iii) personal injuries
and/or property damages resulting from the Product which relate to the portion
of the Product developed and manufactured by Aspect or which relate to NK's
incorporation of the Kit within the Product in accordance with the Technical
Information provided by Aspect hereunder; PROVIDED, HOWEVER, that:



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<PAGE>   12

(a)   Aspect shall have no obligation for any claim of infringement arising
from: (i) any combination by NK of the Product and/or the Kits with any other
product not supplied or approved in writing by Aspect (unless such combination
is a normal combination with other monitoring equipment or any part thereof),
where such infringement would not have occurred but for such combination; (ii)
the adaptation or modification of the Product and/or the Kits not performed or
not authorized by Aspect, where such infringement would not have occurred but
for such adaptation or modification; (iii) the misuse of the Product and/or the
Kits or the use of the Product and/or the Kits in an application for which they
were not designed by Aspect, where such infringement would not have occurred but
for such use or misuse; or (iv) a claim based on intellectual property rights
owned by NK or any of its Affiliates.

(b)   In the event that the Products are held in a suit or proceeding to
infringe any intellectual property rights of a third party, and the use of the
Product or the Kits is enjoined or Aspect reasonably believes that it is likely
to be found to infringe or likely to be enjoined, Aspect shall, at its sole cost
and expense, either (i) procure for NK the right to continue manufacturing,
using and selling the Products and/or using and selling the Kits, or (ii)
replace the Product and/or the Kits with non-infringing Products of equivalent
functionality. If neither (i) or (ii) are practicable, either party may
terminate this Agreement, effective immediately, upon giving the other party
written notice. Upon such termination, Aspect shall refund to NK the Unused
Portion of the license fee described in Section 2.1(c) above, according to
Section 6.6 below.

(c)   This Section 5.2 constitutes NK's exclusive remedy in the event that the
Product, the Kits and/or the Trademarks infringe on the intellectual property
rights of third parties.

5.3   INDEMNIFICATION PROCEDURES. The Party benefitting from an indemnity
hereunder (the "indemnified party") hereby agrees that: (a) the other Party (the
"indemnifying Party") shall have sole control and authority with respect to the
defense or settlement of any such claim; and (b) the indemnified Party and its
Affiliates, officers, directors, employees and agents thereof shall cooperate
fully with the indemnifying Party, at the indemnifying Party's sole cost and
expense, in the defense of any such claim. Any settlement of any such claims
that imposes any liability or limitation on the indemnifying Party shall not be
entered into without the prior written consent of the indemnifying Party.

5.4   PARTIAL INDEMNIFICATION. In the event a claim is based partially on an
indemnified claim described in Sections 5.1 and/or 5.2 above and partially on a
non-indemnified claim, or is based partially on a claim described in Section 5.1
above and partially on a claim described in Section 5.2 above, any payments and
reasonable attorney fees incurred in connection with such claims are to be
apportioned between the Parties in accordance with the degree of cause
attributable to each Party.



                                      -12-
<PAGE>   13
            Confidential Materials omitted and filed separately with
      the Securities and Exchange Commission. Asterisks denote omissions.


6.    TERMINATION OR EXPIRATION

6.1   EXPIRATION OF AGREEMENT. Unless it is terminated earlier pursuant to this
Article, this Agreement shall continue in full force and effect until it
automatically expires on the fourth (4th) anniversary of the Commencement Date.
Both parties shall discuss the renewal of this Agreement at least six (6) months
prior to such expiration of this Agreement.

6.2   TERMINATION FOR CAUSE. Upon the occurrence of a material breach or default
as to any obligation hereunder by either Party and the failure of the breaching
Party to promptly pursue (within thirty (30) days after receiving written notice
thereof from the non-breaching Party) a reasonable remedy designed to cure (in
the reasonable judgment of the non-breaching Party) such material breach or
default, this Agreement may be terminated by the non-breaching Party by giving
written notice of termination to the breaching Party, such termination being
immediately effective upon the giving of such notice of termination.

6.3   AFTER TERMINATION OR EXPIRATION. The Parties agree that, once this
Agreement is terminated or expires, NK shall immediately cease: (a) any use or
practice of the Licensed Technology; and (b) any development, manufacture, use
or sale of the Product; PROVIDED, HOWEVER, that: (i) NK shall have the right to
manufacture Products using the Kits which are in NK's possession at the time of
such termination or expiration; (ii) NK shall have the right to sell Products
which are in NK's possession at the time of such termination or expiration, and
manufactured by NK under 6.3(a) above, for a period of three (3) months after
such termination or expiration; PROVIDED, HOWEVER, that NK may, at its option,
within ten (10) days after the end of such three (3) month period, notify Aspect
that it has elected to extend this period for nine (9) additional months, in
which case NK shall pay Aspect US [**] for each module sold during such nine (9)
month period; (iii) Aspect or any third party designated by Aspect shall sell to
NK the parts necessary to repair the Products and shall grant to NK the right to
repair Products, for a period reasonably deemed that Products are used by the
customers; and (iv) Aspect or any third party designated by Aspect shall
continue to supply NK with BIS sensors to use with Products, for a period
reasonably deemed that Products are used by the customers.

6.4   PAYMENT OBLIGATIONS CONTINUE. Upon termination or expiration of this
Agreement, nothing shall be construed to release NK from its obligations to pay
Aspect any and all amounts accrued but unpaid pursuant to Article 3 above prior
to the date of such termination or expiration.



                                      -13-
<PAGE>   14
            Confidential Materials omitted and filed separately with
      the Securities and Exchange Commission. Asterisks denote omissions.


6.5   NO DAMAGES FOR TERMINATION. The Parties agree that if either Party
terminates the other Party pursuant to this Article 6, then the terminating
Party shall not be liable for damages or injuries suffered by the other Party as
a result of that termination, unless otherwise expressly provided herein.

6.6   REFUND OF LICENSE FEE. In the event that this Agreement is terminated for
any reason (other than based on a material breach or default of NK in accordance
with Section 6.2 above), the Unused Portion of the license fee paid to Aspect by
NK under Section 2.1(c) of this Agreement shall be refunded to NK by Aspect. For
the purpose of this Agreement, "Unused Portion" shall mean the amount which
equals US [**] multiplied by a fraction, the numerator of which [**] in which
this Agreement is [**] in the period in which this Agreement is effective after
the [**] and the denominator of which is [**]. In no event may this fraction be
less than [**]. In the event that this Agreement is terminated before
Commencement Date (other than based on a material breach or default of NK in
accordance with Section 6.2 above), the full amount of such license fee [**]
shall be refunded to NK.

7.    MISCELLANEOUS

7.1   NO INDIRECT DAMAGES. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT
LIMITED TO, LOSS OF PROFITS OR LOSS OF USE DAMAGES) ARISING OUT OF THE
MANUFACTURE, USE, SALE OR SUPPLYING OF THE PRODUCT OR KITS, EVEN IF SUCH PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSSES.

7.2   ASSIGNMENTS. This Agreement and the rights and obligations hereunder may
not be assigned, delegated or transferred by either Party without the prior
written consent of the other Party; PROVIDED, HOWEVER, that the other Party's
consent shall not be required with respect to any assignment, delegation or
transfer by a Party to (i) an Affiliate of such Party; or (ii) the purchaser of
all or substantially all of the assets or stock of such Party, through merger,
consolidation or otherwise. To the extent permitted by this Agreement, this
Agreement shall be binding upon and inure to the benefit of the permitted
successors and assigns of both Parties.

7.3   GOVERNING LAW. This Agreement shall be construed and governed according
to, and any arbitration shall be conducted in accordance with, the laws of the
Commonwealth of Massachusetts, U.S.A., excluding its conflicts of laws
principles.

7.4   DISPUTE RESOLUTION. Any dispute, controversy or claim arising out of or
relating to this Agreement or to a breach hereof, including its interpretation,
performance or termination, shall be finally resolved by arbitration. The
arbitration shall be conducted by three (3) arbitrators, one to be appointed by
Aspect, one to be appointed by NK and a third being nominated by the two
arbitrators so selected or, if they cannot agree on a third arbitrator, by the
President of the American Arbitration Association. The arbitration shall be
conducted in English and in accordance with the commercial arbitration rules of
the United Nations Commission



                                      -14-
<PAGE>   15

on International Trade Law. The arbitration, including the rendering of the
award, shall take place in Los Angeles, California, U.S.A. and shall be the
exclusive forum for resolving such dispute, controversy or claim. The decision
of the arbitrators shall be binding upon the parties hereto, and the expense of
the arbitration (including without limitation the award of attorneys' fees to
the prevailing party) shall be paid as the arbitrators determine. The decision
of the arbitrators shall be executory, and judgment thereon may be entered by
any court of competent jurisdiction. Notwithstanding anything contained in this
Section to the contrary, each Party shall have the right to institute judicial
proceedings against the other Party or anyone acting by, through or under such
other Party, in order to enforce the instituting Party's rights hereunder
through reformation of contract, specific performance, injunction or similar
equitable relief.

7.5   ENTIRE AGREEMENT. This Agreement supersedes and cancels any previous
agreements or understandings, whether oral, written or implied, heretofore in
effect and sets forth the entire agreement between Aspect and NK with respect to
the subject matter hereof. No modification or change may be made in this
Agreement except by written instrument duly signed by a duly authorized
representative of each Party.

7.6   NOTICES. All notices given under this Agreement shall be in writing and
shall be addressed to the Parties at their respective addresses and telecopy
numbers, and to the attention of the individuals set forth above. Either Party
may change its address, telecopy number and contact person for purposes of this
Agreement by giving the other Party written notice of its new address, telecopy
number or contact person. Any such notice if given or made by registered or
recorded delivery international air mail letter shall be deemed to have been
received on the earlier of the date actually received and the date fifteen (15)
calendar days after the same was posted (and in proving such it shall be
sufficient to prove that the envelope containing the same was properly addressed
and posted as aforesaid) and if given or made by telecopy transmission shall be
deemed to have been received at the time of dispatch, unless such date of deemed
receipt is not a day on which banks in the receiving party's home city are open
for business, in which case the date of deemed receipt shall be the next day on
which banks in the receiving party's home city are open for business.

7.7   WAIVERS. None of the conditions or provisions of this Agreement shall be
held to have been waived by any act or knowledge on the part of either Party,
except by an instrument in writing signed by a duly authorized officer or
representative of such Party. Further, the waiver by either Party of any right
hereunder or the failure to enforce at any time any of the provisions of this
Agreement, or any rights with respect thereto, shall not be deemed to be a
waiver of any other rights hereunder or any breach or failure of performance of
the other Party.



                                      -15-
<PAGE>   16

7.8   RESPONSIBILITY FOR TAXES. Taxes now or hereafter imposed with respect to
the transactions contemplated hereunder (with the exception of income taxes or
other taxes imposed upon Aspect and measured by the gross or net income of
Aspect, and with the exception of withholding tax set forth in Section 2.1(c)
above) shall be the responsibility of NK, and if paid or required to be paid by
Aspect, the amount thereof shall be added to and become a part of the amounts
payable by NK hereunder.

7.9   SEVERABILITY. If any provision of this Agreement is declared invalid or
unenforceable by a court having competent jurisdiction, it is mutually agreed
that this Agreement shall endure except for the part declared invalid or
unenforceable by order of such court. The Parties shall consult and use their
best efforts to agree upon a valid and enforceable provision which shall be a
reasonable substitute for such invalid or unenforceable provision in light of
the intent of this Agreement.

7.10  COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

7.11  RELATIONSHIP OF THE PARTIES.

(a)   The relationship between Aspect and NK shall not be construed to be that
of employer and employee, nor to constitute a partnership, joint venture or
agency of any kind. Neither Party shall have any right to enter into any
contracts or commitments in the name of, or on behalf of, the other Party, or to
bind the other Party in any respect whatsoever.

(b)   NK shall not obligate or purport to obligate Aspect by issuing or making
any affirmations, representations, warranties or guaranties with respect to Kits
to any third party, other than the warranties described in Exhibit D hereto.

7.12  LANGUAGE. All written material, correspondence, Technical Information,
notices and oral assistance supplied by either Party hereunder shall be in the
English language.

7.13  SURVIVAL OF CONTENTS. Notwithstanding anything else in this Agreement to
the contrary, the parties agree that Sections 2.7, 2.11, 3.3 and 3.4 and
Articles 4, 5, 6 and 7 shall survive the termination or expiration of this
Agreement, as the case may be.


                                      -16-
<PAGE>   17
7.14  COMPLIANCE WITH LAWS. NK covenants that all of its activities under or
pursuant to this Agreement shall comply with all applicable laws, rules and
regulations. NK shall be responsible for obtaining all licenses, permits and
approvals which are necessary or advisable for sales of Products in all
jurisdictions and for the performance of its duties hereunder. In particular,
but without limitation, NK shall be responsible for all submissions to the MHW
which may be required to obtain marketing approval of the Product. NK shall use
its best efforts to obtain such MHW approvals as expeditiously as possible. NK
shall promptly give Aspect written notice of the MHW Approval Date. Aspect
shall: (i) fully comply with any applicable law, regulation and rule of
government of the United States and agencies or instrumentalities thereof; and
(ii) maintain all U.S. governmental approvals and licenses necessary to produce
and export the Kit.


                                      -17-
<PAGE>   18
7.15  HEADINGS. Any headings contained herein are for directory purposes only,
do not constitute a part of this Agreement, and shall not be employed in
interpreting this Agreement.

     IN WITNESS WHEREOF, the parties hereto have signed this Agreement under
seal.

                                          ASPECT MEDICAL SYSTEMS, INC.

                                          By /s/ J. B. Eagle
                                             -----------------------------------
                                          Name:  J. B. Eagle
                                          Title: Chairman

                                          NIHON KOHDEN CORPORATION

                                          By /s/ Kazuo Ogino
                                             -----------------------------------
                                          Name:  Kazuo Ogino
                                          Title: Prsident and Chief Executive


EXHIBIT A     Description of BIS Module Kit
EXHIBIT B     Patents and Patent Applications
EXHIBIT C     Trademarks, Service Marks and Trade Names
EXHIBIT D     Warranties for Kit


                                      -18-
<PAGE>   19


EXHIBIT A

DESCRIPTION OF BIS MODULE KIT

The BIS `Module Kit' is designed specifically for OEM applications and allows
the integration of Aspect's BIS monitoring technology into OEM patient
monitoring systems. The BIS Engine will interface to the patient via the Aspect
BIS sensor and to the OEM equipment utilizing a serial (RS-232) 3-wire interface
and the necessary power connections.

The BIS module kits consists of a Digital Signal Converter (DSC-2) that is
placed in proximity to the patient and a small circuit board that resides in the
OEM equipment. The DSC-2 is a small (palm sized) front-end to the BIS Engine
circuit board that provides the patient interface and performs the high
performance analog to digital conversion of the EEG signals. The EEG signals are
transmitted in digital format from the DSC-2 to the BIS engine circuit board via
a 20 foot cable that is hard wired connected at the DSC-2.

The BIS Engine circuit board measures 3 x 4 inches. This board performs digital
signal processing on the digitized EEG signal and outputs the Bispectral Index
to the OEM system via the RS-232 serial connection. The board is constructed
using double sided surface mount techniques. The connections to the BIS Engine
circuit board are a serial interface (RS-232) and power.

Detailed Technical Specifications:

Digital Output:               RS-232 Serial Output
                              (8 data, 1 stop, no parity 115 kBaud)

Parameters:                   BIS, Suppression Ratio,
                              EMG, Raw EEG

Electrical Safety:            Conforms to UL 544, IEC-601-1

Power:                        3.5 Watts Maximum
                              +5V (500 mA)
                              +12V (77 mA)

Artifact Rejection:           Automatic


                                      -19-
<PAGE>   20


Bispectral Index:   0-100 Scale

Digital Signal Converter (DSC-2)

Description: The DSC amplifies and digitizes the signal close to the patient to
minimize electrical interference.

Weight:        4.7 oz (0.13 kg)

Dimensions:    2.6 x 1.0 x 4.3 inches
               (6.6 x 2.5 x 10.8 cm)

Cable Length: 23 ft (7.0 m) integral DSC cable, 1.5 ft (0.45) patient interface
cable.



BIS Engine PCB

Physical:           3x4 inch SMT PCB
Processing Power:   50 MFlops

Software Upgrades

The BIS engine software is stored in reprogrammable FLASH memory. Software
upgrades can be accomplished on-site or remotely via the serial interface.

Serial Identifier

Each BIS engine is given a unique serial identifier. This allows for electronic
identification of every BIS Engine.




                                      -20-
<PAGE>   21

EXHIBIT B

PATENTS AND PATENT APPLICATIONS

<TABLE>
<CAPTION>
<S>            <C>                  <C>                                          <C>

-------------- -------------------- -------------------------------------------- -------
 US PATENT #        PATENT                              DESCRIPTION
-------------- -------------------- -------------------------------------------- -------
  4,907,597    EEG BIS #1           Cerebral Bio-Potential Analysis Patents
-------------- -------------------- covering adaption of bispectral analysis     -------
  5,010,891    EEG BIS #2           and means for extracting information for
-------------- -------------------- diagnostic and monitoring applications       -------
  5,320,109    EEG BIS #3
-------------- --------------------                                              -------
  5,458,117    EEG BIS #4
-------------- -------------------- -------------------------------------------- -------
  5,381,804    A1000/A1050/DSC      Interface to biopotential signal acquisition
-------------- -------------------- -------------------------------------------- -------
  5,305,746    ZipPrep Electrode    Self-prepping electrode technology
-------------- -------------------- -------------------------------------------- -------
   pending     BIS Sensor System    Interface to BIS Disposable
                                    Sensor/Electrode
-------------- -------------------- -------------------------------------------- -------
   pending     BIS Sensor           Disposable
                                    BIS (Zip Prep) Sensor
-------------- -------------------- -------------------------------------------- -------
</TABLE>











                                      -21-
<PAGE>   22

EXHIBIT C

TRADEMARKS



           Aspect(R)

           ZIPPREP(TM)

           Zipprep(TM)

           A-1050(TM)

           A-1000(TM)

           A-2000(TM)

           Bispectral Index(TM)

           BIS(TM)

           BIS(TM)





                                      -22-

<PAGE>   23

EXHIBIT D

WARRANTY

Aspect warrants to the initial Purchaser that the BIS MODULE KIT ("Warranted
Product") will be free from defects in workmanship or materials, when given
normal, proper, and intended usage for a period of 18 months from the date of
its initial shipment to Purchaser, or 12 months from the date of resale by
Purchaser, whichever period first expires. Excluded from this warranty are
expendable components and supply items such as, but not limited to, electrodes,
cables, and prep solutions. Aspect's obligations under this warranty are to
repair or replace any Warranted Product or part thereof that Aspect reasonably
determines to be covered by this warranty and to be defective in workmanship or
materials provided that the Purchaser has given notice of such warranty claim
within the Warranty Period and the Warranted Product is returned to the factory
with freight prepaid. Repair or replacement of Products under this warranty does
not extend the Warranty Period.

To request repair or replacement under this warranty, Purchaser should contact
Aspect at 2 Vision Drive, Natick, Massachusetts 01760, 800-442-2051 or
508-647-2088. Aspect will authorize Purchaser to return the Warranted Product
(or part thereof) to Aspect. Aspect shall determine whether to repair or replace
Products and parts covered by this warranty and all Products or parts replaced
shall become Aspect's property. In the course of warranty service, Aspect may
but shall not be required to make engineering improvements to the Warranted
Product or part thereof. If Aspect reasonably determines that a repair or
replacement is covered by the warranty, Aspect shall bear the costs of shipping
the repaired or replacement Product to Purchaser. All other shipping costs shall
be paid by Purchaser. Risk of loss or damage during shipments under this
warranty shall be borne by the party shipping the Product. Products shipped by
Purchaser under this warranty shall be packaged in the original shipping
container or equivalent packaging to protect the Product. If Purchaser ships a
Product to Aspect in unsuitable packaging, any physical damage present in the
Product on receipt by Aspect (and not previously reported) will be presumed to
have occurred in transit and will be the responsibility of Purchaser.

Unless authorized or instructed by Aspect in advance, this warranty does not
extend to any Warranted Products or part thereof: that have been subject to
misuse, neglect or accident; that have been damaged by causes external to the
Warranted Product, including but not limited to failure of or faulty electrical
power; that have been used in violation of Aspect's instructions; that have been
affixed to any nonstandard accessory attachment; on which the serial number has
been removed or made illegible; that have been modified by anyone other than
Aspect; or that have been disassembled, serviced, or reassembled by anyone other
than Aspect, unless authorized by Aspect. Aspect shall have no obligation to
make repairs, replacements, or corrections which result, in whole or in part,
from normal wear and tear. Aspect



                                      -23-
<PAGE>   24

makes no warranty (a) with respect to any products that are not Warranted
Products, (b) with respect to any products purchased from a person other than
Aspect or an Aspect-authorized distributor or (c) with respect to any product
sold under a brand name other than Aspect.














                                      -24-
<PAGE>   25

THIS WARRANTY IS THE SOLE AND EXCLUSIVE WARRANTY FOR ASPECT'S PRODUCTS, EXTENDS
ONLY TO THE PURCHASER AND IS EXPRESSLY IN LIEU OF ANY OTHER EXPRESS OR IMPLIED
WARRANTIES INCLUDING WITHOUT LIMITATION ANY WARRANTY AS TO MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. EXCEPT AS OTHERWISE PROVIDED HEREIN, ASPECT'S
MAXIMUM LIABILITY ARISING OUT OF THE SALE OF THE PRODUCTS OR THEIR USE, WHETHER
BASED ON WARRANTY, CONTRACT, TORT OR OTHERWISE, SHALL NOT EXCEED THE ACTUAL
PAYMENTS RECEIVED BY ASPECT IN CONNECTION THEREWITH. ASPECT SHALL NOT BE LIABLE
FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL LOSS, DAMAGE OR EXPENSE (INCLUDING
WITHOUT LIMITATION LOST PROFITS) DIRECTLY OR INDIRECTLY ARISING FROM THE SALE,
INABILITY TO SELL, USE OR LOSS OF USE OF ANY PRODUCT. EXCEPT AS SET FORTH
HEREIN, ALL PRODUCTS ARE SUPPLIED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER
EXPRESS OR IMPLIED.

























                                      -25-