Document:

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

                                                                    Exhibit 10.1

                                                                  EXECUTION COPY

                 PRODUCT DEVELOPMENT AND DISTRIBUTION AGREEMENT

      This PRODUCT DEVELOPMENT AND DISTRIBUTION AGREEMENT is entered into as of
May 23, 2005 (the "Effective Date"), by and between Aspect Medical Systems,
Inc., a Delaware corporation having a principal place of business at 141 Needham
Street, Newton, Massachusetts 02464 ("AMS"), and Boston Scientific Corporation,
a Delaware corporation having a principal place of business at One Boston
Scientific Place, Natick, Massachusetts 01760 ("BSC").

                                   Background

      WHEREAS, AMS is interested in developing new applications of its
brain-monitoring technology in the area of the diagnosis and treatment of
neurological, psychiatric and pain disorders;

      WHEREAS, BSC is willing to provide AMS certain funding in connection with
such development efforts;

      WHEREAS, the Board of Directors of AMS has amended the Rights Agreement
dated November 29, 2004 by and between AMS and EquiServe Trust Company, N.A., as
Rights Agent of AMS (the "Rights Plan"), pursuant to which rights under the plan
would become exercisable if BSC acquires any shares of AMS' common stock such
that, after such acquisition, BSC holds beneficial ownership of 29.5 percent or
more of AMS' common stock or commences a tender offer for such stock; and

      WHEREAS, AMS is willing to appoint BSC as the exclusive distributor for
the products developed in connection with those efforts on the terms set forth
herein.

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto, AMS
and BSC agree as follows:

1.    DEFINITIONS.

      Capitalized terms used in this Agreement and not otherwise defined herein
shall have the respective meanings set forth below.

      "AMS Field" means products designed for the early detection, diagnosis
and management of patients with dementia caused by a neurological condition such
as Alzheimer's disease, or with cognitive impairment that is likely a precursor
to Alzheimer's disease.

      "AMS Intellectual Property" shall mean all Intellectual Property which, at
the relevant time of reference thereto, is owned by AMS or to which AMS through
license or otherwise has or acquires rights; provided, however, that (i) "AMS
Intellectual Property" shall specifically exclude Intellectual Property that may
be licensed by BSC to AMS, and (ii) "AMS Intellectual Property" shall include
Program Intellectual Property only if and to the extent provided in this
Agreement.

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      "ASP" shall mean, with respect to any sales of any BIS-Screen Product and
period of time, Net Sales of a Person during such period of time for the sale of
such BIS-Screen Product, divided by the number of units of such BIS-Screen
Product sold by such Person and its Affiliates during such period of time.

      "Act" means the United States Food, Drug and Cosmetic Act and similar laws
and regulations in foreign jurisdictions, all as may be amended from time to
time.

      "Affiliate" means with respect to any party, any Person or entity that,
directly or indirectly, is controlled by, controls or is under common control
with such party.

      "Agreement" means this Agreement, including all Exhibits hereto (which are
hereby incorporated by reference herein), as the same may be amended or
supplemented from time to time in accordance herewith.

      "Approved Major Category" means any Major Category in which the
development of a BIS-Screen Product by AMS has been approved by the Steering
Committee in accordance with the terms of Section 3.5(vi). For purposes of this
Agreement, Depression (including the diagnosis of or detection of suicide
ideation) shall be deemed an Approved Major Category as of the Effective Date.

      "BIS-Screen Products" means any products that incorporate the BIS-Screen
Technology in the BSC Field, provided, that BIS-Screen Products shall not
include any BIS(R) consciousness monitoring products and related products (such
as products designed for closed loop delivery of anesthesia, seizure detection,
analgesia monitoring or other brain status indications) which are used
contemporaneously and in conjunction with BIS(R) consciousness monitoring
products, provided, that such BIS consciousness monitoring products and related
products are not marketed or sold principally for use in the BSC Field. Any
Specified [**] Product shall be a BIS-Screen Product.

      "BIS-Screen Technology" means any EEG analysis technology developed by or
for AMS, or to which AMS otherwise has the right to use as contemplated by this
Agreement, which may be used for the diagnosis of neurological, psychiatric or
pain disorders or screening or monitoring patient response to treatment options
for such disorders.

      "BSC Field" means all applications of the BIS-Screen Technology for the
diagnosis of neurological, psychiatric or pain disorders or screening or
monitoring patient response to treatment options for such disorders, provided,
that the BSC Field shall not include applications specifically within the AMS
Field.

      "Contract Year" means the one-year period beginning on the first day of
the first month immediately following the month in which the Effective Date
occurs and ending on the first anniversary thereof, and each successive one-year
period thereafter during the term of this Agreement.

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      "Confidential Information" means all data, specifications, training
materials and other know-how related to the design, use, implementation,
performance, manufacture, distribution or sale of the BIS-Screen Products, as
well as all other information and data provided by either party to the other
party hereunder in written or other tangible medium and marked as confidential,
or if disclosed orally or displayed, identified as confidential prior to or at
the time of disclosure and confirmed in writing as confidential within 10 days
after disclosure, in each case except any portion thereof which: (i) is known to
the receiving party before receipt thereof under this Agreement as evidenced by
the receiving party's written records; (ii) is properly and lawfully disclosed
to the receiving party by a third person who has the legal right to make such
disclosure; (iii) is or becomes generally known in the trade through no fault of
the receiving party; or (iv) is independently developed by the receiving party
without use of such information, as evidenced by the receiving party's written
records.

      "Cost of Goods Sold" means, (a) with respect to any BIS-Screen Product
manufactured by AMS or BSC, the cost of direct labor, materials, components and
factory overhead, and related costs, in each case as determined in accordance
with GAAP consistently applied, and (b) with respect to any BIS-Screen Product
manufactured by a third party, the amount Distributor pays such third party for
such BIS-Screen Product. Notwithstanding the foregoing, Cost of Goods Sold shall
exclude, in any event, any Distribution Commission and shall include (regardless
of whether or not recorded as part of Cost of Goods Sold on a Person's
regularly-prepared financial statements) any royalties, to the extent that the
inclusion of such amounts would otherwise be consistent with GAAP.

      "Custom Third Party Product" is a BIS-Screen Product developed by AMS,
after receipt of and in accordance with the approval of the Steering Committee
in accordance with Section 3.5(b)(viii), without the use of the proceeds of any
Development Payments, for the treatment of neurological, psychiatric or pain
disorders.

      "Development Period" means the five year period starting on the Effective
Date of this Agreement and ending on the last day of the calendar month
including the fifth anniversary thereof.

      "Disposable Product" means a BIS-Screen Product that is intended for
limited use, or a component of a larger BIS-Screen Product intended to be used
for a limited number of uses. As an example, a separate sensor intended to be
used a single time, or on a limited basis, which requires another device to
collect, collate or interpret results collected by such sensor, would be
considered a "Disposable Product."

      "Distributor" shall mean BSC, in the case of any circumstances where BSC
is distributing BIS-Screen Products manufactured by AMS hereunder, or AMS, in
the case of any circumstances where AMS is distributing BIS-Screen Products
manufactured by BSC hereunder.

      "Excluded BIS-Screen Product" means any BIS-Screen Product (x) with
respect to which the Product Completion Date occurs after the Product Cut-Off
Date and which is not at a stage of

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development, on or prior to the Product Cut-Off Date, such that a functional
prototype that could be used in a clinical trial, including without limitation a
Phase 1 or Phase 2 clinical trial, that could serve as the basis for Product
Approval in the United States has been developed (any such BIS-Screen Products
being referred to herein as "After-Developed Products"), (y) which may be used
only for indications in Major Categories with respect to which BSC has
previously exercised its Opt-Out Options, or (z) any Custom Third Party
Products. Excluded BIS-Screen Products shall not include any Included BIS-Screen
Products, including any BIS-Screen Products which become Included BIS-Screen
Products as a result of a determination by the Steering Committee in accordance
with Section 3.5(b)(xii).

      "Existing [**] Program" means the existing development relationship which
AMS is party to with a third party [**] manufacturer (the "Specified Third
Party"), pursuant to which AMS has received a specified amount of funding to
develop a new product (the "Specified [**] Product"), which may include
BIS-Screen Technology, which Specified [**] Product is intended to provide a
therapeutic option for the treatment of [**] through [**]. AMS hereby represents
and warrants to BSC that AMS has not granted the Specified Third Party any
rights to distribute or sell any Specified [**] Product or other product of AMS.

      "FDA" means the United States Food and Drug Administration, or any
successor entity.

      "First BSC Sales Date" means the first day on which BSC sells a BIS-Screen
Product which is generally available for end-user customers to an unaffiliated
end-user customer or other distributor in the United States (other than
"stocking" orders) following receipt of Product Approval and the commercial
launch by BSC of such BIS-Screen Product.

      "First Other Distributor Sales Date" means the first day on which any
distributor other than BSC, including AMS or any third party distributor engaged
after a determination of the Steering Committee to engage such distributor in
accordance with Section 3.5(b)(xi), sells an Included BIS-Screen Product (other
than a Specific [**] Product) which is generally available for end-user
customers to an end-user customer or other distributor in the United States
(other than "stocking" orders) following receipt of Product Approval and the
commercial launch by such person of such BIS-Screen Product.

      "Foreign Regulatory Authority" means a Regulatory Authority other than the
FDA.

      "GAAP" means United States generally accepted accounting principles.

      "Included BIS-Screen Product" means any BIS-Screen Product (x) with
respect to which the Product Completion Date has occurred on or prior to the
Product Cut-Off Date, (y) which is at a stage of development, on or prior to the
Product Cut-Off Date, such that a functional prototype that could be used in a
clinical trial, including without limitation a Phase 1 or Phase 2 clinical
trial, that could serve as the basis for Product Approval has been substantially
developed, or (z) which has otherwise been designated as an Included BIS-Screen
Product by the Steering Committee in accordance with Section 3.5(b)(xii).
Included BIS-Screen Products shall not

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include any BIS-Screen Products which may be used only for indications in Major
Categories with respect to which BSC has exercised its Opt-Out Options.

      "Intellectual Property" shall mean intellectual property or proprietary
rights of any description including without limitation (i) the Patent Rights,
copyrights, industrial designs, trademarks, service marks, logos, trade dress or
trade name, (ii) related registrations and applications for registration, (iii)
trade secrets, (iv) inventions, discoveries, improvements, modifications,
know-how, technique, methodologies, works of authorship, design or data, whether
or not patented, patentable, copyrightable or reduced to practice, including but
not limited to any inventions, discoveries, improvements, modifications,
know-how, technique, methodologies, works of authorship, designs or data
embodied or disclosed in any: (1) computer source code (human readable format)
and object code (machine readable format); (2) specifications; (3)
manufacturing, assembly, test, installation, service and inspection instructions
and procedures; (4) engineering, programming, service and maintenance notes and
logs; (5) technical, operating and service and maintenance manuals and data; (6)
hardware reference manuals; and (7) user documentation, help files or training
materials, and (v) good will related to any of the foregoing.

      "Major Category" means with respect to the BIS-Screen Products, any
particular disease state or other significant application in the BSC Field. For
purposes of this Agreement, [**] and [**] (including screening for [**] in
connection with [**]), shall each be deemed a separate Major Category within the
BSC Field.

      "Manufacturer" means AMS, in any circumstances where AMS is manufacturing
BIS-Screen Products for distribution by BSC hereunder, and BSC, in any
circumstances where BSC is manufacturing BIS-Screen Products for distribution by
AMS hereunder.

      "Net Sales" of a Person means the aggregate amount of net sales recorded
by such Person or any of its Affiliates from the sale or license of a BIS-Screen
Products in the Territory, in accordance with generally accepted accounting
principles, consistently applied by such Person across all similar product
lines, if any, in connection with the preparation of such Person's audited
financial statements. All sales of BIS-Screen Products invoiced in a currency
other than U.S. Dollars shall be converted to U.S. Dollars on a monthly basis in
accordance with BSC's standard practice prior to calculating the Net Sales of
such BIS-Screen Products. In no event shall the Net Sales of any Person with
respect to any BIS-Screen Products be reduced by any Distribution Commission
that may be payable by any Person with respect to sales of such BIS-Screen
Product.

      When a BIS-Screen Product is sold by a Person in connection with or as a
component of other components or products, then the computation of Net Sales
shall be based on the relative average prices charged during the applicable
quarter for the BIS-Screen Product and the other components or products when
separately invoiced or priced. In the event the BIS-Screen Product and the other
components or products were not separately invoiced or priced during the
applicable quarterly period, the Net Sales computation shall be based on the
relative fair market price which such Person would have charged for the
BIS-Screen Product and other components

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or products to an unrelated purchaser in an arm's length transaction.

      "Opt-Out Period" means, with respect to any Major Category, the period
beginning on the Effective Date and ending on the last day of the fifth (5th)
Contract Year or, if later, the date which is six (6) months following the date
on which the first Product Completion Date for a BIS-Screen Product in such
Major Category has occurred.

      "Patent Rights" means all patents, patent applications and rights to file
patent applications that relate to any BIS-Screen Product or its manufacture,
sale, use, design, import and are licensed to, owned or controlled by AMS now or
in the future and, in each case, any reissues or extensions thereof and any
foreign counterparts, divisions, continuations or continuations-in-part of any
applications or substitutes therefor.

      "Permitted Licenses" means any license of BIS-Screen Technology or Program
Intellectual Property in the BSC Field, or the right to manufacture, market or
sell BIS-Screen Products in the BSC Field, granted by AMS to a third party with
the express approval of the Steering Committee.

      "Person" means an individual, corporation, partnership, limited
partnership, limited liability company, joint venture, trust or unincorporated
organization, or a government or any agency or political subdivision thereof.

      "Product Approvals" means, for any country or other jurisdiction in the
Territory, those regulatory approvals and/or clearances required for
importation, exportation, promotion, pricing, marketing and sale of any
BIS-Screen Products in such country or other jurisdiction for use in one or more
Major Category.

      "Product Completion Date" will be deemed to have occurred for a BIS-Screen
Product if each of the following conditions has been satisfied for such
BIS-Screen Product : (a) such BIS-Screen Product shall have received final
Product Approval in the United States for a specific indication; (b) AMS (if it
has exercised the Manufacturing Option with respect to such BIS-Screen Product),
BSC (if it shall have exercised the Manufacturing Option with respect to such
BIS-Screen Product) or a third party manufacturer selected by the Steering
Committee, has demonstrated the ability to manufacture and deliver units of such
BIS-Screen Product in commercial quantities at least equaling BSC's reasonable
internal forecast for the subsequent six (6) months, assuming an immediate
market launch; (c) the sale of such BIS-Screen Product has not been enjoined by
any court of competent jurisdiction as a result of the any claim by a
third-party that the development, manufacture, marketing, sale or use of such
BIS-Screen Product infringes or violates any Intellectual Property rights of
such third-party; and (d) the Steering Committee shall have determined the
Product Specifications for such BIS-Screen Product in accordance with Section
3.5(b)(vii).

      "Product Cut-Off Date" means [**].

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      "Product Specifications" means with respect to any BIS-Screen Product, the
specifications for such BIS-Screen Product which shall be developed by AMS,
after consultation with BSC, prior to the Product Completion Date for such
BIS-Screen Product and approved by the Steering Committee.

      "Program" means the development of BIS-Screen Products by AMS pursuant to
this Agreement.

      "Program Intellectual Property" means individually and collectively all
Intellectual Property that is conceived, created, discovered, developed, or
reduced to practice or tangible medium of expression by one or more employees or
consultants of AMS and/or one or more employees or consultants of BSC at any
time after the Effective Date in connection with the conduct of the Program.

      "Regulatory Authority" means any national, supra-national, regional, state
or local regulatory agency, department, bureau, commission, council or other
governmental entity in the Territory, including without limitation, the FDA, or
any entity delegated authority by any such governmental entity, including for
example any notified body.

      "Reimbursement Approvals" means governmental and other approvals in any
country or jurisdiction in the Territory, for a buyer to claim reimbursement at
any level for the purchase of the BIS-Screen Products, from private or public
health insurance organizations in such country or jurisdiction in the Territory.

      "Territory" means all countries, and each of their respective territories
and possessions, of the world.

      "Trademarks" means the trademarks owned or controlled by AMS that may be
used from time to time with respect to the BIS-Screen Products.

      Other Defined Terms. Each of the following terms shall have the respective
meaning ascribed to such term in the section of this Agreement set forth
opposite such term below:

<TABLE>
<S>                                                                                      <C>
"After-Developed Product"..................................................              Definition of Excluded
                                                                                         BIS-Screen Product
"AMS"......................................................................              Introductory paragraph
"AMS Development Obligations"..............................................              Section 3.1
"AMS Distribution Election"................................................              Section 5.1(d)
"BSC"......................................................................              Introductory paragraph
"BSC Intellectual Property"................................................              Section 8.2(a)
"Continuous Improvement Option"............................................              Section 3.4
"Coordinator"..............................................................              Section 3.5(a)
"Development Funding Obligation"                                                         Section 2.1
"Development Payment"......................................................              Section 2.2
</TABLE>

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<TABLE>
<S>                                                                                      <C>
"Distribution Commission"..................................................              Sections 5.5 and 5.6
"Distribution Term"........................................................              Section 5.1(b)
"Effective Date"...........................................................              Introductory paragraph
"GMP"......................................................................              Section 7.7
"Indemnifying Party".......................................................              Section 11.2
"Indemnitees"..............................................................              Section 11.2
"Losses"...................................................................              Section 11.1
"Manufacturing Option".....................................................              Section 4.1
"Option Exercise Date".....................................................              Section 4.1
"Opt-Out Options"..........................................................              Section 5.1(b)
"Payment Year".............................................................              Section 2.2
"Product Information"......................................................              Section 9.1
"QSR"......................................................................              Section 7.7
"Resource Plan"............................................................              Section 2.4
"Rights Plan"..............................................................              Recitals
"Specified [**] Product"...................................................              Definition of Excluded
                                                                                         BIS-Screen Product
"Specified Third Party"....................................................              Definition of Excluded
                                                                                         BIS-Screen Product
"Steering Committee".......................................................              Section 3.5(a)
"Supply Forecast"..........................................................              Section 6.1
"Transfer Price"...........................................................              Sections 5.5 and 5.6
</TABLE>

2     FUNDING COMMITMENT.

      2.1 Funding Obligation by BSC. Subject to Section 2.4 and the terms and
conditions of this Agreement, BSC agrees to provide AMS twenty-five million
dollars ($25,000,000) (the "Development Funding Obligation"), to assist in the
funding of AMS' efforts to develop BIS-Screen Products in Approved Major
Categories.

      2.2 Payment Date. The Development Funding Obligation shall be paid to AMS
in separate payments of five million dollars ($5,000,000.00) (each, a
"Development Payment"), with the first such payment to be made on May 31, 2005,
and each of the four remaining payments to be made on or about May 31st of each
of the four calendar years beginning with 2006 (each, a "Payment Year"), by wire
transfer of immediately available funds within thirty (30) days of delivery by
AMS to BSC of a written request therefor.

      2.3 Acceleration of Payments. AMS may, from time to time during any
Payment Year, request an acceleration of part of the Development Payment for a
subsequent Payment Year, subject to an aggregate maximum of an additional two
and a half million dollars ($2,500,000.00) for any Payment Year. BSC shall be
entitled to accept or decline any such request for an acceleration of part of a
Development Payment in its sole discretion. In the event BSC agrees to
accelerate a portion or portions of a Development Payment for any Payment Year,
the obligation of BSC to make a Development Payment for that year shall be
reduced by all

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amounts of such Development Payment accelerated to prior Payment Years, and in
no event shall BSC be required to make Development Payments, in the aggregate,
that exceed the Development Funding Obligation.

      2.4 Use of Proceeds. Attached as Exhibit A hereto is a "Resource Plan"
specifying AMS' current planned use of proceeds for the Development Payments.
The Resource Plan shall be updated no less than annually by the Steering
Committee in accordance with Section 3.5(b)(ix). AMS shall be required to use no
less than eighty percent (80%) of the aggregate amount of the Development
Payments paid to AMS during the Development Period to pay the fully burdened
costs incurred by AMS in developing BIS-Screen Products in any Approved Major
Categories during such period in accordance with the terms of the then-current
Resource Plan, and shall be entitled to use up to twenty per cent (20%) of the
aggregate amount of the proceeds of the Development Payments paid to AMS during
the Development Period to pay the fully burdened costs incurred by AMS in
developing BIS-Screen Products in the AMS Field, or in Major Categories which
are not Approved Major Categories. The proceeds of the Development Payments may
not be used for any other purpose. Without limiting the foregoing, AMS may not
use the proceeds of any Development Payment in connection with the Existing [**]
Program, or for the development of Custom Third Party Products. To the extent
that AMS does not, prior to the end of the Development Period, spend the entire
amount of the Development Payments paid to AMS during the Development Period in
accordance with this Section 2.4, AMS shall be required to spend the balance of
such amounts in accordance with the provisions of this Section 2.4 prior to the
Product Cut-Off Date. For purposes of this Agreement, such fully burdened costs
shall include the sum of all AMS direct labor (incurred at a rate to reflect
both direct and indirect costs) and other direct costs (such as clinical trial
expenses, consultants, etc.) for research & product development, regulatory
clearances and clinical trials, market assessment and development, ongoing
product support, recruiting and corporate and public communications relating to
the Program, legal and audit expenses relating to the Program, as applicable,
and for refining and continuously improving the BIS-Screen Products in the BSC
Field, or in the AMS Field, as applicable.

3     DEVELOPMENT.

      3.1 AMS Development Obligations; Development Costs. During the Development
Period, AMS shall use its commercially reasonable efforts in light of the
feasibility of obtaining relevant Product Approvals, the efficacy and safety of
such BIS-Screen Product and the engineering feasibility, among other factors, to
design and develop BIS-Screen Products for use in Approved Major Categories in
accordance with the then-current Resource Plan. As part of AMS' obligation to
develop BIS-Screen Products in Approved Major Categories during the Development
Period, AMS shall conduct clinical studies for such BIS-Screen Products, and
shall use commercially reasonable efforts to obtain reimbursement in the United
States for such BIS-Screen Products (subject to Section 4 below). In addition,
during the Development Period, AMS shall use commercially reasonable efforts to
timely obtain, to the extent available, the endorsement of the thought leaders
in the profession associated with the indications for which the BIS-Screen
Products are designed. Furthermore, in the event that the Steering Committee
should

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determine during the Development Period that any BIS-Screen Product requires
material modification for application in a particular Approved Major Category in
accordance with Section 3.5(b)(xiii), AMS shall, as part of its obligation to
develop the BIS-Screen Products, design and develop such modifications. The
development obligations described in this Section 3.1 are sometimes referred to
herein as the "AMS Development Obligations". AMS agrees to bear and pay all
costs, including, but not limited to, non-recurring engineering costs, directly
and indirectly related to the AMS Development Obligations. BSC shall have no
obligation to fund, directly or indirectly, any portion of such development
efforts beyond the Development Funding Obligation pursuant to Section 2.1.
During the Distribution Term, to the extent AMS designs or develops BIS-Screen
Products in the AMS Field, AMS will use best efforts to design and develop such
BIS-Screen Products in the AMS Field in a manner such that (i) they differ
materially from BIS-Screen Products in the BSC Field with respect to the
underlying algorithm, the product labeling, the information displayed and the
components that may constitute Disposable Products; and (ii) they may not be
used for indications in the BSC Field (whether or not approved for such
indications), and cannot be interchanged with or substituted for BIS-Screen
Products marketed or sold for use in the BSC Field.

      3.2 Future Developments. In the event BSC desires to have AMS complete
specific development work that has been partially funded by BSC or to have AMS
perform additional development work with respect to BIS-Screen Products (other
than Excluded BIS-Screen Products) for use in the BSC Field after the
Development Period (other than as provided in Section 3.4 below), the Steering
Committee will determine the appropriate level of additional development work
and the appropriate allocation of costs, to continue to design and develop such
BIS-Screen Products for use in the BSC Field in accordance with Section
3.5(b)(x). In the event AMS desires to seek funding for development work with
respect to BIS-Screen Products for use in the BSC Field after the Development
Period, AMS shall not enter into any agreement with a third party relating to
funding of such development work, unless AMS shall first offer such opportunity
to BSC. For purposes of offering BSC any such opportunity, AMS will provide BSC
with notice thereof (which notice will include sufficient technical detail to
permit BSC to evaluate its interest in the opportunity) and shall meet with BSC
within thirty (30) days following such notice to discuss the opportunity. BSC
shall within thirty (30) days from its receipt of such notice notify AMS in
writing whether it will exercise the aforementioned right of first offer with
respect to any such proposal. If BSC indicates that it wishes to pursue such
opportunity, then the parties shall within forty-five (45) days following BSC's
notice engage in good faith negotiation of terms for such funding. If the
parties cannot negotiate mutually acceptable terms within such 45-day period,
and the parties are not willing to extend the period for negotiation, then BSC's
option shall expire with respect to such opportunity and AMS may negotiate with
a third party concerning such opportunity; provided, however, that any such
agreement shall contain terms that are in the aggregate not materially more
favorable to such third party than those last offered to BSC. If AMS wishes to
offer such opportunity to a third party on terms that are in the aggregate
materially more favorable than those last offered to BSC, AMS shall first make
an offer on such "improved" terms to BSC in accordance with the procedure
specified in this Section 3.2.

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<PAGE>

      3.3 Notice; Prototype. During the Development Term, AMS shall promptly
provide written notice exclusively to BSC of the development of any and all
Included BIS-Screen Products potentially having application in the BSC Field.
Upon BSC's written request, AMS shall provide to BSC a functional prototype of
each such BIS-Screen Product and shall permit BSC to conduct due diligence with
respect thereto.

      3.4 Continuous Improvement. During the Development Period, AMS shall, as
appropriate and commercially feasible, improve and enhance the design, quality
and performance of any BIS-Screen Products then being distributed and sold under
this Agreement so as to maintain or increase the competitive advantage of such
BIS-Screen Products in the BSC Field as compared to similar products in the
marketplace for use in the BSC Field, including reducing the Cost of Goods Sold
of each Included BIS-Screen Product in the BSC Field. During the Distribution
Term of this Agreement, on or prior to the First BSC Sales Date or First Other
Distributor Sales Date for a BIS-Screen Product, AMS shall be entitled to elect
(the "Continuous Improvement Option"), to assume the responsibility to, as
appropriate and commercially feasible, continuously improve and enhance the
design, quality and performance of any BIS-Screen Products being distributed and
sold under this Agreement so as to maintain or increase the competitive
advantage of such BIS-Screen Products in the BSC Field as compared to similar
products in the marketplace for use in the BSC Field, including reducing the
Cost of Goods Sold of each Included BIS-Screen Product in the BSC Field, for the
duration of the Distribution Period. In the event that AMS does not exercise the
Continuous Improvement Option with respect to any BIS-Screen Product on or prior
to the First BSC Sales Date or First Other Distributor Sales Date for such
BIS-Screen Product, then (x) any Transfer Price or Distribution Commission
payable by BSC to AMS pursuant to Sections 5.5 or 5.7 for the duration of the
Distribution Term shall be reduced by an amount equal to [**] percent ([**]%) of
the ASP of BSC for such BIS-Screen Product, or [**] percent ([**]%) of Net Sales
of BSC of such BIS-Screen Product, for the applicable period, and (y) any
Transfer Price or Distribution Commission payable by AMS to BSC pursuant to
Sections 5.6 or 5.7 for the duration of the Distribution Term shall be increased
by an amount equal to [**] percent ([**]%) of the ASP of AMS for such BIS-Screen
Product, or [**] percent ([**]%) of Net Sales of AMS of such BIS-Screen Product,
for the applicable period. In addition, in the event that AMS does not exercise
the Continuous Improvement Option with respect to any BIS-Screen Product, the
Steering Committee will be charged with determining which party shall be
responsible for improving the BIS-Screen Product after its market launch, and
what allocation, if any, should be made of the costs thereof between AMS and BSC
in accordance with Section 3.5(b)(xix).

3.5   Steering Committee and Coordinators.

      (a) Appointment. Each party shall appoint two (2) individuals, a
Coordinator and another who is also either an employee of such party or of any
of its Affiliates, to represent such party on a steering committee in connection
with the Program ("Steering Committee"). Each party may, at its sole discretion,
replace its Coordinator or its other member of the Steering Committee. Each
party shall designate a coordinator ("Coordinator") to act as the

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primary liaison between it and the other party for all technical matters that
may arise during the course of the Program. The initial Coordinator for AMS
shall be Philip Devlin; and the initial Coordinator for BSC shall be Robert F.
Braun.

      (b) Responsibilities. The Steering Committee shall have the following
authority and obligations with respect to the relationship of the parties
hereunder:

            (i) to encourage and facilitate the cooperation of the parties under
      this Agreement, and to manage, direct and oversee the efforts
      corresponding thereto;

            (ii) to review and evaluate the results of the Program, to regularly
      report the progress of the Program to the parties;

            (iii) to coordinate the communication, Confidential Information
      exchange and efforts of the parties with respect to all matters under this
      Agreement relating to the Program;

            (iv) to schedule and coordinate visits by personnel of each party to
      facilities of the other party;

            (v) to discuss and resolve, if possible, any issues or disputes that
      arise in the course of the relationship established by this Agreement;

            (vi) to approve any Major Categories with respect to which AMS shall
      attempt to develop BIS-Screen Products;

            (vii) to approve any Product Specifications;

            (viii) to consider, approve or reject, or recommend modifications to
      in anticipation of approving, any proposals by AMS to develop any Custom
      Third Party Products, it being understood that AMS may not develop,
      manufacture, have manufactured, market, sell or distribute any Custom
      Third Party Product without the approval of the Steering Committee;

            (ix) to agree upon, no less than once per Contract Year during the
      Development Period, updates and revisions of the Resource Plan;

            (x) to determine the appropriate level of development work and
      allocation of costs with respect to specific development work after the
      Development Period is complete in accordance with Section 3.2;

            (xi) (1) to review a marketing plan by BSC for any Included
      BIS-Screen Product, three months prior to the Product Completion Date for
      such BIS-Screen Product, and at least annually thereafter, taking into
      account relevant factors, including projected volumes

                                       12

<PAGE>

      and the experience of the sales force with respect to such Included
      BIS-Screen Product, and (2) to identify for approval any third party
      entity to distribute a BIS-Screen Product if BSC has elected to exercise
      its Opt-Out Option with respect to the Major Category to which such
      BIS-Screen Product relates in accordance with Section 5.1(b), and AMS has
      not elected to distribute such BIS-Screen Product in accordance with
      Section 5.1(d), and to determine the principal terms and conditions of
      such distribution arrangement. Without limiting the foregoing, any
      distribution agreement reflecting such third party distribution
      arrangement shall impose obligations on such distributor substantially
      identical to those applicable to the Distributor hereunder;

            (xii) to determine whether any BIS-Screen Products that are
      otherwise Excluded BIS-Screen Products should be designated Included
      BIS-Screen Products for purposes of this Agreement,

            (xiii) to determine whether any BIS-Screen Product requires any
      material modification for application in a particular Approved Major
      Category in accordance with Section 3.1;

            (xiv) to determine whether to grant any licenses or sublicenses to
      the BIS-Screen Technology, the Program Intellectual Property or the right
      to manufacture, market or sell BIS-Screen Products, in each case in the
      BSC Field, in accordance with Section 5.8;

            (xv) to determine the appropriate course of action with respect to
      BIS-Screen Products which are found, or are deemed likely to be held, to
      infringe third party Intellectual Property in accordance with Section
      11.1;

            (xvi) to determine which third party manufacturer, if any, may be
      engaged to manufacture a BIS-Screen Product to be distributed by BSC or
      AMS in accordance with Section 4.1, and to determine the terms of such
      manufacturing arrangement. Without limiting the foregoing, any
      manufacturing agreement reflecting such manufacturing arrangement shall
      impose obligations on such third party manufacturer substantially
      identical to those applicable to the Manufacturer hereunder;

            (xvii) to determine whether AMS or BSC shall prosecute and maintain
      any jointly-owned Program Intellectual Property in accordance with Section
      8.2(d)(ii);

            (xviii) to determine whether any Specified [**] Product should be
      distributed by a third party distributor (including the Specified Third
      Party), and the terms of any such distribution. Any such determination
      made under this clause (xviii) shall be made by the Steering Committee
      with due regard to the strategic interests of BSC and AMS that may be
      applicable from time to time, and in light of the financial and other
      terms of such proposed distribution arrangement;

                                       13

<PAGE>

            (xix) to determine which party shall be responsible for improving a
      BIS-Screen Product after its market launch, and what allocation, if any,
      should be made of the costs thereof between AMS and BSC, in the event that
      AMS does not exercise the Continuous Improvement Option with respect to
      such BIS-Screen Product; and

            (xx) to determine the allocation between BSC and AMS of any expenses
      incurred in seeking and maintaining Product Approvals and/or Reimbursement
      Approvals after the Development Period.

            Where a particular matter described above is made subject to
      Steering Committee approval, it is intended that the parties shall not
      take any such action unless and until such approval is obtained.

      (c) Meetings and Procedures. The Steering Committee meetings shall take
place at such times and places as determined by the Steering Committee, but no
less frequently than twice per Contract Year. The Steering Committee meetings
shall be held alternately at the respective facilities of the parties in the
Commonwealth of Massachusetts, or at such other convenient locations as agreed,
or by teleconference or videoconference.

            (i) AMS shall promptly report to the Steering Committee on all
      material issues relating to its progress in achieving its development
      efforts under the Program.

            (ii) Decisions of the Steering Committee shall be made by unanimous
      vote. If the Steering Committee becomes deadlocked on an issue, the issue
      shall be escalated to each the Chief Financial Officer of BSC, and the
      President of AMS, to seek resolution.

            (iii) The parties shall alternately prepare the minutes of the
      meetings of the Steering Committee, and such minutes shall be provided to
      the non-preparing party for review.

      3.6 Reimbursement Consultation. During the Development Period, BSC shall
make BSC personnel skilled in obtaining Reimbursement Approval available on a
reasonable basis to assist AMS in its efforts to obtain Reimbursement Approval
for the BIS-Screen Products in the BSC Field.

4.    MANUFACTURE OF BIS-SCREEN PRODUCTS

      4.1 AMS Option to Manufacture. AMS shall have the option to manufacture
the requirements of BSC or any other distributor of any Included BIS-Screen
Product, including AMS and any third party distributor appointed in accordance
with Section 5.1(d) (the "Manufacturing Option") under this Agreement. Such
Manufacturing Option shall be exercisable by AMS upon notice to BSC at any time
that is not later than six (6) months prior to

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<PAGE>

the reasonably anticipated Product Completion Date for such Included BIS-Screen
Product ("Option Exercise Date"). In the event AMS does not exercise the
Manufacturing Option prior to the Option Exercise Date with respect to any
Included BIS-Screen Product, BSC shall have the right to exercise the
Manufacturing Option with respect to such BIS-Screen Product. If neither party
exercises the Manufacturing Option, the Steering Committee shall determine the
identity of a third party manufacturer to manufacture such Included BIS-Screen
Product, and the terms of such manufacturing arrangement in accordance with
Section 3.5(b)(xvi).

      4.2 Manufacturing License. (a) In the event BSC exercises the
Manufacturing Option pursuant to Section 4.1 with respect to any Included
BIS-Screen Product, AMS shall grant BSC a nonexclusive, worldwide license under
the AMS Intellectual Property to make such Included BIS-Screen Product for use
and sale in the BSC Field for Approved Major Categories. In the event the
Steering Committee identifies a third party to manufacture a BIS-Screen Product
pursuant to Section 4.1, AMS shall grant such third party a nonexclusive,
worldwide license to make such BIS-Screen Product that Distributor will purchase
from such third party to enable such Distributor to use and sell such BIS-Screen
Product in the BSC Field for Approved Major Categories.

      (b) In the event BSC exercises the Manufacturing Option with respect to
any Included BIS-Screen Product pursuant to Section 4.1, then at BSC's request,
AMS shall, at AMS' cost transfer all technology necessary for BSC to manufacture
such BIS-Screen Product, including the following: (i) deliver to BSC within
thirty (30) days of notice of BSC's intent to exercise rights under Section 4.1,
media embodying or disclosing all technology and know-how, including interfaces
necessary for interoperability with hardware, whether existing as of the
Effective Date or in the future, necessary to enable BSC to manufacture such
Included BIS-Screen Product, and conforming with the applicable Product
Specifications; (ii) undertake all customary activities, and take such other
actions as may be reasonably necessary, including training qualified personnel
of BSC, to transfer the manufacturing of such Included BIS-Screen Product to BSC
from AMS' development and manufacturing functions, until such time as BSC is
manufacturing such Included BIS-Screen Products in accordance with the Product
Specifications on a reproducible commercial volume basis with yields in excess
of [**] percent ([**]%); and (iii) provide BSC with any other reasonable
assistance requested by BSC to assist BSC in attaining such manufacturing
yield..

5.    DISTRIBUTION.

      5.1 Appointment as Distributor; Term of Appointments.

(a) Appointment. Subject to the terms and conditions set forth in this
Agreement, AMS hereby appoints BSC as AMS' exclusive, worldwide distributor of
any and all BIS-Screen Products in all Major Categories within the BSC Field
(other than with respect to any Excluded BIS-Screen Products or any Specified
[**] Product). In connection therewith, AMS hereby grants to BSC and its
Affiliates a fully paid-up, non-exclusive, worldwide, right and license,
including the right to sublicense, to practice the Patent Rights solely in the
BSC Field and use any other AMS Intellectual Property solely in the BSC Field,
whether existing as of the date hereof or in the future, during the Distribution
Term, solely in order to sell, market,

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<PAGE>

commercialize, import, export, develop and distribute (but not to make or have
made) any BIS-Screen Products manufactured by AMS, or manufactured by BSC or a
third party as provided in Section 4.1, for distribution by BSC to end-user
customers hereunder. AMS acknowledges and agrees that this license is being
granted without specific compensation. The license granted by this Section
5.1(a) shall be in addition to, and not in substitution or limit of, any license
that may be granted under Section 4.2.

            BSC acknowledges and agrees that the license granted by this Section
5.1(a) shall provide BSC with no rights with respect to the Patent Rights and
other AMS Intellectual Property other than those specifically provided herein.

            (b) Distribution Term; Opt-Out Options. The term of the distribution
appointment made under paragraph (a) above (the "Distribution Term"), shall
commence on the Effective Date and shall continue until the earlier of the
termination or expiration of this Agreement, or the last day of the calendar
month including the twelfth (12th) anniversary of the First BSC Sales Date of an
Included BIS-Screen Product, provided, that (x) BSC may terminate its
appointment under paragraph (a) with respect to any Major Category (the "Opt-Out
Options") by delivering written notice of such termination, specifying the
applicable Major Category, to AMS in accordance with Section 13.8; (y) AMS may
terminate BSC's appointment under paragraph (a) with respect to any Major
Category in accordance with Section 12.2(b), or BIS-Screen Product in accordance
with Section 12.2(c); and (z) BSC may terminate its appointment under paragraph
(a) with respect to any BIS-Screen Product in accordance with Section 12.2(e).
Notwithstanding the foregoing, in the event that BSC exercises its Opt-Out
Option with respect to an Approved Major Category and a First Other Distributor
Sales Date of a BIS-Screen Product within such Approved Major Category occurs
prior to the First BSC Sales Date of an Included BIS-Screen Product, then the
Distribution Term shall terminate on the last day of the calendar month
including the twelfth (12th) anniversary of such First Other Distributor Sales
Date. At least twelve (12) months prior to the expiration of the Distribution
Term, BSC and AMS shall meet to discuss extending BSC's distributor status with
respect to such Major Category.

            (c) Standstill. During the term of this Agreement, unless BSC shall
exercise its Opt-Out Option with respect to any Major Category, AMS shall not
enter into any agreements with respect to the development, marketing and
distribution of any products with any Person other than BSC that would be
inconsistent with or prevent BSC from being able to market, distribute and sell
BIS-Screen Products (other than Excluded BIS-Screen Products or any Specified
[**] Product) in such Major Category on an exclusive basis as set forth herein.
In addition, during the term of this Agreement, unless BSC shall exercise its
Opt-Out Option with respect to any Major Category, AMS shall not grant to any
Person other than BSC, including but not limited to the Specified Third Party, a
license to any BIS-Screen Technology or AMS Intellectual Property in the BSC
Field or any other right to use, sell, offer to sell, commercialize, import and
export BIS-Screen Products (other than any Excluded BIS-Screen Products) for use
in such Major Category, except to the extent the Steering Committee consents to
the granting of Permitted Licenses. Notwithstanding the foregoing, this Section
5.1 shall not prohibit AMS from granting Permitted Licenses to the extent
approved by the Steering Committee. Without limiting

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<PAGE>

the foregoing, AMS shall not market, sell or distribute, or permit or facilitate
(including by way of grant of a license to any BIS-Screen Technology or AMS
Intellectual Property) the marketing, sale or distribution by any third party
(including the Specified Third Party) of any Specified [**] Product, without the
consent of the Steering Committee.

            (d) Distribution by AMS or Third Parties. In the event that AMS
terminates BSC's distribution appointment with respect to any BIS-Screen Product
in accordance with Section 12.2(c), BSC terminates its distribution appointment
with respect to any BIS-Screen Product in accordance with Section 12.2(e), or
BSC exercises its Opt-Out Option with respect to any Major Category in the BSC
Field, AMS shall be entitled to elect to distribute any such BIS-Screen Product
or BIS-Screen Products in such Major Category, as applicable, directly. AMS
shall be required to give notice to BSC of any such election (an "AMS
Distribution Election") within thirty (30) days of the termination of BSC's
appointment with respect to the applicable BIS-Screen Product or BSC's exercise
of its Opt-Out Option with respect to such Majority Category, as applicable. In
the event that AMS does not exercise the AMS Distribution Election with respect
to any such BIS-Screen Product or Major Category, the Steering Committee shall
determine the identity of any third party distributors to be appointed to
distribute such BIS-Screen Product or BIS-Screen Products in such Major
Category, and the terms of any such distribution arrangement in accordance with
Section 3.5(b)(xi). AMS shall also be entitled to distribute any After-Developed
Products or Custom Third Party Products directly, or through one or more
third-party distributors, without requiring the approval or consent of the
Steering Committee or BSC.

      5.2 Distribution Relationship; No Competitive Devices. With respect to
each BIS-Screen Product (other than any Excluded BIS-Screen Products), until the
end of the Distribution Term, (i) AMS agrees not to sell such BIS-Screen Product
for use in the BSC Field to any party other than BSC in a manner inconsistent
with the rights granted to BSC hereunder; and (ii) AMS agrees not to
manufacture, license for manufacture, provide or sell such BIS-Screen Product
for or to any third party if AMS knows or has reason to believe that such
BIS-Screen Product will be provided, distributed or sold anywhere in the
Territory for use in the BSC Field in a manner inconsistent with the rights
granted to BSC hereunder. AMS further agrees to use all commercially reasonable
best efforts to prevent the sale of products to customers for resale or
distribution within the Territory for use in the BSC Field in a manner
inconsistent with the rights granted to BSC hereunder and shall take all actions
reasonably requested by BSC to prevent such unauthorized sales activity,
provided, that AMS shall not be required to initiate legal action against any
third party as a result of this provision. Notwithstanding anything to the
contrary in this Agreement, provided that BSC does not market or promote the use
of any such Included BIS-Screen Products outside the BSC Field, BSC shall be
permitted to sell Included BIS-Screen Products within the Territory for
applications in the BSC Field without regard to the indications for which such
BIS-Screen Products are actually used by end-user customers. AMS also agrees,
with respect to each BIS-Screen Product that is then being distributed by BSC,
AMS will not contemporaneously market, sell or otherwise promote the sale of any
device that is intended to be used for the indication for which such BIS-Screen
Product is then being marketed and sold by BSC.

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<PAGE>

      5.3 Marketing. Subject to Section 9.1, all business decisions concerning
the marketing, sales and distribution by BSC in the Territory of any BIS-Screen
Products to be distributed by BSC, including the price, other sale terms and
promotion thereof, will be within the sole discretion of BSC. All business
decisions concerning the marketing, sales and distribution by AMS in the
Territory of any BIS-Screen Products to be distributed by AMS, including the
price, other sale terms and promotion thereof, will be within the sole
discretion of AMS.

      5.4 BSC's Obligation to Promote BIS-Screen Products; No Competitive
Devices. With respect to each BIS-Screen Product then being distributed by BSC,
BSC shall promote and market such BIS-Screen Product for sale in the Territory,
using its usual and customary efforts exercised in connection with the promotion
and marketing of other products having similar market potential, viewed in light
of the state of the relevant Product Approvals and Reimbursement Approvals,
including the level of reimbursement, efficacy and safety of the BIS-Screen
Product, perceived market size and potential, BSC's gross margin, anticipated
difficulty of market development, level of competition in a particular country
and availability of BIS-Screen Products, among other relevant factors. BSC's
efforts shall include, where appropriate, (i) maintenance and training of a
sales force, (ii) development and distribution of marketing materials, and (iii)
representation of such BIS-Screen Product during appropriate trade conferences
attended by BSC, in each case as the same shall be reasonably available to BSC
and reasonably necessary to achieve the purposes of this Section 5.4. BSC also
agrees, with respect to each BIS-Screen Product that is then being distributed
by BSC, without the consent of AMS, which consent will not be unreasonably
withheld, delayed or conditioned, BSC will not contemporaneously market, sell or
otherwise promote the sale of any device that is intended to be used for the
indication for which such BIS-Screen Product is then being marketed and sold by
BSC. Such restriction shall not apply to (1) products which have received
approval for other indications so long as BSC does not promote the product for
the same indication with respect to which BSC is then distributing a BIS-Screen
Product; and (2) screening technology incorporated into a separate medical
device principally intended as a treatment option.

      5.5 Transfer Price for BSC Distributed Products Manufactured by AMS; BSC
Distribution Commission where BSC is Manufacturer. With respect to each
BIS-Screen Product manufactured by AMS and distributed by BSC during the
Distribution Term, BSC shall pay AMS a transfer price (a "Transfer Price") for
any unit of such BIS-Screen Product delivered to and not rejected by BSC during
such period equal to the quotient of (x) the ASP of BSC for such BIS-Screen
Product for such period multiplied by [**], plus the Cost of Goods Sold of AMS
for such BIS-Screen Product for such period, divided by (y) [**]. In the event
that BSC exercises the Manufacturing Option with respect to any BIS-Screen
Products and distributes and sells such BIS-Screen Products to end-users, then
BSC shall pay to AMS, within sixty (60) days of the end of each fiscal quarter
of BSC during the term of this Agreement, a commission (a "Distribution
Commission"), on Net Sales recorded by BSC with respect to the sale of any such
BIS-Screen Product within such fiscal quarter by BSC, in an amount equal to the

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<PAGE>

quotient of (x) the Net Sales recorded by BSC of such BIS-Screen Product for
such period multiplied by [**], minus an amount equal to the aggregate Cost of
Goods Sold of BSC for such BIS-Screen Product for such period, divided by (y)
[**].

      5.6 Commission Payable to BSC on Sales of BIS-Screen Products (including
Custom Third Party Products) by AMS; AMS Transfer Price. With respect to each
BIS-Screen Product manufactured by AMS (including, without limitation, any
Custom Third Party Product, any BIS-Screen Product marketed for an indication in
a Major Category with respect to which BSC has exercised its Opt-Out Option, any
BIS-Screen Product with respect to which BSC's distribution appointment was
terminated in accordance with Section 12.2, and any Specified [**] Product, but
excluding any After-Developed Products) and distributed by AMS directly in
accordance with Section 5.1(d), AMS shall pay to BSC, within sixty (60) days of
the end of each fiscal quarter of AMS during the term of this Agreement, a
commission (also, a "Distribution Commission"), on Net Sales recorded by AMS
with respect to the sale of any such BIS-Screen Product within such fiscal
quarter by AMS, in an amount equal to the quotient of (x) the Net Sales recorded
by AMS of such BIS-Screen Product for such period multiplied by [**], minus the
aggregate Cost of Goods Sold of such BIS-Screen Product for such period, divided
by (y) [**]. With respect to each BIS-Screen Product manufactured by BSC and
distributed by AMS during the Distribution Term, AMS shall pay BSC a transfer
price (also, a "Transfer Price") for any unit of such BIS-Screen Product
delivered to and not rejected by AMS during such period equal to the quotient of
(x) the ASP of AMS for such BIS-Screen Product for such period, multiplied by
[**], plus the Cost of Goods Sold of BSC for such BIS-Screen Product for such
period, divided by (y) [**].

      5.7 Commission Payable to BSC on Sales of BIS-Screen Products by a Third
Party Distributor. In the event that one or more third party distributors with
respect to any BIS-Screen Products (including, without limitation, any Custom
Third Party Product, any BIS-Screen Product marketed for an indication in a
Major Category with respect to which BSC has exercised its Opt-Out Option, any
BIS-Screen Product with respect to which BSC's distribution appointment was
terminated in accordance with Section 12.2, and any Specified [**] Product, but
excluding any After-Developed Products) in the BSC Field is appointed in
accordance with Section 5.1(d), then AMS shall pay to BSC, within thirty (30)
days of the end of each fiscal quarter of AMS during the term of this Agreement,
a Distribution Commission, on Net Sales recorded by AMS with respect to the
sales of any such BIS-Screen Products within such fiscal quarter by such
third-party distributor or distributors, in an amount equal to (x) the Net Sales
recorded by AMS from the sale of such BIS-Screen Products, minus the Cost of
Goods Sold of AMS with respect to such BIS-Screen Products, divided by [**]. In
the event that a third party distributor with respect to any BIS-Screen Products
in the BSC Field is appointed in accordance with Section 5.1(d), and BSC
manufactures and sells such BIS-Screen Product to such third party distributor
for resale (without such BIS-Screen Product first being sold to AMS) then BSC
shall pay to AMS, within thirty (30) days of the end of each fiscal quarter of
BSC during the term of this Agreement, a Distribution Commission, on Net Sales
recorded by BSC with respect to the sales of any such BIS-Screen Products within
such fiscal quarter by such third-party distributor or distributors, in an
amount equal to (x) the Net Sales recorded by BSC from the sale of such
BIS-

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<PAGE>

Screen Products, minus the Cost of Goods Sold of BSC with respect to such
BIS-Screen Products, divided by [**].

      5.8 Sublicense Revenue. Without limiting AMS' obligations to pay
Distribution Commissions in accordance with Sections 5.6 and 5.7, AMS shall
share with BSC on an equal basis all payments received by AMS during the term of
this Agreement as a result of licenses or sublicenses entered into by AMS for
any rights to the BIS-Screen Technology or any AMS Intellectual Property or
Program Intellectual Property in the BSC Field, other than any license to the
BIS-Screen Technology or any AMS Intellectual Property or Program Intellectual
Property in the BSC Field which does not permit the licensee to use such
technology or Intellectual Property in connection with the sale of products
marketed or intended for use principally in the BSC Field. AMS' right to enter
into licenses or sublicenses with respect to any rights to the BIS-Screen
Technology in the BSC Field is subject to the prior approval of the Steering
Committee in accordance with Section 3.5(b)(xiv).

      5.9 Distribution Commissions Payable to BSC on After-Developed Products.
In the event that AMS elects to distribute any BIS-Screen Products which are
After-Developed Products itself or appoint one or more third-party distributors
to distribute such BIS-Screen Products, AMS shall pay to BSC, within thirty (30)
days of the end of each fiscal quarter of AMS during the term of this Agreement,
a Distribution Commission on Net Sales recorded by AMS with respect to the sales
of any such BIS-Screen Products within such fiscal quarter by AMS or such
third-party distributor or distributors, in an amount equal to the Net Sales
recorded by AMS from the sale of such BIS-Screen Products (without any deduction
for the amounts required to be paid to BSC under this Section 5.9), multiplied
by [**].

6.    PURCHASE OF PRODUCTS BY BSC AND TERMS OF SALE.

      6.1 Supply Forecasts. During the Distribution Term, the Distributor of any
BIS-Screen Product shall provide to the Manufacturer of such BIS-Screen Product,
on a monthly basis, a six-month forecast (each, a "Supply Forecast") of expected
orders of such BIS-Screen Product beginning with the month following the month
in which such Supply Forecast is delivered. With the exception of the first [**]
of each Supply Forecast delivered to Manufacturer, such Supply Forecasts shall
not constitute binding orders. Notwithstanding the foregoing, following
termination of this Agreement in accordance with Section 12, Distributor shall
be released from any requirement with respect to the [**] of the then-current
Supply Forecast other than to reimburse Manufacturer for the Cost of Goods Sold
for the BIS-Screen Products forecast for purchase in such month, to the extent
such BIS-Screen Products, or components thereof, cannot be incorporated into
products purchased by Distributor or another party.

      6.2 Product Orders. All orders of BIS-Screen Products by BSC, where BSC is
Distributor and AMS is Manufacturer with respect to any BIS-Screen Product shall
be on BSC's standard form of purchase order which BSC may employ and be in
effect from time to time generally for the purchase of products similar to the
BIS-Screen Product being ordered and AMS

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<PAGE>

shall deliver the BIS-Screen Products in accordance therewith. A copy of BSC's
current standard form of purchase order employed by BSC and in effect as of the
date of this Agreement is attached hereto as Exhibit B. BSC reserves the right
to modify its standard form of purchase order in effect from time to time
generally for the purchase of products similar to the BIS-Screen Products;
provided that such modifications do not materially change the obligations and
rights of AMS, in the circumstances where AMS is Manufacturer, under this
Agreement. The provisions of this Agreement shall prevail over any inconsistent
statements or additional statements or provisions, rights and obligations
contained in any document related to this Agreement passing between the parties
hereto including, but not limited to, any purchase order, acknowledgment,
confirmation or notice. Orders shall be submitted by mail or facsimile, or by
other means agreed upon by the parties.

      6.3 Product Specifications; Packaging and Labeling. All BIS-Screen
Products delivered by a Manufacturer hereunder shall be in full compliance with
the Product Specifications for such BIS-Screen Product and shall be ready for
end-user sale, including all packaging, labeling, instructions-for-use and
sterilization required by the applicable Product Approval and as agreed by BSC
and AMS. BSC shall have final approval over all labeling for BIS-Screen Products
to be distributed by BSC under this Agreement which approval shall not be
unreasonably withheld. AMS shall consult with BSC with respect to the package of
any BIS-Screen Products manufactured by AMS and distributed by BSC under this
Agreement and any proposed modifications thereof. AMS shall include trademarks
and tradenames of BSC in the packaging and labeling of all BIS-Screen Products
manufactured by AMS for distribution by BSC as reasonably requested by BSC. BSC
shall have the right to sell any such BIS-Screen Products as BSC private label
products.

      6.4 Supply.

            (a) Manufacture and Delivery. Any Manufacturer of BIS-Screen
Products shall manufacture, sell and deliver such BIS-Screen Product to the
Distributor of such BIS-Screen Products in accordance with this Agreement and
the related purchase orders on the date specified for delivery in the purchase
order, which shall in no event to be less than eight (8) weeks from the date of
receipt by Manufacturer of a purchase order from Distributor or, if no such date
is specified, within eight (8) weeks of receipt by Manufacturer of Distributor's
purchase orders for BIS-Screen Products. A Manufacturer shall not be obligated
to supply a quantity of any BIS-Screen Product that exceeds the monthly average
(over the prior three (3) month period) of the binding portion of the previous
Supply Forecast relating to such BIS-Screen Product delivered by Distributor
plus [**] percent ([**]%) of such average. If any specialized materials that are
not anticipated to be included in any BIS-Screen Product are required to
manufacture any BIS-Screen Product, Manufacturer shall, after consultations with
Distributor, have the right to reasonably increase such lead times.

      (b) Failure to Meet Supply Obligation.

                  (i) Price Reduction. If a Manufacturer is unable to supply all
of any of the

                                       21

<PAGE>

BIS-Screen Products ordered by Distributor in accordance with the terms of this
Agreement and the purchase orders therefor in any given month, Manufacturer
shall use commercially reasonable efforts to remedy any problems resulting in
any such supply failures.

                  (ii) Failure to Supply. If Manufacturer is unable to supply
BIS-Screen Products ordered by Distributor in accordance with the terms of this
Agreement and the purchase orders therefor for more than one (1) month in any
consecutive six (6) month period during the term of this Agreement for reasons
other than as provided in Section 13.14 hereof, Manufacturer shall pay
liquidated damages to Distributor in an amount equal to [**] per cent ([**]%) of
the aggregate Transfer Price payable by Distributor to Manufacturer for the
amount of undelivered products for the first week of such delay and an amount
equal to [**] per cent ([**]%) of the aggregate Transfer Price payable by
Distributor to Manufacturer for the amount of undelivered products for each week
of delay thereafter; provided that the total amount of such liquidated damages
for such particular undelivered product shall not exceed [**] per cent ([**]%)
of the aggregate Transfer Price of such undelivered products.

      6.5 Product Pricing and Payment. Manufacturer shall invoice Distributor in
U.S. Dollars for BIS-Screen Products delivered to Distributor in accordance with
this Agreement and the purchase orders therefor in U.S. Dollars. Distributor
shall pay for BIS-Screen Products in U.S. Dollars at the times specified in
Sections 5.5 and 5.6 unless Distributor is in dispute of any payment.

      6.6 Samples. During each Contract Year during the term of the Agreement
and upon Distributor's request, unless BSC shall have exercised the
Manufacturing Option with respect to any such BIS-Screen Products, AMS will
provide BIS-Screen Products to Distributor for use in sales demonstrations and
trade shows relating to the BSC Field. In the case of any BIS-Screen Products
which are Disposable Products, Distributor shall pay to AMS an amount equal to
the product of the Cost of Goods Sold for such BIS-Screen Product [**]. In the
case of any BIS-Screen Products which are not Disposable Products, Distributor
pay to Manufacturer an amount equal to the sum of (i) the Cost of Goods Sold for
such BIS-Screen Products plus (ii) the amount obtained by multiplying (a) such
Cost of Goods Sold by (b) [**] per cent ([**]%). Distributor shall not sell such
sample BIS-Screen Products in the Territory.

      6.7 Shipping. Manufacturer shall ship BIS-Screen Products ordered by
Distributor hereunder in accordance with the purchase orders therefor via common
carrier selected by Distributor at Distributor's expense, FOB Manufacturer's
location or other Manufacturer-designated destination point. Risk of loss or
damage to all BIS-Screen Products shall pass to Distributor only upon delivery
of the BIS-Screen Products by Manufacturer to the common carrier selected by
Distributor.

      6.8 Acceptance. (a) Each shipment of BIS-Screen Products from Manufacturer
to Distributor shall contain such quality control certificates as may be
reasonably requested by Distributor certifying that the BIS-Screen Products are
in conformity with the Product Specifications and all Product Approvals.

                                       22

<PAGE>

      (b) Without prejudice to any other right or remedy of Distributor, in case
any item is defective in material or workmanship, or otherwise not in conformity
with the Product Specifications, Distributor will have the right to reject it.
Any item that is defective in material or workmanship, or otherwise not in
conformity with the Product Specifications must be replaced by and at the
expense of Manufacturer promptly after notice, if such notice is given within
the applicable warranty period for such BIS-Screen Product. Distributor will
return all BIS-Screen Products in its possession that are defective in material
or workmanship, or otherwise not in conformity with the Product Specifications
to Manufacturer at Manufacturer's expense. Distributor will not be required to
pay for any item which is returned to Manufacturer because it is defective in
material or workmanship, or otherwise not in conformity with the Product
Specifications, or its shipping costs or any other costs related thereto.

      6.9 Changes. From and after the First Sales Date of any BIS-Screen
Product, Manufacturer shall not make (i) any changes to its manufacturing
processes for such BIS-Screen Product hereunder that would require regulatory
approval in the United States, (ii) any significant changes to the form, fit or
function of such BIS-Screen Product, (iii) any change to the packaging or
labeling of such BIS-Screen Product, (iv) any change to such BIS-Screen Product
that may impact any existing Product Approval or require regulatory approval to
make such change, or (v) any material change to the Product Specifications,
unless approved in writing by Distributor not less than thirty (30) days in
advance of any such change.

      6.10 Audit Rights; Resale Prices.

      (a) BSC Audit Rights. Once in each Contract Year and once during the
twelve (12) month period immediately following any termination or expiration of
this Agreement, BSC shall have the right to engage an independent certified
public accountant to inspect, copy and audit all documentation pertaining to the
current and immediately prior Contract Year or, in the case of an inspection and
audit of the application of any Development Payment, any Contract Year, that (i)
is retained by AMS in the ordinary course of business, and (ii) is materially
relevant to understand how the proceeds of any Development Payments have been
applied during the term of the Agreement, or are materially relevant to the
calculation of any components used to calculate the applicable Distribution
Commission or Transfer Price for any BIS-Screen Products then distributed by BSC
or AMS. AMS agrees to preserve and allow such independent certified public
accountant reasonable access to all such documentation once during the
applicable period upon reasonable prior notice from BSC. Such audit shall be at
the expense of BSC; provided, however, in the event that such audit reveals that
the actual amount of any component of any Transfer Price or Distribution
Commission with respect to any BIS-Screen Product reported to BSC by AMS is at
least ten percent (10%) greater or less than the amount previously represented
by AMS to BSC in determining any Transfer Price or Distribution Commission
payable with respect to any BIS-Screen Product, or that AMS has breached its
obligations under Section 2.4 in any material respect, AMS shall be required to
reimburse BSC for all costs and expenses reasonably incurred by BSC in
connection with such audit and to immediately pay BSC any amounts the audit
reveals are owed to BSC based upon a recalculation of the applicable Transfer

                                       23

<PAGE>

Price or Distribution Commission. Nothing in this paragraph (a) shall be deemed
to require AMS to keep any books of account or records other than those which it
maintains in the ordinary course of business in its usual and customary
practice, to retain any such books of account or records for any period in
excess of the period for which AMS retains such records in the ordinary course
of business in its usual and customary practice, or to provide access to any
books and records of AMS other than that specified above.

      (b) AMS Audit Rights. Once during each Contract Year and once during the
twelve (12) month period immediately following any termination or expiration of
this Agreement, AMS shall have the right, upon prior written notice of at least
ten (10) business days delivered to BSC, to engage an independent certified
public accountant to review and audit all documentation pertaining to the
current and immediately prior Contract Year that (i) is retained by BSC in the
ordinary course of business, and (ii) is materially relevant to the calculation
of any components used to calculate the applicable Distribution Commission or
Transfer Price for any BIS-Screen Products then distributed by BSC or AMS. Such
audit shall be at the expense of AMS; provided, however, in the event that such
audit reveals that the actual amount of any component of any Transfer Price or
Distribution Commission with respect to any BIS-Screen Product reported by BSC
to AMS is at least ten percent (10%) greater or less than the amount previously
represented by BSC to AMS in determining any Transfer Price or Distribution
Commission payable with respect to any BIS-Screen Product, BSC shall be required
to reimburse AMS for all costs and expenses reasonably incurred by AMS in
connection with such audit and to immediately pay AMS any amounts the audit
reveals are owed to AMS based upon a recalculation of the applicable Transfer
Price or Distribution Commission. Nothing in this paragraph (b) shall be deemed
to require BSC to keep any books of account or records other than those which it
maintains in the ordinary course of business in its usual and customary
practice, to retain any such books of account or records for any period in
excess of the period for which BSC retains such records in the ordinary course
of business in its usual and customary practice, or to provide access to any
books and records of BSC other than that specified above.

      (c) Resale Prices. Nothing contained in this Agreement shall be deemed to
limit in any way the right of Distributor to determine the prices at which, or
the terms on which, any BIS-Screen Products purchased by Distributor may be
resold by Distributor in the BSC Field.

      6.11 Shelf-Life. All BIS-Screen Products which are Disposable Products
delivered to Distributor hereunder shall have a remaining shelf-life of no less
than the greater of [**] months from the date of manufacture and [**] months
from the date of delivery of such Disposable Products to Distributor.

      6.12 Service Obligation. Manufacturer shall provide high quality,
professional warranty support and service directly to end-user purchasers of
BIS-Screen Products distributed in the United States and Canada pursuant to this
Agreement. In all other countries in the Territory, Distributor shall facilitate
the return and replacement of any BIS-Screen Products being distributed by
Distributor which require warranty service or replacement by sending any
BIS-Screen Product in need of repair or replacement to Manufacturer's facility
specified by Manufacturer upon receipt of notice of the product failure. During
the term of this Agreement,

                                       24

<PAGE>

Manufacturer shall provide to Distributor free of charge, temporary use,
replacement BIS-Screen Products, to the extent such BIS-Screen Products are then
being distributed by Distributor, that may be provided to customers in the event
that such customer's BIS-Screen Products requires repair or replacement. If a
repair or replacement is covered by the warranty for such BIS-Screen Product,
all parts and labor costs for such repair or replacement and transportation,
insurance and handling charges of shipment of such BIS-Screen Product to
Manufacturer for repair or replacement shall be covered by Manufacturer.
Repaired or replaced BIS-Screen Products will also be returned to sender at
Manufacturer's expense. Repairs made by Manufacturer outside of the warranty
period shall be billed at a repair charge mutually acceptable to Manufacturer
and Distributor.

7.    REGULATORY APPROVALS AND COMPLIANCE.

      7.1 General. AMS shall be responsible for obtaining, maintaining and
complying with all United States regulatory requirements and approvals
(including all Product Approvals) necessary or useful to promote and sell the
BIS-Screen Products in the United States, including conducting all necessary
clinical and/or outcomes trials. Subject to BSC's consulting obligation under
Section 3.6, AMS shall use commercially reasonable efforts to obtain
Reimbursement Approvals for the BIS-Screen Products in the United States. AMS
shall promptly notify BSC and provide to BSC a copy or transcription, if
available, of any communication from the FDA and any Foreign Regulatory
Authority relating to the BIS-Screen Products, the marketing thereof or any
related matter (including copies of all Product Approvals) and AMS shall keep
BSC reasonably apprised of regulatory interactions and similar activities with
governmental authorities and international bodies in connection with the
BIS-Screen Products. In pursuing such approvals, AMS shall permit BSC to review
and comment upon AMS' regulatory and clinical trial plans. All expenses incurred
in seeking and maintaining such Product Approvals and Reimbursement Approvals in
the United States during the Development Period shall be borne by AMS. Any
expenses incurred in seeking and maintaining such Product Approvals after the
Development Period shall be allocated between BSC and AMS by the Steering
Committee. BSC may, in its sole discretion, seek (i) additional Product
Approvals for countries in the Territory outside of the United States, and (ii)
any Reimbursement Approvals outside of the United States. If BSC elects to seek
any such Product Approval or Reimbursement Approval, BSC shall promptly notify
AMS and shall provide to AMS a copy of all Product Approvals received by BSC,
and shall keep AMS reasonably apprised of regulatory interactions and similar
activities with governmental authorities and international bodies in connection
with the BIS-Screen Products. In pursuing such approvals, BSC shall permit AMS
to review and comment upon BSC's regulatory and clinical trial plans for the
Territory. AMS shall provide all reasonable assistance requested by BSC in
obtaining any such additional Product Approvals or any Reimbursement Approvals.
Product Approvals shall be obtained in the name of AMS or BSC depending on what
is customary in such jurisdiction and the most expedient way to obtain the
relevant Product Approvals for such jurisdiction. All expenses incurred in
seeking and maintaining such additional Product Approvals or Reimbursement
Approvals during the Development Period shall be borne by BSC. Any expenses
incurred in seeking and maintaining such additional Product Approvals and
Reimbursement Approvals after the Development Period

                                       25

<PAGE>

shall be allocated between BSC and AMS by the Steering Committee.

      7.2 Data. AMS shall provide to BSC throughout the term of this Agreement
copies of its then-existing scientific, medical, technical and other data
related to the BIS-Screen Products that is useful to support BSC's marketing
activities. AMS shall update the data submissions it makes under this Section
7.2 and provide BSC with all new data promptly after the same is developed,
assembled or comes to the attention of AMS. AMS shall also periodically (and in
any event, no less frequently than once per calendar quarter) provide BSC with a
written report summarizing the progress of all clinical trials conducted by AMS
with respect to BIS-Screen Products in each Major Category within the BSC Field.

      7.3 Vigilance Program. Distributor shall be responsible for maintaining
medical device vigilance systems in the Territory as required of a distributor
of products such as the BIS-Screen Products by local regulations for BIS-Screen
Products that it distributes, and shall provide Manufacturer with reasonable
access to such records. AMS and BSC shall inform the other in writing
immediately if it becomes aware of any medical complaint that may be required to
be reported to any Regulatory Authority in the Territory, provided, that
Distributor shall be responsible for maintaining a record of complaints received
and shall determine, with input from the Manufacturer, when any such complaints
need to be reported to any Regulatory Authority, respond to any questions or
comments from such Regulatory Authorities, and shall serve as support for any
Authorized Representative within the Territory Manufacturer shall be responsible
for investigating complaints, and Manufacturer shall promptly notify Distributor
in writing if it becomes aware of any issue relating to the safety or efficacy
of any BIS-Screen Product including, without limitation, such BIS-Screen
Product's manufacture, labeling or packaging.

      7.4 Product Recalls. (a) If, in the judgment of either Manufacturer or
Distributor, any defect relating to any BIS-Screen Product sold by Distributor
or any government action requires a recall of, or the issuance of an advisory
letter regarding, any BIS-Screen Product sold by Distributor, either party may
undertake such recall or issue such advisory letter after consultation with the
other party. Each party shall notify the other party in a timely manner prior to
making any recall or issuing any advisory letter. The parties shall endeavor to
reach an agreement prior to making any recall or issuing any advisory letter
regarding the manner, text and timing of any publicity to be given such matters
in time to comply with any applicable legal or regulatory requirements, but such
agreement will not be a precondition to any action that either party deems
necessary to protect users of the BIS-Screen Products or to comply with any
applicable governmental orders or mandates. The parties agree to provide
reasonable assistance to one another in the event of any recall or issuance of
any advisory letter. The party responsible for the defect giving rise to the
recall shall promptly pay or reimburse Distributor for the reasonable costs of
effecting such recall or issuing such advisory letter, including without
limitation costs related to return of recalled BIS-Screen Products (including
shipping, quality control testing, notification and restocking costs). If and to
the extent such recall results from a defect in the design or manufacture of
such BIS-Screen Product recalled or from literature or other information
supplied by Manufacturer that relates to such BIS-Screen Product,

                                       26

<PAGE>

Manufacturer shall be deemed responsible for the defect giving rise to the
recall. Manufacturer shall not be responsible for the cost and expense of any
recall which results from an act or omission of Distributor with respect to such
BIS-Screen Product. Notwithstanding anything in this Agreement to the contrary,
Distributor shall have the right to manage any recall within the Territory of
any BIS-Screen Product then being distributed by Distributor.

      (b) In the event of a recall of any BIS-Screen Product then being
distributed by Distributor, Manufacturer shall correct any deficiency relating
to its manufacturing, packaging, testing, labeling, storing or handling of such
BIS-Screen Product, if applicable, and shall either, at Distributor's election,
(i) at Manufacturer's cost replace each unit of the BIS-Screen Product recalled
(including without limitation units held in inventory by Distributor or its
customers) with a corrected BIS-Screen Product within a reasonable period of
time, or (ii) refund the purchase price therefor.

      7.5 Notice. Each of AMS and BSC shall notify the other immediately if it
becomes aware of any issue with a BIS-Screen Product or its testing,
manufacture, labeling or packaging, occurring within the Territory, including
without limitation any issue relating to regulatory compliance, safety or
efficacy of a BIS-Screen Product. Without limiting the generality of the
foregoing, AMS and BSC will notify the other promptly in writing if it becomes
aware of any death or bodily injury caused by a BIS-Screen Product (or suspected
to be caused by a BIS-Screen Product) or any malfunction of a BIS-Screen Product
occurring within the Territory.

      7.6 Compliance with Laws. Each of BSC and AMS will comply with all
applicable laws and regulations in the Territory pertaining to the testing,
manufacture, labeling or packaging of the BIS-Screen Products and in any other
manner pertaining to performance by them of their respective obligations under
this Agreement, including the maintenance of ongoing quality assurance and
testing procedures to comply with applicable regulatory requirements. Each of
BSC and AMS will also comply with all applicable laws and regulations of the
countries and jurisdictions in the Territory pertaining to the import, export,
distribution, sales and marketing of the BIS-Screen Products. Without limiting
the generality of the foregoing, AMS will (i) report to the FDA within any
relevant time periods all events that are required to be reported (including
without limitation any death or serious bodily injury caused by a BIS-Screen
Product); and (ii) deliver, within the permitted time periods, all annual or
other periodic reports required to be delivered to the FDA. Without limiting the
generality of the foregoing, BSC will (1) report to the every applicable Foreign
Regulatory Authority within any relevant time periods all events that are
required to be reported (including without limitation any death or serious
bodily injury caused by a BIS-Screen Product); and (2) deliver, within the
permitted time periods, all annual or other periodic reports required to be
delivered to every applicable Foreign Regulatory Authority.

      7.7 Manufacturing Requirements. Manufacturer will manufacture BIS-Screen
Products in accordance with (a) the Product Specifications, (b) applicable
regulations relating to Good Manufacturing Practices and similar controls
required by the Act ("GMP"), quality system regulations of the FDA ("QSR"),
including without limitation master device and lot history records, and ISO 9001
and EN 46000 requirements, and (c) other pertinent rules and regulations

                                       27

<PAGE>

of the FDA and any Foreign Regulatory Authorities in other applicable
jurisdictions. Upon the request of Distributor, Manufacturer shall provide
Distributor with written evidence of compliance with the criteria set forth in
the preceding sentence. During the term of this Agreement, Manufacturer will
maintain or cause to be maintained the BIS-Screen Product manufacturing
facility's registration as a certified medical device manufacturing facility and
will maintain such facility registration with all applicable Regulatory
Authorities or cause such facility to be maintained such that the facility would
pass an audit for compliance with GMP and QSR.

      7.8 Distributor Inspection Rights; Regulatory Co-operation. Distributor
shall have the right to have its representatives present at the plant or plants
at which the BIS-Screen Products to be delivered to Distributor hereunder are
manufactured during normal business hours to conduct an initial and periodic
inspections of such facilities and manufacturing procedures for compliance with
GMP and QSR, the Product Specifications and Distributor's quality assurance
requirements and to inspect Manufacturer's inventory of BIS-Screen Products to
be delivered to Distributor hereunder, work-in-process, raw materials to be used
for the BIS-Screen Products to be delivered to Distributor hereunder, production
records, design history file, quality materials, regulatory dossiers and such
other matters as may be pertinent to proper quality assurance of the BIS-Screen
Products to be delivered hereunder. Distributor agrees to give Manufacturer a
minimum of five (5) business days' prior notice of any such inspection.
Manufacturer shall immediately use its best efforts to take such action as is
required to correct any failures by Manufacturer to comply with Section 7.7
hereof. Manufacturer agrees to provide reasonable assistance to Distributor in
arranging visits and inspection of the plants at which Manufacturer's vendors
manufacture any component or material incorporated into any product.
Manufacturer shall use reasonable efforts to include in any third-party
manufacturing agreement relating to any BIS-Screen Product to be delivered to
Distributor hereunder a provision that grants to Distributor, as a third-party
beneficiary, rights to inspect the plant or plants at which the products are
manufactured on the terms set forth in this Section. Manufacturer further agrees
to use its reasonable best efforts to provide such documentation or conduct such
analyses as Distributor may reasonably request in connection with any regulatory
submission or audit.

      7.9 Regulatory Audit. Manufacturer will permit authorized representatives
of any Regulatory Authority to inspect Manufacturer's plant and production
facilities relating to or used in connection with the manufacture of the
BIS-Screen Product to be delivered to Distributor hereunder and will promptly
notify Distributor when AMS receives notice of any such inspection. Manufacturer
will advise Distributor of the findings of any regulatory inspection and will
take the necessary steps reasonably promptly to correct any compliance
deficiencies found by the Regulatory Authority relating to the production of the
BIS-Screen Products to be delivered to Distributor hereunder. AMS and BSC
further agree to use their reasonable best efforts to provide to Distributor
such documentation or conduct such analyses as Distributor may reasonably
request in connection with any regulatory submission or audit concerning the
BIS-Screen Products to be delivered to Distributor hereunder.

      7.10 Clinical Trials. AMS shall review with BSC the selection of clinical
sites of any

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<PAGE>

clinical trial to be conducted with respect to any Included BIS-Screen Products.
AMS shall be responsible for conducting and managing, at its own expense, all
clinical trial programs in the United States necessary or desirable in order to
fulfill AMS' obligations under Section 7.1. In the event that AMS intends to
conduct a clinical trial with respect to any BIS-Screen Products that could
affect the use of BIS-Screen Products in the BSC Field, AMS shall notify BSC of
such intended trial and BSC shall have (a) the right to review and comment upon
the protocol for such study, (b) the right to suggest that certain practitioners
participate in such study, (c) the right to suggest certain modifications to
such trial that could be helpful in the marketing and sale of the BIS-Screen
Products marketed and sold by BSC in the BSC Field hereunder; and (d) the right
to receive and review any data ultimately collected from such trials.

8.    TRADEMARKS; INFRINGEMENT OF INTELLECTUAL PROPERTY.

      8.1 Trademark License. AMS hereby grants to BSC a fully paid up and
royalty-free right and license to use the Trademarks in connection with the
promotion, marketing, sale, distribution and delivery of the BIS-Screen Products
in the Territory during the period in which BSC is authorized to distribute
BIS-Screen Products hereunder. In the event BSC or its designee is the
manufacturer of BIS-Screen Products that BSC or such designee will promote,
market, sell, distribute or deliver using the Trademarks pursuant to the
foregoing license: (i) the quality of such BIS-Screen Products shall be of a
high standard consistent with the level of quality reflected in products
manufactured by AMS, and (ii) the Trademarks shall not be used in a manner that
would diminish or otherwise damage AMS' goodwill therein. BSC shall not be
obligated to use the Trademarks in connection with the promotion and marketing
of any BIS-Screen Product. Without limiting the foregoing, BSC shall be entitled
to use its own trademarks in connection with the promotion, marketing, sale,
distribution and delivery of BIS-Screen Products, which trademarks shall remain
at all times the exclusive property of BSC.

      8.2 Intellectual Property.

                  (a) Title. AMS and BSC may mutually agree, in writing, whether
any Program Intellectual Property generated as a result of the development
activities of AMS during the term of this Agreement shall be considered to be
AMS Intellectual Property or Intellectual Property of BSC. In the absence of any
written agreement by AMS and BSC to the contrary, Program Intellectual Property
created solely by employees or consultants of AMS during the term of this
Agreement shall be considered to be AMS Intellectual Property, Program
Intellectual Property created solely by employees or consultants of BSC during
the term of this Agreement shall be considered to be Intellectual Property of
BSC ("BSC Intellectual Property"), and all other Program Intellectual Property
shall be considered to be jointly owned by BSC and AMS, subject in all cases to
the other terms and conditions of this Agreement.

            (b) Grant of License to AMS. BSC hereby grants to AMS a
non-exclusive, worldwide, royalty-free license, excluding the right to
sublicense, under the BSC Intellectual Property, for the manufacture of
BIS-Screen Products.

                                       29

<PAGE>

            (c) Disclosure: Patent Prosecution.

                  (i) AMS shall promptly disclose to BSC knowledge of any
Program Intellectual Property developed in the course of the Distribution Term.
Within forty-five (45) days following the date of such disclosure regarding the
existence of particular Program Intellectual Property, the parties shall confer
as to appropriate protection for such Program Intellectual Property.

                  (ii) AMS shall be responsible for the preparation, filing
(including foreign filing decisions), prosecution and maintenance of patent
applications and patents for any Program Intellectual Property which is AMS
Intellectual Property. BSC shall be responsible for the preparation, filing
(including foreign filing decisions), prosecution and maintenance of patent
applications and patents for any Program Intellectual Property which is BSC
Intellectual Property. The Steering Committee shall determine, based on the
relevance of such Intellectual Property to the respective products and
technology of BSC and AMS, who shall be responsible for the preparation, filing
(including foreign filing decisions), prosecution and maintenance of patent
applications and patents for any Program Intellectual Property which is
jointly-owned Program Intellectual Property. Whichever party shall be
responsible for prosecuting such jointly-owned Program Intellectual Property
shall furnish or have furnished to the other party copies of documents relevant
to the same and provide the other party with the opportunity to review and
comment on patent decisions made by patent counsel with respect to the Program
Intellectual Property. AMS shall pay all expenses associated with the
preparation, filing, prosecution, issuance and maintenance of patents or other
intellectual property protection for the Program Intellectual Property. No
disclosure of information hereunder will be required by either party if such
disclosure will be deemed a prior publication or disclosure as may jeopardize
the disclosing party's right to seek patent or other intellectual property
protection for the matter disclosed.

      8.3 Infringement.

            (a) Generally. Each of BSC and AMS will notify the other party in
writing of any infringement in the Territory of a Patent Right, Trademark or
other AMS Intellectual Property that relates to the BIS-Screen Products or any
unauthorized disclosure or use of any Confidential Information within thirty
(30) days after it becomes aware of such infringement or unauthorized
disclosure. AMS shall have the exclusive right (after consultation with BSC) at
its own cost to take all legal action it deems necessary or advisable to
eliminate or minimize the consequences of any infringement of a Patent Right,
Trademark or any other AMS Intellectual Property.

            (b) Participation. AMS shall permit BSC to participate at its own
cost in any legal action brought by AMS to eliminate or minimize the
consequences of any infringement of a Patent Right, Trademark or any other AMS
Intellectual Property in the BSC Field; provided, that AMS shall maintain the
right to control the prosecution and settlement of such action.

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<PAGE>

            (c) Proceeds and Expenses.

                  (i) All proceeds realized upon any judgment or settlement
regarding an action undertaken pursuant to Section 8.3(a) above (net of direct
out-of-pocket expenses relating thereto) and in which BSC participates as
described in Section 8.3(b) above shall be shared based on the parties' relative
lost profits.

                  (ii) Notwithstanding the foregoing, if (1) AMS fails to take
legal action to eliminate or minimize the consequences of an infringement of a
Patent Right, Trademark or any other AMS Intellectual Property that relates to
BIS-Screen Products distributed by BSC hereunder within sixty (60) days after
the earlier of the date: (a) AMS first became aware of such infringement; or (b)
BSC notifies AMS of its good faith belief that infringement has occurred,
subject to the dispute resolution procedure set forth below; and (2) such
infringer has acquired a market share for the applicable product of greater than
[**] percent ([**]%), then, in the countries where such infringement is
occurring, BSC shall be entitled to reduce (A) the Transfer Price otherwise
payable by the greater of (y) [**] percent ([**]%) of the Transfer Price, or (z)
[**] percent ([**]%) of the Transfer Price as otherwise calculated pursuant to
this Agreement minus the Cost of Goods Sold of AMS for such BIS-Screen Product
for such period, or (B) any Distribution Commission otherwise payable by BSC
with respect to such BIS-Screen Products by [**] percent ([**]%) of such
Distribution Commission as otherwise calculated hereunder, until the
infringement is substantially eliminated or the market share of such infringer
is reduced to below [**] percent ([**]%) in the applicable country. In the event
the parties are unable to agree upon whether a third party is infringing a
Patent Right, Trademark or any other AMS Intellectual Property that relates to
BIS-Screen Products distributed by BSC hereunder, the matter shall be submitted
to three persons (who may be patent counsel to AMS or BSC, or independent patent
counsel) having experience with and knowledge of the subject matter of this
Agreement, to be mutually agreed upon by the parties. The determination made by
such persons shall be (A) made within twenty (20) days of submission, (B) final
and binding on the parties hereto, and (C) provided to the parties in writing.
The fees and disbursements of such persons shall be divided equally between the
parties.

9.    CERTAIN OBLIGATIONS OF SUPPLIER.

      9.1 Product Information. AMS will furnish to BSC any and all product user
manuals, sales literature, service manuals, product specifications and other
applicable information relating to the BIS-Screen Products to be delivered to
BSC hereunder, including without limitation such information as is necessary or
appropriate for BSC to formulate any other manuals, promotional materials and
warning labels deemed necessary or appropriate by BSC (collectively, the
"Product Information"). AMS represents and warrants that the Product Information
shall be accurate and complete in all material respects, and undertakes to
update any such Product Information when any information included therein
becomes outdated, inaccurate or misleading. BSC shall have the right to produce,
at its expense, promotional material, BIS-Screen Product handling manuals,
instructions for use, warning labels and other written information relating to
the BIS-Screen Products which is based in whole or in part on the material
supplied by AMS. AMS shall have

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<PAGE>

the right to review and approve, which such review and approval shall not be
unreasonably withheld or delayed, any promotional material proposed to be used
by BSC prior to such use in the event that such promotional material deviates in
any material manner from the Product Information.

      9.2 Training Advice and Assistance. AMS will provide sufficient clinical
specialist support to assist BSC to train BSC sales representatives and to
support large-scale clinical education and market development activities in the
BSC Field. AMS specialists will also be available to support BSC sales
representatives at specific customer sites as appropriate; however, it is
understood that customer-specific support will be limited to key accounts and
centers of excellence. AMS will provide such additional reasonable technical
assistance and training regarding the BIS-Screen Products for BSC's
representatives as BSC reasonably requests. AMS shall also provide to BSC other
services or other support information to assist BSC in marketing the BIS-Screen
Products as BSC reasonably requests. Any support provided under this Section 9.2
shall be provided by AMS at AMS' expense, provided, that after the Development
Period BSC shall reimburse AMS for AMS' actual costs on a time and materials
basis incurred in performing such support.

10.   REPRESENTATIONS AND WARRANTIES.

      10.1 Mutual Representations and Warranties. Each of AMS and BSC hereby
represents and warrants to the other that:

            (a)   it is a duly and validly organized and existing corporation in
                  good standing under the laws of the State of Delaware, and
                  that it or its Affiliates that may be performing its
                  obligations under this Agreement are legally qualified to do
                  business in each jurisdiction in which this Agreement may be
                  performed and its activities hereunder requires such
                  qualification;

            (b)   the performance of this Agreement and the consummation of the
                  transactions contemplated herein will not result in any breach
                  or violation of any terms or provisions of, or constitute a
                  default under, its certificate or articles of incorporation or
                  By-Laws, or other organizational documents, or any material
                  agreement or instrument to which it is a party, by which it is
                  bound, or to which any of its property is subject;

            (c)   all requisite corporate action has been taken for the due
                  authorization, execution, delivery, and performance of this
                  Agreement by it, and this Agreement constitutes a legal
                  binding obligation, enforceable against such party, in
                  accordance with its terms, except insofar as enforceability
                  may be limited by bankruptcy, insolvency, reorganization, or
                  similar laws affecting the rights of creditors generally; and

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<PAGE>

            (d)   it is not a party to any litigation relating to, or that could
                  reasonably be expected to affect, its ability to perform its
                  obligations under this Agreement.

      10.2 Product Warranty. Manufacturer represents and warrants to Distributor
that all BIS-Screen Products supplied to Distributor hereunder shall: (i) for a
period of the first to expire of the period of [**] months after delivery of
such BIS-Screen Product (other than a Disposable Product) to Distributor or the
period of [**] months after the date of resale of such BIS-Screen Product (other
than a sensor) by Distributor, conform to the applicable Product Specifications,
(ii) for a period of no shorter than the longer of [**] months after manufacture
of each BIS-Screen Product sensor, or [**] months from the delivery of such
BIS-Screen Product to Distributor, conform to the applicable Product
Specifications, (iii) be manufactured, labeled, packaged and tested (while in
the possession or control of Manufacturer) in accordance with the applicable
Product Approvals therefor and the applicable laws and regulations in each
country or jurisdiction within the Territory relating to the manufacture,
labeling, packaging and testing of the BIS-Screen Products, (iv) be free from
defects in design, materials and workmanship, and (v) be free and clear of all
liens and encumbrances.

      10.3. Non-Infringement. To its knowledge, AMS represents and warrants to
BSC that the manufacture, exportation, importation, marketing, sale and
distribution of BIS-Screen Products in the Territory, will not infringe the
rights of third parties.

      10.4. No Other Distributors. AMS represent and warrants that it does not
currently have any other agents, representatives, or distributors for the
promotion or sale of BIS-Screen Products in the Territory for use in the BSC
Field.

      10.5. Disclaimer of Warranties. EXCEPT AS PROVIDED IN THIS AGREEMENT, AMS
MAKES NO OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT
TO THE BIS-SCREEN PRODUCTS, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.

11.   INDEMNIFICATION.

      11.1. Infringement Indemnification. Subject to the provisions of Section
11.3 below, AMS shall defend, indemnify and hold harmless BSC, its subsidiaries,
parent corporations, Affiliates, officers, directors, independent contractors,
partners, shareholders, employees, agents, and their respective successors and
assigns from and against any claim, suit, demand, loss, damage, expense
(including reasonable attorney's fees and those that may be asserted by a third
party) or liability (collectively, "Losses") arising from or related to an
allegation that any BIS-Screen Product, or the manufacture, exportation,
importation, marketing, sale and distribution of any BIS-Screen Product,
infringes or misappropriates any intellectual property right of any third party
(including without limitation any patent, copyright, trade secret or trademark),
provided

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<PAGE>

that AMS shall have no liability hereunder with respect to any such Losses based
on a trademark other than a Trademark. If the manufacture, marketing or sale of
any BIS-Screen Product is held to constitute an infringement or misappropriation
of any third party's intellectual property rights or if in AMS' reasonable
opinion, after consultation with the Steering Committee, the manufacturing,
marketing or sale of any BIS-Screen Product is, or is likely to be held to
constitute, an infringement or misappropriation, AMS will at its expense and
option: (i) procure the right for BSC to continue distributing the BIS-Screen
Product in accordance with this Agreement at no additional cost to BSC; (ii)
replace the BIS-Screen Product with a non-infringing and non-misappropriating
equivalent product conforming to the Product Specifications at no additional
cost to BSC or (iii) modify the BIS-Screen Product to make it non-infringing and
non-misappropriating while conforming to the Product Specifications at no
additional cost to BSC. In the event that AMS determines that none of the
foregoing alternatives are reasonably available, AMS shall be released from any
obligation to deliver such BIS-Screen Product to BSC hereunder and BSC shall be
released from its obligations under Section 5.4 with respect to such BIS-Screen
Product, provided, however, that (1) any such BIS-Screen Product shall remain
subject to the provisions of Sections 5.1, 5.2, 5.5 and 5.6 for the duration of
the Distribution Term; and (2) the Steering Committee shall determine the most
appropriate course of action with respect to the BIS-Screen Product.
Notwithstanding the foregoing, AMS shall not be responsible for any such Losses
resulting from any allegation based on intellectual property of BSC incorporated
into any such BIS-Screen Product. The obligations of AMS set forth in this
Section 11.1 shall not apply to any claim based on (a) any adaptation or
modification of the BIS-Screen Products not made or not authorized by AMS where
such infringement would not have occurred but for such adaptation modification,
(b) any combination by BSC of a BIS-Screen Product with products not provided by
AMS or authorized or approved in writing by AMS where such infringement would
not have occurred but for such combination or (c) intellectual property rights
owned by BSC or any of its Affiliates.

      11.2 Other Claims. Subject to the provisions of Section 11.3 below, each
of AMS and BSC (each, in such capacity, an "Indemnifying Party") will defend,
indemnify and hold harmless the other party, its subsidiaries, parent
corporations, Affiliates, officers, directors, partners, shareholders,
employees, agents, and their respective successors and assigns (collectively, in
such capacity, the "Indemnitees") from and against any Losses, including without
limitation Losses imposed upon the Indemnitee(s) by any third party, arising
from or related to: (a) any material breach of such Indemnifying Party's
representations and warranties, covenants or obligations under this Agreement;
or (b) any negligence or intentional misconduct by such Indemnifying Party (or
its employees, agents or representatives) in performing its obligations under
this Agreement. Without limiting the foregoing, AMS shall defend, indemnify and
hold harmless the BSC Indemnitees from and against any Losses imposed upon the
BSC Indemnitees by any third party arising from or related to any of the
BIS-Screen Products in connection with any injury, illness or death unless such
injury was caused by a combination or modification of the BIS-Screen Products
made by BSC that was not authorized or approved by AMS in writing, in which case
BSC shall defend, indemnify and hold harmless the AMS Indemnitees from and
against any Losses imposed upon AMS Indemnitees by any third party arising from
or related to any of such BIS-Screen Products in connection with any injury,
illness or death. The foregoing

                                       34

<PAGE>

indemnification shall not apply in the event and to the extent that a court of
competent jurisdiction determines that such Losses arose as a result of any
Indemnitee's negligence, intentional misconduct or breach of this Agreement.
Without limiting the foregoing, AMS shall defend, indemnify and hold harmless
the BSC Indemnitees from and against any Losses imposed upon the BSC Indemnitees
by any third party arising from or related to any of the BIS-Screen Products in
connection with any injury, illness and/or death to the extent that such injury,
illness and/or death resulted from the negligent, reckless or willful act or
omission, whether direct or indirect, of AMS (or any Person or entity, other
than BSC, acting on AMS' behalf) or from a product defect for which AMS (or any
Person or entity, other than BSC, acting on AMS' behalf) was directly or
indirectly responsible or from any product description or claim made by or on
behalf of AMS in writing or through electronic transmission and upon which BSC
or any third party has relied. Also, without limiting the foregoing, BSC shall
defend, indemnify and hold harmless AMS Indemnitees from and against any Losses
imposed upon AMS Indemnitees by any third party arising from or related to any
of the BIS-Screen Products in connection with any injury, illness and/or death
to the extent that such injury, illness and/or death resulted from the
negligent, reckless or willful act or omission, whether direct or indirect, of
BSC (or any Person or entity, other than AMS, acting on BSC's behalf) or from
any product description or claim made by or on behalf of BSC that is
inconsistent with the Product Specifications or any relevant Product Approval in
writing or through electronic transmission and upon which any third party has
relied.

      11.3 Procedure. A party seeking indemnification shall promptly notify the
other party in writing of a claim or suit; provided, that a party's failure to
give such notice or delay in giving such notice shall not effect such party's
right to indemnification under this Section 11 except to the extent that the
other party has been prejudiced by such failure or delay. Neither party has any
obligation to indemnify the other party in connection with any settlement made
without the Indemnifying Party's written consent. The Indemnitee has the right
to participate at its own expense in the claim or suit and in selecting counsel
therefor. The Indemnitee shall cooperate with the Indemnifying Party as
reasonably requested, at the Indemnifying Party's sole cost and expense. The
Indemnifying Party shall not settle any claim or suit without the Indemnitee's
prior written consent unless such settlement is limited to the payment of cash
by the Indemnifying Party and contains a full release of the Indemnitee.

      11.4 Insurance. At all times during which any BIS-Screen Product is being
clinically tested with human subjects or commercially distributed or sold by BSC
hereunder, as well as for a period of seven years thereafter, AMS shall procure
and maintain insurance, including without limitation product liability
insurance, adequate to cover its obligations hereunder and which is consistent
with normal business practices of prudent companies similarly situated. Any such
insurance policy shall at all times name BSC as an additional insured
thereunder. It is understood that such insurance shall not be construed to
create a limit of AMS' liability with respect to its indemnification obligations
under this Section 11. AMS shall provide BSC with written evidence of such
insurance upon request. AMS shall provide BSC with written notice at least
fifteen (15) days prior to the cancellation, non-renewal or material change in
such insurance.

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<PAGE>

12.   TERM AND TERMINATION.

      12.1 Term. This Agreement shall take effect as of the Effective Date and
shall remain in effect until the later of the twentieth (20th) anniversary of
the Effective Date, provided, that if any BIS-Screen Product with respect to
which a Transfer Price or Distribution Commission is payable is then being sold,
and the Distribution Term has not otherwise expired, then this Agreement shall
remain in effect until the expiration of the Distribution Term.

      12.2 Termination. (a) AMS may terminate this Agreement at any time upon
sixty (60) days written notice to BSC in the event that BSC shall have
materially breached its Development Funding Obligation under Section 2.1 hereof,
and shall not have cured such breach prior to the expiration of such sixty (60)
day period. BSC may terminate this Agreement at any time upon sixty (60) days
written notice to AMS in the event that AMS shall have materially breached any
of its obligations, representations or warranties hereunder and shall not have
cured such breach prior to the expiration of such sixty (60) day period. Without
limiting the foregoing, failure by AMS to meet [**] per cent ([**]%) of BSC's
Product orders that AMS is obligated to meet with respect to any BIS-Screen
Product for three consecutive months or for an aggregate of one hundred twenty
(120) days in any Contract Year shall be deemed to be a material breach of an
obligation by AMS hereunder.

      (b) AMS may, without limiting (a) above, terminate BSC's appointment as
distributor under Section 5.1(a) with respect to an Approved Major Category,
upon sixty (60) days written notice to BSC (unless such condition is cured
within such sixty (60) day period), in the event that BSC fails to make at least
one BIS-Screen Product generally available for purchase in the United States
(which such BIS-Screen Product delivered to BSC from AMS shall comply with the
Product Specifications for such BIS-Screen Product and with respect to which AMS
is expending commercially reasonable efforts to timely obtain reimbursement for
such BIS-Screen Product in the United States) within a Major Category prior to
the date that is six (6) months after the date on which BSC is no longer
entitled to exercise its Opt-Out Option with respect to such Major Category.

      (c) AMS may, without limiting (a) above, terminate BSC's appointment as
distributor under Section 5.1(a) with respect to any BIS-Screen Product then
being distributed by BSC, upon sixty (60) days written notice to BSC (unless
such condition is cured within such sixty (60) day period), in the event that
AMS is able to demonstrate by clear and convincing evidence that BSC has failed
to comply with its obligations set forth in Section 5.4 hereof with respect to
such BIS-Screen Product for three (3) consecutive months in any Contract Year;
but only if, AMS has given a termination notice pursuant to the first sentence
of Section 12.2(a) within sixty (60) days following the last day of such three
(3) consecutive month period, and BSC does not cure such failure within such
sixty (60) day period.

      (d) The parties may terminate this Agreement at any time upon mutual
written agreement.

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<PAGE>

      (e) In addition to the foregoing, BSC shall be entitled to terminate its
appointment as the distributor of any BIS-Screen Product that it is then
distributing at any time upon notice to AMS.

      12.3 Effect of Termination. Termination of this Agreement shall not affect
rights and obligations of either party that may have accrued prior to the
effective date of termination or any obligation that by its nature or express
terms survives termination. Without limiting the foregoing, the provisions of
Sections 1, 5.7, 5.8, 6.10, 7.4, 11, 12 and 13 hereof shall survive any
expiration or termination of this Agreement, provided, that the provisions of
Sections 5.7 and 5.8 (except as they relate to obligations accrued before such
termination) shall not survive any termination of this Agreement by AMS under
Section 12.2(a). Notwithstanding any expiration or termination of this
Agreement, (i) Manufacturer shall make such further deliveries of BIS-Screen
Products to Distributor as are required to comply with Distributor's delivery
obligations to customers existing on the date of termination, (ii) Distributor
shall continue to have all rights necessary or appropriate to sell out its
inventory pursuant to this Section 12.3 for a period of one (1) year after
termination and during such period Manufacturer shall continue to comply with
all of its duties and obligations hereunder necessary or appropriate to
facilitate BSC's sell out of inventory, including without limitation those set
forth in Sections 6.3, 6.10, 7.1-7.6, 7.8, 8.1 hereof, and (iii) AMS'
obligations to pay Distribution Commissions with respect to Net Sales recorded
by AMS with respect to the sales of BIS-Screen Products by AMS directly as
Distributor or by any third-party distributor appointed by AMS shall survive
until the twelfth (12th) anniversary of the earlier of the First Other
Distributor Sales Date or the First BSC Sales Date.

13.   GENERAL PROVISIONS.

      13.1 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Massachusetts without giving
effect to its rules regarding conflicts of laws.

      13.2 Confidentiality. It is contemplated that in the course of the
performance of this Agreement each party may, from time to time, disclose
Confidential Information to the other. Each party agrees to keep the other's
Confidential Information in confidence and use it only as specifically permitted
under the Agreement, maintaining the same procedures and policies with respect
to the other's Confidential Information as it does with its own Confidential
Information, provided, that in all cases reasonable care shall be used to
protect such Confidential Information; and provided, further, that no provision
of this Agreement shall be construed to preclude such disclosure of Confidential
Information as may be required by law, the rules and regulations of any stock
exchange or The Nasdaq Stock Market, or by court order, or to the extent
necessary and appropriate to divulge such Confidential Information to obtain
governmental approval for the investigation or marketing of the BIS-Screen
Products; provided further, that notice of such disclosure is provided to the
other party prior to such disclosure.

      13.3 Waiver. Except as otherwise expressly set forth herein, no provision
of or right

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<PAGE>

under this Agreement shall be deemed to have been waived by any act or
acquiescence on the part of either party, its agents or employees, except by an
instrument in writing signed by an authorized officer of each party. No waiver
by either party of any breach of this Agreement by the other party shall be
effective as to any other breach, whether of the same or any other term or
condition and whether occurring before or after the date of such waiver.

      13.4 Independent Contractors. Each party represents that it is acting on
its own behalf as an independent contractor and is not acting as an agent for or
on behalf of any third party. This Agreement and the relations hereby
established by and between AMS and BSC do not constitute a partnership, joint
venture, franchise, agency or contract of employment.

      13.5 Assignment. Neither party may assign its rights or delegate its
obligations hereunder without the prior written consent of the other; provided,
that notwithstanding the foregoing, either party may assign, without the other
party's consent, its rights and obligations hereunder to (a) an Affiliate or to
a purchaser of all or substantially all of the assets or business of such or the
division of such party responsible for distributing or providing the BIS-Screen
Products and (b), in the case of BSC only, sub-distributors designated by BSC in
its sole discretion, in all cases to an Affiliate, purchaser or sub-distributor
that has the experience and financial resources to comply with the obligations
of the assigning party hereunder. No such assignment or delegation shall relieve
the assigning or delegating party from its obligations hereunder. It is
understood that either party may from time to time perform some or all of its
obligations hereunder through one or more of its Affiliates.

      13.6 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective permitted assigns and
successors, including but not limited to in the case of AMS any Person that is
AMS' successor by merger, or by acquiring a majority of the outstanding voting
stock of AMS or substantially all of the AMS Intellectual Property and Patent
Rights relating to the BIS-Screen Products distributed or to be distributed by
BSC under this Agreement.

      13.7 Publicity. AMS and BSC agree that no public release or announcement
concerning this Agreement in any manner shall be issued during the term of the
Agreement by either party without the prior consent of the other party (which
consent shall not be unreasonably withheld), except as such release or
announcement may be required by law or the rules or regulations of any
securities exchange or the National Association of Securities Dealers, in which
case the party required to make the release or announcement shall use its
reasonable best efforts to allow the other party reasonable time to comment on
such release or announcement, and, if applicable, any associated request for
confidential treatment, in advance of such issuance.

      13.8 Notices. Unless otherwise provided herein, any notice, report,
payment or document to be given by one party to the other shall be in writing
and shall be deemed given when delivered personally or mailed by certified or
registered mail, postage prepaid (such mailed notice to be effective on the date
which is three business days after the date of mailing), or sent

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<PAGE>

by reputable overnight courier (such notice sent by courier to be effective one
business day after it is deposited with such courier), and in the case of BSC,
addressed to the attention of the Chief Financial Officer, with a copy to the
attention of the Assistant General Counsel at One Boston Scientific Place,
Natick, Massachusetts, 01760, and in the case of AMS, addressed to the attention
of Chief Financial Officer or to such other place as any party may designate as
to itself by written notice to the other party, with a copy to Susan Murley,
Esq., Wilmer, Cutler, Pickering, Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109.

      13.9 Severability. In the event any provision of this Agreement shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other term or
provision hereof. The parties agree that they will negotiate in good faith or
will permit a court to replace any provision hereof so held invalid, illegal or
unenforceable with a valid provision which is as similar as possible in
substance to the invalid, illegal or unenforceable provision.

      13.10 Headings. Headings of the sections and subsections of this Agreement
are for reference purposes only and shall not limit or affect the meaning or
construction of the terms and conditions hereof.

      13.11 Interpretation. Words such as "herein", "hereinafter", "hereof" and
"hereunder" refer to this Agreement as a whole and not merely to a section or
paragraph in which such words appear, unless the context otherwise requires. The
singular shall include the plural, unless the context otherwise requires.
Whenever the word "include", "includes" or "including" appears in this
Agreement, it shall be deemed in each instance to be followed by the words
"without limitation."

      13.12 Entire Agreement; Amendment. The terms and provisions contained in
this Agreement constitute the entire understanding of the parties with respect
to the transactions and matters contemplated hereby and supersede all previous
communications, representations, agreements and understandings relating to the
subject matter hereof. No agreement or understanding amending, supplementing or
extending this Agreement shall be binding upon either party unless it is in a
writing and signed by the applicable party. Without limiting the foregoing, the
parties anticipate that the Exhibits, Annexes and Schedules hereto may be
amended or supplemented from time to time by mutual written agreement. If any of
the express provisions of this Agreement conflict with any of the provisions of
the Resource Plan, such conflict shall be resolved in every instance in favor of
the express provisions of this Agreement, unless otherwise agreed upon in
writing by the parties.

      13.13 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

      13.14 Further Assurances; Force Majeure. Each party covenants and agrees
that, subsequent to the execution and delivery of this Agreement and without any
additional

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<PAGE>

consideration, it will execute and deliver any further legal instruments and
perform any acts which are or may become reasonably necessary to effectuate the
purposes of this Agreement. Any delay in the performance of any of the duties or
obligations of either party hereto shall not be considered a breach of this
Agreement and the time required for performance (and if relevant, the
measurement period for a Contract Year) shall be extended for a period equal to
the period of such delay; provided, that such delay has been caused by or is the
result of any act of God, embargo, strike, fire, flood or other unforeseeable
cause beyond the control and without the fault or negligence of the party so
affected. The party so affected shall give prompt notice to the other party of
such cause, and shall take whatever reasonable steps are necessary to relieve
the effect of such cause as rapidly as possible. Nothing in this Section 13.14
shall in any way limit BSC's rights pursuant to Section 11.2 hereof.

      13.15 Limitation of Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, IN NO EVENT SHALL AMS OR BSC HAVE ANY LIABILITY TO THE OTHER FOR
ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL OR OTHER INDIRECT DAMAGES; PROVIDED,
HOWEVER, IN THE EVENT THAT ANY SUCH DAMAGES CONSTITUTE LOSSES (AS DEFINED IN
SECTION 11.1 HEREOF) AGAINST WHICH A PARTY HAS AN OBLIGATION TO INDEMNIFY THE
OTHER PARTY, SUCH INDEMNIFYING PARTY SHALL BE REQUIRED TO INDEMNIFY THE OTHER
PARTY FOR SUCH DAMAGES.

                  [Remainder of Page Intentionally Left Blank.]

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<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Product
Development and Distribution Agreement to be executed by their respective duly
authorized officers, and have duly delivered and executed this Product
Development and Distribution Agreement under seal as of the date first set forth
above.

ASPECT MEDICAL SYSTEMS, INC.                BOSTON SCIENTIFIC corporation

By: /s/ Michael Falvey                      By: /s/ Lawrence C. Best
    ------------------                          ------------------------------
Name:  Michael Falvey                           Name:  Lawrence C. Best
Title: Chief Financial Officer                  Title: Chief Financial Officer

                                       41

<PAGE>

                                                                  EXECUTION COPY

                                                                       EXHIBIT A

                                  RESOURCE PLAN

Aspect Neuroscience is a division of Aspect Medical Systems, Inc. (ASPM), a
publicly traded company founded in 1987. Our mission is to leverage and extend
the application of Aspect's BIS platform technology (an EEG-based signal
processing technology initially employed to measure anesthetic effect on the
brain) to the fields of neurology and psychiatry.

Since November, 2001 we have invested research and development resources in the
neuroscience area. We are currently developing a number of opportunities that
may be broadly categorized in two disease areas, depression and Alzheimer's
disease. This document has been updated reflect a proposed R&D alliance with
Boston Scientific.

DEPRESSION

      Management of antidepressant therapy in Major Depressive Disorder (MDD)

      Management of neurological disease via neurostimulation

ALZHEIMER'S DISEASE

Diagnosis and management of Alzheimer's disease

 The products under development are simple-to-operate, office-based devices that
will provide real-time non-invasive assessment of severity of disease or
therapeutic response. We envision a range of potential uses of these devices
including disease-specific measurements and screening of depression and dementia
as well as other neuropsychiatric conditions. This document provides an overview
of the various business opportunities and how we see them evolving as of May,
2005.

NEUROSCIENCE R&D FUNDING OVERVIEW

DEPRESSION ANTIDEPRESSANT MANAGEMENT

Activities

      Product Development [**]

      Clinical Trials [**]

      Marketing (Communications, product management, etc.)

      Reimbursement

      Regulatory

<PAGE>

The average funding level for depression project throughout the 5 year period
will be approximately $[**]. We expect the total R&D investment over the five
year period will be between [**] dollars.

ALZHEIMER'S DISEASE

The Alzheimer's disease program will be funded at approximately $[**] in the
next year. In the following years we will determine the appropriate level of
funding based on BIS-AD research results and market factors such as new drug
pipeline. We expect that approximately a [**] dollar R&D investment will be
required to bring the Alzheimer's disease product to market.

[**]

OTHER BIS-SCREEN RESEARCH

Throughout the time period of the alliance we will explore a number of potential
applications through-out the alliance period. If one or more demonstrate
promise, we will expand the research program in that area. [**].

If the pilot research results are promising, we will expand the research program
for that application.

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<PAGE>

1. MANAGEMENT OF DEPRESSION

Our device (MedIndicator) will help clinicians manage the treatment of
depression by measuring the effects of treatment on the brain.

Our value proposition is: Use of MedIndicator will bring quicker relief of
depression through faster selection of the best antidepressant for a patient and
better compliance with treatment plan. By knowing that they are on the right
antidepressant, patients will be encouraged to get through the medication
waiting period, endure the side effects and better comply with the treatment
plan. For those patients for whom MedIndicator results show that a specific
antidepressant will not relieve depression, a clinician will be able to change
medication faster and get to the right treatment plan in a shorter period of
time.

Economic benefits will also be realized as a result of this innovation. Savings
will be achieved by reducing the number of doctor visits for depression, getting
a patient to the right treatment faster and by decreasing the amount of time a
patient may be out of work due to depression.

      Note: Given the recent attention to the importance of the risk of suicide
      of depressed patients being treated with antidepressants, we have explored
      the association of our technology on this end-point (suicide ideation).
      Initial results from this research are promising (to be presented at
      NCDEU, 2005). The actual incidence of suicide is very low, and thus the
      studies purporting to study it must be large in size.

MEDINDICATOR

Prior to starting antidepressant therapy, the clinician will take a baseline
MedIndicator reading from a patient. The clinician will select the
antidepressant class and brand based on clinical assessment, medication side
effect profile and specific patient needs. Dose will be selected based on
clinical judgment and manufacturer's instructions for drug titration.

As early as one week after the start of treatment the patient comes back for a
second MedIndicator reading that will indicate whether or not the medication is
working. If it is working, the clinician will assure the patient that although
he/she may not feel the benefits of the medication and may feel the side
effects, relief of depressive symptoms is underway. Providing visual evidence
that the antidepressant medication is working is likely to encourage patients to
stick to a treatment plan.

If the one-week results show that the medication is not working, the clinician
will most likely increase medication dose and ask the patient to come back the
following week for another MedIndicator reading. If the change in medication
dose does not make a difference, a drug from another medication class will most
likely be prescribed to the patient. The process is repeated for a maximum of
three class changes until the right drug class/dose

                                       44

<PAGE>

combination is found. Studies completed to date demonstrate that only 35% of
patients will have remission of depression symptoms from the first
antidepressant medication prescribed using clinical judgment and therefore
multiple changes in treatment are often necessary. MedIndicator has the
potential to greatly accelerate the speed and accuracy with which these changes
are made by physicians, greatly increasing the efficiency of treatment for
depression.

[**]

DEPRESSION MARKET SIZE

DEPRESSION MANAGEMENT

Patients with Unipolar Major                     (National Institute of Health)
Depression                        [**]
Percentage to Treat               [**]%
Available Population              [**]

Average # of Tests per Patient    [**]

Market Size in Units              [**]

ASP of Aspect per Test           $[**]

MARKET SIZE IN $                 $[**]

                                       45

<PAGE>

DEVELOPMENT PLAN

<TABLE>
<S>         <C>
[**]

[**]        [**] [**] [**] [**][**] [**] [**] [**] [**] [**] [**] [**][**] [**] [**] [**] [**] [**] [**] [**][**]
[**]        [**] [**] [**] [**][**] [**] [**] [**] [**] [**] [**] [**][**] [**] [**] [**] [**] [**] [**] [**][**]

[**]        [**] [**]

[**]                  [**] [**][**] [**] [**] [**] [**] [**]

[**]                                                         [**] [**][**] [**] [**] [**]

[**]                                                                                 [**] [**] [**] [**]

[**]                                                                  [**] [**] [**] [**] [**] [**] [**]
[**]                                                                                                     [**]

[**]
</TABLE>

                                       46

<PAGE>

Market Size and Revenue Opportunity

<TABLE>
<S>                  <C>             <C>      <C>          <C>          <C>
[**]
[**]                 [**]            [**]
[**]                 [**]            [**]
[**]                 [**]
[**]                 [**]
[**]                 [**]
[**]                 [**]

[**]                 [**]            [**]
[**]                 [**]            [**]
[**]                 [**]
                     [**]            [**]     [**]         [**]         [**]
[**]                 [**]            [**]     [**]         [**]         [**]
[**]                 [**]            [**]     [**]         [**]         [**]
[**]                                 [**]     [**]         [**]         [**]
[**]                 [**]            [**]     [**]         [**]         [**]
[**]                 [**]            [**]     [**]         [**]         [**]
[**]                 [**]            [**]     [**]         [**]         [**]
</TABLE>

DEVELOPMENT PLAN

[**]

                                       47

<PAGE>

3. DIAGNOSIS AND MANAGEMENT OF ALZHEIMER'S DISEASE

Our device will provide an objective quantitative assessment of brain function
relating to the severity of AD. There are at least three different value
propositions

      1.    The device will be used to diagnose Alzheimer's disease.

      2.    The device will assess severity of AD and will track progression of
            disease and/or the impact of therapy

Diagnosis of Alzheimer's disease

Although there are consensus standards for the diagnosis of AD, the diagnosis of
AD is problematic. Numerous studies have confirmed that AD typically goes
undetected in the primary care setting due to subtle nature of the disease
progression. Although it is widely believed that current therapies are not very
effective, there are ample data to demonstrate that early diagnosis and
treatment is of significant benefit to the patient. It has also been shown that
early treatment delays nursing home admission by a substantial time period.

Assessment of Alzheimer's Disease

Currently there is no objective quantitative way to track the change in
Alzheimer's patient status. In current clinical practice, physicians
periodically assess the status of a patient using a number of factors including
a patient's performance on cognitive tests. A quick, reliable objective measure
of disease progression would be helpful in the management of AD. This will
become important when better therapies are available.

                                       48

<PAGE>

MARKET SIZE AND REVENUE OPPORTUNITY

<TABLE>
<S>               <C>             <C>           <C>         <C>            <C>
[**]              [**]            [**]          [**]        [**]           [**]
[**]
[**]              [**]            [**]
[**]              [**]            [**]
[**]              [**]
[**]              [**]
[**]              [**]
[**]              [**]
[**]              [**]            [**]          [**]        [**]           [**]
[**]              [**]            [**]          [**]        [**]           [**]
[**]              [**]            [**]          [**]        [**]           [**]
[**]              [**]            [**]          [**]        [**]           [**]
[**]
[**]
[**]              [**]            [**]
[**]              [**]            [**]
[**]              [**]
[**]              [**]
[**]              [**]
[**]              [**]
[**]              [**]
[**]              [**]            [**]          [**]        [**]           [**]
[**]              [**]            [**]          [**]        [**]           [**]
[**]              [**]            [**]          [**]        [**]           [**]
[**]              [**]            [**]          [**]        [**]           [**]
</TABLE>

Note: Bachman1 determined 5-year dementia incidence rates ranging from 0.7%
(0.14% annually) at ages 65-69 to 11.8% (2.4% annually) at ages 85-89. So if we
assume a linear increase with age by 5 year bins and average the annual
incidence rates across the bins, we get annual incidence rates of 0.[**]% for
65-74 years and [**]% for 75-84 years. Thus, the total annual incidence is [**]
(65-74 y.o.) + [**] (75-84 y.o.) or a total of [**].

----------

(1) Bachman DL, Wolf PA, Linn RT, Knoefel JE, Cobb JL, Belanger AJ, White LR,
D'Agostino RB Incidence of dementia and probable Alzheimer's disease in a
general population: the Framingham Study. Neurology. 1993 Mar;43(3 Pt 1):515-9.

                                       49

<PAGE>

ALZHEIMER'S DISEASE DEVELOPMENT PLAN

[**]

                                       50

<PAGE>

                                                                  EXECUTION COPY

                                                                       EXHIBIT B

                       BSC STANDARD FORM OF PURCHASE ORDER

                                 PURCHASE ORDER

BOSTON SCIENTIFIC                                                         Page 1
Corporate Headquarters
One Boston Scientific Place                                   Purchase Order No.
NATICK MA 01760
USA

TELEPHONE:  (508) 650-8000                               THIS NUMBER MUST APPEAR
                                                       ON ALL INVOICES, PACKAGES
                                                             AND CORRESPONDENCE.

VENDOR CODE                       SHIP TO ADDRESS
                                  Boston Scientific
VENDOR                            US Distribution Center
                                  500 Commander Shea Boulevard
                                  QUINCY MA 02171
                                  USA
                                  BILL TO ADDRESS
                                  BOSTON SCIENTIFIC CORPORATION
                                  Attention:  Accounts Payable
                                  One Boston Scientific Place
                                  NATICK MA 01760
TELEPHONE                         USA
FAX                                                            TAX EXEMPTION NO.
                                                                      04-2695240

DATE ORDERED                 FOB                          MODE OF TRANSPORTATION

BUYER NO.                         CONFIRM TO
         NATICK
TERMS OF PAYMENT:

<TABLE>
<CAPTION>
               PART NUMBER                    DESCRIPTION                                      REVISION
ITEM             QUANTITY       UOM            DUE DATE          UNIT PRICE      TAXABLE         TOTAL
----           -----------      ---           -----------        -----------     -------       ---------
<S>            <C>              <C>           <C>                <C>             <C>           <C>

00010

                                EA

Balance Due:
Item Text:

                                                                 TOTAL ORDER
                                                                 CURRENCY                         USD
</TABLE>

                                                      _________________________
                                                      Authorized Signature

<PAGE>

NO CHANGES OR SUBSTITUTION CAN BE MADE TO BSC SPECIFIED COMPONENTS OR THE
PROCESSING OF THOSE COMPONENTS WITHOUT PRIOR NOTIFICATION AND APPROVAL OF THE
PURCHASING DEPARTMENT.

                                   VENDOR COPY

                                       2

<PAGE>

                                                                  EXECUTION COPY

                       PURCHASE ORDER TERMS AND CONDITIONS

1) Definitions, Whenever used in this Purchase Order, the following terms shall
have the following meanings: (a) "Buyer" means Boston Scientific Corporation or
one of its subsidiaries or affiliates set forth on the front of this Purchase
Order; (b) "Seller" means the person, partnership, corporation or other entity
specified as the Seller on the front of this Purchase Order; and (c) "Goods"
means all articles, materials, supplies, drawings, data, documents, goods and
other property furnished or to be furnished under this Purchase Order to Buyer,
and all services, including design, delivery installation, inspection and
testing, specified or required to be furnished under this Purchase Order.

2) Complete Agreement; Acceptance. This Purchase Order constitutes an offer by
the Buyer to the Seller to purchase, upon the terms and conditions stated
herein, the Goods, and shall become a binding contract upon acceptance either by
acknowledgment or performance by the Seller. This Purchase Order constitutes the
sole and entire agreement between the parties relating to the subject matter
hereof and supersedes all prior understandings, agreements, transactions and
communications, whether oral or written, with respect to the matters referred to
herein, unless Buyer and Seller have executed a separate written contract which
specifically states that the terms of that contract prevail. No other terms or
conditions and no modification, alteration or amendment of this Purchase Order
shall be binding upon the Buyer unless accepted in writing by an authorized
officer of the Buyer.

3) Delivery. Delivery or performance shall be made strictly in accordance with
the date or dates specified in this Purchase Order. If Goods are not delivered
or services are not performed, by the specified time Buyer shall have the option
of purchasing elsewhere and charging Seller with any loss resulting therefrom
and/or approving in writing a revised delivery schedule and/or of canceling this
Purchase Order, or any part thereof, without prejudice to its other rights. With
respect to any part of the order so canceled, Buyer may, at its option, either
return such materials to Seller, at Seller's risk and expense, or charge Seller
a reasonable storage charge until Seller removes such materials. Goods or
components fabricated beyond Buyer's authorization are at Seller's risk. Unless
otherwise agreed, invoices covering Goods received ahead of schedule will not be
paid until their normal maturity after the date specified for delivery.

      Seller shall be responsible for any and all loss or damage to the Goods
until the Goods have been received and accepted by the Buyer.

4) Assignment; Sub-Contracting. Any and all rights to the Seller under this
Purchase Order, including without limitation rights to monies due, shall not be
assigned in whole or in part, nor any obligation of the Seller under this
Purchase Order subcontracted, by the Seller without the Buyer's prior written
consent. All terms hereof shall be binding upon, and shall accrue to the benefit
of, the successors and permitted assigns of the parties hereto. Seller shall
take all steps required to ensure that its employees, agents and permitted
subcontractors comply with all provisions hereof as if the Seller. In any case,
assigned accounts shall be subject to set-off, recoupment or any other claim of
the Buyer against the Seller.

<PAGE>

5) Warranties. Seller warrants that all Goods furnished by it under this
Purchase Order shall be free from defects in material and workmanship and
otherwise shall be fit and sufficient for the purpose intended; shall be of good
and merchantable quality and that all materials, components, parts and other
items incorporated in the Goods shall be new and of the most suitable quality
for their intended purpose; and shall conform to blueprints, specifications,
samples and other descriptions furnished with this Purchase Order or as
subsequently changed by Buyer. Seller further warrants that all Goods furnished
shall be free of any lien, charge, encumbrance and interest of any nature of any
third party, and that Seller shall have good and marketable title thereto upon
provision to Buyer. The warranties herein shall survive inspection and
acceptance by Buyer. The foregoing warranties are in addition to any and all
other warranties, whether express, or implied, created by law.

      Seller agrees to indemnify and save Buyer, its affiliates, their employees
and customers, and any and all direct or indirect vendees thereof, harmless with
respect to all losses, costs, expenses and damages, including consequential
damages and attorney's fees, incurred or asserted as a consequence of any breach
of any warranty contained in this Purchase Order.

6) Buyer is an equal Opportunity Employer. Buyer hereby incorporates by
reference as a part of this Purchase Order applicable provisions Executive Order
11246, regarding equal opportunity for all persons without regard to race,
color, religion, sex or national origin; the Vietnam Era Veterans Readjustment
Assistance Act of 1974, as amended (the "Veteran's Act"), and the Rehabilitation
act of 1973 (the "Rehab Act"). Pursuant to Executive Order 11246, and
particularly 41 C.F.R. 60-1.2, and acceptance of this contract, Seller certifies
that it complies with the provisions of Executive Order 11246, Veteran's Act and
Rehab Act, and Seller does not and will not maintain any facilities in a
segregated manner or permit Seller's employees to perform their services at any
location under Seller's control, where segregated facilities are maintained.
Further, Seller agrees that Seller will obtain a certificate containing similar
statements prior to the award of any nonexempt subcontract.

7) Price and Payment. Payment of specified prices shall constitute full
consideration for the Goods hereunder. Such prices shall be subject to
adjustment only as specifically provided for in this Purchase Order. Unless
otherwise specified, all prices include 011 applicable taxes, assessments and
other amounts payable to governmental authorities; Seller shall separately
invoice Buyer for any specified amounts payable to Buyer. Any time period
specified for payment, or for accepting any discounts, shall commence on the
later (i) the date that Buyer receives Seller's correct invoice thereof, or (ii)
the date that Buyer accepts the Goods (together with any specified
documentation) at the specified location. In the event prices or taxes are
higher than specified on the front of this Purchase Order, Seller shall advise
the Buyer thereof prior to shipment. By acceptance of this Purchase Order,
Seller warrants that the prices charged hereunder are not in excess of the
Seller's current selling price to any other purchase of the same or
substantially similar items (taking into account quantities so sold), and agrees
that in the event it is determined that the prices charged herein are in excess
of such prices, such excess will be refunded to Buyer.

8) Invoicing. Invoices must be mailed to the address of the Buyer specified on
the front of this Purchase Order. Unless otherwise agreed between the parties, a
separate invoice shall be issued

                                       4

<PAGE>

by Seller for each shipment, and billing for partial shipment will not be
honored by Buyer. Seller shall not issue an invoice prior to shipment of the
Goods and, except as otherwise agreed in writing between the parties, no payment
will be made by Buyer prior to its receipt of the Goods and a correct invoice.
Invoices must, inter alia, contain the following information: Purchase Order
number, item number and description of the Goods, quantities, size and unit
price for each type of Goods and extended totals. Invoices not containing such
information may result in payment delays by Buyer; such delays shall not subject
Buyer to any penalty, interest or additional charge. Buyer's failure to object
to provisions in Seller's invoice or other communications which conflict with
the terms hereof shall not be deemed a waiver of the terms and conditions
hereof, which shall prevail.

9) Transportation; Packing. All materials shall be packed in accordance with
specifications provided by Buyer, or, if no specifications are provided,
otherwise suitably packed in order to protect the materials fully during
transportation and to secure the lowest available transportation costs. All
materials shall be forwarded in accordance with Buyer's instructions, or in the
absence of such instructions, by the route and method of transportation
sufficient to meet applicable delivery dates representing the lowest available
transportation costs. Excess transportation costs otherwise incurred will be
charged to Seller's account. When usual terms or tariffs do not include
insurance, shipments must be forwarded properly insured to their full sales
price hereunder. No charge shall be made for freight, shipping, packing,
insurance, boxing, storage or drayage unless authorized by Buyer in writing.

      Buyer's order numbers and symbols must be plainly marked on all invoices,
packages, bills of lading and shipping orders.

      A packing slip bearing a complete record of the shipment, including the
number of the order to which it applies, is required with each shipment
hereunder. Invoices, bills of lading or express receipts, and packing lists must
be mailed within twenty-four hours following shipment. Each invoice must show
the shipping route, quantity prices, number of packages and serial numbers
thereof, and the number of Buyer's purchase order to which shipment applies.
Payment and discounts shall be calculated from the date of receipt at Buyer's
office of the foregoing invoice, bills of lading or express receipts and packing
lists.

10) Compliance with Law. Seller warrants that the Goods sold and furnished
hereunder shall be manufactured, sold, delivered and furnished in compliance
with all applicable federal, state and local laws and regulations, including
without limitation, the Robinson-Patman Act and the Fair Labor Standards Act of
1938, as amended. All laws and regulations required by their terms to be
incorporated in agreements of this type are hereby incorporated herein by
reference. Seller agrees to hold Buyer harmless from and to indemnify Buyer for
any losses, expenses, costs, or damages resulting from the Seller's breach of
this warranty.

      In addition, Seller warrants that all work contemplated hereunder shall be
performed in strict conformity with all federal, state and local laws and
ordinances, and all regulations of all governmental authorities. Seller agrees,
upon request, to furnish Buyer with a certificate of compliance with any or all
such laws, and of the provisions herein, in such form as Buyer may require.
Without limiting the generality of the foregoing, where Seller performs services
on

                                       5

<PAGE>

Buyer's premises, Seller agrees to furnish Buyer satisfactory evidence or
compliance with all laws and regulations, including specifically, without
limitation, all taxes on payroll or contributions on account of social security,
unemployment insurance and federal or state workmen's compensation. Seller
agrees that, if in the performance of this Purchase Order, Seller or any of its
employees, agents, or subcontractors is required to enter upon premises other
than premises owned or occupied by such person, Seller shall ensure that public
liability and property damage insurance in amounts satisfactory to Buyer, naming
Buyer as an additional insured, be maintained to cover any liability in
connection therewith.

11) Gratuities. Seller warrants that it has not offered or given and will not
offer or give to any employee, agent or representative of Buyer any gratuity
with a view toward securing any business from Buyer or influencing such person
with respect to the terms, conditions or performance of any contract with Buyer.
Any breach of this warranty shall be a material breach of each and every
contract between Buyer and Seller.

12) Inspection and Approval; Return of Goods. All Goods shall be subject to
inspection by Buyer before and after delivery and acceptance, it being expressly
agreed that payment shall not constitute final acceptance. Upon discovery by
Buyer that the Goods contain any defect, patent or latent, or that they fail to
conform to the warranties herein or any other warranties under law, the Buyer
shall have the right: (i) to reject the Goods, or if the Goods have been
accepted by the Buyer, to return them to the Seller at Seller's risk and expense
and to recover all freight, storage, handling and other expenses incurred by the
Buyer and to be relieved of any payment for the purchase price therefor, or, if
payment has been made, to recover the purchase price so paid; (ii) to recover
all expenses incurred in making the Goods in an attempt to make them usable;
and/or (iii) to cancel the applicable Purchase Order. Goods so returned shall
not be replaced without Buyer's written replacement order. Buyer's rights as set
forth in this paragraph shall not be construed to limit or affect any other
rights which Buyer may have at law or under the terms hereof.

13) Buyer's Proprietary Rights. All processes, drawings, data, reports, plans,
documents, business secrets and information of any kind pertaining to Buyer's
business shall be treated and recognized as the sole and exclusive; property of
Buyer and shall at all time he kept by Seller as secret and confidential; and
any inventions, discoveries and improvements which Seller may make arising out
of the performance of services or delivery of Goods hereunder, and relating in
any manner to Buyer's business shall be promptly disclosed by Seller to Buyer,
and the rights to any of the foregoing shall belong to and become the property
of the Buyer and Seller shall never use nor permit the use of the same for
Seller's benefit or for the benefit of any other person, firm or corporation.
Seller shall not prepare any writings, reports, publications, etc. in any way
connected with or arising out of the process, design or any other information
which Seller is studying for Seller's own use or for release to others, except
as specifically required by Buyer without prior written consent of Buyer.

      Seller may disclose or reveal any such information only to those in its
organization who must have access to such information to perform the services
specifically required of Seller by Buyer. Seller shall make known to all those
in its organization who have access to such information Seller's obligations
hereunder and that such information is confidential and is the

                                       6

<PAGE>

property of the Buyer. All models, drawings, sketches, documents, and other
written information furnished to Seller or otherwise obtained by Seller in
connection with this order shall be the property of Buyer and shall be deemed a
loan to Seller for use solely in the performance of services for Buyer, and
shall be returned to Buyer whenever return is requested by Buyer and, in any
event, upon completion of Seller's work for Buyer.

      All specifications, drawings, tools, materials and other items which are
supplied by Buyer shall be and remain the property of Buyer, and Buyer shall
have the right to enter Seller's premises and remove them at any time without
being guilty of trespass or liable to Seller for damages for any sort. All such
items shall be used only in the performance of work under this Purchase Order.
Seller shall not dispose of any such items without Buyer's written consent, and
shall, upon completion of the work, promptly deliver all such property and
productions therefrom to Buyer. Seller hereby indemnifies Buyer against any loss
which Buyer may sustain arising out of the failure of Seller to comply with its
obligations under this paragraph 11. The provisions of this paragraph 11 shall
survive delivery and payment, and remain in full force until all said items are
delivered to Buyer or otherwise disposed of with Buyer's written consent.

14) Patents. In the event that any article sold and delivered hereunder shall be
covered by any patent, copyright or other form of protection of intellectual
property right of a third party, Seller will indemnify and save harmless Buyer
from any and all loss, cost or expense on account, including consequential
damages and attorney's fees of any and all claims, suits or judgment on account
of the use or sale of other disposition of such article in violation thereof.
Buyer reserves the right, at its election, to control or participate in any such
suit or proceeding and may be represented therein by its own counsel, if it so
desires.

15) Set-Off. Seller agrees that Buyer shall have the right to set-off against
any amounts which may become payable by Buyer to Seller under this Purchase
Order or otherwise, any amounts which Seller may owe to Buyer, whether arising
under this Purchase Order or otherwise.

16) Indemnities. Seller agrees to indemnify, defend and hold harmless Buyer, its
successors and assigns, and the respective directors, officers, agents,
customers, employees and representatives of Buyer and its successors and
assigns, from any and all loss, damage, expenses, claims and suits (including
costs and attorney's fees) by reason of any liability imposed on any Indemnitee
for injury to persons or damages to property caused by or in any way arising out
of the furnishing of Goods hereunder, except such claims as may result from the
negligent act or omission of Buyer, its officers, agents or employees.

17) Validity. The invalidity in whole or in part of any condition of this order
shall not effect the validity of the other conditions.

18) Changes. Buyer shall have the right, by written change notice, to suspend
work at any time before completion of the order, or to make changes in
quantities, drawings, specifications, delivery schedules and dates and methods
of shipment and packaging. If such changes cause an increase or decrease in the
amount due under the order or in the time required for its performance, an
equitable adjustment shall be made and the order shall be modified in writing
accordingly. Any claim for adjustment must be asserted by the Seller in writing
within 15 days

                                       7

<PAGE>

from the date the change is ordered. Changes shall not be binding upon Buyer
unless evidenced by a purchase order change notice issued and signed by an
authorized agent of the Buyer.

19) Disclosure of Information. Seller shall not, without first obtaining Buyer's
written consent, in any manner advertise or publish the fact that Seller has
furnished or contracted to furnish the Goods to Buyer or otherwise use Buyer's
name.

20) Cancellation or Default. If Seller fails to deliver the Goods, to perform
the services or to perform any of the other provisions of this order, at the
time specified herein or any extension thereof authorized by Buyer in writing,
Buyer may, by written notice of default to Seller, cancel the whole or any part
of the Goods ordered without liability, except for completed services and
completed supplies delivered and accepted under that portion of the order not
canceled. Buyer may also cancel this Purchase Order without liability at any
time prior to delivery and acceptance by the Buyer if (i) Seller ceases to
conduct its operations in the normal course of business; (ii) Seller makes an
assignment for the benefit of its creditors. Notwithstanding the foregoing,
neither party shall be liable for delays or defaults due to causes beyond its
control and without its fault or negligence; provided that party exercises due
diligence in promptly notifying the other party hereto of the delay and the
causes therefor and takes all reasonable action to remedy the same. The failure
of either party to enforce any of its rights under this Purchase Order shall not
constitute a waiver of such rights.

21) Compliance with Terms and Conditions of Purchase Order. Buyer may at any
time insist upon strict compliance with these terms and conditions,
notwithstanding any previous custom, practice, or course of dealing to the
contrary.

                                       8<PAGE>

                                                                   EXHIBIT 10.24

                                                                  Execution Copy

                              EVERGREEN SOLAR, INC.

                 4.375% CONVERTIBLE SUBORDINATED NOTES DUE 2012

                               PURCHASE AGREEMENT

                                                                   June 23, 2005

SG COWEN & CO., LLC
   As Representative of the several Initial Purchasers
c/o   SG Cowen & Co., LLC
      1221 Avenue of the Americas
      New York, New York 10020

Dear Sirs:

1. INTRODUCTORY. Evergreen Solar, Inc., a Delaware corporation (the "Company"),
proposes to sell, pursuant to the terms of this Agreement, to the several
initial purchasers named in Schedule A hereto (collectively, the "Initial
Purchasers" and, each, an "Initial Purchaser"), $75,000,000 aggregate principal
amount of its 4.375% Convertible Subordinated Notes due 2012 (the "Firm Notes").
In addition, the Company proposes to grant to the Initial Purchasers the option
to purchase from the Company some or all of the Option Notes (as defined in
Section 8 hereof) pursuant to Section 8 hereof. The Firm Notes and the Option
Notes are hereinafter collectively sometimes referred to as the "Notes." The
Notes will have the terms and provisions that are described in the Offering
Circular (as defined below) under the heading "Description of the Notes" and are
to be issued pursuant to an Indenture dated as of the First Closing Date (as
defined in Section 3(a) hereof) to be entered into between U.S. Bank National
Association, as trustee (the "Trustee"), and the Company (the "Indenture").
Subject to certain conditions, the Notes will be convertible into shares of
common stock, par value $.01 per share, of the Company (the "Common Stock"). SG
Cowen & Co., LLC is acting as representative of the several Initial Purchasers
and in such capacity is hereinafter referred to as the "Representative."

      The Notes will be offered and sold to the Initial Purchasers without being
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and the rules and regulations promulgated thereunder (the "Rules and
Regulations"), in reliance upon an exemption therefrom. The Company has prepared
a preliminary offering circular dated June 22, 2005 (the "Preliminary Offering
Circular") and will prepare a final offering circular dated the date hereof (the
"Offering Circular" and, together with the Preliminary Offering Circular, the
"Circular") setting forth information concerning the Company and the Notes. The
Circular incorporates by reference the Company's (i) Annual Report on Form 10-K
for the year ended December 31, 2004, as amended, (ii) Quarterly Report on Form
10-Q for the quarter ended April 2, 2005 and (iii) Current Reports on Form 8-K
filed on January 14, 2005 (as amended on January 21, 2005) and February 7, 2005
(all

<PAGE>

such documents listed in clauses (i) through (iii) referred to herein as the
"Incorporated Documents"). Any reference to any amendment or supplement to the
Preliminary Offering Circular or the Offering Circular shall be deemed to refer
to and include any documents filed after the date of the Preliminary Offering
Circular or the Offering Circular, as the case may be, under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by
reference in the Preliminary Offering Circular or the Offering Circular, as the
case may be. Copies of the Preliminary Offering Circular have been, and copies
of the Offering Circular will be, delivered by the Company to the Initial
Purchasers pursuant to the terms of this Agreement. Any references herein to the
Circular shall be deemed to include all amendments and supplements thereto and
the Incorporated Documents and any amendments thereto, unless otherwise noted.
The Company hereby confirms that it has authorized the use of the Circular in
connection with the offering and resale of the Notes by the Initial Purchasers
in accordance with Section 3 hereof.

      Holders of the Notes (including the Initial Purchasers and their direct
and indirect transferees) will be entitled to the benefits of a Registration
Rights Agreement dated as of the First Closing Date to be entered into between
the Company and the Initial Purchasers (the "Registration Rights Agreement")
pursuant to which the Company will agree, among other things, to file a
registration statement on the appropriate form with the Securities and Exchange
Commission (the "Commission") registering the Notes and the shares of Common
Stock issuable upon the conversion thereof (the "Underlying Shares") under the
Securities Act.

2.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, the several Initial Purchasers that:

      (a) Each of the Preliminary Offering Circular and the Offering Circular,
      as of its respective date, did not, and on the First Closing Date the
      Offering Circular will not, contain any untrue statement of a material
      fact or omit to state a material fact necessary in order to make the
      statements therein, in the light of the circumstances under which they
      were made, not misleading; provided, however, that the Company makes no
      representation or warranty as to information contained in or omitted from
      the Preliminary Offering Circular or the Offering Circular in reliance
      upon, and in conformity with, written information furnished to the Company
      by an Initial Purchaser specifically for inclusion therein, which
      information the parties hereto agree is limited to the Initial Purchasers
      Information (as defined in Section 17 hereof).

      (b) Assuming the accuracy of the representations and warranties of the
      Initial Purchasers contained in Section 3 hereof and their compliance with
      the agreements set forth therein, it is not necessary, in connection with
      the issuance and sale of the Notes to the Initial Purchasers and the
      offer, resale and delivery of the Notes by the Initial Purchasers in the
      manner contemplated by this Agreement and the Offering Circular, to
      register the Notes under the Securities Act or to qualify the indenture
      under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
      Act").

      (c) The Incorporated Documents, when they were filed with the Commission,
      conformed in all material respects to the requirements of the Exchange Act
      and the rules and regulations of the Commission thereunder; and any
      further documents so filed and incorporated by

                                       -2-
<PAGE>

      reference in the Offering Circular, when such documents are filed with
      Commission, will conform in all material respects to the requirements of
      the Exchange Act and the rules and regulations of the Commission
      thereunder.

      (d) The Company and each of its subsidiaries (as defined in Section 1.5
      hereof) have been duly incorporated or organized and are validly existing
      as corporations or other legal entities in good standing under the laws of
      their respective jurisdictions of organization, are duly qualified to do
      business and are in good standing as foreign corporations or other legal
      entities in each jurisdiction in which their respective ownership or lease
      of property or the conduct of their respective businesses requires such
      qualification and have all corporate power and authority (or, in the case
      of such subsidiaries, similar power and authority) necessary to own or
      hold their respective properties and to conduct the businesses in which
      they are engaged, except where the failure to so qualify, be in good
      standing or have such power or authority would not have, singularly or in
      the aggregate, a material adverse effect on the condition (financial or
      otherwise), results of operations, business or prospects of the Company
      and its subsidiaries taken as a whole (a "Material Adverse Effect"). The
      Company owns or controls, directly or indirectly, only the following
      entities with the indicated percentages of ownership: (i) Evergreen Solar
      Securities Corp., a Massachusetts corporation (100%) ("Evergreen
      Securities"); (ii) EverQ GmbH (formerly TOPAS 107 V.V. GmbH), a German
      limited liability company (75.1%) ("EverQ"); and (iii) Evergreen Solar
      GmbH, a German limited liability company (100%) (together with EverQ, the
      "German Subsidiaries").

      (e) This Agreement has been duly authorized executed and delivered by the
      Company.

      (f) The Company's authorized, issued and outstanding capital stock
      conforms to the description thereof in the Circular, and all of the issued
      and outstanding shares of capital stock of the Company have been duly
      authorized and validly issued, are fully paid and nonassessable and have
      been issued in compliance with federal and state securities laws. None of
      the outstanding shares of the Company's capital stock was issued in
      violation of any preemptive rights, rights of first refusal or other
      similar rights to subscribe for or purchase securities of the Company.
      There are no authorized or outstanding options, warrants, preemptive
      rights, rights of first refusal or other rights to purchase, or equity or
      debt securities convertible into or exchangeable or exercisable for, any
      capital stock of the Company or any of its subsidiaries other than those
      accurately described in the Circular. The description of the Company's
      stock option, stock bonus and other stock plans or arrangements, and the
      options or other rights granted thereunder, included or incorporated by
      reference in the Circular accurately and fairly present the information
      required to be shown with respect to such plans, arrangements, options and
      rights.

      (g) The Underlying Shares have been duly reserved by the Company for
      issuance. When the Underlying Shares are issued in accordance with the
      terms of the Notes and the Indenture, the Underlying Shares will be duly
      authorized and validly issued and will be fully paid and nonassessable and
      free of any preemptive rights, rights of first refusal or other similar
      rights to subscribe for or purchase securities of the Company.

                                       -3-
<PAGE>

      (h) All the outstanding shares of capital stock or other equity interests
      of each subsidiary of the Company have been duly authorized and validly
      issued, are fully paid and nonassessable and, except to the extent
      described in the Circular, are owned by the Company directly or indirectly
      through one or more wholly-owned subsidiaries (it being expressly
      understood that the Company does not own all of the outstanding shares of
      EverQ), free and clear of any claim, lien, encumbrance, security interest,
      restriction upon voting or transfer or any other claim of any third party.

      (i) Prior to the First Closing Date, the Indenture will have been duly
      authorized by the Company and, on the First Closing Date, will have been
      duly executed and delivered by the Company. When the Indenture has been
      duly executed and delivered by the Company, the Indenture will be the
      valid and binding agreement of the Company, enforceable against the
      Company in accordance with its respective terms except as the
      enforceability thereof may be limited by (i) bankruptcy, insolvency,
      reorganization, moratorium or other laws of general applicability relating
      to or affecting creditors' rights and (ii) equitable principles of general
      applicability. On the First Closing Date, the Indenture will conform in
      all material respects to the requirements of the Trust Indenture Act and
      the rules and regulations of the Commission applicable to an indenture
      that is qualified thereunder. The Registration Rights Agreement has been
      duly and validly authorized by the Company and, when duly executed and
      delivered by the Company (assuming the due authorization, execution and
      delivery by the Initial Purchasers), will constitute a valid and legally
      binding agreement of the Company, enforceable against the Company in
      accordance with its terms except (i) as the enforceability thereof may be
      limited by (A) bankruptcy, insolvency, reorganization, moratorium or other
      laws of general applicability relating to or affecting creditors' rights
      and (B) equitable principles of general applicability and (ii) as the
      enforcement of indemnification and contribution provisions thereof may be
      limited by applicable law.

      (j) Prior to the First Closing Date, the Notes will have been duly
      authorized and, on the First Closing Date, will have been duly executed
      and delivered by the Company. When the Notes have been validly issued, and
      duly executed and authenticated by the Trustee, in accordance with the
      provisions of the Indenture and delivered to and paid for by the Initial
      Purchasers in accordance with this Agreement, the Notes will be entitled
      to the benefits of the Indenture and will be valid and binding obligations
      of the Company, enforceable in accordance with their terms except as the
      enforceability thereof may be limited by (i) bankruptcy, insolvency,
      reorganization, moratorium or other laws of general applicability relating
      to or affecting creditors' rights and (ii) equitable principles of general
      applicability.

      (k) The execution, delivery and performance of this Agreement, the
      Indenture, the Registration Rights Agreement and the Notes by the Company
      and the consummation of the transactions contemplated hereby and thereby
      will not conflict with or result in a breach or violation of any of the
      terms or provisions of, or constitute a default under, any indenture,
      mortgage, deed of trust, loan agreement or other material agreement or
      instrument to which the Company or any of its subsidiaries is a party or
      by which the Company or any of its subsidiaries is bound or to which any
      of the property or assets of the Company or any of its subsidiaries is
      subject, nor will such actions result in any violation of the provisions
      of the charter or bylaws of the Company or any of its subsidiaries or any
      statute or any order, rule

                                       -4-
<PAGE>

      or regulation of any court or governmental agency or body having
      jurisdiction over the Company or any of its subsidiaries or any of their
      properties or assets.

      (l) No consent, approval, authorization or order of, or filing or
      registration with, any court or governmental or regulatory agency or body
      is required for the execution, delivery and performance by the Company of
      this Agreement, the Indenture, the Registration Rights Agreement or the
      Notes and the consummation by the Company of the transactions contemplated
      hereby and thereby, except (i) as may be required in connection with the
      transactions contemplated by the Registration Rights Agreement, including
      the registration of the Notes and the Underlying Shares under the
      Securities Act and the qualification of the Indenture under the Trust
      Indenture Act, (ii) for the approval of the Underlying Shares for
      quotation on the Nasdaq National Market and (iii) such filings as may be
      required under state securities or Blue Sky laws in connection with the
      purchase and distribution of the Notes by the Initial Purchasers.

      (m) PricewaterhouseCoopers LLP, who have expressed their opinions on the
      audited financial statements included or incorporated by reference in the
      Offering Circular and on the Company's internal control over financial
      reporting, are independent registered public accountants with respect to
      the Company and its subsidiaries as required by the Securities Act and the
      Rules and Regulations, including Rule 2-01 of Regulation S-X of the Rules
      and Regulations.

      (n) The financial statements, together with the related notes, included or
      incorporated by reference in the Offering Circular present fairly the
      financial position and the results of operations and changes in financial
      position of the Company and its consolidated subsidiaries at the
      respective dates or for the respective periods therein specified. Such
      statements and related notes have been prepared in accordance with United
      States generally accepted accounting principles applied on a consistent
      basis except as may be set forth in the Offering Circular. The financial
      statements, together with the related notes, included in the Offering
      Circular comply in all material respects with the Securities Act and the
      Rules and Regulations. No other financial statements or exhibits and no
      supporting schedules are required by the Securities Act or the Rules and
      Regulations to be included in the Offering Circular.

      (o) Neither the Company nor any of its subsidiaries has sustained, since
      the date of the latest audited financial statements included or
      incorporated by reference in the Offering Circular, any material loss or
      interference with its business from fire, explosion, flood or other
      calamity, whether or not covered by insurance, or from any labor dispute
      or court or governmental action, order or decree, otherwise than as
      described in or contemplated by the Offering Circular; and, since such
      date, there has not been any change in the capital stock (other than upon
      the issuance of shares pursuant to the Company's stock option and
      incentive plan or employee stock purchase plan as in existence on the date
      hereof or pursuant to its currently outstanding options, warrants or
      rights, in each case as described in the Offering Circular, all of which
      issuances have been or will be made in compliance with the Securities Act
      and the Rules and Regulations) or long-term debt of the Company or any of
      its subsidiaries or any material adverse change, or any development
      involving a prospective

                                       -5-
<PAGE>

      material adverse change, in or affecting the business, general affairs,
      management, financial position, stockholders' equity or results of
      operations of the Company and its subsidiaries taken as a whole, otherwise
      than as set forth or contemplated in the Offering Circular.

      (p) Except as described in the Offering Circular, there is no legal or
      governmental proceeding pending to which the Company or any of its
      subsidiaries is a party or of which any property or assets of the Company
      or any of its subsidiaries is the subject that, singularly or in the
      aggregate, if determined adversely to the Company or any of its
      subsidiaries, would have a Material Adverse Effect or prevent or adversely
      affect the ability of the Company to perform its obligations under this
      Agreement; and to the Company's knowledge, no such proceedings are
      threatened or contemplated by governmental authorities or threatened by
      others.

      (q) Neither the Company nor any of its subsidiaries (i) is in violation of
      its charter or bylaws (or similar organizational documents), (ii) is in
      default in any respect, and no event has occurred that, with notice or
      lapse of time or both, would constitute such a default, in the due
      performance or observance of any term, covenant or condition contained in
      any indenture, mortgage, deed of trust, loan agreement or other agreement
      or instrument to which it is a party or by which it is bound or to which
      any of its property or assets is subject or (iii) is in violation in any
      respect of any law, ordinance, governmental rule, regulation or court
      decree to which it or its property or assets may be subject, except, in
      the case of clauses (ii) and (iii) above, any violations or defaults that,
      singularly or in the aggregate, would not have a Material Adverse Effect.

      (r) The Company and each of its subsidiaries possess all licenses,
      certificates, authorizations and permits issued by, and have made all
      declarations and filings with, the appropriate state, federal or foreign
      regulatory agencies or bodies that are necessary for the ownership of
      their respective properties or the conduct of their respective businesses
      as described in the Offering Circular except where any failures to possess
      or make the same, singularly or in the aggregate, would not have a
      Material Adverse Effect, and the Company has not received written
      notification or, to its knowledge, other notification of any revocation or
      modification of any such license, authorization or permit, except where
      such revocation or modification or lack of renewal would not, singularly
      or in the aggregate, have a Material Adverse Effect.

      (s) The Company is not and, after giving effect to the issuance and sale
      of the Notes and the receipt and application of the proceeds thereof as
      described in the Offering Circular, will not be an "investment company" or
      entity controlled by an "investment company" within the meaning of the
      Investment Company Act of 1940, as amended (the "Investment Company Act"),
      and the rules and regulations of the Commission thereunder.

      (t) The Company and its subsidiaries own or possess the right to use all
      patents, trademarks, trademark registrations, service marks, service mark
      registrations, trade names, copyrights, licenses, inventions, know-how,
      trade secrets and rights (collectively, "Intellectual Property") described
      in the Offering Circular as being owned or licensed by them for the
      conduct of their respective businesses, and the Company has not received

                                       -6-
<PAGE>

      written or, to its knowledge, other notice of any claim to the contrary or
      any challenge by any other person to the rights of the Company and its
      subsidiaries with respect to the foregoing. Except as described in the
      Offering Circular, (i) to the Company's knowledge, the conduct of the
      Company's business does not and will not infringe or conflict with any
      Intellectual Property or franchise right of any person and (ii) no written
      or, to the Company's knowledge, other claim has been made against the
      Company alleging the infringement by the Company or any of its licensees
      or other third parties of any Intellectual Property or franchise right of
      any person, except for such as would not have a Material Adverse Effect.
      Each employee of and consultant to the Company and its subsidiaries has
      entered into a confidentiality and invention assignment agreement in favor
      of the Company or its applicable subsidiary as a condition of the
      employment or retention of services of such employee or consultant, except
      where failure to enter into such an agreement would not have a Material
      Adverse Effect. Except for matters relating to third parties expressly
      identified and named in the Offering Circular: (A) to the Company's
      knowledge, there are no rights of third parties to any Intellectual
      Property owned by or licensed to the Company or any of its subsidiaries
      that conflict with the rights of the Company or its subsidiaries related
      to such Intellectual Property, except for any such rights that, singularly
      or in the aggregate, would not have a Material Adverse Effect; (B) to the
      Company's knowledge, there is no infringement by third parties of any
      Intellectual Property owned by or licensed to the Company or its
      subsidiaries that would have a Material Adverse Effect; (C) other than in
      connection with assertions or inquiries made by patent office examiners in
      the ordinary course of the prosecution of the patent applications of the
      Company or its subsidiaries, there is no pending or, to the Company's
      knowledge, threatened action, suit, proceeding or other claim by others
      challenging the rights of the Company or any of its subsidiaries in or to,
      or the validity or scope of, any Intellectual Property owned by or
      licensed to the Company or its subsidiaries, except for any such claim
      that would not have a Material Adverse Effect, and, to the Company's
      knowledge, there are no facts that would form a reasonable basis for any
      such claim; (D) there is no pending or, to the Company's knowledge,
      threatened action, suit, proceeding or other claim by others that the
      Company or any of its subsidiaries, or any of their respective licensees,
      infringes or otherwise violates, or would infringe or otherwise violate
      upon commercialization of its products and product candidates described in
      the Offering Circular, any patent, trademark, copyright, trade secret or
      other proprietary rights of others, and there are no facts that would form
      a reasonable basis for any such claim by others that the Company or any of
      its subsidiaries, or any of their respective licensees, infringes or
      otherwise violates, or would infringe or otherwise violate upon
      commercialization of its products and product candidates described in the
      Offering Circular, any Intellectual Property of others, except, in each
      case in this clause (D), for any such claims that would not have a
      Material Adverse Effect; and (E) to the Company's knowledge, there is no
      patent or patent application that contains claims that conflict with any
      Intellectual Property described in the Offering Circular as being owned by
      or licensed to the Company or any of its subsidiaries or that is necessary
      for the conduct of their respective businesses as currently or
      contemplated to be conducted, except for such as would not have a Material
      Adverse Effect.

      (u) The Company and each of its subsidiaries have good and marketable
      title in fee simple to, or have valid rights to lease or otherwise use,
      all items of real or personal property that are material to the business
      of the Company and its subsidiaries taken as a whole, in each

                                       -7-
<PAGE>

      case free and clear of all liens, encumbrances, claims and defects, except
      as described in the Offering Circular or for those that would not result
      in a Material Adverse Effect.

      (v) No labor disturbance by the employees of the Company or any of its
      subsidiaries exists or, to the Company's knowledge, is threatened that
      would reasonably be expected to have a Material Adverse Effect. To the
      Company's knowledge, no key employee or significant group of employees of
      the Company or any subsidiary plans to terminate employment with the
      Company or any such subsidiary.

      (w) No "prohibited transaction" (as defined in Section 406 of the Employee
      Retirement Income Security Act of 1974, as amended, including the
      regulations and published interpretations thereunder ("ERISA"), or Section
      4975 of the Internal Revenue Code of 1986, as amended from time to time
      (the "Code"), and not otherwise exempt from treatment as a "prohibited
      transaction") or "accumulated funding deficiency" (as defined in Section
      302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA
      (other than events with respect to which the 30-day notice requirement
      under Section 4043 of ERISA has been waived) has occurred with respect to
      any employee benefit plan that could have a Material Adverse Effect; each
      employee benefit plan is in compliance in all material respects with
      applicable law, including ERISA and the Code; the Company has not incurred
      and does not expect to incur liability under Title IV of ERISA with
      respect to the termination of, or withdrawal from, any "pension plan"; and
      each "pension plan" (as defined in ERISA) for which the Company would have
      any liability that is intended to be qualified under Section 401(a) of the
      Code is so qualified in all material respects and nothing has occurred,
      whether by action or by failure to act, that could cause the loss of such
      qualification.

      (x) Neither the Company nor any of its subsidiaries is in violation of any
      foreign, federal, state or local rules, laws or regulations relating to
      the use, treatment, storage and disposal of toxic substances and the
      protection of health or the environment ("Environmental Laws") that are
      applicable to its business, except for any such violations that would not,
      singularly or in the aggregate, have a Material Adverse Effect; neither
      the Company nor any of its subsidiaries has received any written or, to
      their knowledge, other notice from any governmental authority or third
      party of an asserted claim under Environmental Laws; each of the Company
      and its subsidiaries has received all permits, licenses or other approvals
      required of it under applicable Environmental Laws to conduct its business
      and is in compliance with all terms and conditions of any such permit,
      license or approval, except for the lack of such permits, licenses or
      approvals or for such non-compliance as would not, singularly or in the
      aggregate, have a Material Adverse Effect; and to the Company's knowledge,
      there is no claim, action or cause of action filed with a court or
      governmental authority, no investigation with respect to which the Company
      or any of its subsidiaries has received notice and no notice by any other
      person or entity alleging potential liability for investigatory costs,
      cleanup costs, governmental response costs, natural resources damages,
      property damages, personal injuries, attorneys' fees or penalties arising
      out of, based on or resulting from the storage, generation,
      transportation, handling, treatment, disposal, discharge, emission or
      other release of any kind of toxic or other wastes or other hazardous
      substances by, due to or caused by the Company or any of its subsidiaries
      (or any other entity for whose acts or omissions the Company or any of its
      subsidiaries is or may be liable) upon

                                       -8-
<PAGE>

      any of the property now or previously owned or leased by the Company or
      any of its subsidiaries in violation of any statute or any ordinance,
      rule, regulation, order, judgment, decree or permit that would, under any
      Environmental Law, give rise to any liability, except for any violation or
      liability that would not have, singularly or in the aggregate with all
      such violations and liabilities, a Material Adverse Effect.

      (y) The Company has reviewed the effect of Environmental Laws on the
      business, operations and properties of the Company and its subsidiaries,
      during which the Company identified and evaluated associated costs and
      liabilities (including, without limitation, any capital or operating
      expenditures required for clean-up, closure of properties or compliance
      with Environmental Laws, or any permit, license or approval, any related
      constraints on operating activities and any potential liabilities to third
      parties); and on the basis of such review, the Company has reasonably
      concluded that such associated costs and liabilities would not, singly or
      in the aggregate, have a Material Adverse Effect.

      (z) Each of the Company and its subsidiaries (i) has filed all necessary
      federal, state and foreign income and franchise tax returns that are
      required to be filed through the date hereof, (ii) has paid all federal,
      state, local and foreign taxes due and payable for which it is liable
      through the date hereof and (iii) does not have any tax deficiency or
      claims outstanding or assessed or, to the Company's knowledge, proposed
      against it other than those filings, payments or deficiencies that would
      not, singularly or in the aggregate, have a Material Adverse Effect.

      (aa) To the Company's knowledge, the operations of the Company and its
      subsidiaries are and have been conducted at all times in compliance with
      applicable financial recordkeeping and reporting requirements of the
      Currency and Foreign Transactions Reporting Act of 1970, as amended, the
      money laundering statutes of all jurisdictions, the rules and regulations
      thereunder and any related or similar rules, regulations or guidelines,
      issued, administered or enforced by any governmental agency (collectively,
      the "Money Laundering Laws"), except for any such non-compliance as would
      not, singularly or in the aggregate, have a Material Adverse Effect, and
      no action, suit or proceeding by or before any court or governmental
      agency, authority or body or any arbitrator involving the Company or any
      of it subsidiaries with respect to the Money Laundering Laws is pending
      or, to the Company's knowledge, threatened.

      (bb) Neither the Company nor any of its subsidiaries nor, to the Company's
      knowledge, any director, officer, agent, employee or affiliate of the
      Company or any of its subsidiaries is currently subject to any United
      States sanctions administered by the Office of Foreign Assets Control of
      the United States Treasury Department; and the Company will not directly
      or indirectly use the proceeds of the offering of the Notes, or lend,
      contribute or otherwise make available such proceeds to any subsidiary,
      joint venture partner or other person or entity, for the purpose of
      financing the activities of any person currently subject to any United
      States sanctions administered by such office.

                                       -9-
<PAGE>

      (cc) The Company and each of its subsidiaries carry, or are covered by,
      insurance in such amounts and covering such losses and risks as is prudent
      and customary in the businesses in which they are engaged.

      (dd) The Company and each of its subsidiaries maintains a system of
      internal accounting controls sufficient to provide reasonable assurances
      that (i) transactions are executed in accordance with management's general
      or specific authorizations, (ii) transactions are recorded as necessary to
      permit preparation of financial statements in conformity with United
      States generally accepted accounting principles and to maintain
      accountability for assets, (iii) access to assets is permitted only in
      accordance with management's general or specific authorization and (iv)
      the recorded accountability for assets is compared with existing assets at
      reasonable intervals and appropriate action is taken with respect to any
      differences.

      (ee) All descriptions of any franchises, leases, contracts, agreements or
      documents contained in the Offering Circular are accurate and complete
      descriptions of such documents in all material respects. Other than as
      described in the Offering Circular, no such franchise, lease, contract or
      agreement has been suspended or terminated for convenience or default by
      the Company or, to the knowledge of the Company, any of the other parties
      thereto, and the Company has not received written or, to its knowledge,
      other notice of any such pending or threatened suspension or termination,
      except for such pending or threatened suspensions or terminations that
      would not reasonably be expected to, singularly or in the aggregate, have
      a Material Adverse Effect.

      (ff) No relationship, direct or indirect, exists between or among the
      Company, on the one hand, and the directors, officers, stockholders,
      customers or suppliers of the Company, on the other hand, that is required
      to be described in the Offering Circular and that is not so described.

      (gg) No person or entity has the right to require registration of shares
      of Common Stock or other securities of the Company because of the filing
      or effectiveness of a registration statement with the Commission
      registering the Notes or the Underlying Shares or otherwise in connection
      with the offering and sale of the Notes as contemplated by the Offering
      Circular, except for persons and entities who have expressly waived such
      right or who have been given timely and proper notice and have failed to
      exercise such right within the time or times required under the terms and
      conditions of such right or whose right to incidental registration are
      solely dependent on the inclusion of any such shares in such registration
      by persons or entities who have waived such rights and except as otherwise
      set forth in the Offering Circular.

      (hh) Neither the Company nor any of its subsidiaries is a party to any
      contract, agreement or understanding with any person that would give rise
      to a valid claim against the Company or the Initial Purchasers for a
      brokerage commission, finder's fee or like payment in connection with the
      offering and sale of the Notes as contemplated by the Offering Circular.

                                      -10-
<PAGE>

      (ii) No forward-looking statement (within the meaning of Section 27A of
      the Securities Act and Section 21E of the Exchange Act) contained in the
      Offering Circular has been made or reaffirmed without a reasonable basis
      or has been disclosed other than in good faith.

      (jj) Neither the Company nor any of its affiliates has, directly or
      through any agent, sold, offered for sale, solicited offers to buy or
      otherwise negotiated in respect of, any security (as such term is defined
      in the Securities Act) that is or will be integrated with the sale of the
      Notes in a manner that would require registration of the Notes under the
      Securities Act.

      (kk) When the Notes are issued and delivered pursuant to this Agreement,
      the Notes will not be of the same class (within the meaning of Rule 144A
      of the Rules and Regulations ("Rule 144A")) as any security of the Company
      that is listed on a national securities exchange registered under Section
      6 of the Exchange Act or that is quoted in a United States automated
      inter-dealer quotation system.

      (ll) No form of general solicitation or general advertising (within the
      meaning of Regulation D of the Rules and Regulations ("Regulation D")) or
      in any manner involving a public offering within the meaning of Section
      4(2) of the Securities Act was used by the Company or any of its
      representatives or affiliates (as defined in Rule 501(b) of Regulation D)
      in connection with the offer and sale of the Notes contemplated hereby,
      except that no representation or warranty is given with respect to the
      Initial Purchasers. No securities of the same class as the Notes have been
      issued and sold by the Company within the six-month period immediately
      prior to the date hereof, other than the Notes offered or sold to the
      Initial Purchasers hereunder. The Company has not distributed and any
      offering material in connection with the offering and sale of the Notes
      other than the Circular.

      (mm) Neither the Company nor any of the Company's subsidiaries or
      affiliates has taken, directly or indirectly, any action designed to, or
      that might reasonably be expected to, cause or result in stabilization or
      manipulation of the price of any security of the Company in connection
      with the offer or sale of the Notes.

      (nn) The Company is in compliance with all applicable provisions of the
      Sarbanes-Oxley Act of 2002 and all rules and regulations promulgated
      thereunder or implementing the provisions thereof (collectively, the
      "Sarbanes-Oxley Act") that are currently in effect and is actively taking
      steps to ensure that it will be in compliance with other applicable
      provisions of the Sarbanes-Oxley Act not currently in effect upon and at
      all times after the effectiveness of such provisions.

      (oo) The Company is in compliance with all applicable corporate governance
      requirements set forth in the Nasdaq Marketplace Rules that are currently
      in effect and is actively taking steps to ensure that it will be in
      compliance with other applicable corporate governance requirements set
      forth in the Nasdaq Marketplace Rules not currently in effect upon and at
      all times after the effectiveness of such requirements.

      (pp) Neither the Company nor any of its subsidiaries nor, to the Company's
      knowledge, any employee or agent of the Company or any subsidiary, has
      made any contribution or other

                                      -11-
<PAGE>

      payment to any official of, or candidate for, any federal, state or
      foreign office in violation of any law or of the character required to be
      disclosed in the Circular.

      (qq) There are no transactions, arrangements or other relationships
      between or among the Company or, to its knowledge, any of its affiliates
      (as such term is defined in Rule 405 of the Rules and Regulations), on the
      one hand, and any unconsolidated entity, on the other hand, including,
      without limitation, any structured finance, special purpose or limited
      purpose entity that could reasonably be expected to materially affect the
      Company's liquidity or the availability of or requirements for its capital
      resources required to be described in the Offering Circular that have not
      been described as required.

3.    PURCHASE SALE AND DELIVERY OF NOTES.

      (a) On the basis of the representations, warranties and agreements herein
      contained, but subject to the terms and conditions herein set forth, the
      Company agrees to sell to each Initial Purchaser, and each Initial
      Purchaser agrees, severally and not jointly, to purchase from the Company,
      at a purchase price of 97% of the principal amount thereof, plus accrued
      interest, if any, from June 29, 2005 to the First Closing Date (if the
      First Closing Date occurs after June 29, 2005), the principal amount of
      the Notes set forth opposite the name of such Initial Purchaser in
      Schedule A hereto.

            The Company will deliver the Firm Notes to the Representative for
      the respective accounts of the several Initial Purchasers in the form of
      one or more definitive global Notes by book-entry form that will be
      deposited by or on behalf of the Company with The Depository Trust Company
      ("DTC") or its designated custodian for the account of the Initial
      Purchasers as the Representative may direct by notice in writing to the
      Company given at or prior to 12:00 Noon, New York time, on the second full
      business day preceding the First Closing Date (as defined below) against
      payment of the aggregate purchase price to be paid for the Firm Notes by
      wire transfer or transfers in immediately available funds to an account
      designated by the Company and reasonably acceptable to the Representative,
      payable to the order of the Company, all at the offices of Wilson Sonsini
      Goodrich & Rosati, counsel for the Company, 12 East 49th Street, New York,
      New York. Time shall be of the essence, and delivery at the time and place
      specified pursuant to this Agreement is a further condition of the
      obligations of each Initial Purchaser hereunder. The time and date of the
      delivery and closing shall be at 10:00 A.M., New York time, on June 29,
      2005. The time and date of such payment and delivery are herein referred
      to as the "First Closing Date." The First Closing Date and the location of
      delivery of, and the form of payment for, the Firm Notes may be varied by
      agreement between the Company and Representative.

            The Company shall make the certificates for the Firm Notes available
      to the Representative for examination on behalf of the Underwriters in New
      York, New York at least twenty-four hours prior to the First Closing Date.

      (b) The Initial Purchasers have advised the Company that they propose to
      offer the Notes for resale upon the terms and subject to the conditions
      set forth herein and in the Circular. Each Initial Purchaser, severally
      and not jointly, represents and warrants to, and agrees with,

                                      -12-
<PAGE>

      the Company that (i) it is purchasing the Notes pursuant to a private sale
      exempt from registration under the Securities Act, (ii) it has not
      solicited offers for, or offered or sold, and will not solicit offers for,
      or offer or sell, the Notes by means of any form of general solicitation
      or general advertising within the meaning of Rule 502(c) of Regulation D
      or in any manner involving a public offering within the meaning of Section
      4(2) of the Securities Act, (iii) it has solicited and will solicit offers
      for the Notes only from, and has offered or sold and will offer, sell or
      deliver the Notes, as part of its initial offering, only to persons whom
      it reasonably believes to be qualified institutional buyers within the
      meaning of Rule 144A or, if any such person is buying for one or more
      institutional accounts for which such person is acting as fiduciary or
      agent, only when such person has represented to it that each such account
      is such a qualified institutional buyer to whom notice has been given that
      such sale or delivery is being made in reliance on Rule 144A and in each
      case, in transactions in accordance with Rule 144A and (iv) it is an
      accredited investor as defined under Rule 501(a)(1) under the Securities
      Act. Each Initial Purchaser, severally and not jointly, agrees, with
      respect to any resale of the Notes, other than through The PORTAL Market,
      to deliver either with the confirmation of such resale or otherwise prior
      to settlement of such resale a notice to the effect that such resale has
      been made in reliance upon the exemption from the registration
      requirements of the Securities Act afforded by Rule 144A.

      (c) The Company acknowledges and agrees that the Initial Purchasers may
      sell Notes to any affiliate of an Initial Purchaser and that any such
      affiliate may sell Notes purchased by it to an Initial Purchaser.

4.    FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the several
Initial Purchasers that:

      (a) Prior to the expiration of nine months after the date of the Offering
      Circular, to advise the Initial Purchasers promptly and, if requested,
      confirm such advice in writing, of the happening of any event that makes
      any statement of a material fact made in the Offering Circular untrue or
      requires the making of any additions to or changes in the Offering
      Circular (as amended or supplemented from time to time) in order to make
      the statements therein, in the light of the circumstances under which they
      were made, not misleading; to advise the Initial Purchasers promptly of
      any order preventing or suspending the use of the Preliminary Offering
      Circular or the Offering Circular, of any suspension of the qualification
      of the Notes under any state securities or Blue Sky laws for offering or
      sale in any jurisdiction and of the initiation or threatening of any
      proceeding for any such purpose; and to use its reasonable best efforts to
      prevent the issuance of any such order preventing or suspending the use of
      the Preliminary Offering Circular or the Offering Circular or suspending
      any such qualification and, if any such suspension is issued, to obtain
      the lifting thereof at the earliest possible time.

      (b) If, at any time prior to the earlier of (i) the completion of the
      resale of the Notes by the Initial Purchasers and (ii) the date that is
      nine months after the date of the Offering Circular, any event shall occur
      or condition exist as a result of which it is necessary, in the opinion of
      counsel for the Initial Purchasers or counsel for the Company, to amend or
      supplement the Offering Circular so that the Offering Circular will not
      include any untrue statement of a material fact or omit to state a
      material fact necessary in order to make the

                                      -13-
<PAGE>

      statements therein, in the light of the circumstances existing at the time
      it is delivered to a purchaser, not misleading, or if it is necessary to
      amend or supplement the Offering Circular to comply with applicable law,
      to promptly prepare such amendment or supplement as may be necessary to
      correct such untrue statement or omission or so that the Offering
      Circular, as so amended or supplemented, will comply with applicable law.

      (c) To use reasonable best efforts to file promptly all reports and any
      definitive proxy or information statements required to be filed by the
      Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
      of the Exchange Act subsequent to the date of the Circular and for so long
      as the Notes are outstanding during the period of two years after the
      final Closing Date.

      (d) To deliver promptly to the Representative in New York City such number
      of the following documents as the Representative shall reasonably request:
      (i) each Preliminary Offering Circular, (ii) the Offering Circular (not
      later than 10:00 A.M., New York time, of the second business day following
      the execution and delivery of this Agreement) and any amended or
      supplemented Circular (not later than 10:00 A.M., New York time, on the
      business day following the date of such amendment or supplement) and (iii)
      any document incorporated by reference in the Offering Circular (excluding
      exhibits thereto).

      (e) Prior to making any amendment or supplement to the Offering Circular
      at any time prior to the earlier of (i) the completion of the resale of
      the Notes by the Initial Purchasers and (ii) the date that is nine months
      after the date of the Offering Circular, to furnish a copy thereof to each
      of the Initial Purchasers and counsel for the Initial Purchasers and not
      to effect any such amendment or supplement to which the Initial Purchasers
      shall reasonably and promptly object by notice to the Company after a
      reasonable period to review.

      (f) To make generally available to its stockholders as soon as
      practicable, but in any event not later than eighteen months after the
      date hereof, an earnings statement of the Company and its subsidiaries
      (which need not be audited) complying with Rule 158 of the Rules and
      Regulations.

      (g) The Company will promptly take from time to time such actions as the
      Representative may reasonably request to qualify the Notes for offering
      and sale under state securities or Blue Sky laws of such jurisdictions
      within the United States as the Representative may designate and to
      continue such qualifications in effect for so long as required for the
      distribution of the Notes; provided that the Company and its subsidiaries
      shall not be obligated to qualify as foreign corporations in any
      jurisdiction in which they are not so qualified, to file a general consent
      to service of process in any jurisdiction or to subject itself to taxation
      in any jurisdiction in which it is otherwise not so subject.

      (h) During the period of three years from the date hereof, but only to the
      extent not available on the Commission's website, the Company will deliver
      to the Representative and, upon reasonable request, to each of the other
      Initial Purchasers, promptly after they are available, copies of (i) all
      reports or other communications furnished to stockholders generally and
      (ii) all reports and financial statements furnished or filed with the
      Commission

                                      -14-
<PAGE>

      pursuant to the Exchange Act or any national securities exchange or
      automatic quotation system on which the Common Stock is listed or quoted.

      (i) For so long as the Notes are outstanding and are "restricted
      securities" within the meaning of Rule 144(a)(3) of the Rules and
      Regulations, to furnish to holders of the Notes and prospective purchasers
      of the Notes designated by such holders, upon request of such holders or
      such prospective purchasers, the information required to be delivered
      pursuant to paragraph (d)(4) of Rule 144A, unless the Company is then
      subject to and in compliance with Section 13 or 15(d) of the Exchange Act.

      (j) The Company will not directly or indirectly offer, sell, assign,
      transfer, pledge or contract to sell, or otherwise dispose of, any shares
      of or securities convertible into or exercisable or exchangeable for
      Common Stock, or announce the offering of or file any registration
      statement under the Securities Act in respect of, any shares of or
      securities convertible into or exercisable or exchangeable for shares of
      Common Stock, in each case for a period of 90 days from the date of the
      Offering Circular without the prior written consent of the Representative,
      other than the Company's sale of the Notes hereunder and the issuance of
      shares of Common Stock pursuant to the Company's stock option and
      incentive plan or employee stock purchase plan as in existence on the date
      hereof (as such plans may be modified to increase the number of shares of
      Common Stock available for grant thereunder as described in the Offering
      Circular) or pursuant to its currently outstanding options, warrants or
      rights, in each case as described in the Offering Circular, all of which
      issuances will be made in compliance with the Securities Act and the Rules
      and Regulations; provided, however, that if (A) the Company issues an
      earnings release or material news or a material event relating to the
      Company occurs during the last 17 days of such 90-day period or (B) prior
      to the expiration of such 90-day period, the Company announces that it
      will release earnings results during the 16-day period beginning on the
      last day of such 90-day period, the restrictions imposed by this Section
      4(j) shall continue to apply until the expiration of the 18-day period
      beginning on the issuance of such earnings release or the occurrence of
      such material news or material event.

      (k) The Company will cause each of its officers, directors and
      stockholders listed in Schedule B to furnish to the Representative, prior
      to the First Closing Date, a letter, substantially in the form of Exhibit
      I hereto. The Company agrees that, upon any determination by the Company
      that the restrictions imposed by any such letter so furnished by any of
      such officers, directors or stockholders will not apply to such number of
      shares of Common Stock as is specified in a notice to such officer,
      director or stockholder, as provided in such letter during the 60-day
      period beginning 31 days after the date of the Offering Circular, the
      Company will promptly provide written notice of such determination,
      including the number of such shares as to which such restrictions will not
      be applicable, to the Representative. The Company agrees that the total
      number of shares of Common Stock as to which the restrictions imposed by
      all of the letters so furnished by such officers, directors and directors
      will not be applicable shall not exceed, during the 30-day period
      beginning 31 days after the date of the Offering Circular, an aggregate of
      500,000 shares of Common Stock or, during the 60-day period beginning 31
      days after the date of the Offering Circular, an aggregate of 1,000,000
      shares of Common Stock, provided that no more than 250,000 of

                                      -15-
<PAGE>

      such shares may be sold by all of such officers, directors and
      stockholders in the aggregate during any period of five consecutive
      trading days.

      (l) To assist the Initial Purchasers in arranging for the Notes to be
      designated Private Offerings, Resales and Trading through Automated
      Linkages ("PORTAL") Market securities in accordance with the rules and
      regulations adopted by the National Association of Securities Dealers,
      Inc. (the "NASD") for The PORTAL Market and for the Notes to be eligible
      for clearance and settlement through DTC.

      (m) Not to, and to cause its subsidiaries and use its reasonable efforts
      to cause its other affiliates not to, sell, offer for sale or solicit
      offers to buy or otherwise negotiate in respect of any security (as such
      term is defined in the Securities Act) that could be integrated with the
      sale of the Notes in a manner that would require registration of the Notes
      under the Securities Act.

      (n) Not to, and to cause its subsidiaries and use its reasonable efforts
      to cause its other affiliates not to, and not to authorize or knowingly
      permit any person acting on their behalf to, solicit any offer to buy or
      offer to sell the Notes by means of any form of general solicitation or
      general advertising within the meaning of Regulation D or in any manner
      involving a public offering within the meaning of Section 4(2) of the
      Securities Act; and not to offer, sell, contract to sell or otherwise
      dispose of, directly or indirectly, any securities under circumstances
      where such offer, sale, contract or disposition would cause the exemption
      afforded by Section 4(2) of the Securities Act to cease to be applicable
      to the offering and sale of the Notes as contemplated by this Agreement
      and the Offering Circular.

      (o) During the period from the First Closing Date until two years after
      the final Closing Date, without the prior written consent of the Initial
      Purchasers, not to, and to cause its subsidiaries and use its reasonable
      efforts to cause its other affiliates (as defined in Rule 144 of the Rules
      and Regulations) not to, resell any of the Notes that have been reacquired
      by them for so long as the Notes are "restricted securities" within the
      meaning of Rule 144(a)(3) of the Rules and Regulations, except for Notes
      purchased by the Company or any of its subsidiaries and resold in a
      transaction registered under the Securities Act.

      (p) Prior to each of the Closing Dates, the Company will furnish to the
      Representative, as soon as they have been prepared, copies of any
      unaudited interim consolidated financial statements of the Company for any
      periods subsequent to the periods covered by the financial statements
      included or incorporated by reference in the Offering Circular.

      (q) Prior to each of the Closing Dates, the Company will not issue any
      press release or other communication directly or indirectly or hold any
      press conference with respect to the Company, its condition, financial or
      otherwise, or earnings, business affairs or business prospects (except for
      routine marketing communications in the ordinary course of business and
      consistent with the past practices of the Company and of which the
      Representative is notified), without the prior written consent of the
      Representative, unless in the judgment of the Company and its counsel, and
      after notification to the Representative, such press release or
      communication is required by law.

                                      -16-
<PAGE>

      (r) In connection with the offering of the Notes, until the Representative
      shall have notified the Company of the completion of the resale of the
      Notes, the Company will not, and will use reasonable efforts to cause its
      affiliated purchasers (as defined in Regulation M under the Exchange Act)
      not to, either alone or with one or more other persons, bid for or
      purchase, for any account in which it or any of its affiliated purchasers
      has a beneficial interest, any Notes, or attempt to induce any person to
      purchase any Notes; and the Company will not, and will use reasonable
      efforts to cause its affiliated purchasers not to, make bids or purchase
      for the purpose of creating actual, or apparent, active trading in or of
      raising the price of the Notes; provided, however, that if requested in
      writing by the Company, the Representative will confirm whether or not the
      resale of the Notes by the Representatives is complete.

      (s) Not to, and to cause its subsidiaries and use its reasonable efforts
      to cause its other affiliates not to, take, directly or indirectly, any
      action intended to result in manipulation of the price of any security of
      the Company to facilitate the sale or resale of the Notes.

      (t) The Company will use its reasonable efforts to obtain approval of the
      Underlying Shares for quotation on the Nasdaq National Market in
      accordance with the requirements of the Nasdaq National Market's
      requirements.

      (u) The Company will not, for so long as the Notes are outstanding and are
      "restricted securities" within the meaning of Rule 144(a)(3) of the Rules
      and Regulations, be or become, or be or become owned by, an open-end
      investment company, unit investment trust or face-amount certificate
      company that is or is required to be registered under Section 8 of the
      Investment Company Act, and will not be or become, or be or become owned
      by, a closed-end investment company required to be registered, but not
      registered thereunder.

      (v) The Company shall at all times continue to comply, in all material
      respects, with all applicable provisions of the Sarbanes-Oxley Act in
      effect from time to time.

      (w) The Company will apply the net proceeds from the sale of the Notes as
      set forth in the Offering Circular under the heading "Use of Proceeds."

5.    PAYMENT OF EXPENSES. The Company agrees with the Initial Purchasers to pay
(a) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Notes and any taxes payable in that connection; (b) the costs
incident to the preparation, printing and distribution of the Preliminary
Offering Circular and the Offering Circular, any amendments, supplements and
exhibits thereto or any document incorporated by reference therein, this
Agreement, the Indenture and the Registration Rights Agreement; (c) all expenses
incurred in connection with the acceptance of the Notes for The PORTAL Market
and eligibility for clearance and settlement through DTC; (d) the reasonable
fees and expenses (including any related and documented fees and expenses of
counsel for the Initial Purchasers) incurred in connection with filings, if any,
under Conduct Rules 2710 or 2720 of the NASD; (e) any applicable listing or
other fees; (f) the reasonable fees and expenses of qualifying the Notes under
the securities laws of the several jurisdictions as provided in Section 4(g)
hereof and of preparing, printing and distributing Blue Sky Memoranda and Legal
Investment Surveys (including related and documented fees and expenses of
counsel for the Initial Purchasers

                                      -17-
<PAGE>

not to exceed $5,000); (g) all fees and expenses of the Trustee or any agent
thereof; (h) any fees charged by securities rating services for rating the
Notes; (i) the costs and expenses relating to investor presentations on any
"road show" undertaken in connection with the marketing of the offering of the
Notes or related communications to investors (including the reasonable costs and
expenses of the Initial Purchasers), including, without limitation, expenses
associated with the production of presentation slides and graphics, fees and
expenses of any consultants engaged by the Company in connection with such
presentations or communications with the prior approval of the Company, travel
and lodging expenses of representatives and officers of the Company, the Initial
Purchasers and any such consultants and the cost of any aircraft chartered with
the Company's prior approval in connection with such road show; and (j) all
other costs and expenses incident to the performance of the obligations of the
Company under this Agreement (including, without limitation, the fees and
expenses of the Company's counsel and the Company's independent accountants);
provided that, except as otherwise provided in this Section 5 and in Section 10
hereof, the Initial Purchasers shall pay their own costs and expenses, including
the fees and expenses of their counsel, any transfer taxes on the Notes that
they may sell and the expenses of advertising any offering of the Notes made by
the Initial Purchasers.

6. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The respective obligations of
the several Initial Purchasers hereunder are subject to the accuracy, when made
and on each of the Closing Dates, of the representations and warranties of the
Company contained herein, to the accuracy of the statements of the Company made
in any certificates pursuant to the provisions hereof, to the performance by the
Company of their obligations hereunder, and to each of the following additional
terms and conditions:

      (a) No stop order suspending the sale of the Notes in any jurisdiction
      shall have been issued and no proceeding for that purpose shall have been
      commenced or shall be pending or threatened.

      (b) None of the Initial Purchasers shall have discovered and disclosed to
      the Company on or prior to such Closing Date that the Offering Circular or
      any amendment or supplement thereto contains an untrue statement of a fact
      that, in the opinion of counsel for the Initial Purchasers, is material or
      omits to state any fact that, in the opinion of such counsel, is material
      and is required to be stated therein or is necessary to make the
      statements therein not misleading.

      (c) All corporate proceedings and other legal matters incident to the
      authorization, form and validity of each of this Agreement, the Notes, the
      Indenture and the Registration Rights Agreement and all other legal
      matters relating to this Agreement and the transactions contemplated
      hereby shall be reasonably satisfactory in all material respects to
      counsel for the Initial Purchasers, and the Company shall have furnished
      to such counsel all documents and information that such counsel may
      reasonably request to enable them to pass upon such matters.

      (d) Wilson Sonsini Goodrich & Rosati shall have furnished to the
      Representative such counsel's written opinion, as counsel for the Company,
      addressed to the Initial Purchasers

                                      -18-
<PAGE>

      and dated such Closing Date, in form and substance reasonably satisfactory
      to the Representative, to the effect that:

            (i)   The Company has been duly incorporated and is an existing
                  corporation in good standing under the laws of the State of
                  Delaware. The Company has the corporate power and authority to
                  own its properties and assets and to carry on its business as
                  described in the Offering Circular.

            (ii)  Evergreen Securities has been duly incorporated and is an
                  existing corporation in good standing under the laws of the
                  Commonwealth of Massachusetts. Evergreen Securities has the
                  corporate power and authority to own its properties and assets
                  and to carry on its business as presently conducted. To such
                  counsel's knowledge, all of the outstanding shares of capital
                  stock of Evergreen Securities have been duly authorized; and
                  except to the extent set forth in the Offering Circular and as
                  otherwise provided in the Articles of Association of EverQ or
                  its similar organizational documents such as the Master Joint
                  Venture Agreement relating to EverQ, the shares of capital
                  stock of each subsidiary of the Company listed on a schedule
                  attached to such opinion are owned by the Company directly or
                  indirectly through one or more wholly-owned subsidiaries, are
                  free of any adverse claim under Section 8-303 of the Uniform
                  Commercial Code and are not subject to any restriction upon
                  voting or transfer of any third party under any Reviewed
                  Agreement.

            (iii) The Notes issued on such Closing Date have been duly
                  authorized by the Company and, when they have been executed
                  and delivered by the Company and duly executed and
                  authenticated by the Trustee in accordance with the provisions
                  of the Indenture and delivered by the Initial Purchasers
                  against payment of the purchase price therefor specified in
                  this Agreement in accordance with this Agreement, will be
                  valid and binding obligations of the Company, enforceable in
                  accordance with their terms except as (A) the enforceability
                  thereof may be limited by bankruptcy, insolvency,
                  reorganization, moratorium or similar laws affecting
                  creditors' rights generally and (B) rights of acceleration and
                  the availability of equitable remedies may be limited by
                  equitable principles of general applicability.

            (iv)  Each of the Indenture and the Registration Rights Agreement
                  has been duly authorized, executed and delivered by the
                  Company and (assuming the due authorization, execution and
                  delivery of, in the case of the Indenture, the Indenture by
                  the Trustee and, in the case of the Registration Rights
                  Agreement, the Registration Rights Agreement by the Initial
                  Purchasers) constitutes the valid and binding agreement of the
                  Company, enforceable against the Company in accordance with
                  its respective terms except (A) as the enforceability thereof
                  may be limited by (1) bankruptcy, insolvency, reorganization,
                  moratorium or other laws of general applicability relating to
                  or affecting creditors' rights and (2) equitable principles of
                  general applicability

                                      -19-
<PAGE>

                   and (B) as the enforcement of indemnification and
                   contribution provisions of the Registration Rights Agreement
                   may be limited by applicable law.

            (v)    The authorized capital stock of the Company conforms as to
                   legal matters to the description thereof under the heading
                   "Description of Capital Stock" in the Offering Circular. The
                   Underlying Shares have been duly reserved and authorized by
                   the Company for issuance upon such conversion and, upon their
                   issuance in accordance with the terms of the Notes, will be
                   duly authorized, validly issued and fully paid and
                   nonassessable. The stockholders of the Company have no
                   preemptive rights contained in the Company's charter or
                   bylaws and have no contractual, written preemptive rights
                   with the Company under any contract or agreement filed as an
                   exhibit pursuant to Item 601(b)(4) or 601(b)(10) of
                   Regulation S-K to any document filed by the Company under the
                   Exchange Act and incorporated by reference in the Offering
                   Circular (the "Reviewed Agreements") with respect to the
                   Underlying Shares that have not otherwise been waived.

            (vi)   This Agreement has been duly authorized, executed and
                   delivered by the Company.

            (vii)  The execution and delivery by the Company of this Agreement,
                   the Indenture, the Registration Rights Agreement, and the
                   performance by the Company of its obligations hereunder and
                   thereunder (including the obligation of the Company to issue
                   and sell the Notes and to issue the Underlying Shares upon
                   the conversion of the Notes), do not (A) violate any
                   provisions of the Company's charter or bylaws or any
                   provisions of any applicable United States federal or
                   California or Delaware state law, rule or regulation known to
                   us to be customarily applicable to transactions of this
                   nature, (B) violate, or constitute a default under, any of
                   the Reviewed Agreements or (C) violate any order known to
                   such counsel of any United States federal or California or
                   Delaware state governmental agency or body or court having
                   jurisdiction over the Company or any of its subsidiaries or
                   any of their properties or assets.

            (viii) No consent, approval or authorization of, or designation,
                   declaration, filing or registration with, any United States
                   federal or California or Delaware state court or governmental
                   agency is required on the part of the Company for the
                   execution and delivery of this Agreement, the Indenture, the
                   Registration Rights Agreement, the offer, issuance or sale by
                   the Company of the Notes and the consummation by the Company
                   of the transactions contemplated hereby and thereby, except
                   (A) as may be required in connection with the transactions
                   contemplated by the this Agreement, the Indenture and the
                   Registration Rights Agreement, including the registration of
                   the Notes and the Underlying Shares under the Securities Act
                   and the qualification of the Indenture under the Trust
                   Indenture Act, (B) for the approval of the Underlying Shares
                   for quotation on the Nasdaq National Market and (C) such
                   consents, approvals, authorizations, registrations or
                   qualifications as may be

                                      -20-
<PAGE>

                   required by the NASD and under state securities or Blue Sky
                   laws in connection with the purchase and distribution of the
                   Notes by the Initial Purchasers.

            (ix)   The statements in the Offering Circular under the heading
                   "Description of the Notes," insofar as they purport to
                   constitute a summary of the terms of the Notes or legal
                   matters or provisions of the Indenture, the Registration
                   Rights Agreement or this Agreement, fairly summarize, in all
                   material respects, such terms.

            (x)    The statements in the Offering Circular under the heading
                   "Material U.S. Federal Income Tax Considerations," insofar as
                   they purport to describe provisions of the United States
                   federal tax laws referred to therein, accurately summarize,
                   in all material respects, such laws.

            (xi)   To such counsel's knowledge and other than as set forth in
                   the Offering Circular, there are no legal or governmental
                   proceedings pending to which the Company or any of its
                   subsidiaries is a party or of which any property or asset of
                   the Company or any of its subsidiaries is the subject that we
                   believe would have a Material Adverse Effect or would prevent
                   or adversely affect the ability of the Company to perform its
                   obligations under this Agreement, the Indenture or the
                   Registration Rights Agreement; and to such counsel's
                   knowledge, no such proceedings have been threatened in
                   writing by governmental authorities or threatened in writing
                   by others.

            (xii)  To such counsel's knowledge, no person or entity has the
                   right to require registration of the Notes or other
                   securities of the Company in connection with the offering and
                   sale of the Notes by the Company as contemplated by the
                   Offering Circular, except for persons and entities who have
                   expressly waived such right or who have been given timely and
                   proper notice and have failed to exercise such right within
                   the time or times required under the terms and conditions of
                   such right or whose right to incidental registration are
                   solely dependent on the inclusion of any such shares in such
                   registration by persons or entities who have waived such
                   rights and except as otherwise described in the Offering
                   Circular.

            (xiii) The Company is not, and after giving effect to the offering
                   of the Notes and the receipt and application of the proceeds
                   thereof as described in the Offering Circular will not be,
                   required to register as an "investment company" as such term
                   is defined in the Investment Company Act and the rules and
                   regulations of the Commission thereunder.

            (xiv)  Assuming the accuracy of the representations and warranties
                   of the Initial Purchasers contained in Section 3 hereof and
                   their compliance with the agreements set forth therein, it is
                   not necessary, in connection with the issuance and sale of
                   the Notes by the Company to the Initial Purchasers

                                      -21-
<PAGE>

                  pursuant to this Agreement or for the initial resale of the
                  Notes by the Initial Purchasers in the manner contemplated by
                  this Agreement and the Offering Circular (it being understood
                  that no opinion is expressed as to any subsequent resale of
                  the Notes or the Underlying Shares), to register the Notes
                  under the Securities Act or to qualify the indenture under the
                  Trust Indenture Act.

            (xv)  The documents incorporated by reference in the Offering
                  Circular, as amended or supplement, when they were filed (or,
                  if an amendment with respect to any such document was filed,
                  when such amendment was filed) with the Commission, appeared
                  on their face to comply as to form in all material respects
                  with the applicable requirements of the Exchange Act (it being
                  understood that such counsel need express no opinion as to the
                  financial statements or other financial data included or
                  incorporated by reference therein).

      Such counsel shall also have furnished to the Representative a written
      statement, addressed to the Initial Purchasers and dated such Closing
      Date, in form and substance satisfactory to the Representative, to the
      effect that (A) such counsel has acted as counsel for the Company in
      connection with the preparation of the Offering Circular and (B) based on
      such counsel's examination of the Offering Circular and such counsel's
      investigations made in connection with the preparation of the Offering
      Circular and conferences with certain officers and employees of and
      auditors and patent counsel for the Company and with you and counsel for
      the Initial Purchasers, at which conferences the contents of the Offering
      Circular and related matters were reviewed and discussed, no facts have
      come to such counsel's attention through such review and discussion as
      described therein that have caused such counsel to believe that as of its
      issue date or the date hereof, the Offering Circular or any amendment or
      supplement thereto contained an untrue statement of a material fact or
      omitted to state a material fact necessary to make the statements therein,
      in the light of the circumstances under which they were made, not
      misleading, it being understood that such counsel need express no opinion
      as to the financial statements or other financial data included or
      incorporated by reference in the Offering Circular.

      The foregoing opinion and statement may be qualified by a statement to the
      effect that such counsel has not independently verified the accuracy,
      completeness or fairness of the statements contained in the Offering
      Circular and takes no responsibility therefor except to the extent set
      forth in the opinion described in clause (x) above.

      (e) Taylor Wessing shall have furnished to the Representative such
      counsel's written opinion, as German counsel for the Company, addressed to
      the Initial Purchasers and dated such Closing Date, in form and substance
      reasonably satisfactory to the Representative, to the effect that:

            (i)   The German Subsidiaries have been duly organized and are
                  validly existing as corporations under the laws of the Federal
                  Republic of Germany and are duly qualified to do business in
                  Germany and, to our knowledge, in each jurisdiction in which
                  their respective ownership or lease of property or the

                                      -22-
<PAGE>

                  conduct of their respective businesses requires such
                  qualification and have all power and authority necessary to
                  own or hold their respective properties and to conduct the
                  businesses in which they are engaged, except where the failure
                  to so qualify or have such power or authority would not have,
                  singularly or in the aggregate a Material Adverse Effect; and
                  to such counsel's knowledge, the German Subsidiaries are only
                  engaged in business in Germany.

            (ii)  All registered shares of capital stock of each of the German
                  Subsidiaries have been duly authorized and validly issued, are
                  fully paid and nonassessable and are, to such counsel's
                  knowledge, except to the extent set forth in the Offering
                  Circular, owned by the Company directly; and to such counsel's
                  knowledge, all of such outstanding shares are registered or,
                  with respect to a capital increase contemplated in the
                  organizational documents of the German Subsidiaries, will be
                  registered.

            (iii) The execution, delivery and performance of this Agreement, the
                  Indenture and the Registration Rights Agreement by the Company
                  and the consummation of the transactions contemplated herein
                  will not conflict with or result in a breach or violation of
                  any of the terms or provisions of, or constitute a default
                  under any indenture, mortgage, deed of trust, loan agreement
                  or other agreement or instrument known to such counsel after
                  reasonable investigation to which either German Subsidiary is
                  a party or by which either German Subsidiary is bound or to
                  which any of the properties or assets of either German
                  Subsidiary is subject, nor will such actions result in any
                  violation of the Articles of Association (or similar
                  organizational documents such as the Master Joint Venture
                  Agreement relating to EverQ) of either German Subsidiary or
                  any statute or law or any order known to such counsel or any
                  rule or regulation of any governmental agency or body or court
                  having jurisdiction over either German Subsidiary or any of
                  their respective properties or assets.

            (iv)  To such counsel's knowledge, neither German Subsidiary (A) is
                  in violation of its organizational documents, (B) is in
                  default, and no event has occurred that, with notice or lapse
                  of time or both, would constitute a default, in the due
                  performance or observance of any term, covenant or condition
                  contained in any agreement or instrument to which it is a
                  party or by which it is bound or to which any of its
                  properties or assets is subject or (C) is in violation of any
                  law, ordinance, governmental rule, regulation or court decree
                  to which it or its property or assets may be subject or has
                  failed to obtain any license, permit, certificate, franchise
                  or other governmental authorization or permit necessary to the
                  ownership of its property or to the conduct of its business
                  except, in the case of clauses (B) and (C), for those
                  defaults, violations or failures that, either individually or
                  in the aggregate, would not have a Material Adverse Effect.

            (v)   To such counsel's knowledge and other than as set forth in the
                  Offering Circular, there are no legal or governmental
                  proceedings pending to which

                                      -23-
<PAGE>

                  either German Subsidiary is a party or of which any property
                  or asset of either German Subsidiary is the subject that,
                  singularly or in the aggregate, if determined adversely to
                  either German Subsidiary, might have a Material Adverse Effect
                  or would prevent or adversely affect the ability of the
                  Company to perform its obligations under this Agreement; and
                  to such counsel's knowledge, no such proceedings are
                  threatened or contemplated by governmental authorities or
                  threatened by others.

      (f) The Representative shall have received a written opinion from
      Proskauer Rose LLP, as counsel for the Company as to certain matters
      involving Intellectual Property of the Company and its subsidiaries,
      addressed to the Initial Purchasers and dated such Closing Date, in
      substantially the forms thereof attached as Exhibit II hereto.

      (g) The Representative shall have received from Pillsbury Winthrop LLP,
      counsel for the Initial Purchasers, such written opinion or opinions,
      dated such Closing Date, with respect to such matters as the Initial
      Purchasers may reasonably require, and the Company shall have furnished to
      such counsel such documents as they request for enabling them to pass upon
      such matters.

      (h) At the time of the execution of this Agreement, the Representative
      shall have received from PricewaterhouseCoopers LLP, a letter, addressed
      to the Initial Purchasers and dated such date, in form and substance
      satisfactory to the Representative (i) confirming that they are
      independent registered public accountants with respect to the Company and
      its subsidiaries within the meaning of the Securities Act and the Rules
      and Regulations and (ii) stating the conclusions and findings of such firm
      with respect to the financial statements and certain financial information
      included or incorporated by reference in the Offering Circular, including
      statements and information of the type ordinarily included in accountant's
      "comfort letters" delivered in accordance with Statement of Auditing
      Standards No. 72 (or any successor thereto).

      (i) On each Closing Date, the Representative shall have received a letter
      (each, a "bring-down letter") from PricewaterhouseCoopers LLP, addressed
      to the Initial Purchasers and dated such Closing Date confirming, as of
      the date of such bring-down letter (or, with respect to matters involving
      changes or developments since the respective dates as of which specified
      financial information is given in the Offering Circular as of a date not
      more than three business days prior to the date of such bring-down
      letter), the conclusions and findings of such firm with respect to the
      financial information and other matters covered by its letter delivered to
      the Representative concurrently with the execution of this Agreement
      pursuant to Section 6(h) hereof.

      (j) The Company shall have furnished to the Representative a certificate,
      dated such Closing Date, of its Chairman of the Board, its President or a
      Vice President and its chief financial officer stating that (i) such
      officers have carefully examined the Offering Circular and, in their
      opinion, the Offering Circular, as of its date or at such Closing Date,
      did not include any untrue statement of a material fact and did not omit
      to state a material fact necessary to make the statements therein, in the
      light of the circumstances under with they

                                      -24-
<PAGE>

      were made, not misleading, (ii) since the date of the Offering Circular,
      no event has occurred that should have been set forth in a supplement or
      amendment to the Offering Circular, (iii) to their knowledge after
      reasonable investigation, as of such Closing Date, the other
      representations and warranties of the Company set forth in this Agreement
      are true and correct and the Company has complied with all agreements and
      satisfied all conditions on its part to be performed or satisfied
      hereunder at or prior to such Closing Date and (iv) subsequent to the date
      of the most recent financial statements included or incorporated by
      reference in the Offering Circular, there has been no material adverse
      change in the financial position or results of operation of the Company
      and its subsidiaries, or any change, or any development including a
      prospective change, in or affecting the condition (financial or
      otherwise), results of operations, business or prospects of the Company
      and its subsidiaries taken as a whole, except as set forth in the Offering
      Circular.

      (k) Neither the Company nor any of its subsidiaries shall have sustained
      since the date of the latest audited financial statements included or
      incorporated by reference in the Offering Circular any loss or
      interference with its business from fire, explosion, flood or other
      calamity, whether or not covered by insurance, or from any labor dispute
      or court or governmental action, order or decree, otherwise than as set
      forth or contemplated in the Offering Circular and (ii) since such date
      there shall not have been any change in the capital stock or long-term
      debt of the Company or any of its subsidiaries or any change, or any
      development involving a prospective change, in or affecting the business,
      general affairs, management, financial position, stockholders' equity or
      results of operations of the Company and its subsidiaries, otherwise than
      as set forth or contemplated in the Offering Circular, the effect of
      which, in any such case described in clause (i) or (ii) above, is, in the
      judgment of the Representative, so material and adverse as to make it
      impracticable or inadvisable to proceed with the sale or delivery of the
      Notes on the terms and in the manner contemplated in the Offering
      Circular.

      (l) No action shall have been taken and no statute, rule, regulation or
      order shall have been enacted, adopted or issued by any governmental
      agency or body that would, as of such Closing Date, prevent the issuance
      or sale of the Notes or materially and adversely affect or potentially
      materially and adversely affect the business or operations of the Company;
      and no injunction, restraining order or order of any other nature by any
      federal or state court of competent jurisdiction shall have been issued as
      of such Closing Date that would prevent the issuance or sale of the Notes
      or materially and adversely affect or potentially materially and adversely
      affect the business or operations of the Company.

      (m) Subsequent to the execution and delivery of this Agreement there shall
      not have occurred any of the following: (i) trading in securities
      generally on the New York Stock Exchange or the American Stock Exchange or
      in the over-the-counter market, or trading in any securities of the
      Company on any exchange or in the over-the-counter market, shall have been
      suspended or minimum or maximum prices or maximum range for prices shall
      have been established on any such exchange or such market by the
      Commission, by such exchange or by any other regulatory body or
      governmental authority having jurisdiction, (ii) a banking moratorium
      shall have been declared by Federal or state authorities or a material
      disruption has occurred in commercial banking or securities settlement or
      clearance services in the

                                      -25-
<PAGE>

      United States, (iii) the United States shall have become engaged in
      hostilities, or the subject of an act of terrorism, or there shall have
      been an escalation in hostilities involving the United States, or there
      shall have been a declaration of a national emergency or war by the United
      States or (iv) there shall have occurred such a material adverse change in
      general economic, political or financial conditions (or the effect of
      international conditions on the financial markets in the United States
      shall be such) so as to make it, in the judgment of the Representative,
      impracticable or inadvisable to proceed with the sale or delivery of the
      Notes on the terms and in the manner contemplated in the Offering
      Circular.

      (n) On the First Closing Date, (i) the Indenture shall have been duly
      executed and delivered by the Company and the Trustee, (ii) the Notes
      shall have been duly executed and delivered by the Company and duly
      authenticated by the Trustee and (iii) the Registration Rights Agreement
      shall have been duly executed and delivered by the Company and the Initial
      Purchasers.

      (o) The Notes shall have been accepted for The PORTAL Market and be
      eligible for clearance and settlement through DTC.

      (p) The Representative shall have received the written agreements,
      substantially in the form of Exhibit I hereto, of the officers, directors
      and stockholders of the Company listed in Schedule B to this Agreement in
      accordance with Section 4(k) hereof.

      All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.

7.    INDEMNIFICATION AND CONTRIBUTION.

      (a) The Company shall indemnify and hold harmless each Initial Purchaser,
      its members, officers, employees, representatives and agents and each
      person, if any, who controls any Initial Purchaser within the meaning of
      the Securities Act (collectively, the "Initial Purchaser Indemnified
      Parties" and, each, an "Initial Purchaser Indemnified Party") against any
      loss, claim, damage or liability, joint or several, or any action in
      respect thereof, to which that Initial Purchaser Indemnified Party may
      become subject, under the Securities Act or otherwise, insofar as such
      loss, claim, damage, liability or action arises out of or is based upon
      (i) any untrue statement or alleged untrue statement of a material fact
      contained in the Preliminary Offering Circular or the Offering Circular or
      in any amendment or supplement thereto, (ii) the omission or alleged
      omission to state in the Preliminary Offering Circular or the Offering
      Circular or in any amendment or supplement thereto a material fact
      required to be stated therein or necessary to make the statements therein
      not misleading or (iii) any act or failure to act, or any alleged act or
      failure to act, by any Initial Purchaser in connection with, or relating
      in any manner to, the Notes or the offering contemplated hereby and that
      is included as part of or referred to in any loss, claim, damage,
      liability or action arising out of or based upon matters covered by clause
      (i) or (ii) above (provided that the Company shall not be liable in the
      case of any matter covered by this clause (iii) to the extent that it is
      determined in a final judgment by a court of competent jurisdiction that
      such loss, claim,

                                      -26-
<PAGE>

      damage, liability or action resulted directly from any such act or failure
      to act undertaken or omitted to be taken by such Initial Purchaser through
      its gross negligence or willful misconduct) and shall reimburse each
      Initial Purchaser Indemnified Party promptly upon demand for any legal or
      other expenses reasonably incurred by that Initial Purchaser Indemnified
      Party in connection with investigating or preparing to defend or defending
      against or appearing as a third party witness in connection with any such
      loss, claim, damage, liability or action as such expenses are incurred;
      provided, however, that the Company shall not be liable in any such case
      to the extent that any such loss, claim, damage, liability or action
      arises out of or is based upon an untrue statement or alleged untrue
      statement in or omission or alleged omission from the Preliminary Offering
      Circular or the Offering Circular or any such amendment or supplement in
      reliance upon and in conformity with written information furnished to the
      Company through the Representative by or on behalf of any Initial
      Purchaser specifically for use therein, which information the parties
      hereto agree is limited to the Initial Purchaser's Information.

            This indemnity agreement is not exclusive and will be in addition to
      any liability that the Company might otherwise have and shall not limit
      any rights or remedies that may otherwise be available at law or in equity
      to each Initial Purchaser Indemnified Party.

      (b) Each Initial Purchaser, severally and not jointly, shall indemnify and
      hold harmless the Company its officers, employees, representatives and
      agents, each of its directors and each person, if any, who controls the
      Company within the meaning of the Securities Act (collectively, the
      "Company Indemnified Parties" and, each, a "Company Indemnified Party")
      against any loss, claim, damage or liability, joint or several, or any
      action in respect thereof, to which the Company Indemnified Parties may
      become subject, under the Securities Act or otherwise, insofar as such
      loss, claim, damage, liability or action arises out of or is based upon
      (i) any untrue statement or alleged untrue statement of a material fact
      contained in the Preliminary Offering Circular or the Offering Circular or
      in any amendment or supplement thereto or (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, but in each case
      only to the extent that the untrue statement or alleged untrue statement
      or omission or alleged omission was made in reliance upon and in
      conformity with written information furnished to the Company through the
      Representative by or on behalf of that Initial Purchaser specifically for
      use therein, and shall reimburse the Company Indemnified Parties for any
      legal or other expenses reasonably incurred by such parties in connection
      with investigating or preparing to defend or defending against or
      appearing as third party witness in connection with any such loss, claim,
      damage, liability or action as such expenses are incurred; provided that
      the parties hereto hereby agree that such written information provided by
      the Initial Purchasers consists solely of the Initial Purchaser's
      Information. This indemnity agreement is not exclusive and will be in
      addition to any liability that the Initial Purchasers might otherwise have
      and shall not limit any rights or remedies that may otherwise be available
      at law or in equity to the Company Indemnified Parties.

      (c) Promptly after receipt by an indemnified party under this Section 7 of
      notice of any claim or the commencement of any action, the indemnified
      party shall, if a claim in respect thereof is to be made against the
      indemnifying party under this Section 7, notify the

                                      -27-
<PAGE>

      indemnifying party in writing of the claim or the commencement of that
      action; provided, however, that the failure to notify the indemnifying
      party shall not relieve it from any liability that it may have under this
      Section 7 except to the extent it has been materially prejudiced by such
      failure; and, provided, further, that the failure to notify the
      indemnifying party shall not relieve it from any liability that it may
      have to an indemnified party otherwise than under this Section 7. If any
      such claim or action shall be brought against an indemnified party, and it
      shall notify the indemnifying party thereof, the indemnifying party shall
      be entitled to participate therein and, to the extent that it wishes,
      jointly with any other similarly notified indemnifying party, to assume
      the defense thereof with counsel reasonably satisfactory to the
      indemnified party. After notice from the indemnifying party to the
      indemnified party of its election to assume the defense of such claim or
      action, the indemnifying party shall not be liable to the indemnified
      party under this Section 7 for any legal or other expenses subsequently
      incurred by the indemnified party in connection with the defense thereof
      other than reasonable costs of investigation; provided, however, that any
      indemnified party shall have the right to employ separate counsel in any
      such action and to participate in the defense thereof but the fees and
      expenses of such counsel shall be at the expense of such indemnified party
      unless (i) the employment thereof has been specifically authorized by the
      indemnifying party in writing, (ii) such indemnified party shall have been
      advised by such counsel that there may be one or more legal defenses
      available to it that are different from or additional to those available
      to the indemnifying party and in the reasonable judgment of such counsel
      it is advisable for such indemnified party to employ separate counsel or
      (iii) the indemnifying party has failed to assume the defense of such
      action and employ counsel reasonably satisfactory to the indemnified
      party, in which case, if such indemnified party notifies the indemnifying
      party in writing that it elects to employ separate counsel at the expense
      of the indemnifying party, the indemnifying party shall not have the right
      to assume the defense of such action on behalf of such indemnified party,
      it being understood, however, that the indemnifying party shall not, in
      connection with any one such action or separate but substantially similar
      or related actions in the same jurisdiction arising out of the same
      general allegations or circumstances, be liable for the reasonable fees
      and expenses of more than one separate firm of attorneys at any time for
      all such indemnified parties, which firm shall be designated in writing by
      the Representative, if the indemnified parties under this Section 7
      consist of any Initial Purchaser Indemnified Party, or by the Company if
      the indemnified parties under this Section 7 consist of any Company
      Indemnified Parties. Each indemnified party, as a condition of the
      indemnity agreements contained in Sections 7(a) and 7(b) hereof, shall use
      all reasonable efforts to cooperate with the indemnifying party in the
      defense of any such action or claim. Subject to the provisions of Section
      7(d) hereof, no indemnifying party shall be liable for any settlement of
      any such action effected without its written consent (which consent shall
      not be unreasonably withheld), but if settled with its written consent or
      if there be a final judgment for the plaintiff in any such action, the
      indemnifying party agrees to indemnify and hold harmless any indemnified
      party from and against any loss or liability by reason of such settlement
      or judgment.

      (d) If at any time an indemnified party shall have requested that an
      indemnifying party reimburse the indemnified party for fees and expenses
      of counsel, such indemnifying party agrees that it shall be liable for any
      settlement of the nature contemplated by this Section 7 effected without
      its written consent if (i) such settlement is entered into more than

                                      -28-
<PAGE>

      45 days after receipt by such indemnifying party of the request for
      reimbursement, (ii) such indemnifying party shall have received notice of
      the terms of such settlement at least 30 days prior to such settlement
      being entered into and (iii) such indemnifying party shall not have
      reimbursed such indemnified party in accordance with such request prior to
      the date of such settlement.

      (e) If the indemnification provided for in this Section 7 is unavailable
      or insufficient to hold harmless an indemnified party under Section 7(a)
      or 7(b) hereof, then each indemnifying party shall, in lieu of
      indemnifying such indemnified party, contribute to the amount paid or
      payable by such indemnified party as a result of such loss, claim, damage
      or liability, or action in respect thereof, (i) in such proportion as
      shall be appropriate to reflect the relative benefits received by the
      Company on the one hand and the Initial Purchasers on the other from the
      offering of the Notes or (ii) if the allocation provided by clause (i)
      above is not permitted by applicable law, in such proportion as is
      appropriate to reflect not only the relative benefits referred to in
      clause (i) above but also the relative fault of the Company on the one
      hand and the Initial Purchasers on the other with respect to the
      statements or omissions that resulted in such loss, claim, damage or
      liability, or action in respect thereof, as well as any other relevant
      equitable considerations. The relative benefits received by the Company on
      the one hand and the Initial Purchasers on the other with respect to such
      offering shall be deemed to be in the same proportion as the total net
      proceeds from the offering of the Notes purchased under this Agreement
      (before deducting expenses) received by the Company bear to the total
      discounts and commissions received by the Initial Purchasers with respect
      to the Notes purchased under this Agreement. The relative fault shall be
      determined by reference to, among other things, whether the untrue or
      alleged untrue statement of a material fact or the omission or alleged
      omission to state a material fact relates to information supplied by the
      Company on the one hand or the Initial Purchasers on the other, the intent
      of the parties and their relative knowledge, access to information and
      opportunity to correct or prevent such untrue statement or omission;
      provided that the parties hereto agree that the written information
      furnished to the Company through the Representative by or on behalf of the
      Initial Purchasers for use in the Preliminary Offering Circular or the
      Offering Circular consists solely of the Initial Purchasers Information.
      The Company and the Initial Purchasers agree that it would not be just and
      equitable if contributions pursuant to this Section 7(e) were to be
      determined by pro rata allocation (even if the Initial Purchasers were
      treated as one entity for such purpose) or by any other method of
      allocation that does not take into account the equitable considerations
      referred to herein. The amount paid or payable by an indemnified party as
      a result of the loss, claim, damage or liability, or action in respect
      thereof, referred to above in this Section 7(e) shall be deemed to
      include, for purposes of this Section 7(e), any legal or other expenses
      reasonably incurred by such indemnified party in connection with
      investigating or defending any such action or claim. Notwithstanding the
      provisions of this Section 7(e), no Initial Purchaser shall be required to
      contribute any amount in excess of the amount by which the total price at
      which the Notes purchased by it and distributed to the public were offered
      to the public less the amount of any damages that such Initial Purchaser
      has otherwise paid or become liable to pay by reason of any untrue or
      alleged untrue statement or omission or alleged omission. No person guilty
      of fraudulent misrepresentation (within the meaning of Section 11(f) of
      the

                                      -29-
<PAGE>

      Securities Act) shall be entitled to contribution from any person who was
      not guilty of such fraudulent misrepresentation.

            The Initial Purchasers' obligations to contribute as provided in
      this Section 7(e) are several in proportion to their respective purchase
      obligations and not joint.

8. OPTION NOTES. The Initial Purchasers may purchase all or less than all of an
additional $15,000,000 aggregate principal amount of 4.375% Convertible
Subordinated Notes due 2012 (the "Option Notes"). The Company agrees to sell to
each Initial Purchaser named in Schedule A hereto, and each such Initial
Purchaser agrees, severally and not jointly, to purchase from the Company, at a
purchase price equal to the same price as the Firm Notes purchased on the
Closing Date, the principal amount of Option Notes (subject to such adjustments
as the Initial Purchasers in their discretion may determine so that no Initial
Purchaser shall be obligated to purchase Option Notes other than in authorized
denominations) that bears the same proportion to the aggregate principal amount
of Option Notes to be purchased as the number of Firm Notes set forth opposite
the name of such Initial Purchaser in Schedule A hereto bears to the aggregate
principal amount of Firm Notes. The option granted hereby may be exercised as to
all or any part of the Option Notes not more than 30 days subsequent to the date
of this Agreement. No Option Notes shall be sold and delivered unless the Firm
Notes have been, or simultaneously are, sold and delivered. The right to place
the Option Notes or any portion thereof may be surrendered and terminated at any
time upon notice by the Representative to the Company.

   The option granted hereby may be exercised by written notice being given to
the Company by Representative setting forth the aggregate principal amount of
Option Notes to be purchased by the Initial Purchasers and the date and time for
delivery of and payment for the Option Notes. Each date and time for delivery of
and payment for the Option Notes (which may be the First Closing Date, but not
earlier) is herein called the "Option Closing Date" and shall in no event be
earlier than two business days nor later than five business days after written
notice is given. (The Option Closing Date and the First Closing Date are herein
called, collectively, the "Closing Dates" and, each, a "Closing Date"). The
Option Closing Date and the location of delivery of, and the form of payment
for, the Option Notes may be varied by agreement between the Company and the
Representative.

9. TERMINATION. The obligations of the Initial Purchasers hereunder may be
terminated by the Representative, in its absolute discretion by notice given to
and received by the Company prior to delivery of and payment for the Firm Notes
if, prior to that time, any of the events described in Section 6(k) or 6(m)
hereof have occurred or if the Initial Purchasers shall decline to purchase the
Notes for any reason permitted under this Agreement.

10. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If (a) the Company shall fail
to tender the Notes for delivery to the Initial Purchasers for any reason not
permitted under this Agreement, (b) the Initial Purchasers shall decline to
purchase the Notes for any reason permitted under this Agreement or (c) this
Agreement shall have been terminated pursuant to Section 11 hereof, then the
Company shall reimburse the Initial Purchasers for the fees and expenses of
their counsel and for such other out-of-pocket expenses as shall have been
reasonably incurred by them in connection with this Agreement and the proposed
purchase of the Notes, and upon demand the Company shall

                                      -30-
<PAGE>

pay the full amount thereof to the Representative. If this Agreement is
terminated pursuant to Section 11 hereof by reason of the default of one or more
Initial Purchasers, the Company shall not be obligated to reimburse any
defaulting Initial Purchaser on account of those expenses.

11. SUBSTITUTION OF INITIAL PURCHASERS. If any Initial Purchaser or Initial
Purchasers shall default in its or their obligations to purchase the Notes
hereunder and the aggregate principal amount of Notes that such defaulting
Initial Purchaser or Initial Purchasers agreed but failed to purchase does not
exceed 10% of the total principal amount of Notes purchased, the other Initial
Purchasers shall be obligated severally, in proportion to their respective
commitments hereunder, to purchase the Notes that such defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase. If any Initial
Purchaser or Initial Purchasers shall so default and the aggregate principal
amount of Notes with respect to which such default or defaults occur is more
than 10% of the total principal amount of Notes purchased and arrangements
satisfactory to the Representative and the Company for the purchase of such
Notes by other persons are not made within 48 hours after such default, this
Agreement shall terminate.

      If the remaining Initial Purchasers or substituted Initial Purchasers are
required hereby or agree to take up all or part of the Notes of a defaulting
Initial Purchaser or Initial Purchasers as provided in this Section 11, (i) the
Company shall have the right to postpone the Closing Dates for a period of not
more than five full business days in order that the Company may effect whatever
changes may thereby be made necessary in the Offering Circular, or in any other
documents or arrangements, and (ii) the respective principal amount of Notes to
be purchased by the remaining Initial Purchasers or substituted Initial
Purchasers shall be taken as the basis of their purchase obligation for all
purposes of this Agreement. Nothing herein contained shall relieve any
defaulting Initial Purchaser of its liability to the Company or the other
Initial Purchasers for damages occasioned by its default hereunder. Any
termination of this Agreement pursuant to this Section 11 shall be without
liability on the part of any non-defaulting Initial Purchaser or the Company,
except expenses to be paid or reimbursed pursuant to Sections 5 and 10 hereof
and except the provisions of Section 7 hereof shall not terminate and shall
remain in effect.

12. SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the several Initial Purchasers, the
Company and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding sentence any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person, except that (a) the representations,
warranties, covenants, agreements and indemnities of the Company contained in
this Agreement shall also be for the benefit of the Initial Purchaser
Indemnified Parties, and the indemnities of the several Initial Purchasers shall
also be for the benefit of the Company Indemnified Parties and (b) the holders
from time to time of the Notes and prospective purchasers of the Notes
designated by such holders shall be entitled to enforce the agreement for their
benefit contained in Section 4(i) hereof as if such holders and prospective
purchasers were parties to this Agreement. It is understood that each Initial
Purchaser's responsibility to the Company is solely contractual in nature and
the Initial Purchasers do not owe the Company, or any other party, any fiduciary
duty as a result of this Agreement.

                                      -31-
<PAGE>

13. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The respective
indemnities, covenants, agreements, representations, warranties and other
statements of the Company and the several Initial Purchasers, as set forth in
this Agreement or made by them respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any Initial Purchaser, the Company or any person controlling any of
them and shall survive delivery of and payment for the Notes.

14. NOTICES. All statements, requests, notices and agreements hereunder shall be
in writing, and:

      (a) if to the Initial Purchasers, shall be delivered or sent by mail,
      telex or facsimile transmission to SC Cowen & Co., LLC, 1221 Avenue of the
      Americas, New York, New York 10020, Attention: John Mosler, Managing
      Director (Fax: 212-278-4290), with a copy to SG Cowen & Co., LLC at the
      same address, Attention: General Counsel (Fax: 212-278-7432); and

      (b) if to the Company shall be delivered or sent by mail, telex or
      facsimile transmission to Evergreen Solar, Inc., 138 Bartlett Street,
      Marlboro, Massachusetts 01752, Attention: Richard G. Chleboski, Chief
      Financial Officer, Vice President, Treasurer and Secretary (Fax:
      508-229-0747).

15. DEFINITION OF CERTAIN TERMS. For purposes of this Agreement, (a) "business
day" means any day on which the New York Stock Exchange, Inc. is open for
trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules
and Regulations.

16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

17. INITIAL PURCHASERS INFORMATION. The parties hereto acknowledge and agree
that, for all purposes of this Agreement, the "Initial Purchasers Information"
consists solely of the following information in the Offering Circular: (i) the
last paragraph on the front cover page of the Offering Circular; and (ii) the
statements contained in the fourth paragraph concerning the Initial Purchasers
and in the fourth sentence of the seventh paragraph under the heading "Plan of
Distribution" in the Offering Circular.

18. AUTHORITY OF THE REPRESENTATIVE. In connection with this Agreement, you will
act for and on behalf of the several Initial Purchasers, and any action taken
under this Agreement by the Representative will be binding on all the Initial
Purchasers.

19. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any Section,
paragraph or provision of this Agreement shall not affect the validity or
enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.

20. GENERAL. This Agreement, together with certain letters or other written
agreements between the Company and the Initial Purchasers as of the date hereof,
constitutes the entire agreement of the parties to this Agreement and supersedes
all prior written or oral and all contemporaneous oral

                                      -32-
<PAGE>

agreements, understandings and negotiations with respect to the subject matter
hereof. In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and the Representative.

21. COUNTERPARTS. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

                                      -33-
<PAGE>

      If the foregoing is in accordance with your understanding of the agreement
between the Company and the several Initial Purchasers, kindly indicate your
acceptance in the space provided for that purpose below.

                                                   Very truly yours,

                                                   EVERGREEN SOLAR, INC.

                                                   By: /s/ Richard M. Feldt
                                                       ------------------------
                                                       Name: Richard M. Feldt
                                                       Title: President & CEO

Accepted as of
the date first above written:
SG COWEN & CO., LLC
     Acting on its own behalf
     and as Representative of the several
     Initial Purchasers referred to in the
     foregoing Agreement.

By: SG COWEN & CO., LLC

By: /s/ John Mosler
    --------------------------------
    Name: John Mosler
    Title: Managing Director

                                      -34-
<PAGE>

                                   SCHEDULE A

<TABLE>
<CAPTION>
                                                  Aggregate Principal
                                                    Amount of Firm
                                                       Notes to
Name                                                be Purchased
----                                              -------------------
<S>                                               <C>
SG Cowen & Co., LLC.............................  $        63,750,000
First Albany Capital Inc........................  $         7,500,000
Merriman Curhan Ford & Co.......................  $         3,750,000
                                                  -------------------

Total                                             $        75,000,000
                                                  ===================
</TABLE>

<PAGE>

                                   SCHEDULE B

      The Representative shall have received the written agreements,
substantially in the form of Exhibit I to this Agreement, of the following
officers, directors and stockholders of the Company in accordance with Section
4(k) of this Agreement:

      -     Richard M. Feldt;

      -     Richard G. Chleboski;

      -     Dr. Jack I. Hanoka;

      -     Dr. Terry Bailey;

      -     Mark A. Farber;

      -     Dr. Brown F. Williams

      -     Timothy Woodward;

      -     Phillip J. Deutch;

      -     Michael El-Hillow;

      -     Charles J. McDermott;

      -     Dr. Robert W. Shaw, Jr.;

      -     Dr. William P. Sommers;

      -     Gary Pollard;

      -     Nth Power Technologies Entities; and

      -     RockPort Capital Entities.

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