10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

[x]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended December 31, 2003
	OR
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission File Number: 0-10521

ADVANCED NEUROMODULATION SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Texas (State or other jurisdiction of incorporation or organization)	75-1646002 (I.R.S. Employer Identification No.)
6501 Windcrest Drive, Plano, Texas (Address of principal executive offices)	75024 (Zip Code)

Registrant’s telephone number, including area code: (972) 309-8000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:

Title of Each Class	Name of Each Exchange on Which Registered
NONE	NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:

Title of Class

Common Stock, $.05 Par Value

     Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [  ]

     Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of the S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

     Indicate by checkmark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2) Yes [x] No [  ]

     Aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant as of June 30, 2003: $644,543,537

     Number of shares outstanding of the registrant’s Common Stock as of March 5, 2004: 19,998,791

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant’s definitive Proxy Statement for the registrant’s 2004 Annual Meeting of Shareholders are incorporated by reference into Part III.

TABLE OF CONTENTS

PART I
	ITEM 1. BUSINESS
	ITEM 2. FACILITIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTSON FORM 8-K
Signatures
Appendix A
	Appendix B
	Appendix C
INDEX TO EXHIBITS
Sublease Agreement dated as of June 18, 2003
Fixed Price Contract dated as of December 17, 2003
Fixed Price Contract dated as of December 10, 2003
Standard Form of Agreement-Owner and Contractor
Standard Form of Agreement-Owner and Architect
Standard Form of Agreement-Owner/Construction Mgr.
Change Order dated as of August 27, 2003
Abbreviated Standard Form of Agreement
Change Order dated as of December 15, 2003
Change Order dated as of February 20, 2004
Code of Ethics
Subsidiaries
Consent of Independent Auditors
Certification of the CEO Pursuant to Rule 13a-14
Certification of the CFO Pursuant to Rule 13a-14
Certification of the CEO Pursuant to Section 906
Certification of the CFO Pursuant Section 906

Advanced Neuromodulation Systems, Inc.

Annual Report

Form 10-K

Year Ended December 31, 2003

PART I

ITEM 1. BUSINESS

Overview

We design, develop, manufacture and market advanced implantable neuromodulation devices that improve the quality of life for people suffering from chronic pain. Neuromodulation devices include implantable neurostimulation devices, which deliver electric current directly to targeted nerves, and implantable drug pumps, which deliver small, precisely controlled doses of drugs directly to targeted sites within the body. Our products utilize innovative technologies that offer advanced programming features, user-friendly interfaces and smaller implanted devices, resulting in greater patient comfort. We are leveraging our neuromodulation product platforms to develop new pain management products and to expand into new applications.

We market our products to physicians who specialize in managing chronic pain. We define chronic pain as pain that persists or recurs for more than six months, is resistant to conservative therapies and significantly restricts a patient’s normal activities. There are approximately 3,000 pain management specialists in the U.S., approximately 80% of whom are anesthesiologists and approximately 20% of whom are neurosurgeons or orthopedic surgeons, and the number of pain management specialists is growing steadily.

In 2003, we acquired certain operations of our three remaining U.S. distributors who marketed our neuromodulation products in the United States. In March 2003, we acquired certain operations of Sun Medical, Inc. (Sun Medical), our largest distributor for approximately $4.9 million. In September 2003, we acquired certain operations of Comedical, Inc. (Comedical) for approximately $1.1 million. In November 2003, we acquired certain operations of our sole remaining distributor in the U.S., State of the Art Medical Products, for approximately $4.2 million. As part of these acquisitions, substantially all of the direct sales persons who represented our products joined us as direct employees. We believe that these acquisitions will strengthen our sales capabilities and allow us to focus the sales priorities of those personnel on our products, expand sales coverage in those former distributor territories and invest in customer and market development.

We currently market three principal product lines: our Renew® radio frequency (RF) system, our Genesis® and GenesisXP™ implantable pulse generator (IPG) systems and our AccuRx® implantable drug pump. We have sold Renew in the U.S. since June 1999 for treatment of chronic pain of the trunk and limbs. Renew’s advanced features effectively manage complex and multi-extremity pain patterns and provide pain management specialists with significant programming flexibility. We began selling Genesis in Europe in the first quarter of 2001 and in the U.S. and Australia in January 2002 for treatment of chronic pain of the trunk and limbs. We believe that Genesis offers a superior size-to-function ratio, greater patient comfort, more flexibility in addressing different pain patterns and other technological advances, which provide us with a competitive advantage. Additionally, we received

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approval from the U.S. Food and Drug Administration (FDA) in July 2002 to market an enhanced version of Genesis, the GenesisXP IPG system for treatment of chronic pain of the trunk and limbs, which we launched in the U.S. in the fourth quarter of 2002. The GenesisXP offers substantially more battery capacity than Genesis, resulting in enhanced longevity and/or additional power to treat more complex pain. We began selling AccuRx in certain international markets in the second quarter of 2001 and in 2003 completed all implants in a 109 patient clinical trial we conducted of AccuRx in the U.S. under an investigational device exemption (IDE) from the FDA. AccuRx is smaller than the other constant rate drug pumps currently on the market, and it incorporates a new polymeric diaphragm technology that makes it more precise under varying conditions than other constant rate drug pumps. We filed our pre-market approval (PMA) application for AccuRx with the FDA in December 2003.

Our Hi-tronics Designs, Inc. (HDI) subsidiary designs and manufactures medical devices for us, and for other companies on an O.E.M. (original equipment manufacturer) basis. HDI’s core strength is in developing highly sophisticated electromechanical devices featuring electronic circuits with very low power requirements. The acquisition of HDI allowed us to leverage its expertise in development and manufacturing and benefit from its technology platforms.

We were incorporated in the State of Texas on May 2, 1979.

The Neuromodulation Market Opportunity

When treating patients suffering from chronic pain, pain management specialists can select from several therapy options, ranging from the least invasive and lowest-cost therapies to the most aggressive and expensive therapies. Initially, patients typically try over-the-counter medications and physical therapy. If these therapies fail, patients generally try some combination of prescription medications, TENS therapy (application of electrical impulses to the skin), psychological therapy and nerve blocks (injections that provide temporary pain relief). If these therapies do not succeed in relieving pain, patients may then try narcotic and opioid drugs, neurolysis (destruction of the affected nerve) and thermal procedures. At some point during their course of treatment, patients may use neuromodulation products or undergo more invasive surgical procedures.

Patients who opt for neurostimulation or drug pumps to treat chronic pain typically range in age from 25 to 55, have suffered back or neck injuries or otherwise suffer from degenerative spine conditions, and are in constant pain that has not been alleviated by other therapies, including back surgeries. A growing number of patients are choosing neuromodulation over prolonged systemic use of narcotic or opioid drugs, which have negative side effects, or back surgeries involving vertebral fusion or nerve destruction, which are irreversible and often unsuccessful.

The use of neuromodulation devices to manage chronic pain is growing rapidly. According to an independent study, spinal cord stimulation products were forecasted to account for $357.0 million in revenues in 2003 in the United States, up from $293.2 million in 2002. Total neurostimulation revenues for all currently approved indications in the U.S. (including deep brain stimulation, sacral nerve stimulation and other applications) were forecasted to account for $553.4 million in 2003, up from $435.7 million in 2002, according to the same study. A separate study forecasted that in 2002 worldwide sales of drug pumps were approximately $270 million.

The primary factors driving this growth include the following:

• Increased physician and patient awareness of the benefits of neuromodulation. Neuromodulation can manage pain effectively, is minimally invasive, has few side effects and is generally reversible. As physicians and their patients are becoming more aware of these benefits and more accepting of this treatment option, neuromodulation is being used earlier in the process of managing chronic pain. Consequently, the number of pain management specialists worldwide

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who understand and are trained to use neuromodulation products and techniques is growing steadily.

• Expanded indications for the use of neuromodulation products. Neuromodulation products have demonstrated success in the treatment of indications outside of chronic pain. Other companies have recently received regulatory approvals to use these products to address new indications, including essential tremor, Parkinson’s Disease, and incontinence, and future approvals are expected for angina and severe headaches, which should expand the neuromodulation market.

• Technological advances in neuromodulation products. Advances in technology have decreased the size of neuromodulation devices, increased the longevity of their power sources and enhanced programmability and other functional components of the devices, leading to better results for patients.

• Patients’ increased focus on quality of life. In the past, chronic pain sufferers were often resigned to long-term use of pain-killing drugs, often bedridden and unable to maintain a normal lifestyle. Today, many chronic pain patients hope to resume an active lifestyle following an injury or illness, and thus are more likely to consider and accept neuromodulation therapy.

Our Strategy

Our objective is to be a leading provider of a full range of innovative neuromodulation devices for the management of chronic pain and nervous system disorders. To achieve this objective, we are pursuing the following business strategies:

• Expand our presence in the chronic pain market. Through the recent launches of our IPG systems, we have entered a market that is estimated to be nearly five times larger than the RF market, and thus significantly expanded our potential market opportunity. We intend to continue increasing our penetration of the chronic pain market by enhancing our sales and marketing resources. We also intend to leverage our relationships with pain management specialists as well as our favorable track record with our RF systems to grow our market share in the IPG portion of the neurostimulation market and to further strengthen our position in the RF portion of this market.

• Pursue regulatory approvals for new treatment indications. We believe our neurostimulation technology platforms have broad applicability for multiple treatment indications beyond chronic pain conditions. We will pursue regulatory approvals for new clinical applications to treat disorders affecting large patient populations, including essential tremor, Parkinson’s Disease, pelvic pain and severe headaches, where neuromodulation has demonstrated success.

• Continue to build and expand our technology leadership. We have focused on building a corporate infrastructure and core competency in research and development, manufacturing, sales and marketing, reimbursement and regulatory affairs to provide our customers with the highest quality products and services. We believe this strategy will enable us to expand our existing product platforms into new applications and product offerings. We will continue to invest significant resources in the development of our infrastructure and technology platforms to maintain our reputation as a leader in the neuromodulation market.

• Evaluate and pursue acquisitions and strategic alliances. We will pursue acquisitions and strategic alliances that complement our existing neuromodulation business, products and technology platforms and that enhance our product development, and our technological and marketing capabilities.

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Our Products

Within the neuromodulation market, there are two main categories of treatment: neurostimulation, in which an implanted device delivers electrical current directly to targeted nerve sites, and implantable drug pumps, in which an implanted pump delivers drugs directly to a targeted site. We currently market products in both of these treatment categories.

Neurostimulation Therapy Overview

Neurostimulation involves delivering small, mild electrical pulses to the spinal cord or peripheral nerves to inhibit or block the sensation of pain. This stimulation of nerves at or near the site where pain is perceived masks the sensation of pain by generating a tingling sensation or “paresthesia.” Neurostimulation is generally used to manage sharp, intense and constant pain arising from nerve damage or nervous system disorders.

A neurostimulation system typically consists of a pulse generator that produces electrical current, and an external or internal power source. The pulse generator is generally implanted under the patient’s skin in the abdominal area. Leads, which are catheters that contain electrodes and connecting wires, extend from the pulse generator to the targeted therapy site in the epidural space along the spinal cord. The electrodes are centered on the therapy site and deliver electrical current from the pulse generator to the prescribed area. An external programmer allows the physician and patient to adjust the electrical current to the electrodes to optimize the therapeutic effect.

Implant procedures are most often performed at hospitals on an outpatient basis, with a small percentage of procedures also performed at ambulatory surgery centers and at hospitals on an inpatient basis. In most cases, a patient will receive a trial device for a period of up to two weeks. Based on our experience, more than 70% of patients who undergo a trial procedure elect to receive a permanent implant. Implant procedures cost between $30,000 and $50,000, including the cost of the system. The cost of the system generally ranges from $10,000 to $20,000, depending on whether an IPG or RF system is used, the components utilized and the sophistication of the system selected.

Clinical results demonstrate that the majority of patients who are implanted with a neurostimulation system experience a substantial reduction in pain, an increase in activity level, a reduction in use of narcotics and a reduction in hospitalization. We believe these benefits translate into an overall reduction in healthcare costs as well as a significant improvement in the patient’s quality of life.

Our Neurostimulation Products

We currently have two neurostimulation product platforms that we market worldwide: our Renew RF system, which uses an external power source, and our family of totally implantable IPG systems, Genesis and GenesisXP.

Renew

Renew is the latest generation system in our RF stimulation product line, which we believe is the leading technology in the RF stimulation market. We introduced Renew in the U.S. during June 1999 and began selling it in international markets during 2000. The Renew system consists of an implanted RF receiver/pulse generator and leads, and a transmitter containing a power source that is worn externally. The system is powered with the help of an antenna that is attached to the patient’s skin with adhesive tape. Because Renew has a rechargeable, external power source, we believe it is best suited for patients with complex, changing or multi-extremity pain patterns that require higher power levels for treatment.

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Genesis

In late 2000, we received regulatory approvals to begin selling our Genesis IPG system in certain international markets, and we commenced sales during the first quarter of 2001. In November 2001, we received FDA approval of Genesis for treatment of chronic pain of the trunk and limbs, and we launched Genesis in the U.S. in January 2002. Additionally, we received approval in July 2002 from the FDA to market an enhanced version of Genesis, the GenesisXP IPG system for the treatment of chronic pain of the trunk and limbs, which we launched in the U.S. in the fourth quarter of 2002. The GenesisXP offers substantially more battery capacity than Genesis, resulting in enhanced longevity and/or additional power to treat more complex pain. As a result, we now participate in the largest part of the implantable neurostimulation market, as approximately 80% of neurostimulation implantation procedures performed involve IPG systems and the remainder involves RF systems.

Like other IPGs, Genesis is totally implanted and contains a power source with a life of two to five years, depending on stimulation parameters. Generally, simple, localized pain sufferers require less power output than complex, multi-site pain sufferers. These patients and their physicians will usually select an IPG in order to benefit from the convenience of a totally implantable system.

Our Neurostimulation Technologies

Although our Renew and Genesis systems differ in certain significant respects, they share similar technology platforms and benefits, including:

• Greatest number of electrodes. Our Renew system is the only product on the market that can accommodate up to 16 electrodes. In addition, our IPG systems not only allow the use of two 4-electrode leads, but also allow the use of one 8-electrode lead. A greater number of electrodes results in more comprehensive coverage along the spine, and provides physicians with increased flexibility in accommodating a patient’s changing pain patterns. This advantage can, in some cases, also enable a physician to address the problem of lead “migration”, or lead movement along the spine after implant, noninvasively by reprogramming the patient’s stimulation, rather than using an invasive procedure to revise the placement of the lead. We estimate that lead migration occurs in 10% to 15% of cases.

• Advanced programmability. Our Renew, Genesis, and GenesisXP systems feature MultiStim technology. This technology allows clinicians to create multiple stimulation programs, which can be delivered rapidly and sequentially to cover complex pain patterns. These systems also feature PC-Stim, which enables patients to select from a number of clinician-prescribed stimulation programs to optimize treatment as their pain patterns change. Additionally, we have also developed PainDoc®, a proprietary, Windows-based computerized support system, and Rapid Programmer™, a palm-sized programming tool, which facilitate programming and therapy management.

• Innovative and patented technology. Our neurostimulation devices offer our advanced patented technology, which allows programmability of each individual electrode to a “tri-state” position, either positive, negative or neutral. This provides added flexibility in directing the flow of stimulation and is a valuable tool in addressing lead migration.

• Reduced size of implanted device. Our Renew receiver, our Genesis IPG and GenesisXP offer smaller “size-to-power” ratios than comparable products currently on the market, which results in enhanced patient comfort.

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• Ease of lead implantation. Our leads are designed for ease of implantation, which makes the procedure easier for physicians to perform and reduces the time required to complete the procedure.

• User-friendly interface. Our neurostimulation devices have easy-to-use controls and interactive displays that include a stimulation diagram for quick visual confirmation of stimulation coverage.

The following table summarizes some of the key features of the Renew and Genesis systems:

PRODUCT FEATURES	RENEW	GENESIS
Implanted Elements	Receiver/pulse generator, leads	Pulse generator/power supply, leads
External Elements	Programmer, transmitter/power supply, antenna	Programmer
Battery	External, rechargeable and replaceable	Internal with 2-5 year life, depending on program settings and system use
Programming Control	Up to 24 programs, plus some patient control	Up to 24 programs
Lead and Electrode Capacity	1 to 4 leads utilizing up to 16 electrodes	1 or 2 leads utilizing up to 8 electrodes

Our Implantable Drug Pump Product — AccuRx

Implantable drug pumps deliver precise doses of medication directly to a targeted site. This direct drug delivery creates a higher drug concentration at the site, which can often provide faster relief with much lower quantities of medication. For example, the difference in intraspinal versus oral morphine dosage is approximately 1:300. These lower dosages help to minimize side effects, and are more economical for the patient and the third-party reimbursement system. Today, implantable drug pumps are used for the delivery of morphine for the treatment of pain (such as cancer pain), baclofen for spasticity and other movement disorders, and for the intra-arterial delivery of various drugs for chemotherapy.

Implantable drug pumps consist of the pump and a catheter. The pump contains a reservoir that holds the drug and regulates the drug’s delivery rate. The pump is implanted under the skin in the abdominal area and is connected to the catheter, which is tunneled under the skin into either the epidural or intrathecal space of the spinal column. Implantation procedures are most often performed at hospitals on an outpatient basis, with a small percentage of procedures also performed at ambulatory surgery centers and at hospitals on an inpatient basis. The pump is refilled by placing a needle through the skin into an access port on the pump and injecting the drug into the reservoir.

Currently, there are two basic types of implantable drug pumps — constant rate and programmable. Constant rate pumps provide drug infusion at a single, continuous flow rate that cannot be changed once the pump has been implanted in the patient. Programmable pumps allow the rate of drug delivery to be non-invasively changed to meet the patient’s needs. According to an industry report, worldwide

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sales of programmable drug pumps in 2002 were forecasted to be approximately $243 million, as compared with worldwide sales of constant rate drug pumps of $27 million.

We currently offer one drug pump product, our AccuRx constant rate drug pump. We received regulatory approvals to distribute AccuRx in certain international markets for the delivery of morphine and began selling AccuRx in those markets in the second quarter of fiscal 2001. We also received an IDE from the FDA to initiate clinical trials in the U.S. for the delivery of morphine. The clinical trials included 15 sites and 109 patients, all of whom have now been implanted with AccuRx systems. We filed our PMA application with the FDA in December 2003, and must receive approval from the FDA before we can market AccuRx within the United States. We currently expect a late 2004 or early 2005 launch of AccuRx within the United States, assuming the FDA approves our PMA application.

AccuRx is currently the only constant rate drug pump that is powered by our proprietary polymeric diaphragm, rather than by pressurized gas in a chamber surrounding the drug reservoir. The advantages of this design are that our pump is more precise under varying conditions (because its operation is not affected by changes in the body’s temperature or pressure), simpler to manufacture, smaller than other drug pumps on the market and can hold more drug for its size than competing products.

Financial Segments

We operate in two business segments. The Neuro Products segment designs, develops, manufactures and markets implantable medical devices that are used to manage chronic intractable pain and other disorders of the central nervous system through the delivery of electrical current or drugs directly to targeted nerve fibers. The HDI O.E.M. segment provides contract development and O.E.M. manufacturing of electro-mechanical devices. See Note 12 to the Consolidated Financial Statements for segment financial data for the years ended December 31, 2003, 2002 and 2001.

Sales and Marketing

General

We target our sales and marketing efforts at pain management specialists, which include anesthesiologists, neurosurgeons and orthopedic surgeons. Because most pain management specialists implant both RF and IPG devices, as well as drug pumps, we expect to leverage our relationships and experience with pain management specialists and track record with our RF systems to establish our position in the IPG portion of the neurostimulation market. Additionally, by rounding out our product offerings with our IPG systems, we are now able to target physicians who have historically implanted only IPGs.

In 2003, we derived 93% of our net revenues for neuromodulation products from domestic sales and approximately 7% from international sales.

U.S.

With our acquisitions of certain operations of our remaining three domestic distributors in 2003, we have expanded our domestic sales force. In the U.S., we currently use a hybrid sales force, which now consists of 55 direct sales employees and 37 commissioned sales agents. We typically have contracts with all of our sales agents that provide for exclusive territories and sales quotas.

Our sales agents cover defined geographic territories and focus predominantly on the pain management market. Many of our sales agents sell our products as their flagship product line. We pay

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our sales agents commissions at contractual rates, and we invoice and collect revenues from end users.

We employ 26 clinical specialists, who support our direct and commissioned sales agents by providing intra-operative technical and clinical assistance and post-operative programming support.

In addition, we employ eight regional sales managers who interact with our customers and oversee our commissioned sales agents and direct sales employees, a Director of North American Sales and a Vice President of North American Sales, who both coordinate the sales efforts of our distribution network in North America.

Our domestic marketing programs include:

• medical marketing programs intended to educate physicians and their staffs about our products and their use;

• surgical training programs offered to physicians interested in improving their surgical techniques;

• education materials, such as brochures and videos, to educate patients and physicians;

• reimbursement assistance, with the help of outside consultants, to assist physicians in obtaining appropriate reimbursement for our products and their services;

• consulting relationships with opinion leaders who provide us feedback about our current and future products, diagnostic and treatment trends and other areas of interest;

• web site marketing focused on educating both physicians and patients about our product alternatives, reimbursement for our procedures and our company;

• medical journal advertisements; and

• involvement in medical device societies and conferences.

International

Internationally, we market our products through 20 independent distributors who represent us in 26 countries. We are represented by direct salespersons employed by us in Germany. Our Director of International Operations, who is based in the United Kingdom, manages our international distribution network. We are in the process of training and signing independent distributors to market our products in additional countries.

Customer Service

Our sales representatives and clinical specialists are responsible for training physicians and nurses on programming and trouble-shooting any problems with our RF and IPG systems. Both the RF and IPG systems have up to 24 different program settings, which can be programmed and saved into memory. Therefore, significant training of physicians and nurses is required for new users of our products. We typically provide a warranty against defects in workmanship and materials for one year from the date of sale of our products to end-users.

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Major Customers

During 2003, we had no customer with net sales greater than 10% of net revenue for our Neuro Products segment. During 2002 and 2001, we had one customer that accounted for 10% or more of our net revenue from our Neuro Products segment. Sun Medical, a specialty distributor, accounted for $6.3 million, or 13.5% of our Neuro Products segment revenue for the year ended December 31, 2002 and $4.2 million, or 15.3% of our Neuro Products segment revenue for the year ended December 31, 2001. In March 2003, we acquired certain operations of Sun Medical and hired substantially all of the salespeople who had accounted for sales of our Neuro Products. See Note 3 to the Consolidated Financial Statements.

During the year ended December 31, 2003, we had two customers that together accounted for $9.84 million, or 88.8% of net revenue of our HDI O.E.M. segment. Medtronic, Inc. (Medtronic), our most significant competitor, accounted for $8.40 million, or 75.8%, and Arrow International, Inc. (Arrow) accounted for $1.44 million, or 13.0%. During the year ended December 31, 2002, we had two customers that together accounted for $9.52 million, or 89.3% of net revenue of our HDI O.E.M. segment. Medtronic accounted for $6.74 million, or 63.2%, and Arrow accounted for $2.78 million, or 26.1%. During the year ended December 31, 2001, we had three customers that collectively accounted for 10% or more of net revenue of our HDI O.E.M. segment. Medtronic accounted for $6.3 million, or 60.3%, Arrow accounted for $1.8 million, or 17.2%, and Transneuronix, Inc. accounted for $1.1 million, or 10.5%.

HDI currently manufactures two products for Medtronic, one of which accounts for substantially all of the revenue generated from this customer. This product is manufactured under an exclusive Supply Agreement that expires on January 1, 2005. The terms of the Supply Agreement require Medtronic to purchase its requirements for the device from us through March 31, 2004 and then at least 50% of its requirements through January 1, 2005. The device is sold in the cardiology market and is not competitive with any of our products. The Supply Agreement provides that either party may terminate the agreement prior to January 1, 2005 in the event of a material breach or nonperformance. Additionally, Medtronic can terminate the Supply Agreement prior to January 1, 2005 by paying us a termination fee. Medtronic has indicated its desire to extend the agreement and HDI and Medtronic are currently discussing the terms of a new supply agreement. Arrow engaged HDI in October 2000 to develop several products for a new cardiology system under a Product Development and Manufacturing Agreement. Development is likely to be completed during the first half of 2004. At the conclusion of the development, Arrow will likely seek PMA approval from the FDA to market and sell the system. Under the agreement with Arrow, HDI has ongoing exclusive rights to manufacture the products for clinical trials and subsequent market release if the system is approved, until Arrow meets certain purchase minimums.

Research and Development

We currently have an in-house research and development staff of 70 people. In 2003, we spent $9.53 million (10.5% of total net revenue) on research and development and clinical trials, and we expect to increase our investment in research and development and clinical trials for 2004 to approximately $12 million. In 2002 and 2001, we spent $5.84 million (10.2% of total net revenue) and $4.93 million (13.0% of total net revenue), respectively, on research and development and clinical trials.

Our current research and development efforts include work on the following:

• An IPG stimulation system to address migraine headaches. During the first quarter of 2001, we initiated a pilot clinical study in the U.S., which consisted of 10 patients at 2 sites, to evaluate the efficacy of Genesis for treating migraine headaches. We completed the pilot study during the second quarter of 2002, and the data will be used to determine the parameters for a larger pivotal

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clinical study to support a PMA application for Genesis to treat migraine headaches. There are approximately one million patients in the U.S. alone who suffer from migraine headaches. We plan to initiate clinical trials in 2004 for migraine headaches upon approval of an IDE by the FDA.

• IPG stimulation systems for deep brain stimulation to address essential tremor, Parkinson’s Disease and other indications. We plan to initiate clinical trials in 2004 for deep brain stimulation to treat essential tremor and Parkinson’s Disease upon approval of an IDE by the FDA.

• Exploring new applications of our neurostimulation systems to address angina, peripheral vascular disease and sacral nerve stimulation for pelvic pain and incontinence.

• Next-generation IPG and RF neurostimulation systems.

• Next-generation drug pumps, including a prototype programmable pump that will take several years to develop, and new applications for drug pumps.

• Clinical trials that we expect to initiate on several of our new products upon IDE approval from the FDA.

Hi-tronics Designs, Inc.

Our HDI subsidiary developed and is the manufacturer of our Genesis IPG and GenesisXP IPG, and is also the manufacturer of the transmitter used with Renew. HDI’s core strength is in developing highly sophisticated electromechanical devices featuring electronic circuits with very low power requirements, utilizing both discrete and highly integrated technology. Combined with our capabilities in the design and manufacture of implantable leads, electronic device control and communication systems and implantable drug pumps, we believe this expertise allows us to develop more sophisticated products in less time.

As an O.E.M. manufacturer, HDI has developed and introduced more than 60 medical devices for leading medical device companies in the fields of cardiology, neurology and orthopedics. Through HDI, we offer our customers complete development and manufacturing services, beginning with product definition and design and continuing through validation, prototyping, regulatory approval and manufacturing. In 2003, our HDI O.E.M. operations accounted for 12.2% of our consolidated revenues. We expect revenue at HDI to grow modestly and we expect the percentage of HDI O.E.M. revenue to our total revenue to decrease further as our neuromodulation sales continue to grow and as we continue to utilize more of HDI’s manufacturing and development capabilities for our own needs. We currently use approximately 55% of HDI’s manufacturing capacity to supply products on an intercompany basis.

Manufacturing

We operate two manufacturing facilities: one in Plano, Texas and the other in Hackettstown, New Jersey. We assemble and package the majority of our neurostimulation devices and implantable drug pumps at our Plano facility. We also manufacture a variety of medical devices and products on an O.E.M. basis in our Hackettstown facility.

Our manufacturing processes largely consist of the assembly of standard and custom components that we purchase from third-party subcontractors, functional testing to ensure adherence to specifications and inspection of completed products, and the manufacture of our own leads and drug pumps. Our implantable devices are assembled and sterilized in a “clean room” environment designed and maintained to reduce product exposure to particulate matter.

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We rely on third-party suppliers for most of our products’ components and on single suppliers for several critical components used in our main products, including the computer chip used in the receiver of our RF system, the computer chip used in the IPG programmer and Renew transmitter, the batteries used in our IPG systems and the medical-grade polyurethane (bionate) that we and our competitors use in our products. We have been notified by the supplier of the computer chip used in the receiver of our RF system that at some point in the future it intends to cease manufacturing and supplying the computer chip, but to date it has not determined when this will occur. This supplier has agreed to allow us to place a final one-time purchase order for the computer chip. In the interim, we are maintaining a higher than normal inventory of the computer chip and are working to develop a new product design that uses an alternative computer chip. We currently have enough of the chips in stock to meet our projected requirements through the end of 2005.

We currently have sufficient manufacturing capacity to support our business plan, and we plan to relocate our Plano facilities to our new corporate headquarters in mid-2004 which will increase our capacity. See Item 2 “Facilities”. We have no backlog.

Intellectual Property

We rely on a combination of patents, trade secrets, know-how, trademarks and agreements to protect our intellectual property. We currently own or hold exclusive field of use licenses to 33 U.S. and 8 foreign patents relating to our stimulation systems’ electrode, receiver, transmitter and programmer technology and our fully implantable drug pump technology. These and other co-owned and non-exclusively licensed patents cover important aspects of both our RF and IPG stimulation systems for a wide range of current and future applications. We currently have 52 pending U.S. patent applications and over 18 pending foreign patent applications. These pending patent applications cover new stimulation lead technology, methods of using our products to address specific indications, implant accessories, improved connector mechanisms and implantable drug delivery technology.

U.S. Patent No. 4,793,353 covers a non-invasive multiprogrammable tissue stimulator and method wherein only the programming data need be transmitted. The programming data may define the stimulator’s electrode selection, electrode polarity as either positive, negative or high impedence state, and simulation pulse parameter. This patent is scheduled to expire on December 27, 2005. The expiration of this patent may allow competitors to offer programmable stimulators that define electrode selection, polarity and stimulation pulse parameters, and thus could have an adverse effect on our business. A request for an extension of the term of this patent has been filed with the United States Patent Office pursuant to a federal statute that permits us to seek such an extension based on a regulatory approval delay. A final ruling on the extension request has not been made at the present time. While five other U.S. patents owned or licensed by us are due to expire prior to 2006, the expiration of these other patents would not have a material effect on our ability to protect the intellectual property rights currently utilized in our business, because the patents cover technologies that are not currently utilized in our existing products or services.

We have developed technical knowledge, which, although non-patentable, we consider to be significant in enabling us to compete. However, the proprietary nature of such knowledge may be difficult to protect. We have entered into agreements with each of our key employees prohibiting them from disclosing any of our confidential information or trade secrets or engaging in any competitive business (as defined in the agreements) while the employee is working for us and for a period of one year thereafter. In addition, these agreements also provide that any inventions or discoveries by these individuals relating to our business will be assigned to us and become our sole property.

We own a number of U.S. trademark registrations, including AccuRx®, Advanced Neuromodulation Systems®, ANS & Design®, PainDoc®, Renew®, and Genesis®. U.S. trademark applications are pending for various trademarks that we believe have, or will have, value in the marketplace, including

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Life Gets Better™. We also own trademark registrations and applications in countries outside of the U.S. One of our trademarks, “Quattrode,” is due to expire prior to 2006. Two trademarks, PC-Stim® and Compustim®, will require a Section 8 statement of use prior to 2006. We intend to renew the trademarks prior to their expiration and retain our trademark registration rights.

Competition

We are a small company competing in a large and rapidly growing market. We believe that the principal competitive factors in the neuromodulation market are the quality, performance, cost-effectiveness, ease of use, customer service and technical innovation of neuromodulation devices and the existence and benefits of cost-effective alternative therapies.

Our only significant competitor at this time in the neurostimulation market is Medtronic, one of the world’s largest medical device companies, which has substantially greater resources and marketing power than we do. The neuromodulation market is one of Medtronic’s fastest growing segments. Competitive pressures could increase in the future as Medtronic attempts to secure and grow its position in the neuromodulation market. In the constant rate drug pump portion of the market, our principal competitors are Medtronic and Johnson & Johnson.

We believe the neuromodulation market is a high growth-potential market and that other companies are attempting and will attempt in the future to bring new products or therapies into this market. Barriers to entry by new competitors are high, due to a long and expensive product development and regulatory approval process and the intellectual property and patent positions existing in the market. However, other medical device companies may be able to enter the neuromodulation market by leveraging their existing technologies into neuromodulation platforms, thereby decreasing the time and resources required to enter the market. For example, Advanced Bionics, Inc., a privately held California-based company that currently manufactures and markets a cochlear implant, has publicly stated that it is developing and may be testing an IPG system for the treatment of chronic pain.

Government Regulation

In the U.S., we are subject to regulation by numerous governmental authorities, principally the FDA. The research and development, manufacturing, promotion, marketing and distribution of our products in the U.S. are governed by the Federal Food, Drug and Cosmetic Act and the regulations promulgated thereunder (the FDC Act and Regulations). We are subject to inspection by the FDA for compliance with the procedures set forth in the FDC Act and Regulations. Both of our manufacturing operations are required to comply with the FDA’s Quality System Regulations, commonly referred to as QSR. QSR addresses design controls and methods, facilities and quality assurance controls used in manufacturing medical devices.

The FDA has traditionally pursued a rigorous enforcement program to ensure that regulated entities comply with the FDC Act and Regulations. A company not in compliance may face a variety of regulatory actions, including warning letters, product detentions, device alerts, mandatory recalls or field corrections, product seizures, rescission of marketing permits, injunctive actions or civil penalties and criminal prosecutions of the company or responsible employees, officers and directors. The FDA last inspected our Plano facility in 2003 and our Budd Lake and Hackettstown facilities in 2002, and no Inspectional Observations were found at any of these locations.

The process of obtaining FDA clearance can be lengthy, expensive and uncertain. Under the FDA’s requirements, a new medical device cannot be released for commercial use until a PMA application has been filed with the FDA and the FDA has approved the device’s release. If a manufacturer can establish that a newly developed device is “substantially equivalent” to a legally marketed device, the manufacturer may seek marketing clearance from the FDA to market the device by filing a 510(k)

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premarket notification with the FDA, which usually takes less time to receive than a PMA clearance. Either a 510(k) or a PMA, if granted, may include significant limitations on the indicated uses for which a product may be marketed, and FDA enforcement policy strictly prohibits the promotion of approved medical devices for unapproved uses. In addition, product approvals can be withdrawn for failure to comply with regulatory requirements or the occurrence of unforeseen problems following initial marketing. Although all of our currently marketed products, with the exception of our Genesis and GenesisXP IPGs, have been the subject of successful 510(k) submissions, we believe that because the products we are currently developing are more innovative, some of these products will require us to undertake the lengthier and more costly PMA submission process.

On October 26, 2002, President Bush signed The Medical Device User Fee and Modernization Act of 2002 (MDUFMA), amending the FDC Act. Under MDUFMA, we and other medical device manufacturers with gross sales or receipts of $30 million or more are required to pay a user fee to the FDA for PMA and 510(k) reviews. According to the FDA, the user fees provided by MDUFMA, and the additional appropriations that go with the new law, are intended to ensure that safe and effective medical treatments will reach patients more rapidly, provide greater certainty that manufacturers will receive timely, high quality reviews, and provide resources to ensure that devices marketed in the United States continue to meet high standards for safety and effectiveness.

On August 1, 2003, the FDA announced the fee rates and payment procedures for medical device user fees for 2004. The fee for a PMA application increased to $206,811 from $154,000 in 2003 and the fee for a 510(k) application increased to $3,480 from $2,187 in 2003. Fees for supplements in 2004 will range from $14,890 to $206,811, depending on the type of supplement, compared to $11,088 to $154,000 in 2003. The FDA adjusts these fees annually to account for inflation, changes in workloads, and other factors and announces the new fees for the next fiscal year in a Federal Register notice by August 1 of each year. While we do not anticipate that compliance with MDUFMA will have a material adverse effect on our financial results, MDUFMA increases the cost of regulatory compliance.

Under FDA guidance statements, we will be required to track our AccuRx implantable drug pump when it is approved by the FDA for commercial distribution in the U.S. Prior to commercial distribution in the U.S., we will establish written procedures for tracking our drug pumps in accordance with FDA’s guidance statements.

Medical device laws are also in effect in many of the countries outside the U.S. in which we do business. These laws range from comprehensive device approval and quality system requirements for some or all of our products to simpler requests for product data or certifications. The number and scope of these requirements are increasing and, as we expand our business into new jurisdictions, we will be subject to additional laws. In June 1998, the European Union Medical Device Directive became effective, and all medical devices sold in Europe must now meet the Medical Device Directive standards and receive CE Mark certification. CE Mark certification involves a comprehensive quality system program and submission of data on a product to the Notified Body in Europe. The Medical Device Directive and the ISO 13485 standard are recognized international quality standards that are designed to ensure that companies develop and manufacture quality medical devices. Our Plano facility was audited in 2003, and our Budd Lake and Hackettstown facilities were audited in 2003, for compliance with the Medical Device Directive and ISO 13485, and all three facilities are certified to these standards.

The financial arrangements through which we market, sell and distribute our products are subject to federal and state laws and regulations in the U.S. with respect to patients who are Medicare or Medicaid beneficiaries. These laws include “fraud and abuse” and physician anti-referral laws and regulations. Violations of these laws and regulations may result in civil and criminal penalties, including substantial fines and imprisonment. In a number of states, the scope of fraud and abuse or physician anti-referral laws and regulations, or both, have been extended to include all patients, as opposed to just Medicare and Medicaid beneficiaries. Additionally, our financial arrangements with our customers may be subject to increasing regulation in the future, due to proposed health reform initiatives. Although we do not believe that we will need to undertake any significant expense or modification to our manufacturing operations or the conduct of our business to comply with current or proposed federal or state fraud and abuse or physician anti-referral laws or regulations, if we do not comply with

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any such laws or regulations, our business practices could be adversely affected, and we may also be affected in other respects not presently foreseeable that could have an adverse impact on our business, financial condition and results of operations.

Third-Party Reimbursement

Hospitals and ambulatory surgery centers are the primary purchasers of neuromodulation products. These primary purchasers then bill various third-party payors for the neuromodulation products and procedures they provide to their patients. In the U.S., these third-party payors include Medicare and Medicaid, private insurance companies and managed care organizations, and workers’ compensation programs. Third-party payors carefully scrutinize whether to cover new products and the level of reimbursement for covered products, and coverages and reimbursement levels for neuromodulation products vary among these three primary purchasing groups and the healthcare setting in which physicians perform procedures, and change from year to year. In some cases, we bill Medicare and Medicaid, private insurance companies and managed care organizations, and workers’ compensation programs directly and pursue reimbursement for our products.

Internationally, reimbursement levels and coverages for neuromodulation products vary significantly among the countries in which we do business due to the wide variety of health care payment systems in these countries, which include both government-sponsored health care and private insurance.

We currently employ 13 individuals within our sales and marketing department who work solely on issues related to third-party reimbursement. The responsibilities of these employees include assisting and training physician practices and medical facility staffs in obtaining pre-authorization and confirmation of amount of reimbursement for our products, working with third-party payors as they periodically evaluate reimbursement coverages and levels, and communicating updates on reimbursement information to our sales force.

Employees

As of March 5, 2004, we employed 437 full-time employees, including 70 in research and development, 128 in sales and marketing (including support personnel), 202 in manufacturing and related operations, and the remainder in executive and administrative positions. None of our employees are represented by a labor union and we consider our employee relations to be good.

Website and Availability of SEC Reports

Our website is located at www.ans-medical.com. We post our most recent annual report on Form 10-K, quarterly reports on Form 10-Q filed subsequent to our most recent annual report on Form 10-K, Forms 8-K, all amendments to those reports, and certain other SEC filings on our website under the heading Investors/Financial Information and SEC Filings. We make other SEC filings available through our website free of charge by way of a link to www.sec.gov under the heading “Click here for a list of our SEC filings.”

ITEM 2. FACILITIES

We entered a 63-month lease agreement, which became effective on June 1, 1999, for our 40,000 square foot corporate headquarters and manufacturing facility in Plano, Texas. In September 2002, we amended our lease agreement to add approximately 9,700 square feet of office space located in the same complex. The lease on the additional space as well as the corporate headquarters facility expires in August 2004. We have two five-year renewal options on the facilities. In addition, in June 2003, we entered into a sublease agreement to add approximately 9,800 square feet of office space located in the same complex. The term of the sublease expires on July 31, 2004. We expect to vacate these three spaces during mid-2004.

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Because we expect our business to continue to grow at rates that will demand added office and facility space, we acquired approximately 10 acres of land in December 2002 for approximately $3.19 million. The land is located in Plano, Texas near our current corporate headquarters. We began construction of a new corporate headquarters facility on the land in April 2003 and plan to relocate to the new facility before the expiration of our principal lease in August 2004. The new facility will be approximately 143,000 square feet with an estimated construction cost of approximately $15 million. We also plan to spend approximately $1.5 million for furniture and equipment for the new facility. The new facility was designed to accommodate planned growth within a five-year horizon.

We also lease facilities in New Jersey for our HDI O.E.M. segment. One of the facilities, located in Budd Lake, New Jersey, is 10,730 square feet of office space that is used for administration, design engineering, drafting, documentation and regulatory affairs. We renewed the lease on March 1, 2004 and the lease expires on February 28, 2006. Our Budd Lake lease contains no renewal option. We also lease 18,582 square feet of space in Hackettstown, New Jersey used for our HDI O.E.M. manufacturing operations. We renewed the Hackettstown lease on December 31, 2002 and the lease expires on December 31, 2005 and is renewable for one additional three-year period.

ITEM 3. LEGAL PROCEEDINGS

We are a party to product liability claims and other ordinary routine litigation claims arising in the ordinary course of business related to our neurostimulation devices. Our product liability insurers have assumed responsibility for defending us against product liability claims, subject to reservation of rights in certain cases. Historically, product liability claims for our neurostimulation devices have not resulted in significant monetary liability beyond our insurance coverage. We seek to maintain appropriate levels of product liability insurance with coverage that we believe is comparable to that maintained by companies similar in size and serving similar markets.

Except for ordinary course product liability claims and other ordinary routine litigation incidental to our business, we are not currently a party to any other pending legal proceeding. We maintain general liability insurance against risks arising out of the normal course of business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Inapplicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is currently quoted on the Nasdaq National Market under the symbol “ANSI.” On March 5, 2004, there were approximately 550 holders of record of our common stock. The following table sets forth the quarterly high and low closing sales prices for our common stock. These prices do not include adjustments for retail mark-ups, markdowns or commissions.

2002:	High		Low
First Quarter	$	24.13	$	19.01
Second Quarter	$	22.53	$	19.00
Third Quarter	$	24.61	$	16.61
Fourth Quarter	$	25.15	$	19.01

2003:	High		Low
First Quarter	$	28.60	$	22.77
Second Quarter	$	35.34	$	25.87
Third Quarter	$	43.16	$	35.44
Fourth Quarter	$	46.51	$	36.25

2004:	High		Low
First Quarter (through March 5, 2004)	$	47.87	$	41.00

On July 11, 2003, we effected a 3 for 2 stock split in the form of a 50% stock dividend (one share of common stock paid for every two shares held), paid to shareholders of record on June 20, 2003. All prior period shares, share prices, and income per share figures have been restated to reflect the split.

To date, we have not declared or paid any cash dividends on our common stock and the Board of Directors does not anticipate paying cash dividends on our common stock in the foreseeable future.

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Equity Compensation Plan Information

As of December 31, 2003

	Number of securities				Number of securities
	to be issued upon		Weighted-average		remaining available for
	exercise of		exercise price of		future issuance under
Plan category	outstanding options		outstanding options		equity compensation plans
Equity compensation plans approved by security holders(2)		2,469,572	$	17.76		44,417
Equity compensation plans not approved by security holders(1)(2)		820,693	$	19.03		145
Total		3,290,265	$	18.08		44,562

(1) Executive officers and members of the Board of Directors are not eligible to receive stock option grants under non-shareholder approved plans.

(2) Certain of the plans allow the aggregate number of shares of common stock reserved for options under the plan to be increased by the same percentage that the total number of issued and outstanding shares of common stock increased from the preceding January 1 to the following December 31 (if such percentage is positive).

Equity Compensation Plans Not Approved by Security Holders In April 2001, the Board of Directors adopted the 2001 Employee Stock Option Plan (the 2001 Plan). The purpose of the 2001 Plan is to furnish additional equity incentives to key employees of the Company, other than executive officers of the Company. Members of the Board of Directors are also ineligible to participate in the 2001 Plan. The additional equity incentives are designed to increase shareholder value and to advance the interests of the Company by furnishing incentives to attract and retain the best available personnel for positions of substantial responsibility and to provide incentives to such personnel to promote the success of the business of the Company and its subsidiaries. The total number of shares of common stock issuable under the 2001 Plan is 270,000, subject to an adjustment on January 1 of each year (commencing on January 1, 2002), when the aggregate number of shares of common stock then issuable upon the exercise of options will be increased by the same percentage that the total number of issued and outstanding shares of common stock increased from the preceding January 1 to the following December 31 (if the percentage is positive). On January 1, 2002, 2003 and 2004, 49,788 shares, 115,572 shares and 27,907 shares, respectively were added to the 2001 Plan pursuant to this provision. All options granted under the 2001 Plan will be “nonqualified stock options” under the Internal Revenue Code of 1986, as amended from time to time. All stock option grants under the 2001 Plan expire ten years from the date of grant and for the most part are exercisable one-fourth each year over a four-year period of continuous service. The exercise price of an option granted under the 2001 Plan is determined by the Stock Option Committee, but in no event can be less than the fair market value of the common stock at the time the stock option is granted.

In June 2002, the Board of Directors adopted the 2002 Stock Option Plan (the 2002 Plan). The purpose of the 2002 Plan is to furnish additional equity incentives to advisory directors, consultants and key employees of the Company, other than executive officers of the Company. Members of the Board of Directors are also ineligible to participate in the 2002 Plan. The additional equity incentives are designed to increase shareholder value and to advance the interests of the Company by furnishing incentives to attract and retain the best available advisory directors, consultants and key employees for

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positions of substantial responsibility and to provide incentives to such advisory directors, consultants and key employees to promote the success of the business of the Company and its subsidiaries. The total number of shares of common stock issuable under the 2002 Plan is 337,500, subject to an adjustment on January 1 of each year (commencing on January 1, 2003), when the aggregate number of shares of common stock then issuable upon the exercise of options will be increased by the same percentage that the total number of issued and outstanding shares of common stock increased from the preceding January 1 to the following December 31 (if the percentage is positive). On January 1, 2003 and 2004, 121,973 shares and 29,452 shares, respectively, were added to the 2002 Plan pursuant to this provision. All options granted under the 2002 Plan will be “nonqualified stock options” under the Internal Revenue Code of 1986, as amended from time to time. All stock option grants under the 2002 Plan expire six years from the date of grant for advisory directors and consultants and ten years from the date of grant for key employees. For the most part, stock option grants to key employees under the 2002 Plan are exercisable one-fourth each year over a four-year period of continuous service while stock option grants to advisory directors and consultants vary from cliff vesting in eighteen months, one-half each year over a two-year period of service, one-third each year over a three-year period of service, one-fourth each year over a four-year period of service to one-fifth each year over a five-year period of service. The exercise price of an option granted under the 2002 Plan is determined by the Stock Option Committee, but in no event can be less than the fair market value of the common stock at the time the stock option is granted.

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ITEM 6. SELECTED FINANCIAL DATA

	Years Ended December 31,
	2003		2002		2001		2000		1999(2)
			(in thousands, except per share data)
Statements of Income Data:(1)
Net revenue(2)	$	91,082	$	57,372	$	37,916	$	31,827	$	26,879
Total net revenue		91,082		57,372		37,916		31,827		35,779
Gross profit		63,947		36,713		22,241		17,127		23,852
Research and development expense		9,525		5,843		4,928		3,854		4,097
Sales and marketing expense		26,553		14,932		9,056		6,851		6,290
General and administrative expenses and amortization of intangibles		9,460		6,690		5,448		5,477		4,996
Income from operations		18,409		9,248		2,809		945		8,469
Net income	$	13,217	$	6,684	$	1,518	$	832	$	5,817
Diluted income per share:(3)
Net income	$	.64	$	.37	$	.10	$	.06	$	.43

	December 31,
	2003		2002		2001		2000		1999
					(in thousands)
Balance Sheet Data: (1)
Cash, cash equivalents, certificates of deposit and marketable securities	$	94,802	$	96,770	$	11,937	$	11,599	$	9,736
Working capital		126,437		114,280		24,906		22,211		17,626
Total assets		194,806		158,344		55,865		49,565		48,407
Short-term notes payable and current maturities of long-term notes payable		—		—		52		30		—
Notes payable, excluding current maturities		—		—		137		212		—
Stockholders’ equity	$	178,125	$	145,045	$	46,812	$	40,442	$	36,536

⁽¹⁾ On January 2, 2001, we completed the acquisition of Hi-tronics Designs, Inc. The transaction was accounted for on a pooling of interests basis and accordingly, prior periods have been restated.

⁽²⁾ Net revenue excludes contract research and development revenue in 1999 from our former agreement with Sofamor Danek.

⁽³⁾ On July 11, 2003, we effected a 3 for 2 stock split. All prior period shares, share prices, and income per share figures have been restated to reflect the split.

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The following is a reconciliation of previously reported amounts with restated amounts for total net revenue and net income resulting from the January 2, 2001 acquisition of Hi-tronics Designs, Inc. accounted for on a pooling of interests basis.

	Years Ended December 31,
	2000			1999
	(in thousands)
Reconciliation of total net revenue:
As previously reported by the Company	$	23,082		$	29,478
HDI, for the year ended November 30		10,366			7,989
Elimination of intercompany transactions		(1,621	)		(1,688	)
Total net revenue as restated	$	31,827		$	35,779
Reconciliation of net income:
As previously reported by the Company	$	954		$	6,003
HDI, for the year ended November 30		28			328
Elimination of intercompany transactions		(150	)		(514	)
Net income as restated	$	832		$	5,817

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the Consolidated Financial Statements of the Company and the related Notes.

On July 11, 2003, we effected a 3 for 2 stock split in the form of a 50% stock dividend (one share of common stock paid for every two shares held), paid to shareholders of record on June 20, 2003. All prior period shares, share prices, and income per share figures have been restated to reflect the split.

Background

We entered the neuromodulation market in 1995 through the acquisition of a company that had developed and marketed a radio-frequency (RF) neurostimulation system. Through our initiatives, we developed and launched our next generation neurostimulation system, the Renew® RF spinal cord stimulation system, in 1999. We also recently developed our Genesis® and GenesisXP™ totally implantable pulse generator (IPG) spinal cord stimulation systems. We began selling Genesis in Europe in 2001 and in the U.S. in 2002 subsequent to the FDA’s approval of our PMA application in November 2001, and our GenesisXP IPG system following FDA approval in the fourth quarter of 2002.

In 2000, we completed development of AccuRx, our constant rate implantable drug pump, in part using proprietary technology we licensed from Implantable Devices Limited Partnership (IDP). We began selling AccuRx in certain international markets in the second quarter of 2001. In January 2001, we strengthened our position in the neuromodulation market by acquiring the assets of IDP and ESOX Technology Holdings, LLC (ESOX). This acquisition provided us with intellectual property surrounding implantable drug pump technologies in all applications, including pain and cancer therapy.

Also in January 2001, we completed the acquisition of Hi-tronics Designs, Inc. (HDI). We accounted for this acquisition using the pooling of interests method. Acquiring HDI provided us with additional in-house expertise in the design and manufacture of highly sophisticated electromechanical devices. Additionally, HDI continues to provide contract development and manufacturing services to third parties, which we report as a separate segment for financial reporting purposes (the HDI O.E.M. segment). In the future, we expect our HDI O.E.M. segment revenue to decrease as a percentage of our total revenue as we grow revenue from our proprietary neurostimulation systems and drug pumps and increasingly utilize HDI’s research and development capabilities for internal product development.

In November 2002, we completed the acquisition of MicroNet Medical, Inc. (MicroNet), a privately held developer of medical devices based on proprietary micro-lead technology. MicroNet developed a line of very thin and steerable spinal cord stimulation leads called Axxess™. These leads are the smallest neurostimulation leads on the market, which we believe offers advantages in certain applications.

In 2003, we acquired certain operations of our three remaining U.S. distributors who marketed our neuromodulation products in the United States. In March 2003, we acquired certain operations of Sun Medical, our largest U.S. distributor. In September 2003, we acquired certain operations of Comedical, our northwestern U.S. distributor and in November 2003, we acquired certain operations of our sole remaining distributor in the northeastern U.S., State of the Art Medical Products. As part of these acquisitions, substantially all of the direct sales persons that represented our products joined us as direct employees. We believe that these acquisitions will strengthen our sales capabilities and allow us to focus the sales priorities of those personnel on our products, expand sales coverage in those former distributor territories and invest in customer and market development.

Our current neuromodulation product line includes our Genesis IPG system, GenesisXP IPG system, Renew RF system and AccuRx constant rate drug pump. With the launch of our Genesis and

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GenesisXP IPG systems, we compete in 100% of the implantable neurostimulation market to treat chronic pain of the trunk and limbs. The launch of the Genesis IPG and GenesisXP IPG in 2002 slowed our growth rate in sales of Renew systems from an average percentage growth rate of the mid-teens over the past several years to single-digit growth in both 2002 and 2003. Management believes this trend may continue in 2004 and has assumed similar single-digit growth in Renew sales during 2004.

Critical Accounting Policies and Estimates

General

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to third-party reimbursement rates, bad debts, inventories, intangible assets, and contingencies and litigation. Management bases its estimates on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies affect its more significant judgments and estimates used in preparation of its consolidated financial statements.

Revenue Recognition

We generate revenues from product sales to end customers, product sales to international distributors, and development contracts. Until we completed the acquisition of certain operations of our remaining U.S. distributors in 2003, we also generated revenue from product sales to U.S. distributors.

We recognize revenue on product sales to end customers and distributors upon shipment, provided an arrangement with the customer or distributor exists, the fee is fixed and determinable, and collectibility is reasonably assured. Certain of our customers are third-party payors who reimburse fixed amounts for services based on a specific diagnosis. Revenue is recognized on these third-party payor sales based on the sales price less a contractual adjustment, which is based on our history of reimbursement with the third-party payor, provided all other revenue recognition criteria are met. We do not have any continuing obligation to our customers for installation or training, and there are no acceptance clauses in our customer arrangements.

We recognize revenue on development contracts at HDI using either the percentage of completion method for fixed price development contracts, or as the services are performed for development contracts that are completed on a time and materials basis. We recognize revenue using the percentage of completion method for the fixed price development agreements as the contract term can vary from 9 to 24 months, our right to receive payment depends on our performance in accordance with the agreement, and we can reasonably estimate the costs applicable to various stages of the

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development arrangement. Revenue is recognized based on the ratio of costs incurred in relation to the estimated costs for the total project. If we do not accurately estimate the resources required or the scope of work to be performed under a fixed price development agreement, then future profit margins and results of operations may be negatively impacted.

Under the Company’s shipping terms, title transfers to the end customer or distributor at the point of shipment. Shipping and handling costs are included in cost of revenue. Payments received in advance of revenue recognition requirements are recorded as deferred revenue on the consolidated balance sheet.

Bad Debt

We are required to estimate the collectibility of our trade receivables. A considerable amount of judgment is required in assessing the ultimate realization of the receivables, including the current credit-worthiness of each customer, the aging of receivables and our historical experience. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances or write-offs may be required.

Inventory Reserve

Our reserve for excess and obsolete inventory is based upon forecasted demand for our products. If the demand for our products is less favorable than those projected by management, additional inventory write-downs or write-offs may be required.

Intangible Assets

Intangible assets consist of goodwill, patents, purchased technology, trademarks, customer and supplier relations and covenants not to compete, and are amortized using the straight-line method over their respective useful lives.

In assessing the recoverability of our intangible assets, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets.

Contingencies

We are subject to proceedings, lawsuits and other claims related to our products and business. We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies are made after careful analysis of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy, in dealing with these matters.

Currently, product liability claims and other ordinary routine litigation incidental to our business are the only litigation to which we are a party. While historically our product liability claims have not resulted in significant monetary liability beyond our insurance coverage, an adverse judgment beyond our insurance coverage could have a material adverse impact on our results of operations and financial condition.

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Stock Compensation

See Note 2 to the Consolidated Financial Statements for a discussion of the application of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation” and SFAS 148, “Accounting for Stock-Based Compensation – an Amendment of FASB Statement No. 123” to our stock compensation programs.

Results of Operations

Comparison of the Years Ended December 31, 2003 and 2002

Results for 2003 continue to reflect the positive impact of revenue growth from increased unit sales of our Genesis and GenesisXP IPG systems, which we launched in the United States in January 2002 and December 2002, respectively. We believe these systems will also generate most of our growth during 2004.

Net revenue. Net revenue increased $33.71 million, or 58.8%, in 2003 from 2002 due to increased sales of our neuromodulation products which increased 71.3% to a record $80.00 million in 2003 from $46.71 million in 2002 primarily due to increased sales of our Genesis family of IPG systems. Revenue from our Renew RF system grew modestly year over year. Net revenue of our HDI O.E.M. business, as planned, increased modestly to $11.08 million in 2003 from $10.66 in 2002 primarily due to higher volume of O.E.M. product sales. We continue to use more of HDI’s manufacturing and development capabilities for our own increasing needs and as such we anticipate only modest growth in our HDI O.E.M. business.

Gross profit. Gross profit increased $27.23 million, or 74.2%, in 2003 from 2002 due to the increase in net revenue discussed above and an improvement in gross profit margins. Gross profit margins increased to 70.2% in 2003, compared to 64.0% in 2002, due to higher sales of our neuromodulation products, which contribute higher margins than HDI O.E.M. product sales, higher neuromodulation product sales from direct sales and commissioned agents which contribute higher margins than distributor sales due to three acquisitions in 2003 of certain operations of our remaining U.S. distributors, and operational efficiencies gained from higher manufacturing volumes.

Operating expenses. Total operating expenses increased $18.07 million, or 65.8%, and increased as a percentage of net revenue to 50.0% in 2003 from 47.9% in 2002, primarily due to increased investments in our sales and marketing capabilities, including the additional sales personnel acquired in the three acquisitions in 2003 of certain operations of our remaining U.S. distributors, and to a lesser extent increased investments in research and development and increased amortization expense from intangibles acquired in our various acquisitions. We continued to leverage our general and administrative expense in 2003.

Sales and marketing. Sales and marketing expense, as a percentage of net revenue, increased to 29.2% in 2003 from 26.0% in 2002, and the expense increased in absolute dollars by $11.62 million principally due to higher commission expense from increased Neuro Product sales, higher salary expense from annual salary increases and staffing additions in reimbursement, direct sales and clinical support specialists, higher employee benefit costs from staffing additions, higher travel expense due to increased direct sales activities and higher expense for education and training of new implanters of Neuro Products. In 2003, we expanded our sales and marketing capabilities with the acquisitions of certain operations from our three remaining U.S. distributors and added substantially all of the salespersons of those businesses to our direct sales force. We expect to continue to add additional salespersons in the future.

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Research and development. Research and development expense, as a percentage of net revenue, increased slightly to 10.5% in 2003 from 10.2% in 2002, and the expense increased in absolute dollars by $3.68 million principally due to higher salary and benefit expense from staffing additions and annual salary increases, higher stock-based compensation expense for certain consultants and higher prototype tooling and test materials for new products under development. Our development efforts in 2003 continued to focus on next-generation IPG stimulation systems, an IPG stimulation system for deep brain stimulation and next-generation drug pumps.

General and administrative. General and administrative expense, as a percentage of net revenue, decreased to 8.4% in 2003 from 10.0% in 2002, while the expense increased in absolute dollars by $1.89 million principally due to higher salary expense from annual salary increases and staffing additions, higher employee benefit costs, higher recruiting fee expense and higher depreciation expense.

Amortization of other intangibles. Amortization expense of intangibles increased 92.4% in 2003 from 2002, or $879,000, due to a full year of amortization expense for intangible assets we acquired in the November 2002 MicroNet acquisition, plus amortization of additional intangible assets from earn-out consideration paid in 2003 as milestones were met pursuant to the MicroNet acquisition agreement. In addition we recorded amortization expense for intangible assets we acquired in 2003 from the acquisition of certain operations of our three remaining U.S. distributors. We expect amortization expense to increase in 2004 by approximately $168,000 due to having a full year of amortization expense from the above-mentioned 2003 acquisitions, excluding additional amortization expense that may be generated as we issue additional earn-out consideration that is recorded as intangible assets under the MicroNet acquisition agreement.

Other income. Other income increased $1.05 million in 2003 from 2002 primarily due to the reversal of an accrued tax-abatement liability of $969,000 as we were legally released from our potential obligation to pay that amount in 2003.

Income tax expense. Income tax expense increased $3.67 million in 2003 from 2002 as a result of increased income before taxes and an increase in the overall effective tax rate to 35.1% in 2003 from 34.3% in 2002. Our increased effective tax rate is primarily due to our federal statutory tax rate being 35% in 2003 compared to 34% in 2002. The effective tax rates reflect a provision for state taxes, offset by tax-exempt interest income earned on our cash, cash equivalents and marketable securities.

Net income. Net income increased $6.53 million, or 97.7%, in 2003 from 2002 primarily due to the positive impact of revenue growth from increased unit sales of our Genesis and GenesisXP IPG systems, increased gross margin, and to a lesser extent from the reversal of the tax-abatement liability discussed above. Net income per diluted share increased to $.64 in 2003 from $.37 in 2002. Excluding the one-time tax-abatement reversal, net income per share increased to $.61 in 2003 from $.37 in 2002.

Comparison of the Years Ended December 31, 2002 and 2001

Net revenue. Net revenue increased $19.46 million, or 51.3%, in 2002 from 2001 due to increased sales of our neuromodulation products which increased 70.1% to $46.71 million in 2002 from $27.46 million in 2001 due to the U.S. launch of our Genesis IPG system in January 2002 and our GenesisXP IPG system in December 2002. The launch of the Genesis IPG in 2002 slowed our growth rate in sales of Renew systems from an average percentage growth rate in the mid-teens over the past several years to single-digit growth in 2002. Net revenue from our HDI O.E.M. business increased marginally to $10.66 million in 2002 from $10.46 million in 2001 as we focused more of HDI’s resources on our own manufacturing and research and development needs.

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Gross profit. Gross profit increased $14.47 million, or 65.1%, in 2002 from 2001 due to the increase in net revenue discussed above and an improvement in gross profit margins. Gross profit margins increased to 64.0% in 2002, compared to 58.7% in 2001, due to higher sales of our neuromodulation products, which contribute higher margins than HDI O.E.M. product sales, higher neuromodulation product sales from direct sales and commissioned agents, which contribute higher margins than distributor sales, and operational efficiencies gained from higher manufacturing volumes.

Operating expenses. Total operating expenses increased $8.03 million in 2002 from 2001, but decreased as a percentage of net revenue to 47.9% in 2002 from 51.3% in 2001 due to leveraging of research and development expense, leveraging of general and administrative expense, and to a lesser extent, eliminating amortization expense of goodwill.

Sales and marketing. Sales and marketing expense, as a percentage of net revenue, increased to 26.0% in 2002 from 23.9% in 2001, and the expense increased in absolute dollars by $5.88 million principally due to higher salary and benefit expense from staffing additions in direct sales, reimbursement and sales support positions, higher commission expense from increased product sales, and higher sample and promotional expense in support of the Genesis and GenesisXP IPG launches.

Research and development. Research and development expense, as a percentage of net revenue, decreased to 10.2% in 2002 from 13.0% in 2001, while the expense increased in absolute dollars by $914,000 principally due to higher salary and benefit expense from staffing additions, higher test material expense and higher expense associated with our clinical trials of AccuRx.

General and administrative. General and administrative expense, as a percentage of net revenue, decreased to 10.0% in 2002 from 10.4% in 2001, while the expense increased in absolute dollars by $1.78 million principally due to higher salary expense from staffing additions (including a new executive officer position), higher employee benefit costs, higher bonus expense, higher property tax expense and higher fees for accounting and tax services.

Amortization of intangibles. No amortization expense of goodwill was recorded in 2002 due to the adoption of SFAS No. 142 on January 1, 2002. During 2001, we recorded $557,000 for amortization expense of goodwill.

Amortization expense of other intangibles increased modestly by $19,000 in 2002 from 2001 due to additional amortization expense for intangible assets acquired in November 2002 when we completed the acquisition of MicroNet.

Other income. Other income increased to $923,000 in 2002 from an expense of $26,000 in 2001 primarily due to a $451,000 increase in interest income from higher funds available for investment from our public offering during the second quarter of 2002 and the expense in 2001 of $484,000 for costs associated with the acquisition of HDI. These costs were expensed instead of capitalized because the acquisition was accounted for under the pooling of interests method.

Income tax expense. Income tax expense increased $2.22 million in 2002 from 2001, but the overall effective tax rate decreased to 34.3% in 2002 compared to 45.5% in 2001. The decrease in the effective tax rate in 2002 compared to 2001 was the result of three factors. First, our amortization of goodwill in the 2001 period was not deductible for tax purposes. Second, the HDI acquisition costs expensed in the 2001 period of $484,000 were not fully deductible for tax purposes. Finally, the 2002 period included tax-free interest income.

Net income. Net income increased $5.17 million, or 340.4%, in 2002 from 2001 reflecting the positive impact of revenue growth from increased unit sales of our Genesis and GenesisXP IPG systems, increased gross margin, and leveraging of operating expenses. Net income per diluted share increased

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to $.37 in 2002 from $.10 in 2001. Results for the 2001 period reflect amortization expense for goodwill of $556,604. The 2002 results contain no similar expense since we eliminated the amortization of goodwill on January 1, 2002 when we adopted the new accounting standards for intangible assets described above. If the amortization expense for goodwill were eliminated from the 2001 period, pro forma net income would be $2.07 million and pro forma net income per diluted share would be $.14.

Liquidity and Capital Resources

At December 31, 2003 our working capital increased to $126.44 million from $114.28 million at year-end 2002. The ratio of current assets to current liabilities was 11.21:1 at December 31, 2003 compared to 13.15:1 at December 31, 2002. Cash, cash equivalents, and marketable securities totaled $94.80 million at December 31, 2003 compared to $96.77 million at December 31, 2002. In 2003, we made numerous investments discussed below which were funded to a large extent from operations.

In March, September and November 2003, we acquired certain operations of our three remaining U.S. distributors. These acquisitions expanded our direct domestic sales force. The total cost of these acquisitions was approximately $10.23 million, which we funded from our cash reserves.

In January 2003, we invested $1 million in cash in Innovative Spinal Technologies, Inc., a start-up company that develops spine technologies, products and services through intellectual property development and contract research.

We increased our investment in inventories to $22.11 million at December 31, 2003, from $13.72 million at December 31, 2002. This increase from year-end 2002 was primarily the result of three factors. First, we increased our investment in inventories held by direct and commissioned sales agents during 2003 as a result of an increased sales force. Second, we increased our investment in raw materials and finished goods for our Genesis and GenesisXP IPG systems to support our continued success of these products in the U.S. market and in anticipation of continued sales growth. Finally, we increased our overall investment in inventories in anticipation of our move to our new corporate facility in 2004 due to the new facility requiring regulatory process validation before product can be manufactured in and shipped from the facility.

Our investment in trade accounts receivable increased to $17.89 million at December 31, 2003, from $10.85 million at December 31, 2002 due to the increase in sales of our neuromodulation products resulting from the launch of the Genesis and GenesisXP IPG systems. Our days sales outstanding increased from 55 days at year-end 2002 to 64 days at year-end 2003 due to higher receivables due from insurance companies and hospitals as a result of us acquiring all of our U.S. distributors in 2003. Hospitals and insurance companies have slower payment cycles than our former U.S. distributors, who typically paid us within 10 to 30 days.

In November 2002, we completed the acquisition of MicroNet. At closing we paid the former MicroNet shareholders $500,000 in cash and 234,453 shares of our common stock with a value at the time of issuance of $4,648,421. In addition, we incurred expenses of $859,460, including an investment-banking fee of $600,000. In March 2003, we paid the former MicroNet shareholders an aggregate of 42,519 shares of our common stock with a value at the time of issuance and release from escrow of $1,020,059 upon the successful completion of half of the first product milestone, and in October 2003, we paid the former MicroNet shareholders an aggregate of 17,462 shares of our common stock with a value at the time of issuance and release from escrow of $700,182 upon the successful completion of another product sub-milestone. The former MicroNet shareholders may receive additional shares of our common stock if additional product and sales milestones are met. The aggregate value of the additional potential milestone earnout payments was $9 million as measured at the time the transaction was completed. Of this $9 million in additional shares, a fixed number of our common shares totaling 134,409 with an aggregate value at closing of $3 million were issued into an

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escrow account. Shares that are released from escrow if such milestones are met will be valued at the time of release from escrow. At December 31, 2003, 100,811 shares remained in escrow. The product and sales milestones referred to above consist of three principal product milestones and a sales milestone. Each of the product milestones has three to four sub-milestones that relate to the delivery of specific products, including four separate 4-electrode leads (Milestone I), two separate 8-electrode leads (Milestone II) and three separate leads and a trial cable (Milestone III). The product sub-milestones are met if and when we are able to submit, and if and when we receive, regulatory approvals for products that have been adapted for use with our electrical stimulation devices. The sales milestone will be met if and when we and our subsidiaries generate $5 million in cumulative net sales of MicroNet lead products during the four years following the closing of the MicroNet transaction.

An important product milestone deadline occurred under the MicroNet acquisition agreement in November 2003, which was not met. We are currently in discussions with the former MicroNet shareholders regarding this product milestone. If this product milestone had been achieved by the deadline, the value of the milestone payment at December 31, 2003 was approximately $1,552,684, or 33,894 shares, which would have been allocated to certain identifiable intangible assets in accordance with the original purchase price allocation.

Excluding expenditures discussed below on our new facility, we spent $5.80 million during 2003 for capital expenditures primarily for new furniture and equipment for personnel we hired during 2003 and additional manufacturing tooling and equipment to support our current products and new products we expect to introduce in 2004.

Because we expect our business to continue to grow at rates that will demand added office and facility space, in April 2003 we began construction on a new 143,000 square foot corporate headquarters facility on the 10 acres of land we acquired in December 2002. The land is located in Plano, Texas, near our current corporate headquarters. Our current lease on our 49,700 square foot corporate headquarters expires in August 2004 and we plan to relocate to the new facility prior to the expiration of the lease. We designed the new facility to accommodate planned growth within a five-year horizon. The construction cost of the facility is approximately $15 million, and we expect to spend approximately $1.5 million on office furniture and equipment for the new facility. We have funded the interim construction costs from our cash reserves and through December 31, 2003 have spent approximately $8.8 million. While we have not yet determined the method by which we will permanently finance the facility, we believe our cash position and overall balance sheet position provides us with various financing alternatives, including financing the facility from our current cash, financing through a debt vehicle such as a mortgage or other form of note, or a sale-and-leaseback transaction.

We received $7.52 million of cash during 2003 from the exercise of employee, advisory director and director stock options to purchase 1,124,372 shares of our common stock.

Liquidity may also be enhanced based on our ability to utilize all or part of a net operating loss carryforward of $4.3 million to offset future taxable income. We acquired $3.4 million of the net operating loss carryforward in connection with the MicroNet acquisition and its utilization may be subject to a limitation under Section 382 of the Internal Revenue Code. The rules of Section 382 of the Internal Revenue Code generally apply to limit a corporation’s ability to utilize acquired net operating loss carryforwards to reduce its federal taxable income in the periods after an acquisition. The Company’s ability to use the net operating loss carryforwards acquired in the MicroNet acquisition to reduce its federal taxable income is subject to these rules. Provided the Company generates sufficient taxable income in future years, the Section 382 limitation will have the effect of deferring the utilization of the net operating loss carryforwards over several years. Without this limitation, the Company would be able to immediately use the net operating loss carryforwards to reduce taxable income in future tax periods. The total amount of net operating loss carryforwards that

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the Company may use to reduce taxable income in any taxable year after the acquisition is determined with reference to its purchase price of MicroNet. Based on current estimates and assumptions, we expect to utilize at least approximately $700,000 in net operating loss carryforwards per full twelve-month tax years, assuming we generate sufficient taxable income in any given year to utilize such amount.

Additionally, liquidity may be enhanced to the extent we realize tax benefits from stock option exercises. Exercises of nonqualified stock options, and exercises of incentive stock options followed by “disqualifying dispositions” of the underlying common stock within one year following exercise generate compensation expense for tax purposes in the year of exercise or disposition, as the case may be. During 2003, we generated a $9.79 million tax benefit related to nonqualified stock option exercises and disqualifying dispositions of common stock acquired on exercise of incentive stock options.

We believe our current cash, cash equivalents, marketable securities and cash generated from operations will be sufficient to fund our current levels of operating needs and capital expenditures for the foreseeable future. We currently have no credit facilities in place. If we decide to acquire complementary businesses, product lines or technologies, or enter into joint ventures or strategic alliances that require substantial capital, we intend to finance those activities by the most attractive alternative available, which could include utilizing our current cash, bank borrowings, or the issuance of debt or equity securities.

The following table sets forth certain information concerning our contractual obligations at December 31, 2003.

	Maturity by Fiscal Year
							2006 and
(in thousands)	Total		2004		2005		Thereafter
Operating leases (1)	$	1,096	$	814	$	260	$	22
Inventory purchases (2)		8,017		7,857		160		—
Commitments for construction of new corporate headquarters facility (3)		6,094		6,094		—		—
Total	$	15,207	$	14,765	$	420	$	22

(1)	In accordance with accounting principles generally accepted in the U.S., these obligations are not reflected in the consolidated balance sheets. These obligations are for operating lease payments primarily related to facilities.
(2)	Our inventory purchase commitments do not exceed our projected requirements over the related terms and are in the normal course of business.
(3)	Contractual commitments for construction of our new corporate headquarter facility of 143,000 square feet.

Cash Flows

Net cash provided by operating activities was $16.48 million in 2003, $7.59 million in 2002, and $3.06 million in 2001. Net cash provided by operating activities increased by $8.89 million in 2003 from 2002 principally due to a $6.53 million increase in net income and a $7.94 million increase in tax benefits from the exercise of stock options. These increases were partially offset by increases in accounts receivable and inventory. Net cash provided by operating activities increased by $4.53 million in 2002 from 2001 principally due to a $5.17 million increase in net income.

Net cash used in investing activities was $26.38 million in 2003, $91.14 million in 2002 and $3.09 million in 2001. In 2003, our primary investing activities using cash were the purchase of marketable securities ($382.65 million), the purchase of certain operations of three of our U.S. distributors ($10.23 million), funds used to finance the interim construction of our new corporate headquarters facility ($8.83 million), capital expenditures ($5.80 million), and the purchase of minority equity investments in

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preferred stock of two privately-held companies ($1.10 million), while net proceeds from the sale of marketable securities provided cash of $382.22 million. In 2002, our primary investing activities using cash were the purchase of marketable securities ($188.39 million), the purchase of land ($3.19 million), capital expenditures ($2.94 million) and cash used in the purchase of MicroNet ($1.36 million), while net proceeds from the sale of marketable securities provided cash of $104.75 million. In 2001, our primary investing activities using cash were the purchase of marketable securities ($3.90 million) and capital expenditures ($3.11 million) for additional manufacturing tooling and equipment, office furniture and equipment, non-compete agreements and patents, while maturing certificates of deposit and sales of marketable securities provided cash of $3.92 million. The non-compete agreements discussed in this section for fiscal year 2001 relate to a $200,000 expenditure incurred in 2001 to purchase a non-compete agreement from a former distributor of our Neuro Products. In reference to the patents, we incurred $191,000 in cash expenditures (in addition to the stock we issued with a value of $2,426,662) related to the purchase of ESOX in January 2001, which was allocated to the patents we acquired in the transaction. Prior to the transaction, we had licensed the technology from ESOX. The patents we acquired in the ESOX transaction relate to our implantable drug pump technologies. We are currently seeking FDA approval to commercialize an implantable drug pump in the United States.

Net cash provided by financing activities was $7.52 million in 2003, $84.73 million in 2002, and $957,000 in 2001. During 2003, all of the cash provided by financing activities was the result of the exercise of stock options. During 2002, we used $190,000 to repay our entire outstanding long-term debt, while we received $83.18 million in net proceeds from a public offering and $1.75 million from the exercise of stock options. During 2001, we used $48,000 to reduce certain debt obligations, while we received $1.00 million from the exercise of stock options.

Currency Fluctuations

Substantially all of our international sales are denominated in U.S. dollars. Fluctuations in currency exchange rates in other countries could reduce the demand for our products by increasing the price of our products in the currency of the countries in which the products are sold, although we do not believe currency fluctuations have had a material effect on the Company’s results of operations to date.

Outlook and Uncertainties

The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995: Certain matters discussed in this Annual Report on Form 10-K contain statements that constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The words “expect,” “estimate,” “anticipate,” “predict,” “believe,” “plan,” “will,” “should,” “intend,” “would,” “scheduled,” “new market,” “potential market applications,” and similar expressions and variations are intended to identify forward-looking statements. Such statements appear in a number of places in this Annual Report on Form 10-K and include statements regarding our intent, belief or current expectations with respect to, among other things: (i) trends affecting our financial condition or results of operations; (ii) our financing plans; and (iii) our business growth strategies. We caution our readers that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those projected in the forward-looking statements as a result of various factors. These risks and uncertainties include the following:

Failure of our Genesis and GenesisXP IPG systems to gain and maintain market acceptance would adversely affect our revenue growth and profitability.

We formally introduced our Genesis IPG system in the U.S. in January 2002 and our GenesisXP IPG system (offering increased battery capacity and longevity) in the U.S. in December 2002. We believe

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that the size and potential for growth of the IPG portion of the neurostimulation market are greater than in the RF portion. Accordingly, our ability to generate increased revenue and profitability, and thus our general success, will depend, in large part, on the market’s acceptance of our IPG systems. As a new entrant into the IPG portion of the neurostimulation market, there are many reasons we might not achieve market acceptance on a timely basis, if at all, including the following:

• competing products, technologies and therapies are available, and others may be introduced that gain greater and faster physician and patient acceptance than our IPG systems; and

• our only competitor in the IPG portion of the market has had its IPG product on the market for some time and enjoys significant brand awareness and other advantages among pain management specialists.

If the IPG portion of the neurostimulation market grows at a faster rate than the RF portion, our failure to successfully market and sell our IPG systems could negatively affect our revenue growth and profitability.

Because our main competitor has significantly greater resources than we do and new competitors may enter the neuromodulation market, it may be difficult for us to compete in this market.

The medical device market is highly competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. Medtronic, is one of the largest competitors in the medical device sector, and is currently our sole competitor in the neurostimulation market and our largest competitor in the implantable drug pump market. Medtronic is a large publicly-traded company and enjoys several competitive advantages over us, including:

• substantially greater name recognition;

• greater resources for product research and development, sales and marketing, distribution, patent protection and pursuing regulatory approvals;

• a greater number of established relationships with health care professionals and third-party payors; and

• multiple product lines and the ability to bundle products together or offer discounts, rebates or other incentives to secure a competitive advantage.

Medtronic will continue to develop new products that compete directly with our products, and its greater resources may allow it to respond more quickly to new technologies, new treatment indications or changes in customer requirements. Further, we generally price our products at a premium to those of Medtronic. Additionally, because the neuromodulation market is a high growth-potential market, other companies may attempt to bring new products or therapies into this market. For example, Advanced Bionics, Inc., a privately-held company that currently manufactures and markets a cochlear implant product, has publicly stated that it is developing and may be testing an IPG system for the treatment of chronic pain. For all of these reasons, we may not be able to compete successfully against Medtronic or against future competitors.

If pain management specialists do not recommend and endorse our products, our sales could be negatively impacted and we may be unable to increase our revenues and profitability.

Our products are based on evolving concepts and techniques in pain management. Acceptance of our products depends on educating the medical community as to the distinctive features, benefits, clinical

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efficacy, safety and cost-effectiveness of our products compared to alternative therapies and competing products, and on training pain management specialists in the proper use of our products. To sell our products, we must successfully educate and train pain management specialists so that they will understand our products and feel comfortable recommending and endorsing them. We may not be able to accomplish this, and even if we are successful in educating and training pain management specialists, there is no guarantee that we will obtain their recommendations and endorsements.

The launch of Genesis and GenesisXP and other market factors could impede growth in or reduce sales of Renew, which would adversely affect our revenues and profitability.

Our Genesis and GenesisXP IPG systems are currently the newest neurostimulation products on the market. Although Genesis and our Renew RF system are targeted towards patients with different types of pain and Genesis is not intended to replace Renew in the neurostimulation market, some pain management specialists may recommend Genesis to their patients when they would have otherwise recommended Renew, and, consequently, Genesis may “cannibalize” or substitute for some sales of Renew. Further, we believe our principal market competitor has chosen to emphasize the IPG as the therapy of choice in the neurostimulation market. These factors could lead to a slowdown in growth, or a reduction, in sales of Renew and similar RF-based neurostimulation products. Although Renew and Genesis are targeted for different patients, sales growth of Renew has slowed since the launch of Genesis. If Renew sales growth continues to slow or sales are reduced, and we do not gain enough market share through IPG sales to compensate for these reduced sales, our revenues and profitability will be adversely affected.

If patients choose less invasive or less expensive alternatives to our products, our sales could be negatively impacted.

We sell medical devices for invasive and minimally-invasive surgical procedures. Patient acceptance of our products depends on a number of factors, including device and associated procedure costs, the failure of less invasive therapies to help the patient, the degree of invasiveness involved in the procedures used to implant our products, the rate and severity of complications from the procedures used to implant our products and any adverse side effects caused by the implanting of our products. If patients choose to use existing less invasive or less expensive alternatives to our products, or if effective new alternatives are developed, our revenues and profitability could be materially adversely affected.

Any adverse changes in coverage or reimbursement amounts by Medicare and Medicaid, private insurance companies and managed care organizations, or workers’ compensation programs could limit our ability to market and sell our products.

In the U.S., our products are generally covered by Medicare and Medicaid and other third-party payors, such as private insurance companies and managed care organizations, and workers’ compensation programs, which reimburse patients for all or part of the cost of our products and related medical procedures. The cost of our products and related procedures are significant, and third-party payors carefully scrutinize whether to cover new products and the level of reimbursement for covered products. Further, for certain types of procedures, gaps exist between the rate of reimbursement paid by Medicare and Medicaid and the rates paid by private insurers. In addition, gaps exist in reimbursement levels depending on the health care setting in which physicians perform procedures using our products. In the future, these gaps may narrow and public and private payors may reduce levels of reimbursement for neuromodulation devices in an effort to control increasing costs. If Medicare or other third-party payors decide to eliminate or reduce coverage amounts on patient reimbursements for our products, this could limit our ability to market and sell our products in the U.S., which would materially adversely affect our revenues and profitability. In November 2003, for example, the Center for Medicare and Medicaid Services issued a final ruling establishing new 2004

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reimbursement rates for Medicare hospital outpatient procedures, including spinal cord stimulation procedures. Reimbursement levels for permanent implants of spinal cord stimulation devices in the hospital outpatient setting were generally reduced as a result of the ruling, which decreased the amount that hospitals would be reimbursed by Medicare for these procedures. However, because the new rates continue to provide hospitals with adequate margins to cover their facility costs and yield a fair profit to the hospitals, the new rates have not had an adverse effect on the prices we charge hospitals for our systems. If in the future CMS reduces rates to such an extent that hospitals’ ability to continue operating profitably in these procedures were at risk, then there could be price pressure on our products at that time.

International market acceptance of our products may also depend, in part, upon the availability of reimbursement within prevailing health care payment systems. Reimbursement and health care payment systems in international markets vary significantly by country, and include both government-sponsored health care and private insurance. We may not obtain international reimbursement approvals in a timely manner, if at all. Where reimbursement in foreign markets is available, it tends to be at levels significantly below those in the U.S. Our failure to receive international reimbursement approvals may negatively impact market acceptance of our products in the international markets in which those approvals are sought.

If we fail to protect our intellectual property rights, our competitors may take advantage of our ideas and compete directly against us.

We rely in part on patents, trade secrets and proprietary technology to remain competitive. We may not be able to obtain or maintain adequate U.S. patent protection for new products or ideas, or prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by employees. Additionally, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S. Even if our intellectual property rights are adequately protected, litigation may be necessary to enforce them, which could result in substantial costs to us and substantial diversion of the attention of our management and key technical employees. If we are unable to adequately protect our intellectual property, our competitors could use our intellectual property to develop new products or enhance their existing products. This could harm our competitive position, decrease our market share or otherwise harm our business.

U.S. Patent No. 4,793,353 covers a non-invasive multiprogrammable tissue stimulator and method wherein only the programming data need be transmitted. The programming data may define the stimulator’s electrode selection, electrode polarity as either positive, negative or high impedence state, and simulation pulse parameter. This patent is scheduled to expire on December 27, 2005. The expiration of this patent may allow competitors to offer programmable stimulators that define electrode selection, polarity and stimulation pulse parameters, and thus could have an adverse effect on our business. A request for an extension of the term of this patent has been filed with the United States Patent Office pursuant to a federal statute that permits us to seek such an extension based on a regulatory approval delay. A final ruling on the extension request has not been made at the present time. While five other U.S. patents owned or licensed by us are due to expire prior to 2006, the expiration of these other patents would not have a material effect on our ability to protect the intellectual property rights currently utilized in our business, because the patents cover technologies that are not currently utilized in our existing products or services.

Other parties may sue us for infringing their intellectual property rights, or we may have to sue them to protect our intellectual property rights.

There has been a substantial amount of litigation in the medical technology industry regarding patents and intellectual property rights. The neuromodulation market is characterized by extensive patent and other intellectual property rights, which can create greater potential than in less-developed markets for

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possible allegations of infringement, particularly with respect to newly-developed technology. We may be forced to defend ourselves against allegations that we are infringing the intellectual property rights of others. In addition, we may find it necessary, if threatened, to initiate a lawsuit seeking a declaration from a court that we are not infringing the intellectual property rights of others or that these rights are invalid or unenforceable, or to protect our own intellectual property rights. Intellectual property litigation is expensive and complex and its outcome is difficult to predict. If we do not prevail in any litigation, in addition to any damages we might have to pay, we would be required to stop the infringing activity, obtain a license, or concede intellectual property rights. Any required license may not be available to us on acceptable terms, if at all. In addition, some licenses may be nonexclusive, and, therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent, we may be unable to sell some of our products, which could adversely affect our revenues and profitability.

Failure to obtain necessary government approvals for new products or for new applications for existing products would mean we could not sell those new products, or sell our existing products for those new applications.

Our products are medical devices, which are subject to extensive government regulation in the U.S. and in foreign countries where we do business. Unless an exemption applies, each medical device that we wish to market in the U.S. must first receive either a PMA or a 510(k) clearance from the FDA with respect to each application for which we intend to market it. Either process can be lengthy and expensive. According to the FDA, the average 510(k) review period was 96 days in 2003, but reviews may take longer and approvals may be revoked if safety or effectiveness problems develop. The PMA process is much more costly, lengthy and uncertain. According to the FDA, the average PMA submission-to-decision period was 359 days in 2003; however, reviews may take much longer and completing a PMA application can require numerous clinical trials and require the filing of amendments over time. The result of these lengthy approval processes is that a new product, or a new application for an existing product, often cannot be brought to market for a number of years after it is developed. Additionally, we anticipate that many of the products we bring to market in the future will require us to seek PMA approvals rather than 510(k) clearances. If we fail to obtain or maintain necessary government approvals of our new products or new applications for existing products on a timely and cost-effective basis, we will be unable to market the affected products for their intended applications.

Modification of any marketed device could require a new 510(k) clearance or PMA or require us to cease marketing or recall the modified device until we obtain this clearance or approval.

Any modification we want to make to an FDA-cleared or approved device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, would require a new 510(k) clearance, or possibly a new or supplemental PMA. Under FDA procedures, we would make the initial determination of whether to seek a new 510(k) clearance or PMA, but the FDA could review our decision. If the FDA disagrees with our decision not to seek a new 510(k) clearance or PMA and requires us to seek either 510(k) clearance or PMA for modifications we have already made to a previously-cleared product, we might be required to cease marketing or recall the modified device until we obtain this clearance or approval. We could also be subject to significant regulatory fines or penalties.

We will be unable to sell our products if we fail to comply with manufacturing regulations.

To commercially manufacture our products, we must comply with government manufacturing regulations that govern design controls, quality systems and documentation policies and procedures. The FDA and equivalent foreign governmental authorities periodically inspect our manufacturing facilities. Our failure to comply with these manufacturing regulations may prevent or delay our marketing or distribution of our products, which would negatively impact our business.

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Our products are subject to product recalls even after receiving FDA clearance or approval, which would negatively affect our financial performance and could harm our reputation.

Any of our products may be found to have significant deficiencies or defects in design or manufacture. The FDA and similar governmental authorities in other countries have the authority to require the recall of any such defective product. A government-mandated or voluntary recall could occur as a result of component failures, manufacturing errors or design defects. We do not maintain insurance to cover losses incurred as a result of product recalls. Any product recall would divert managerial and financial resources and negatively affect our financial performance, and could harm our reputation with customers.

We are subject to potential product liability and other claims and we may not have the insurance or other resources to cover the cost of any successful claim.

Defects in our implantable medical devices could subject us to potential product liability claims that our devices were ineffective or caused some harm to the human body. Our current product liability litigation involves assertions that our products did not perform as intended and, in some cases, that they caused discomfort or harm to the patient. Our product liability insurance may not be adequate to cover current or future claims. Product liability insurance is expensive and, in the future, may not be available on terms that are acceptable to us, if it is available to us at all. Plaintiffs may also advance other legal theories supporting their claims that our products or actions resulted in some harm. A successful claim brought against us in excess of our insurance coverage could significantly harm our business and financial condition.

We are subject to substantial government regulation and our failure to comply with all applicable government regulations could subject us to numerous penalties, any of which could adversely affect our business.

We are subject to numerous government regulations relating to, among other things, our ability to sell our products, third-party reimbursement, fraud and abuse of Medicare or Medicaid and patient privacy. If we do not comply with all applicable government regulations, government authorities could do any of the following:

• impose fines and penalties on us;

• prevent us from manufacturing our products;

• bring civil or criminal charges against us;

• delay the introduction of our new products into the market;

• recall or seize our products;

• disrupt the manufacture or distribution of our products; or

• withdraw or deny approvals for our products.

Any one of these results could materially adversely affect our revenues and profitability and harm our reputation.

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Our reliance on single suppliers for critical components used in our main products could adversely affect our ability to deliver products on time.

We continue to rely upon sole source suppliers for certain materials and services used in manufacturing our products, including the custom chip used in the receiver of our RF system, the computer chip used in the IPG programmer and Renew transmitter, the batteries used in our IPG system and the medical-grade polyurethane (bionate) that we use in all of our products, for reasons of quality assurance, component availability or cost effectiveness. We work closely with our vendors to assure continuity of supply while maintaining high quality and reliability. With the exception of the custom chip used in our RF receiver, which we discuss below, we believe that alternative suppliers exist for the other components used to manufacture our products. FDA requirements regarding the design and manufacture of our products require an investment in time and money to establish additional or replacement sources for certain components or materials. We believe that in some cases, the cost of pursuing and qualifying alternative sources and/or redesigning specific components of our products would significantly outweigh the benefits of doing so and consume significant resources that are better devoted to other aspects of our business. Similarly, qualifying alternative sources or product designs require costly and time-consuming regulatory submissions and approvals that again may not be justified from a cost-benefit standpoint for all components used in our products. The reduction or interruption in supply, or our inability to develop alternative sources of supply, could adversely affect our operations.

Although there are currently no alternative suppliers for the custom chip used in our RF system, we have sufficient chips in stock to meet our near-term requirements and we believe we will be able to order more chips to meet our future needs. In the meantime, we are designing and developing our own replacement chip. The sole supplier of this chip first indicated its desire to cease manufacturing and supplying the RF system chip several years ago. The supplier has continued to supply the chip, however, and to date has not determined if and when it will cease to supply the chip. The supplier has agreed to notify us when it does decide to cease supplying the chip and has promised to permit us to place a final one-time purchase order for the chip. In the interim, we have maintained and will continue to maintain a higher than normal inventory of the chip. We currently have enough of the chips in stock to meet our requirements through the end of 2005. Our engineers are developing a new chip to be used with our next-generation RF receiver. Our engineers estimate that this new chip and the next-generation RF receiver would be completed and have received the appropriate regulatory approvals by the second half of 2005. Consequently, under the circumstances, we do not believe that a single source of supply for the RF system chip poses a serious risk to our business. Our RF system sales accounted for approximately 37% of our total Neuro Product segment sales in 2003, and approximately 33% of our total sales.

Our major competitor in the neuromodulation market currently accounts for a significant percentage of our revenue from our HDI O.E.M. segment.

During 2003, we had two major customers that together accounted for $9.84 million, or 88.8%, of our net revenue from our HDI O.E.M. segment. Medtronic, our most significant competitor, accounted for $8.40 million, or 75.8% and Arrow accounted for $1.44 million, or 13.0%. Either of these customers could cease doing business with us at any time. If this were to occur, our revenues and profitability could be materially adversely affected, at least in the short term.

We are dependent upon the success of neuromodulation technology. Our inability to continue to develop innovative neuromodulation products, or the failure of the neuromodulation market to develop as we anticipate, would adversely affect our business.

Our current products focus on the treatment of chronic pain using neuromodulation. Our development efforts focus on leveraging our neuromodulation expertise. The neuromodulation market is subject to

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rapid technological change and product innovation. Our competitors may succeed in developing or marketing products, using neuromodulation technology or other technologies that may be superior to ours. If we are unable to compete successfully in the development of new neuromodulation products, or if new and effective therapies not based on neuromodulation are developed, our products could be rendered obsolete or non-competitive. This would materially adversely affect our business.

Our success will depend on our ability to attract and retain key personnel and scientific staff.

We believe our future success will depend on our ability to manage our growth successfully, including attracting and retaining scientists, engineers and other highly skilled personnel. Our key employees are subject to confidentiality, trade secret and non-competition agreements, but may terminate their employment with us at any time. Hiring qualified management and technical personnel is difficult due to the limited number of qualified professionals. Competition for these types of employees is intense in the medical device field. If we fail to attract and retain personnel, particularly management and technical personnel, we may not be able to continue to succeed in the neuromodulation market.

If we choose to acquire complementary businesses, products or technologies instead of developing them ourselves, we may be unable to complete these acquisitions or to successfully integrate an acquired business, product or technology in a cost-effective and non-disruptive manner.

Our success depends on our ability to continually enhance and broaden our product offerings in response to changing technologies, customer demands and competitive pressures. Accordingly, we may, as we have in the past, acquire complementary businesses, products or technologies instead of developing them ourselves. We do not know if we will be able to identify prospective acquisition targets or complete any future acquisitions, or whether we will be able to successfully integrate any acquired business, operate it profitably or retain its key employees. Integrating any business, product or technology we acquire could be expensive and time-consuming, disrupt our ongoing business and distract our management and key technical personnel. If we are unable to integrate any acquired entities, products or technologies effectively, our business will suffer. In addition, any impairment of goodwill or other intangible assets or charges resulting from the costs of acquisitions could harm our business and operating results.

We are subject to additional risks associated with international operations.

Internationally, we market our products through 20 independent distributors who represent us in 26 countries, except in Germany where we are represented by direct salespersons. In 2003, 7% of our sales revenue from our neuromodulation products segment came from international sales. International sales are subject to a number of additional risks, including the following:

• establishment by foreign regulatory agencies of requirements different from those in place in the U.S.;

• fluctuations in exchange rates of the U.S. dollar against foreign currencies that may affect demand for our products overseas;

• export license requirements, changes in tariffs, and other general trade restrictions;

• difficulties in staffing and managing international operations;

• political or economic instability; and

• lower and more restrictive third-party reimbursement for our products.

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Any of these risks could make it difficult or impossible for us to continue to expand our overseas operations, which could have an adverse effect on our revenues.

Our operations are conducted at three locations, and a disaster at any of these facilities could result in a prolonged interruption of our business.

We currently conduct all of our development, manufacturing and management activities at our facilities in Plano, Texas and Budd Lake and Hackettstown, New Jersey. However, a natural disaster, such as a tornado, fire or flood, or a man-made disaster, could cause substantial delays in our operations, damage or destroy our manufacturing equipment or inventory and cause us to incur significant additional expenses. A disaster could seriously harm our business and affect our reputation with customers. The insurance we maintain may not be adequate to cover our losses in any particular case.

We may be obligated to issue shares of our common stock in the future and the number of shares could increase if our stock price decreases.

In connection with the acquisition of MicroNet in November 2002, as part of the purchase price, we agreed to pay the former MicroNet shareholders additional shares of our common stock if certain product, regulatory approval and sales milestones are met. The aggregate value of the additional potential milestone earnout payments payable in shares of our common stock was $9 million as measured at the time the transaction was completed. Of this $9 million in additional shares, we issued a fixed number of shares totaling 134,409 with an aggregate value at closing of $3 million into an escrow account. If and when specified product and regulatory milestones are achieved, we will release a specified and fixed number of shares of common stock from escrow to the former MicroNet shareholders. In addition, if and when those same product and regulatory milestones are achieved, we will also issue at that time a number of shares of our common stock with an aggregate value of up to $3 million. Finally, if and when we generate $5 million in cumulative net sales of MicroNet lead products during the four years following the closing, we will issue at that time a number of shares of our common stock with an aggregate value of $3 million. Thus, we agreed to issue shares of our common stock with an aggregate value of up to $6 million in the future upon the achievement of specific milestones, the number of shares of which will depend on the average trading price of our common stock. The average trading price for this purpose is the per share average closing price of our common stock on the Nasdaq National Market for the 30 consecutive trading days immediately prior to two business days before the applicable milestone payment date. Because the number of shares we could be required to issue depends on the average trading price at the time of payment, if the average trading price of our common stock declines significantly, we could be required to issue more shares of our common stock. For example, if our stock price were $40 per share and we were required to issue $3 million of our common stock on satisfaction of the sales milestone, we would be required to issue 75,000 shares of our common stock to the former MicroNet shareholders. If our stock price declined 50% from that level to $20 per share, however, we would be required to issue twice as many shares, or 150,000 shares.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We invest our cash reserves in high quality short-term liquid money market instruments with major financial institutions, a high quality short-term municipal bond fund with a major financial institution and certificates of deposit. At December 31, 2003, we had $71,695 invested in money market funds, $1,677,894 in certificates of deposit with maturities less than 90 days from the purchase date and $3,735,875 in a tax-free municipal bond fund with daily liquidity. The rate of interest earned on these investments will vary with overall market rates. A hypothetical 100-basis point change in the interest rates earned on these investments would not have a material effect on our income or cash flows.

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We also have certain investments in available-for-sale securities. These investments primarily consist of investment grade municipal bonds with maturities less than one year from the date of purchase, 7-day and 35-day AAA municipal bond floaters and Freddie Mac Notes with maturities less than one-year from the date of purchase. The cost of these investments is $86,243,780 and the fair value at December 31, 2003 was $86,213,841. The investments are subject to overall bond market and interest rate risk, however the Company believes the risk to be limited since a large portion of the investments, $82,747,000, are in 7-day and 35-day municipal floaters which have no principal risk. The investment grade municipal bonds and Freddie Mac Notes may have risk of principal depending on the overall bond market. A hypothetical 10% decrease in the value of these investments from their prices at December 31, 2003 would decrease the fair value by $346,628.

We do not use derivative financial instruments to manage the impact of interest rate changes on our investments or debt instruments.

At December 31, 2003, we had no interest bearing debt.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is set forth in Appendices A, B and C.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the SEC and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Based on their evaluation of our disclosure controls and procedures which took place as of the end of the period covered by this report, the Chief Executive and Chief Financial Officers believe that these controls and procedures are effective to ensure that we are able to collect, process and disclose the information we are required to disclose in the reports we file with the SEC within the required time periods.

No changes in our internal controls over financial reporting have occurred during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is contained in our definitive proxy statement to be filed in connection with our 2004 annual meeting of shareholders, which information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is contained in our definitive proxy statement to be filed in connection with our 2004 annual meeting of shareholders, which information is incorporated herein by reference. Information under the captions “Compensation Committee Report” and “Performance Graph” are not incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is contained in our definitive proxy statement to be filed in connection with our 2004 annual meeting of shareholders, which information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Inapplicable.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is contained in our definitive proxy statement to be filed in connection with our 2004 annual meeting of shareholders, which information is incorporated herein by reference.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed as part of this report.

1.	Financial Statements: See Index to Financial Statements on the second page of Appendix A. See Appendix C.
2.	Financial Statement Schedules:* Schedule II — Valuation and Qualifying Accounts. See Appendix B.
	* Those schedules not listed above are omitted as not applicable or not required.
3.	Exhibits: See (c) below.

(b) Reports on Form 8-K.

(1)

The Company furnished a report on Form 8-K on October 23, 2003, providing under Item 12. “Results of Operations and Financial Condition”, a press release issued by the Company on October 23, 2003 disclosing information regarding our results of operations and financial condition for the third quarter ended September 30, 2003 and our outlook for 2003.

(2)

The Company filed a report on Form 8-K on November 25, 2003, reporting under Item 5. “Other Events”, that Christopher G. Chavez, President and Chief Executive Officer of the Company, and James P. Calhoun, Vice President-Human Resources of the Company, each entered into a “Preset Diversification Program” (PDP) during August 2003, a stock disposition plan intended to qualify for the safe harbor offered by Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. Both of the PDP plans became effective as of November 28, 2003.

(c) Exhibits:

Exhibit
Number	Description
2.1	Agreement and Plan of Merger, dated as of November 30, 2000, by and among Advanced Neuromodulation Systems, Inc., ANS Acquisition Corp. and Hi-tronics Designs, Inc. (10)
2.2	Agreement and Plan of Merger, dated as of November 4, 2002, by and among Advanced Neuromodulation Systems, Inc., MicroNet Acquisition, Inc. and MicroNet Medical, Inc. (14)
3.1	Articles of Incorporation, as amended and restated(11)
3.2	Bylaws(11)
4.1	Rights Agreement dated as of August 30, 1996, between Quest Medical, Inc. and KeyCorp Shareholder Services, Inc. as Rights Agent(5)
4.2	Amendment To Rights Agreement dated as of January 25, 2002 between Advanced Neuromodulation Systems, Inc. and Computershare Investor Services LLC (formerly KeyCorp Shareholder Services, Inc) (12)
10.1	Quest Medical, Inc. 1979 Amended and Restated Employees Stock Option Plan(2)
10.2	Form of 1979 Employees Stock Option Agreement(3)
10.3	Quest Medical, Inc. Directors Stock Option Plan (as amended)(2)

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Exhibit
Number	Description
10.4	Form of Directors Stock Option Agreement(1)
10.6	Quest Medical, Inc. 1995 Stock Option Plan(4)
10.7	Form of 1995 Employee Stock Option Agreement(4)
10.8	Quest Medical, Inc. 1998 Stock Option Plan(7)
10.9	Advanced Neuromodulation Systems, Inc. 2000 Stock Option Plan(9)
10.10	Employment Agreement dated April 9, 1998 between Scott F. Drees and Quest Medical, Inc.(6)
10.11	Employment Agreement dated April 9, 1998 between F. Robert Merrill III and Quest Medical, Inc.(6)
10.12	Employment Agreement dated April 1, 2002 between Christopher G. Chavez and Advanced Neuromodulation Systems, Inc.(13)
10.13	Employment Agreement dated April 1, 2002 between Kenneth G. Hawari and Advanced Neuromodulation Systems, Inc.(13)
10.14	Special Termination Agreement dated April 1, 2002 between Christopher G. Chavez and Advanced Neuromodulation Systems, Inc.(13)
10.15	Special Termination Agreement dated April 1, 2002 between Kenneth G. Hawari and Advanced Neuromodulation Systems, Inc.(13)
10.16	Form of Employment Agreement and Covenant Not to Compete, between the Company and key employees(1)
10.17	Lease Agreement dated as of February 4, 1999, between Advanced Neuromodulation Systems, Inc. and Legacy Lincoln I, LTD. (8)
10.18	Second Amendment to Lease Agreement dated as of September 1, 2002, between Advanced Neuromodulation Systems, Inc. and Plano R&D Associates, LTD. (15)
10.19	Escrow Agreement dated November 25, 2002, among Advanced Neuromodulation Systems, Inc., Thomas E. Brust and Computershare Trust Company (16)
10.20	Sublease Agreement dated as of June 18, 2003, between Advanced Neuromodulation Systems, Inc. and Integrated Device Technology, Inc. (17)
10.21	Fixed Price Contract dated as of December 17, 2003, between Advanced Neuromodulation Systems, Inc. and Trane, a Division of American Standard, Inc. (17)
10.22	Fixed Price Contract dated as of December 10, 2003, between Advanced Neuromodulation Systems, Inc. and Dallas Security Systems, Inc. (17)
10.23	Standard Form of Agreement Between Owner and Contractor dated as of April 30, 2003, between Advanced Neuromodulation Systems, Inc. and Rogers O’Brien Construction Co., Inc. (17)
10.24	Standard Form of Agreement Between Owner and Architect dated as of January 15, 2003, between Advanced Neuromodulation Systems, Inc. and Good Fulton & Farrell Architects (17)
10.25	Standard Form of Agreement Between Owner and Construction Manager dated as of October 15, 2002, between Advanced Neuromodulation Systems, Inc. and Koll Development Company (17)
10.26	Change Order dated as of August 27,2003, between Advanced Neuromodulation Systems, Inc. and Rogers O’Brien Construction Company (17)
10.27	Abbreviated Standard Form of Agreement Between Owner and Contractor for Construction Projects of a Limited Scope dated as of June 25, 2003, between Advanced Neuromodulation Systems, Inc. and Performance Contracting, Inc. (17)
10.28	Change Order dated as of December 15, 2003, between Advanced Neuromodulation Systems, Inc. and Rogers O’Brien Construction Company (17)
10.29	Change Order dated as of February 20, 2004, between Advanced Neuromodulation Systems, Inc. and Rogers O’Brien Construction Company (17)
14.1	Code of Ethics (17)
21.1	Subsidiaries (17)
23.1	Consent of Independent Auditors(17)
31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(17)
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(17)
32.1	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(18)
32.2	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(18)

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(1)	Filed as an Exhibit to the Company’s Registration Statement on Form S-18, Registration No. 2-71198-FW, and incorporated herein by reference.
(2)	Filed as an Exhibit to the report of the Company on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference.
(3)	Filed as an Exhibit to the Company’s Registration Statement on Form S-1, Registration No. 2-78186, and incorporated herein by reference.
(4)	Filed as an Exhibit to the Company’s Registration Statement on Form SB-2, Registration No. 33-62991, and incorporated herein by reference.
(5)	Filed as an Exhibit to the report of the Company on Form 8-K dated September 3, 1996, and incorporated herein by reference.
(6)	Filed as an Exhibit to the report of the Company on Form 10-Q for the quarter ended March 31, 1998, and incorporated herein by reference.
(7)	Filed as an Exhibit to the Definitive Proxy Statement on Schedule 14A dated April 27, 1998, and incorporated herein by reference.
(8)	Filed as an Exhibit to the report of the Company on Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.
(9)	Filed as an Exhibit to the Definitive Proxy Statement on Schedule 14A dated April 17, 2000, and incorporated herein by reference.
(10)	Filed as an Exhibit to the report of the Company on Form 8-K dated January 9, 2001, and incorporated herein by reference. Upon request, the Company will furnish a copy of any omitted schedule to the Commission.
(11)	Filed as an Exhibit to the report of the Company on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
(12)	Filed as an Exhibit to the report of the Company on Form 8-K dated January 30, 2002, and incorporated herein by reference.
(13)	Filed as an Exhibit to the report of the Company on Form 10-Q for the quarter ended March 31, 2002, and incorporated herein by reference.
(14)	Filed as an Exhibit to the report of the Company on Form 8-K dated November 26, 2002, and incorporated herein by reference.
(15)	Filed as an Exhibit to the report of the Company on Form 10-K for the year ended December 31, 2002, and incorporated herein by reference.
(16)	Filed as an Exhibit to the report of the Company on Form 10-K/A for the year ended December 31, 2002, and incorporated herein by reference.
(17)	Filed herewith.
(18)	Furnished herewith.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ADVANCED NEUROMODULATION SYSTEMS, INC.
	By:	/s/ Christopher G. Chavez
Date:March 15, 2004	Christopher G. Chavez President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Company and in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Christopher G. Chavez Christopher G. Chavez	Chief Executive Officer, President and Director of Advanced Neuromodulation Systems, Inc. (Principal Executive Officer)	March 15, 2004
/s/ F. Robert Merrill III F. Robert Merrill III	Executive Vice President-Finance, Chief Financial Officer and Treasurer of Advanced Neuromodulation Systems, Inc. (Principal Financial and Accounting Officer)	March 15, 2004
/s/ Hugh M. Morrison Hugh M. Morrison	Chairman of the Board and Director of Advanced Neuromodulation Systems, Inc.	March 15, 2004
/s/ Robert C. Eberhart Robert C. Eberhart	Director of Advanced Neuromodulation Systems, Inc.	March 15, 2004
/s/ Joseph E. Laptewicz, Jr. Joseph E. Laptewicz, Jr.	Director of Advanced Neuromodulation Systems, Inc.	March 15, 2004
/s/ J. Philip McCormick J. Philip McCormick	Director of Advanced Neuromodulation Systems, Inc.	March 15, 2004
/s/ Richard D. Nikolaev Richard D. Nikolaev	Director of Advanced Neuromodulation Systems, Inc.	March 15, 2004
/s/ Michael J. Torma Michael J. Torma	Director of Advanced Neuromodulation Systems, Inc.	March 15, 2004

-44-

Appendix A

Consolidated Financial Statements
Independent Auditors’ Report

Three Years Ended December 31, 2003

Forming a Part of the Annual Report on

Form 10-K

Item 8

of

ADVANCED NEUROMODULATION SYSTEMS, INC.
(Name of issuer)

Filed with the

Securities and Exchange Commission

Washington, D.C. 20549

under

The Securities Exchange Act of 1934

Advanced Neuromodulation Systems, Inc. and Subsidiaries

Table of Contents
to
Consolidated Financial Statements

Form 10-K — Item 8

Report of Ernst & Young LLP, Independent Auditors

Consolidated Financial Statements:

Consolidated Balance Sheets — December 31, 2003 and 2002
Consolidated Statements of Income — Years ended December 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows — Years ended December 31, 2003, 2002 and 2001
Consolidated Statements of Stockholders’ Equity — Three years ended December 31, 2003
Notes to Consolidated Financial Statements

Report of Ernst & Young LLP, Independent Auditors

The Board of Directors Advanced Neuromodulation Systems, Inc.

We have audited the accompanying consolidated balance sheets of Advanced Neuromodulation Systems, Inc. and subsidiaries (the Company) as of December 31, 2003 and 2002, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These consolidated financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Advanced Neuromodulation Systems, Inc. and subsidiaries at December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for goodwill as of January 1, 2002, as required by Statement of Financial Accounting Standards No. 142, “Accounting for Goodwill and Other Intangible Assets.”

/s/ Ernst & Young LLP

Ernst & Young LLP

Dallas, Texas
March 8, 2004

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2003 and 2002

Assets	2003		2002
Current assets:
Cash and cash equivalents	$	8,588,281	$	10,972,974
Marketable securities		86,213,841		85,796,944
Receivables:
Trade accounts, less allowances of $447,457 in 2003 and $295,391 in 2002		17,892,416		10,847,237
Interest and other		259,687		189,017
Total receivables		18,152,103		11,036,254
Inventories:
Raw materials		10,766,127		7,141,338
Work-in-process		3,569,111		2,364,386
Finished goods		7,777,921		4,217,222
Total inventories		22,113,159		13,722,946
Deferred income taxes		1,423,228		1,122,617
Income taxes receivable		1,324,001		—
Prepaid expenses and other current assets		1,007,244		1,032,883
Total current assets		138,821,857		123,684,618
Property, equipment and fixtures:
Land		3,191,427		3,191,427
New facility construction in progress		8,825,730		—
Furniture and fixtures		4,429,672		4,022,901
Machinery and equipment		13,944,120		10,343,953
Leasehold improvements		1,822,152		1,702,965
		32,213,101		19,261,246
Less accumulated depreciation and amortization		11,063,091		8,653,255
Net property, equipment and fixtures		21,150,010		10,607,991
Minority equity investments in preferred stock		1,104,000		—
Goodwill		12,078,668		7,407,237
Patents and licenses, net of accumulated amortization of $1,848,354 in 2003 and $1,435,835 in 2002		5,814,974		5,323,417
Purchased technology, net of accumulated amortization of $2,910,895 in 2003 and $2,098,200 in 2002		10,319,679		9,033,472
Tradenames, net of accumulated amortization of $1,110,458 in 2003 and $969,952 in 2002		1,800,572		1,701,154
Customer and supplier relations, net of accumulated amortization of $194,303 in 2003		2,373,558		—
Other assets, net of accumulated amortization of $803,797 in 2003 and $529,102 in 2002		1,342,969		586,238
	$	194,806,287	$	158,344,127

See accompanying notes to consolidated financial statements.

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
December 31, 2003 and 2002

Liabilities and Stockholders' Equity	2003			2002
Current liabilities:
Accounts payable	$	5,717,222		$	2,392,579
Accrued salary and employee benefit costs		4,045,361			3,077,603
Accrued tax abatement liability		—			969,204
Accrued commissions		1,424,471			794,521
Income taxes payable		—			822,228
Deferred revenue		503,093			646,577
Warranty reserve		294,290			402,259
Other accrued expenses		400,159			299,905
Total current liabilities		12,384,596			9,404,876
Deferred income taxes		3,389,255			3,731,939
Non-current deferred revenue		907,513			162,504
Commitments and contingencies
Stockholders’ equity:
Common stock, $.05 par value
Authorized – 25,000,000 shares; Issued – 19,712,938 shares in 2003 and 18,526,014 in 2002		985,647			926,301
Additional capital		149,644,033			129,738,644
Retained earnings		27,515,001			14,393,748
Accumulated other comprehensive income (loss), net of tax benefit of $10,181 in 2003 and $7,155 in 2002		(19,758	)		(13,885	)
Total stockholders’ equity		178,124,923			145,044,808
	$	194,806,287		$	158,344,127

See accompanying notes to consolidated financial statements.

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Consolidated Statements of Income
Years Ended December 31

	2003		2002			2001
Net revenue	$	91,081,969	$	57,372,013		$	37,916,435
Cost of revenue		27,135,320		20,658,798			15,675,436
Gross profit		63,946,649		36,713,215			22,240,999
Operating expenses:
Sales and marketing		26,552,873		14,931,826			9,055,932
Research and development		9,525,411		5,842,576			4,928,432
General and administrative		7,628,127		5,738,392			3,957,867
Amortization of other intangibles		1,831,644		952,214			933,257
Amortization of goodwill		—		—			556,604
		45,538,055		27,465,008			19,432,092
Income from operations		18,408,594		9,248,207			2,808,907
Other income (expense):
Acquisition related costs		—		—			(483,766	)
Interest expense		—		(10,759	)		(24,346	)
Investment income		995,318		933,668			482,417
Other income		974,846		—			—
		1,970,164		922,909			(25,695	)
Income before income taxes		20,378,758		10,171,116			2,783,212
Income taxes		7,161,504		3,486,658			1,265,466
Net income	$	13,217,254	$	6,684,458		$	1,517,746
Net income per share:
Basic	$	.69	$	.41		$	.11
Diluted	$	.64	$	.37		$	.10

See accompanying notes to consolidated financial statements.

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31

	2003			2002			2001
Cash flows from operating activities:
Net income	$	13,217,254		$	6,684,458		$	1,517,746
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,054,078			2,299,335			1,932,452
Amortization		1,831,644			952,214			1,489,861
Deferred income taxes		(1,169,197	)		645,134			(455,003	)
Stock-based compensation		845,480			123,492			—
Accrued tax abatement liability		(969,204	)		—			—
Non-operating loss included in net income		—			8,666			—
Increase in inventory reserve		84,132			51,403			107,880
Changes in operating assets and liabilities:
Receivables		(7,115,849	)		(4,306,888	)		(1,027,050	)
Inventories		(6,461,212	)		(4,025,504	)		(2,672,605	)
Income taxes receivable		(1,324,001	)		678,341			(318,388	)
Prepaid expenses and other current assets		4,306			(387,323	)		564,866
Income taxes payable		(822,228	)		822,228			(89,380	)
Tax benefit from stock option exercises		9,786,072			1,847,438			1,669,405
Accounts payable		3,324,643			557,542			493,227
Accrued expenses		1,589,993			1,874,533			553,380
Deferred revenue		601,525			(233,609	)		(706,916	)
Total adjustments		3,260,182			907,002			1,541,729
Net cash provided by operating activities		16,477,436			7,591,460			3,059,475
Cash flows from investing activities:
Proceeds from certificates of deposits with maturities over 90 days		—			—			1,040,000
Purchases of marketable securities		(382,648,595	)		(188,390,536	)		(3,896,199	)
Proceeds from sales of marketable securities		382,222,800			104,747,808			2,876,720
Purchase of land		—			(3,191,427	)		—
New facility construction in progress		(8,825,730	)		—			—
Additions to property, equipment, fixtures and intangible assets		(5,796,645	)		(2,942,227	)		(3,108,055	)
Minority equity investments in preferred stock		(1,104,000	)		—			—
Acquisition of MicroNet		—			(1,359,460	)		—
Acquisition of certain operations of distributors		(10,226,900	)		—			—
Net cash used in investing activities		(26,379,070	)		(91,135,842	)		(3,087,534	)
Cash flows from financing activities:
Payment of long-term notes		—			(189,722	)		(47,807	)
Net proceeds from public offering of common stock		—			83,175,353			—
Exercise of stock options and warrants		7,516,941			1,746,400			1,004,914
Net cash provided by financing activities		7,516,941			84,732,031			957,107
Net increase (decrease) in cash and cash equivalents		(2,384,693	)		1,187,649			929,048
Net cash used by Hi-tronics in December 2000 (see Note 3)		—			—			(672,444	)
Cash and cash equivalents at beginning of year		10,972,974			9,785,325			9,528,721
Cash and cash equivalents at end of year	$	8,588,281		$	10,972,974		$	9,785,325
Supplemental cash flow information is presented below:
Income taxes paid (net of refunds)	$	732,944		$	(415,311	)	$	815,000
Interest paid	$	—		$	10,759		$	24,346
Non-cash activity:
Stock issued for patents and intangible assets	$	1,720,241		$	4,648,421		$	2,426,662

See accompanying notes to consolidated financial statements.

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Three Years Ended December 31, 2003

										Accumulated Other
										Comprehensive						Total
	Common Stock				Additional		Retained			Income			Treasury			Stockholders'
	Shares		Amount		Capital		Earnings			(Loss)			Stock			Equity
Balance at December 31, 2000 (restated for 3 for 2 stock split)		13,324,589	$	666,229	$	34,247,395	$	6,539,223		$	(83,241	)	$	(927,793	)	$	40,441,813
Net income		—		—		—		1,517,746			—			—			1,517,746
Net loss of Hi-tronics for December 2000 (see Note 3)		—		—		—		(347,679	)		—			—			(347,679	)
Adjustment to unrealized losses on marketable securities, net of tax		—		—		—		—			61,991			—			61,991
Comprehensive income																	1,232,058
Compensation expense resulting from changes to Hi-tronics stock options in December 2000		—		—		37,029		—			—			—			37,029
Issuance of shares for stock option exercises		283,213		14,161		990,753		—			—			—			1,004,914
Tax benefit from stock option exercises		—		—		1,669,405		—			—			—			1,669,405
Issuance of 178,650 shares from treasury for acquisition		—		—		1,498,869		—			—			927,793			2,426,662
Balance at December 31, 2001		13,607,802		680,390		38,443,451		7,709,290			(21,250	)		—			46,811,881
Net income		—		—		—		6,684,458			—			—			6,684,458
Adjustment to unrealized losses on marketable securities, net of tax		—		—		—		—			7,365			—			7,365
Comprehensive income																	6,691,823
Sale of newly issued common stock in a public offering, net of offering costs		4,312,500		215,625		82,959,728		—			—			—			83,175,353
Issuance of shares for stock option exercises		371,259		18,563		1,727,837		—			—			—			1,746,400
Stock-based compensation		—		—		123,492		—			—			—			123,492
Issuance of 234,453 shares for acquisition		234,453		11,723		4,636,698		—			—			—			4,648,421
Tax benefit from stock option exercises		—		—		1,847,438		—			—			—			1,847,438
Balance at December 31, 2002		18,526,014		926,301		129,738,644		14,393,748			(13,885	)		—			145,044,808
Net income		—		—		—		13,217,254			—			—			13,217,254
Adjustment to unrealized losses on marketable securities, net of tax		—		—		—		—			(5,873	)		—			(5,873	)
Comprehensive income																	13,211,381
Issuance of shares for stock option exercises		1,124,372		56,219		7,460,722		—			—			—			7,516,941
Stock-based compensation		—		—		845,480		—			—			—			845,480
Shares issued for fractional share round-up in 3 for 2 stock split		2,571		128		95,873		(96,001	)		—			—			—
Issuance of earn-out shares for acquisition		59,981		2,999		1,717,242		—			—			—			1,720,241
Tax benefit from stock option exercises		—		—		9,786,072		—			—			—			9,786,072
Balance at December 31, 2003		19,712,938	$	985,647	$	149,644,033	$	27,515,001		$	(19,758	)	$	—		$	178,124,923

See accompanying notes to consolidated financial statements.

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

(1) Business

Advanced Neuromodulation Systems, Inc. (the Company or ANS) designs, develops, manufactures and markets implantable neuromodulation devices. ANS devices are used primarily to manage chronic severe pain. ANS revenues are derived primarily from sales throughout the United States, Europe and Australia.

On July 11, 2003, the Company effected a 3 for 2 stock split in the form of a 50% stock dividend (one share of common stock paid for every two shares held), paid to shareholders of record on June 20, 2003. All prior period shares, share prices, and income per share figures have been restated to reflect the split.

The research and development, manufacture, sale and distribution of medical devices is subject to extensive regulation by various public agencies, principally the Food and Drug Administration and corresponding state, local and foreign agencies. Product approvals and clearances can be delayed or withdrawn for failure to comply with regulatory requirements or the occurrence of unforeseen problems following initial marketing.

In addition, ANS neuromodulation products are purchased primarily by hospitals and other users who then bill various third-party payors including Medicare, Medicaid, private insurance companies and managed care organizations. These third-party payors reimburse fixed amounts for services based on a specific diagnosis. The impact of changes in third-party payor reimbursement policies and any amendments to existing reimbursement rules and regulations that restrict or terminate the eligibility of ANS products could have an adverse impact on the Company’s financial condition and results of operations.

(2) Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Advanced Neuromodulation Systems, Inc. and all of its subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassification

Certain amounts in the prior years financial statements have been reclassified to conform to the Company’s 2003 presentation.

Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

-1-

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

Revenue Recognition

The Company generates revenues from product sales to end customers, product sales to distributors, and development contracts. The Company recognizes revenue from neuro product sales when the goods are shipped to its customers or distributors, provided an arrangement exists, the fee is fixed and determinable, and collectibility is reasonably assured. Certain of the Company’s customers are third-party payors who reimburse fixed amounts for services based on a specific diagnosis. Revenue is recognized on these third-party payor sales based on the sales price less a contractual adjustment, which is based on the Company’s history of reimbursement with the third-party payor, provided all other revenue recognition criteria are met. The Company also records, as a reduction in revenue, a provision for estimated sales returns and adjustments on product sales in the same period as the related revenue is recorded. These estimates are based on historical sales returns, analysis of credit memo data, and other known factors. Payments received in advance of revenue recognition requirements are recorded as deferred revenue on the consolidated balance sheets. In the second quarter of 2003, the Company received a payment of $1,200,000 related to a distribution agreement under which the Company has granted the exclusive rights to market certain of its neuromodulation products in Japan. Of such payment, $1,100,000 was recorded as deferred revenue and is being amortized into revenue over the length of the distribution agreement, which at the date of payment was 9.25 years. At December 31, 2003, the balance of the deferred revenue under this agreement was $1,010,811.

The Company recognizes revenue from custom manufactured products at HDI when the goods are shipped to the customer. HDI also develops products for certain customers under fixed price research and development contracts. The Company recognizes revenue and profit under the development agreements using the percentage-of-completion method, which relies on estimates of total expected revenue and costs. The Company follows this method since reasonably dependable estimates of revenue and costs applicable to various stages of a development agreement can be made. If the Company does not accurately estimate the resources required or the scope of work to be performed under a development agreement, then future profit margins and results of operations may be negatively impacted. In certain cases, HDI will undertake a development project on a cost plus basis. In these cases, the Company invoices and recognizes revenue for actual time and material expended on the project at contractual hourly billing rates and markups.

Under the Company’s shipping terms, title transfers to the end customer or distributor at the point of shipment. Shipping and handling costs are included in cost of revenue.

Investments

The Company’s investments in marketable and debt securities are classified as available-for-sale and are carried at fair value with the unrealized gains and losses, net of tax, reported in a separate component of stockholders’ equity entitled “Accumulated Other Comprehensive Income (losses).” The cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income. Realized gains and losses and declines in value judged to be other than temporary are included in other income. The cost of securities sold is based on the specific identification method. Interest and dividends are included in investment income. The Company acquires marketable and debt securities having contractual terms less than one year, and as such all of the Company’s marketable and debt securities are classified as short-term marketable investments.

The Company holds minority investments in preferred stock, which are stated at cost given the ownership percentage is less than 10%, and represents a long-term investment in two private companies made for business purposes. Consistent with the Company’s policies for other long-lived assets, the carrying value of these long-term strategic investments is periodically reviewed for

-2-

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

impairment whenever triggering events occur that may indicate the fair value of the investment is less than the carrying value.

Accounts Receivable

The Company estimates the collectibility of its trade receivables. A considerable amount of judgment is required in assessing the ultimate realization of the receivables, including the current credit-worthiness of each customer. The Company’s historical bad debt experience has been within management’s expectations.

Inventories

Inventories are recorded at the lower of standard cost or market. Standard cost approximates actual cost determined on the first-in, first-out (FIFO) basis. Cost includes the acquisition cost of raw materials and components, direct labor and overhead. The Company reserves for excess and obsolete inventory based upon forecasted demand for its products.

Property, Equipment and Fixtures

Equipment and fixtures are stated at cost. Additions and improvements extending asset lives are capitalized while maintenance and repairs are expensed as incurred. The cost and accumulated depreciation of assets sold or retired are removed from the accounts and any gain or loss is reflected in the Statement of Income.

Depreciation is provided using the straight-line method over the estimated useful lives of the various assets as follows:

Leasehold improvements	The lesser of 3 to 5 years or the term of the lease
Furniture and fixtures	2 to 10 years
Machinery and equipment	3 to 10 years

Construction in process represents costs incurred to fund the Company’s new headquarters facility. Depreciation of the facility will begin upon completion of construction.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net assets of acquired businesses. Effective January 1, 2002 the Company adopted Statement of Financial Accounting Standards No. 142 (SFAS 142), “Goodwill and Other Intangible Assets.” Under the provision of SFAS 142, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests in accordance with the statement.

During the first quarter of 2004, the Company performed its annual review for impairment of goodwill as of December 31, 2003 and, based on this review, no impairment was recorded. The Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets in assessing the recoverability of its goodwill. If these estimates or the related assumptions change, the Company may be required to record impairment charges for these assets in the future.

-3-

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

Prior to the adoption of SFAS 142, amortization expense was recorded for goodwill. Had SFAS 142 been effective January 1, 2001, net income and income per share for fiscal 2001 would have been reported as follows:

Reported net income	$	1,517,746
Goodwill amortization		556,604
Adjusted net income	$	2,074,350
Basic net income per share:
Reported	$	.11
Goodwill amortization		.04
Adjusted	$	.15
Diluted net income per share:
Reported	$	.10
Goodwill amortization		.04
Adjusted	$	.14

The Company’s definite-lived intangible assets are reviewed for impairment whenever events indicate that their carrying amount may not be recoverable. In such reviews, the related undiscounted cash flows expected are compared with their carrying values to determine if a write-down to fair value is required. At December 31, 2003, the Company does not believe there has been any impairment of its intangible assets. The cost of purchased intangibles related to acquisitions is amortized on a straight-line basis over the following estimated useful life:

Purchased technology	15 years
Tradenames	15-20 years
Patents	15-17 years
Customer and supplier relations	4-7 years
Non-compete agreements (included in Other assets)	Term of agreement

The cost of certain licensed patents is amortized on a straight-line basis over the estimated useful life (20 years) of such patents. Costs of patents that are the result of internal development are charged to current operations.

The Company expects to record annual amortization expense of approximately $1,999,000 in 2004, $1,950,000 in 2005, $1,947,000 in 2006, $1,874,000 in 2007 and $1,657,000 in 2008 related to its intangible assets as of December 31, 2003.

Warranty Obligations

The Company’s products are generally covered by a one-year warranty. The Company accrues a warranty reserve for estimated costs to provide warranty services. The estimated costs to service the Company’s warranty obligations are based on historical experience and expectation of future conditions.

Research and Development

Product development costs including start-up and research and development are charged to operations in the year in which such costs are incurred.

-4-

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

Advertising

Advertising expense is charged to operations in the year in which such costs are incurred. Total advertising expense, included in sales and marketing expense was $108,333, $74,673, and $20,592 at December 31, 2003, 2002 and 2001, respectively.

Deferred Taxes

The Company accounts for income taxes using the liability method as required by Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109). Under the liability method, deferred taxes are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax laws that will be in effect when the differences are expected to reverse.

Stock-Based Compensation

The Company accounts for its stock-based employee compensation plans in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) and related interpretations. Under APB 25, no compensation expense is recognized for stock option grants to employees if the exercise price of the Company’s stock option grants is at or above fair market value of the underlying stock on the date of the grant. Stock-based compensation to non-employees is measured at fair market value over the service period and recorded as compensation expense in the Statement of Income. The Company recorded $845,480, $123,492 and $0 of compensation expense for stock compensation to non-employees in 2003, 2002 and 2001, respectively. The Company has adopted the pro-forma disclosure-only provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), as amended by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.” The following table illustrates the effect on net income and net income per share amounts if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation:

	2003		2002		2001
Net income as reported	$	13,217,254	$	6,684,458	$	1,517,746
Stock-based compensation expense		4,104,009		2,107,799		1,613,378
Pro-forma net income (loss)	$	9,113,245	$	4,576,659	$	(95,632	)
Basic shares		19,180,041		16,350,060		13,390,478
Diluted shares		20,589,887		17,837,456		14,875,511
Pro-forma Basic EPS	$	.48	$	.28	$	(.01	)
Pro-forma Diluted EPS	$	.44	$	.26	$	(.01	)

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Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For purposes of the pro-forma disclosures above, the weighted average fair value per stock option granted in fiscal 2003, 2002, and 2001 was $11.54, $8.78, and $4.16, respectively. The fair value was estimated using the Black-Scholes option-pricing model with the following assumptions:

	2003	2002	2001
Risk-free interest rate	2.09%	4.50%	4.40%
Average life of options (years)	3.0	3.0	3.0
Volatility	64.9%	67.6%	74.5%
Dividend yield	—	—	—

Earnings Per Share

Basic earnings per share is computed based only on the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the additional dilutive effect, if any, of stock options using the treasury stock method based on the average market price of the stock during the period. The following table presents the reconciliation of basic and diluted shares:

	2003		2002		2001
Weighted-average shares outstanding (basic shares)		19,180,041		16,350,060		13,390,478
Effect of dilutive instruments:(1)
Stock options		1,409,846		1,487,396		1,485,033
Diluted weighted-average shares outstanding		20,589,887		17,837,456		14,875,511

⁽¹⁾ See Note 7 for a description of these instruments.

For 2003, 2002 and 2001 the incremental shares used for dilutive earnings per share relate to stock options whose exercise price was less than the average market price in the underlying quarterly computations. Options to purchase 29,781 shares at an average price of $30.63 per share were outstanding in 2003 and options to purchase 37,125 shares at an average price of $13.19 per share were outstanding in 2001, but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. In 2002, all options were included in the computation of diluted earnings per share.

Following is the Company’s computation of basic and diluted income per share for the years ended December 31:

	2003		2002		2001
Basic income per share:
Basic weighted average shares outstanding		19,180,041		16,350,060		13,390,478
Net income	$	13,217,254	$	6,684,458	$	1,517,746
Net income per share	$	0.69	$	0.41	$	0.11
Diluted income per share:
Diluted weighted average shares outstanding		20,589,887		17,837,456		14,875,511
Net income	$	13,217,254	$	6,684,458	$	1,517,746
Net income per share	$	0.64	$	0.37	$	0.10

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Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

Comprehensive Income

Comprehensive income is the total of net income and all other non-owner changes in equity, and consists of net income, unrealized gains or losses on the Company’s available for sale securities, and, for 2001, the effect of the change in fiscal year end of a company acquired (see Note 3).

(3) Business Combinations and Asset Acquisitions

During 2003, the Company completed the following three acquisitions of certain operations of the Company’s existing Neuro distributors:

		Purchase Price
November 1, 2003	State of the Art Medical Products	$	4,235,627
September 4, 2003	Comedical, Inc.		1,134,081
March 27, 2003	Sun Medical, Inc.		4,857,192
Total		$	10,226,900

These transactions enable the Company to focus sales priorities on the Company’s products, expand sales coverage and invest in customer and market development. The assets and operations acquired are part of the Neuro Products segment. The purchase price of these acquisitions was recorded as follows:

			Weighted
			Average
			Amortization
	Amount		Period
Inventory	$	2,013,133		n/a
Customer and supplier relations		2,567,861	6.75 years
Non-compete agreements (included in other assets)		857,861	4.0 years
Equipment		116,614		n/a
Goodwill (tax deductible)		4,671,431		n/a
Total	$	10,226,900

On November 26, 2002, the Company completed the acquisition of MicroNet Medical, Inc. (MicroNet), a privately held developer of medical devices based on proprietary micro-lead technology. Under the terms of the transaction, which was structured as a merger, the Company acquired only MicroNet’s proprietary technology and certain associated tangible assets, which are part of the Neuro Products segment. MicroNet’s operations, other tangible assets, certain liabilities and certain employees became part of a separate, unaffiliated company. ANS assumed no material debt, liabilities, or overhead in the transaction. At closing, the Company paid the former MicroNet shareholders $500,000 in cash and 234,453 shares of ANS common stock valued at $4,648,421. The Company also paid acquisition related costs of $859,460, including an investment-banking fee of $600,000. In addition to the initial purchase price paid at closing, the Company agreed to pay the former MicroNet shareholders additional shares of ANS common stock if certain product, regulatory approval, and sales milestones are met. These milestones consist of three principal product milestones and a sales milestone. Each of the product milestones has four to six sub-milestones that relate to the delivery of specific products, and are met if and when the Company is able to submit, and when the Company receives regulatory approvals for products that have been adapted for use directly with the Company's devices. The sales milestone will be met if

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Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

and when $5 million in cumulative net sales are generated of MicroNet lead products during the four-year following the closing of the MicroNet transaction.

The aggregate value of the additional potential milestone earn out payments payable in shares of ANS common stock was $9 million as measured at the closing of the MicroNet transaction. Of this $9 million in additional shares, a fixed number of ANS common shares totaling 134,409 with an aggregate value at closing of $3 million were issued into an escrow account. If and when the product and regulatory milestones are met, a specified and fixed number of ANS common shares will be released from the escrow (which for purchase price accounting will be valued at the time of release from escrow). In addition, if and when those same product and regulatory milestones are achieved, at that time a number of ANS common shares will be issued with an aggregate value of up to $3 million. Finally, if and when $5 million in cumulative net sales are generated of MicroNet lead products during the four years after closing, at that time a number of ANS common shares will be issued with an aggregate value of up to $3 million.

The initial purchase price of the MicroNet acquisition was recorded in 2002 as follows:

	Amount		Amortization Period
Purchased technology	$	5,761,558	15 years
Tradenames		138,181	15 years
Non-compete agreements (included in other assets)		108,142	5 years
Total	$	6,007,881

As the MicroNet acquisition was effected through a stock-for-stock exchange, and therefore not tax deductible beyond MicroNet’s existing tax basis, the Company recorded a deferred tax liability of $2,651,720 for the identified intangible assets related to the initial purchase price. The recording of the deferred tax liability resulted in additional basis in purchased technology of $1,396,224 and in additional tradenames of $74,410. In addition, the Company acquired MicroNet’s net operating loss carryforward of approximately $3.4 million, which was recorded as a deferred tax asset of $1,181,086 (see Note 6).

In March 2003, two parts of the first major product milestone were satisfied, and 42,519 of ANS common shares were issued (of which 22,401 shares were released from escrow) with a value at the time of issuance and release from escrow of $1,020,059. In October 2003, an additional product milestone was satisfied, and 17,462 shares of ANS common shares were issued (of which 11,197 shares were released from escrow) with a value at the time of issuance and release from escrow of $700,182. The value of ANS common shares issued and released from escrow during 2003 was allocated to certain identifiable intangible assets in accordance with the original purchase price allocation, and resulted in the following additions to identifiable intangible assets:

	Amount		Amortization Period
Purchased technology	$	1,649,712	15 years
Tradenames		39,565	15 years
Non-compete agreements (included in other assets)		30,964	5 years
Total	$	1,720,241

As indicated above, the Company recorded a deferred tax liability for the identified intangible assets related to the additional earn-out consideration issued. The deferred tax liability was allocated in accordance with the original purchase price allocation resulting in an additional $449,190 and $21,305 of purchased technology and tradenames, respectively.

-8-

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

An important product milestone deadline occurred under the MicroNet acquisition agreement in November 2003, which was not met. The Company is currently in discussions with the former MicroNet shareholders regarding this product milestone. If this product milestone had been achieved by the deadline, the value of the milestone payment at December 31, 2003 was approximately $1,552,684, or 33,894 shares, which would have been allocated to certain identifiable intangible assets in accordance with the original purchase price allocation.

Another important product milestone deadline will occur in May 2004, while other milestones depend on the receipt of regulatory approvals and meeting the aggregate sales milestone referred to above. All milestones must be met by November 2006 or November 2007, depending on the milestone.

On January 1, 2001, the Company acquired the assets (primarily intellectual property consisting of patents) of Implantable Devices Limited Partnership (IDP) and ESOX Technology Holdings, LLC (ESOX), two privately-held companies, for 178,650 shares of the Company’s common stock. Based on the closing price of ANS common stock on December 29, 2000, the value of the stock issued to acquire the assets was $2,426,662. The assets purchased consisted primarily of intellectual property and developed technology, and are part of the Neuro Products segment. The purchase price of these acquisitions was recorded to patents, and is being amortized over a 15-year period.

Also on January 1, 2001, the Company completed the acquisition of Hi-tronics Designs, Inc. (HDI), a privately held contract developer and original equipment manufacturer (O.E.M) of electro-mechanical devices with headquarters in Budd Lake, New Jersey. The Company acquired all of HDI’s outstanding stock through a merger in exchange for 1,657,088 shares of ANS common stock. The transaction was accounted for on a pooling of interest basis and accordingly, prior periods were restated. Prior to the Company’s acquisition of HDI, HDI’s fiscal year ended on November 30. The Consolidated Balance Sheet at December 31, 2000 combined the balance sheet of HDI at November 30, 2000 with the Balance Sheet of the Company at December 31, 2000. Beginning in 2001, the fiscal year-ends were conformed to December 31. As a result, the results of operations of HDI for the one-month period ending December 31, 2000 have been recorded directly to retained earnings in the Consolidated Statement of Stockholders’ Equity for the period ended December 31, 2001 and are not reflected in the Consolidated Statements of Income. Summary operating results of HDI for this one-month period ending December 31, 2000, were as follows:

Net revenue	$	119,481
Loss before income tax benefit		(591,600	)
Net loss		(347,679	)

For the one-month period ended December 31, 2000, cash flows for HDI were as follows:

Net cash used by operating activities	$	(647,210	)
Net cash used by investing activities		(14,516	)
Net cash used by financing activities		(10,718	)
Net decrease in cash	$	(672,444	)

The results of operations for the acquisitions above have been included in the Company’s consolidated Statements of Income after the date of the acquisition, with the exception of the HDI acquisition accounted for as a pooling of interest, for which prior periods have been restated.

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Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

(4) Marketable Securities

The following is a summary of the Company’s marketable and debt securities classified as available-for-sale securities at December 31, 2003:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Freddie Mac notes	$	256,250	$	—	$	6,562	$	249,688
Investment grade municipal bonds		3,240,396		6,510		30,318		3,216,588
7-day and 35-day AAA municipal bond floaters		82,747,134		431		—		82,747,565
	$	86,243,780	$	6,941	$	36,880	$	86,213,841

Estimated fair value for the investment grade municipal bonds, 7-day and 35-day municipal bond floaters and Freddie Mac notes is provided by the brokerage firms holding such bonds and notes at each reporting period by utilizing a standard pricing service.

At December 31, 2003, no individual security represented more than 7.5% of the total portfolio or 3.25% of total assets. The Company did not have any investments in derivative financial instruments at December 31, 2003.

The following is a summary of the Company’s marketable and debt securities classified as available-for-sale securities at December 31, 2002:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Freddie Mac and Federal Home Loan Bank notes	$	770,814	$	—	$	15,474	$	755,340
Investment grade municipal bonds		2,222,170		5,349		10,915		2,216,604
7-day and 35-day AAA municipal bond floaters		82,825,000		—		—		82,825,000
	$	85,817,984	$	5,349	$	26,389	$	85,796,944

At December 31, 2002, no individual security represented more than 6.5% of the total portfolio or 3.5% of total assets. The Company did not have any investments in derivative financial instruments at December 31, 2002.

(5) Minority Investments in Preferred Stock

In January 2003, the Company invested $1 million in cash to purchase preferred stock for a minority equity position in Innovative Spinal Technologies, Inc., a privately held start-up company that develops spine technologies, products and services through intellectual property development and contract research. This investment is accounted for under the cost method of accounting due to the Company’s minimal ownership percentage. The Company periodically reviews the valuation of this investment using available financial information from Innovative Spine Technologies, Inc. As of December 31, 2003, there were no indicators that the fair value of the investment is less than the carrying value.

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Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

(6) Federal Income Taxes

The significant components of the net deferred tax liability at December 31, were as follows:

	2003			2002
Deferred tax assets:
Net operating loss carry forwards	$	1,504,601		$	1,181,086
Accrued expenses and reserves		411,853			692,576
Inventory		456,449			236,615
Deferred revenue		480,978			122,680
Marketable securities		10,178			8,303
Stock-based compensation		353,990			46,309
Other		311,871			95,500
Total deferred tax assets		3,529,920			2,383,069
Deferred tax liabilities:
Purchased intangible assets		(4,224,642	)		(4,464,083	)
Equipment and fixtures		(1,271,305	)		(528,308	)
Total deferred tax liabilities		(5,495,947	)		(4,992,391	)
Net deferred tax liabilities	$	(1,966,027	)	$	(2,609,322	)

As of December 31, 2003, the Company had a net operating loss carry forward of approximately $4.3 million which expires in years through 2021. Of the $4.3 million net operating loss carry forward approximately $3.4 million was acquired by the Company in connection with the MicroNet acquisition and its utilization in any future year may be subject to a limitation under Section 382 of the Internal Revenue Code or other provisions which may limit the use of the net operating loss carry forward in any tax year.

The provision (benefit) for income taxes for the years ended December 31 consists of the following:

	2003			2002		2001
Current	$	7,749,925		$	2,841,524	$	1,747,285
Deferred		(588,421	)		645,134		(481,819	)
	$	7,161,504		$	3,486,658	$	1,265,466

A reconciliation of the provision for income taxes to the expense calculated at the U.S. statutory rate follows:

	2003			2002			2001
Income tax expense at statutory rate	$	7,132,565		$	3,458,179		$	946,292
Tax effect of:
State taxes		511,812			275,481			42,959
Nondeductible amortization of goodwill		—			—			189,245
Tax-exempt interest		(326,340	)		(291,745	)		—
Other		(156,533	)		44,743			86,970
Income tax expense	$	7,161,504		$	3,486,658		$	1,265,466

-11-

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

(7) Stockholders’ Equity

The Company has a Shareholder’s Rights Plan, adopted in 1996 and amended in 2002, which permits shareholders to purchase shares of the Company’s common stock at significant discounts in the event a person or group acquires more than 15% of the Company’s common stock or announces a tender or exchange offer for more than 20% of the Company’s common stock.

At December 31, 2000, the Company had 178,650 treasury shares. These shares were reissued on January 2, 2001 in connection with the acquisition of IDP and ESOX (see Note 3).

The Company issued 4,312,500 shares of common stock during May 2002 in an underwritten public offering. The Company received net proceeds from the offering of approximately $83.2 million.

The Company has various stock option plans (the Plans) pursuant to which stock options may be granted to key employees, officers, directors and advisory directors of the Company. In accordance with the Plans, on January 1 of each year the aggregate number of shares of common stock reserved for options under the Plans is increased by the same percentage that the total number of issued and outstanding shares of common stock increased from the preceding January 1 to the following December 31 (if such percentage is positive). On January 1, 2003 and 2004, options to purchase 1,374,353 shares and 331,859 shares of common stock, respectively, were added to the Plans.

Several of the Plans allow for the grant of incentive stock options to key employees and officers intended to qualify for preferential tax treatment under Section 422 of the Internal Revenue Code of 1986. Under all of the Company’s Plans, the exercise price of options granted must equal or exceed the fair market value of the common stock at the time of the grant. Options granted to employees and officers expire ten years from the date of grant and for the most part are exercisable one-fourth each year over a four-year period of continuous service. Options granted to directors and advisory directors expire six years from the date of grant and for the most part are exercisable one-fourth each year over a four-year period of continuous service. Certain options, however, have an eighteen-month, two-year, three-year, four year or five year vesting schedule.

At December 31, 2003, under all of the Company’s Plans, 3,290,265 shares had been granted and were outstanding, 4,852,623 shares of common stock had been issued upon exercise, and 44,562 shares were reserved for future grants.

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Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

Data with respect to stock option plans of the Company are as follows:

Options Outstanding						Exercisable Options
				Weighted				Weighted
				Average				Average
	Shares			Exercise Price		Shares		Exercise Price
January 1, 2001		2,196,956		$	5.39		911,496	$	3.49
Granted		620,250		$	8.34
Exercised		(283,214	)	$	3.72
Forfeited		(30,230	)	$	5.80
January 1, 2002		2,503,762		$	6.29		1,125,323	$	4.41
Granted		925,500		$	18.36
Exercised		(371,259	)	$	4.87
Forfeited		(18,375	)	$	11.46
January 1, 2003		3,039,628		$	10.11		1,304,607	$	5.77
Granted		1,406,125		$	26.20
Exercised		(1,124,372	)	$	6.72
Forfeited		(31,116	)	$	18.05
December 31, 2003		3,290,265		$	18.08		821,285	$	9.07

									Exercisable Options at
Options Outstanding at December 31, 2003									December 31, 2003
					Weighted
					Average		Weighted				Weighted
	Range of				Remaining Life		Average				Average
Exercise Prices			Shares		(Years)		Exercise Price		Shares		Exercise Price
	$	3.33-4.42		262,827		4.09	$	3.97		262,827	$	3.97
	$	5.02-7.42		404,398		6.79	$	6.94		148,742	$	6.68
	$	8.17-10.67		317,770		5.50	$	9.46		194,851	$	9.37
	$	12.67-16.61		340,381		7.58	$	15.20		114,841	$	14.61
	$	19.00-23.42		1,442,264		8.41	$	21.33		99,274	$	19.07
	$	25.17-37.17		480,875		9.10	$	31.31		750	$	25.87
	$	38.00-42.58		41,750		9.83	$	39.31		—	$	—
				3,290,265		7.62	$	18.08		821,285	$	9.07

(8) Commitments and Contingencies

The Company leases offices, manufacturing and research facilities, as well as office equipment under operating leases. Future minimum rental payments related to these operating leases at December 31, 2003 are as follows:

			Office
	Facility Leases		Equipment		Total
2004	$	809,514	$	4,823	$	814,337
2005		259,489		—		259,489
2006		21,907		—		21,907
2007 and thereafter		—		—		—
	$	1,090,910	$	4,823	$	1,095,733

-13-

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

Total rent expense for offices, manufacturing and research facilities, and office equipment for the years ended December 31, 2003, 2002 and 2001 was $1,190,319, $1,063,097 and $858,761, respectively.

In connection with the construction of a new corporate headquarters and manufacturing facility of 143,000 square feet located in Plano, Texas, the Company entered into various agreements in 2003 for architectural and construction services. The total amount of the agreements at inception totaled approximately $15 million. At December 31, 2003, the remaining commitment under these agreements was approximately $6.1 million. The construction on the new facility commenced in April 2003 and the Company anticipates moving its operations to the new facility before its currently leased facilities in Plano, Texas expire in August 2004.

The Company is a party to product liability claims related to ANS neurostimulation devices. Product liability insurers have assumed responsibility for defending the Company against these claims. The Company seeks to maintain appropriate levels of product liability insurance with coverage comparable to that maintained by companies similar in size and serving similar markets. While historically product liability claims for ANS neurostimulation devices have not resulted in significant monetary liability for the Company beyond its insurance coverage, there can be no assurances that the Company will not incur significant monetary liability to the claimants if such insurance is inadequate, and there can be no assurance that the Company’s neurostimulation business and future ANS product lines will not be adversely affected by these product liability claims.

Except for such product liability claims and other ordinary routine litigation incidental or immaterial to its business, the Company is not currently a party to any other pending legal proceeding. The Company maintains general liability insurance against risks arising out of the normal course of business.

Under the Company’s sales agreements with its independent sales agents, the Company can terminate those agreements without cause by paying an early termination fee equal to 100% of the commissions that would otherwise be payable on sales in the territory for the 90 days after termination and 50% of the commission that would otherwise be payable on sales in the territory for the 90 day period after the first 90 day period.

In addition, under its distributor agreements, sales agent agreements and certain other ordinary course commercial contracts with third parties, the Company typically agrees to indemnify the other contracting party from damages and costs that may arise from product liability claims. The terms of the agreements and contracts vary and the potential exposure under these indemnities cannot reasonably be estimated or determined.

(9) Financial Instruments, Risk Concentration and Major Customers

In the United States, the Company’s accounts receivable from its Neuro Products segment are due primarily from hospitals, insurance companies and Medicare. Internationally, the Company’s accounts receivable from its Neuro Products segment are due primarily from distributors located in Europe and Australia. For the HDI O.E.M segment, all of the accounts receivable are due from privately held and publicly traded medical device companies based in the United States. The Company generally does not require collateral for trade receivables. The Company maintains an allowance for doubtful accounts based upon expected collectibility. Any losses from bad debts have historically been within management’s expectations.

In 2003, the Company had no customer with net sales greater than 10% of net revenue for its Neuro Products segment as a result of the March 2003 acquisition of the pain management business of Sun Medical, Inc. (Sun Medical), the Company’s largest distributor. Net sales of implantable neurostimulation systems to

-14-

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

one major customer, Sun Medical for each of the years ended December 31, as a percentage of net revenue from the Neuro Products segment, were as follows: 2002- 14% and 2001- 15%.

Net sales of HDI O.E.M. products and services to two major customers for the year ended December 31, 2003, as a percentage of net revenue from the HDI O.E.M. segment were 76% and 13%, respectively. Net sales of HDI O.E.M. products and services to two major customers for the year ended December 31, 2002, as a percentage of net revenue from the HDI O.E.M. segment were 63% and 26%, respectively. Net sales of HDI O.E.M products and services to three major customers for the year ended December 31, 2001, as a percentage of net revenue from the HDI O.E.M. segment were 60%, 17% and 11%, respectively.

Foreign sales, primarily Europe and Australia, for the years ended December 31, 2003, 2002 and 2001 were approximately 7%, 8% and 10% of net revenue from the Neuro Products segment, respectively. The HDI O.E.M. segment had no foreign sales for the years ended December 31, 2003, 2002 and 2001, respectively.

(10) Employee Benefit Plans

The Company has a defined contribution retirement savings plan (the Plan) available to substantially all employees of its Neuro Products segment. The Plan permits employees to elect salary deferral contributions of up to 15% of their compensation and requires the Company to make matching contributions equal to 50% of the participants’ contributions to a maximum of 6% of the participants’ compensation. The Company also has a defined contribution retirement savings plan (the HDI Plan) available to substantially all employees of HDI. The HDI Plan permits employees to elect salary deferral contributions of up to 15% of their eligible compensation, subject to statutory limitations, and requires the Company to make matching contributions equal to 100% of the participants’ contributions to a maximum of 5% of the participants’ eligible compensation. The Board of Directors may change the percentage of matching contribution under either of the plans at their discretion. The expense of the Company’s contribution for the years ended December 31 was $475,012 in 2003, $346,125 in 2002 and $305,091 in 2001.

(11) Accrued Tax Abatement Liability

In January 1998, the Company sold its cardiovascular operations to Atrion Corporation, and granted Atrion a nine-month option to acquire the Company’s principal office and manufacturing facility in Allen, Texas for $6.5 million. During October 1998, Atrion exercised its option to acquire the facility. When the facility was built in 1993, the Company entered a ten-year agreement with the City of Allen granting tax abatements to the Company if a minimum job base and personal property base were maintained in the City of Allen. The agreement provided for the repayment of abated taxes if the Company defaulted under the agreement. During 1998 the Company recorded a pretax expense of $969,204 in connection with the abated taxes. In April 1999, the Company was successful in petitioning the City of Allen to assign the abatement agreement to Atrion. In July 1999, the Company, Atrion and the City of Allen executed an assignment agreement under which Atrion (as successor in interest to the Company) must continue to meet the conditions of the original tax abatement agreement until August 2003. Atrion met the minimum requirements under the agreement through 2003, and as such the Company was absolved from any liability. Accordingly, the Company reversed the accrual of $969,204 in September 2003 to other income in the Consolidated Statements of Income.

-15-

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

(12) Segment Information

The Company operates in two business segments. The Neuro Products segment designs, develops, manufactures and markets implantable medical devices that are used to manage chronic intractable pain and other disorders of the central nervous system through the delivery of electrical current or drugs directly to targeted nerve fibers. The HDI O.E.M. segment provides contract development and O.E.M. manufacturing of electro-mechanical devices. Intersegment revenue from HDI is billed at cost with no intercompany mark-up.

Segment data as of and for the year ended December 31, 2003 is as follows:

	Neuro		HDI		Intercompany			Consolidated
	Products		O.E.M.		Eliminations			Total
Revenue from external customers	$	80,000,647	$	11,081,322	$	—		$	91,081,969
Intersegment revenues	$	—	$	8,054,406	$	(8,054,406	)	$	—
Segment income from operations	$	16,406,245	$	2,002,349	$	—		$	18,408,594
Segment assets	$	191,842,645	$	11,133,803	$	(8,170,161	)	$	194,806,287

Segment data as of and for the year ended December 31, 2002 is as follows:

	Neuro		HDI		Intercompany			Consolidated
	Products		O.E.M.		Eliminations			Total
Revenue from external customers	$	46,712,158	$	10,659,855	$	—		$	57,372,013
Intersegment revenues	$	—	$	5,663,216	$	(5,663,216	)	$	—
Segment income from operations	$	7,013,895	$	2,234,312	$	—		$	9,248,207
Segment assets	$	154,451,136	$	8,982,629	$	(5,089,638	)	$	158,344,127

Segment data as of and for the year ended December 31, 2001 is as follows:

	Neuro		HDI		Intercompany			Consolidated
	Products		O.E.M.		Eliminations			Total
Revenue from external customers	$	27,460,618	$	10,455,817	$	—		$	37,916,435
Intersegment revenues	$	—	$	2,862,652	$	(2,862,652	)	$	—
Segment income from operations	$	1,040,036	$	1,768,871	$	—		$	2,808,907
Segment assets	$	51,246,012	$	6,847,014	$	(2,227,941	)	$	55,865,085

(13) Subsequent Event

In March 2004, the Company agreed to acquire microHelix, Inc.’s (microHelix) cable and wire division, which is operated out of Portland, Oregon, for approximately $2 million in cash and assumed liabilities. The transaction is subject to customary terms and conditions, including shareholder approval by microHelix shareholders. The acquisition is expected to close in April 2004. The acquisition of microHelix represents a vertical integration of a component supplier to the Company and other third parties, and provides the Company with additional research and development resources and intellectual property for the design and development of existing and new products.

-16-

Appendix B

Schedule II — Valuation and Qualifying Accounts

Forming a Part of the Annual Report

Form 10-K

Item 14

of

ADVANCED NEUROMODULATION SYSTEMS, INC.
(Name of issuer)

Filed with the

Securities and Exchange Commission

Washington, D.C. 20549

under

The Securities Exchange Act of 1934

Schedule II — Valuation and Qualifying Accounts
Advanced Neuromodulation Systems, Inc. and Subsidiaries
December 31, 2003

	Balance at				Charged to
	Beginning of		Charged to		Other				Balance at
Description	Year		Expenses		Accounts		Deductions		End of Year
Year ended December 31, 2003:
Allowance for doubtful accounts	$	295,391	$	199,503	$	—	$	47,437	$	447,457
Year ended December 31, 2002:
Allowance for doubtful accounts	$	124,111	$	186,336	$	—	$	15,056	$	295,391
Year ended December 31, 2001:
Allowance for doubtful accounts	$	213,249	$	10,000	$	—	$	99,138	$	124,111

Appendix C

Quarterly Financial Data
(unaudited)

Forming a Part of the Annual Report

Form 10-K

Item 8

of

ADVANCED NEUROMODULATION SYSTEMS, INC.
(Name of issuer)

Filed with the

Securities and Exchange Commission

Washington, D.C. 20549

under

The Securities Exchange Act of 1934

2003	1st Qtr.		2nd Qtr.		3rd Qtr.		4th Qtr.
Net revenue	$	19,670,591	$	22,324,461	$	23,418,505	$	25,668,412
Gross profit		12,788,900		15,273,182		17,034,060		18,850,507
Income from operations		3,815,709		4,273,899		5,165,514		5,153,472
Income from operations before income taxes (1)		4,097,364		4,568,371		6,334,961		5,378,062
Net income	$	2,619,814	$	2,923,115	$	3,952,852	$	3,721,473
Basic income per share	$	0.14	$	0.15	$	0.20	$	0.19
Diluted income per share	$	0.13	$	0.14	$	0.19	$	0.18

(1) Q3 2003 includes other income of $969,204 from the reversal of an accrued tax abatement liability.

2002	1st Qtr.		2nd Qtr.		3rd Qtr.		4th Qtr.
Net revenue	$	11,472,646	$	13,423,371	$	14,327,505	$	18,148,491
Gross profit		6,958,486		8,359,944		9,474,096		11,920,689
Income from operations		1,239,225		2,084,679		2,532,874		3,391,429
Income from operations before income taxes		1,308,425		2,227,928		2,905,351		3,729,412
Net income	$	836,976	$	1,448,441	$	1,942,303	$	2,456,738
Basic income per share	$	.06	$	.10	$	.11	$	.13
Diluted income per share	$	.05	$	.09	$	.10	$	.12

INDEX TO EXHIBITS

Exhibit
Number	Description
2.1	Agreement and Plan of Merger, dated as of November 30, 2000, by and among Advanced Neuromodulation Systems, Inc., ANS Acquisition Corp. and Hi-tronics Designs, Inc. (10)
2.2	Agreement and Plan of Merger, dated as of November 4, 2002, by and among Advanced Neuromodulation Systems, Inc., MicroNet Acquisition, Inc. and MicroNet Medical, Inc. (14)
3.1	Articles of Incorporation, as amended and restated(11)
3.2	Bylaws(11)
4.1	Rights Agreement dated as of August 30, 1996, between Quest Medical, Inc. and KeyCorp Shareholder Services, Inc. as Rights Agent(5)
4.2	Amendment To Rights Agreement dated as of January 25, 2002 between Advanced Neuromodulation Systems, Inc. and Computershare Investor Services LLC (formerly KeyCorp Shareholder Services, Inc) (12)
10.1	Quest Medical, Inc. 1979 Amended and Restated Employees Stock Option Plan(2)
10.2	Form of 1979 Employees Stock Option Agreement(3)
10.3	Quest Medical, Inc. Directors Stock Option Plan (as amended)(2)
10.4	Form of Directors Stock Option Agreement(1)
10.6	Quest Medical, Inc. 1995 Stock Option Plan(4)
10.7	Form of 1995 Employee Stock Option Agreement(4)
10.8	Quest Medical, Inc. 1998 Stock Option Plan(7)
10.9	Advanced Neuromodulation Systems, Inc. 2000 Stock Option Plan(9)
10.10	Employment Agreement dated April 9, 1998 between Scott F. Drees and Quest Medical, Inc.(6)
10.11	Employment Agreement dated April 9, 1998 between F. Robert Merrill III and Quest Medical, Inc.(6)
10.12	Employment Agreement dated April 1, 2002 between Christopher G. Chavez and Advanced Neuromodulation Systems, Inc.(13)
10.13	Employment Agreement dated April 1, 2002 between Kenneth G. Hawari and Advanced Neuromodulation Systems, Inc.(13)
10.14	Special Termination Agreement dated April 1, 2002 between Christopher G. Chavez and Advanced Neuromodulation Systems, Inc.(13)
10.15	Special Termination Agreement dated April 1, 2002 between Kenneth G. Hawari and Advanced Neuromodulation Systems, Inc.(13)
10.16	Form of Employment Agreement and Covenant Not to Compete, between the Company and key employees(1)
10.17	Lease Agreement dated as of February 4, 1999, between Advanced Neuromodulation Systems, Inc. and Legacy Lincoln I, LTD. (8)
10.18	Second Amendment to Lease Agreement dated as of September 1, 2002, between Advanced Neuromodulation Systems, Inc. and Plano R&D Associates, LTD. (15)
10.19	Escrow Agreement dated November 25, 2002, among Advanced Neuromodulation Systems, Inc., Thomas E. Brust and Computershare Trust Company (16)
10.20	Sublease Agreement dated as of June 18, 2003, between Advanced Neuromodulation Systems, Inc. and Integrated Device Technology, Inc. (17)
10.21	Fixed Price Contract dated as of December 17, 2003, between Advanced Neuromodulation Systems, Inc. and Trane, a Division of American Standard, Inc. (17)
10.22	Fixed Price Contract dated as of December 10, 2003, between Advanced Neuromodulation Systems, Inc. and Dallas Security Systems, Inc. (17)
10.23	Standard Form of Agreement Between Owner and Contractor dated as of April 30, 2003, between Advanced Neuromodulation Systems, Inc. and Rogers O’Brien Construction Co., Inc. (17)
10.24	Standard Form of Agreement Between Owner and Architect dated as of January 15, 2003, between Advanced Neuromodulation Systems, Inc. and Good Fulton & Farrell Architects (17)
10.25	Standard Form of Agreement Between Owner and Construction Manager dated as of October 15, 2002, between Advanced Neuromodulation Systems, Inc. and Koll Development Company (17)

Exhibit
Number	Description
10.26	Change Order dated as of August 27,2003, between Advanced Neuromodulation Systems, Inc. and Rogers O’Brien Construction Company (17)
10.27	Abbreviated Standard Form of Agreement Between Owner and Contractor for Construction Projects of a Limited Scope dated as of June 25, 2003, between Advanced Neuromodulation Systems, Inc. and Performance Contracting, Inc. (17)
10.28	Change Order dated as of December 15, 2003, between Advanced Neuromodulation Systems, Inc. and Rogers O’Brien Construction Company (17)
10.29	Change Order dated as of February 20, 2004, between Advanced Neuromodulation Systems, Inc. and Rogers O’Brien Construction Company (17)
14.1	Code of Ethics (17)
21.1	Subsidiaries (17)
23.1	Consent of Independent Auditors (17)
31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(17)
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(17)
32.1	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(18)
32.2	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(18)

(1)	Filed as an Exhibit to the Company’s Registration Statement on Form S-18, Registration No. 2-71198-FW, and incorporated herein by reference.
(2)	Filed as an Exhibit to the report of the Company on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference.
(3)	Filed as an Exhibit to the Company’s Registration Statement on Form S-1, Registration No. 2-78186, and incorporated herein by reference.
(4)	Filed as an Exhibit to the Company’s Registration Statement on Form SB-2, Registration No. 33-62991, and incorporated herein by reference.
(5)	Filed as an Exhibit to the report of the Company on Form 8-K dated September 3, 1996, and incorporated herein by reference.
(6)	Filed as an Exhibit to the report of the Company on Form 10-Q for the quarter ended March 31, 1998, and incorporated herein by reference.
(7)	Filed as an Exhibit to the Definitive Proxy Statement on Schedule 14A dated April 27, 1998, and incorporated herein by reference.
(8)	Filed as an Exhibit to the report of the Company on Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.
(9)	Filed as an Exhibit to the Definitive Proxy Statement on Schedule 14A dated April 17, 2000, and incorporated herein by reference.
(10)	Filed as an Exhibit to the report of the Company on Form 8-K dated January 9, 2001, and incorporated herein by reference. Upon request, the Company will furnish a copy of any omitted schedule to the Commission.
(11)	Filed as an Exhibit to the report of the Company on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
(12)	Filed as an Exhibit to the report of the Company on Form 8-K dated January 30, 2002, and incorporated herein by reference.
(13)	Filed as an Exhibit to the report of the Company on Form 10-Q for the quarter ended March 31, 2002, and incorporated herein by reference.
(14)	Filed as an Exhibit to the report of the Company on Form 8-K dated November 26, 2002, and incorporated herein by reference.
(15)	Filed as an Exhibit to the report of the Company on Form 10-K for the year ended December 31, 2002, and incorporated herein by reference.
(16)	Filed as an Exhibit to the report of the Company on Form 10-K/A for the year ended December 31, 2002, and incorporated herein by reference.
(17)	Filed herewith.
(18)	Furnished herewith.

EX-10.20

                                                                   EXHIBIT 10.20

                               SUBLEASE AGREEMENT

         THIS SUBLEASE AGREEMENT (this "Sublease") is entered into as of this
18th day of June, 2003, by and between Integrated Device Technology, Inc.
("Sublessor") and Advanced Neuromodulation Systems, Inc. ("Sublessee").

                                R E C I T A L S :

         The property to be subleased is situated in the City of Plano, County
of Collin, State of Texas and is located at 6505 Windcrest, Plano, Texas (the
"Building"). The premises consist of approximately 9,823 rentable square feet in
the Building (the "Premises"), which Sublessor desires to sublet to Sublessee.
The Premises is subject to a Building Lease dated January 31, 2000, and a First
Amendment to Lease Agreement dated June 3, 2000 (collectively, the "Primary
Lease") between Sublessor and Legacy Lincoln I, Ltd. ("Landlord's Predecessor").
Sublessee is also a party to a Lease for premises located in the same building
complex as the Premises, which Lease is dated February 4, 1999, as amended by
the First Amendment to Lease Agreement dated April 21, 1999 and the Second
Amendment to Lease Agreement dated September 1, 2002 (collectively, the
"Reference Lease") between Sublessee and Landlord's Predecessor. The current
landlord under both the Primary Lease and the Reference Lease is Plano R&D
Associates, Ltd. ("Landlord").

         NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, Sublessor and Sublessee agree as follows:

         1.       Sublease. Sublessor hereby subleases to Sublessee, and
Sublessee hereby subleases from Sublessor, upon the terms and conditions set
forth herein, the Premises consisting of approximately 9,823 rentable square
feet as shown on the drawing attached hereto as Exhibit A and incorporated
herein by reference.

         2.       Term. The term of the Sublease shall be for a period of
thirteen (13) months commencing on July 1, 2003, and ending on July 31, 2004
(the "Sublease Term"). Sublessee shall have the right to hold over in the
Premises for up to an additional sixty (60) days after the expiration of the
Sublease Term at the same terms and conditions herein, provided Sublessor is
given written notice thereof at least 30 days prior to the end of the Sublease
Term.

                  Beneficial Occupancy: Sublessee shall have the right to
install, disassemble and store or reconfigure furniture located within the
Premises and commence installation of its required telecommunication systems
commencing with the full execution of this Sublease Agreement and prior to the
commencement of the Sublease Term ("Beneficial Occupancy"), provided such
Beneficial Occupancy does not materially disrupt Sublessor's normal business in
the Premises, and provided
                                       1



Sublessee has obtained the prior written consent of the Landlord under the
Primary Lease.

         3.       Rent.

         a)       Sublessee shall pay Sublessor the total amount of $10,655.45
upon full execution of the Sublease, representing the first month's Base Rent
($7,367.25) and the Additional Rent ($3,288.20) as defined in Section 4.

         b)       Sublessee shall thereafter pay to Sublessor the Base Rent in
advance on or before the first day of each calendar month without notice or
demand. Monthly Base Rent shall equal $7,367.25.

         4.       Additional Rent. In addition to the monthly Base Rent,
Sublessee shall thereafter pay to Sublessor all Operating Expenses, including
Taxes, Insurance, Common Area Maintenance & Utilities currently estimated at
$4.02 a square foot per year ($3,288.20 per month). The Additional Rent shall be
payable monthly, on the same day Base Rent is payable. Further, Sublessee shall
be responsible monetarily for its janitorial service.

         5.       Primary Lease.

                  a)       Sublessor agrees to perform its obligations under the
Primary Lease, provided that Sublessee will have no recourse against Sublessor
for Sublessor's failure to perform if and for so long as Sublessee is itself in
default under the Sublease.

                  b)       Sublessor agrees to use its best efforts to cause the
Landlord to perform its obligations under the Primary Lease, including without
limitation Landlord's obligations to provide the building services it has agreed
to provide under the Primary Lease.

                  c)       Sublessee will not take any action or omit taking any
action that would cause Sublessor to be in default under the Primary Lease.

         6.       Alterations, Improvements and Additions. Sublessee may not
make any alterations, improvements or additions to the Premises (collectively,
"Improvements") without the express prior written consent of Landlord and
Sublessor, which consent by Landlord (with respect to nonstructural alterations
or additions) and Sublessor shall not be unreasonably withheld or delayed. It
shall not be deemed unreasonable for Sublessor to withhold consent if
restrictions under the Primary Lease prohibit or materially inhibit such
Improvements and Sublessee will be responsible for all costs associated
therewith, including Landlord fees, if any.

         7.       Parking. The parties agree that 32 parking spaces related to
the Premises will be allocated to Sublessee for its and its employees' and
licensees' use during the Sublease Term.

                                       2



         8.       Brokers. Sublessor and Sublessee hereby recognize Swearingen
Realty Group, L.L.C. and Henry S. Miller Commercial, Inc. as the only real
estate brokers involved in this Sublease transaction.

         9.       Condition of Subleased Premises and Surrender of the Sublease
Premises. Sublessee acknowledges the (i) Sublessee has fully inspected the
Subleased Premises and accepts the same in their present condition, "as is,
where is", with all faults, and (ii) Sublessor has made no warranties or
representations to Sublessee whatsoever with respect to the condition of the
Subleased Premises. Sublessee agrees to surrender the Subleased Premises to
Sublessor at the end of the Sublease Term in substantially the same condition
that it accepted them at the beginning of the Sublease Term, ordinary wear and
tear excepted.

         10.      Insurance, Certificates, Licenses and/or Permits. Sublessee
shall obtain at Sublessee's sole cost and expense, all necessary insurance,
certificates, licenses or permits to do business in the Premises, which may be
required by any governmental authorities, Landlord and/or the Primary Lease.

         11.      Complete Agreement and Amendment. Subject to the second
sentence of this Section 11, this Sublease sets forth the complete agreement
between Sublessor and Sublessee with respect to the subject matter hereof, and
this Sublease may not be terminated, amended or modified in any respect except
by agreement in writing executed by both Sublessor and Sublessee and approved in
writing by Landlord. To the extent any question arises with respect to the
Sublessor's or Sublessee's rights, duties and obligations under this Sublease
that is not addressed specifically by this Sublease, the parties will refer to
the Reference Lease, and to that extent only, the terms and conditions of the
Reference Lease are hereby incorporated herein by reference.

         12.      Survival. All duties and obligations of Sublessee under this
Sublease that are unperformed shall survive the termination of expiration of
this Sublease.

         13.      Binding Effect. Except as limited by Paragraph 14 hereof, this
Sublease and all the terms and conditions hereof shall be binding upon and inure
to the benefit of both Sublessor and Sublessee and their respective successors,
legal representatives and assigns.

         14.      Assignment and Subletting. Sublessee shall not be entitled to
sublet or assign all or any part of its interest in the Premises without the
prior written consent of Sublessor and Landlord. This Sublease may not be sublet
or assigned in any instance unless the assignee or subtenant agrees in writing
to be fully bound by the terms of this Sublease and assumes in writing all
obligations of Sublessee hereunder. Regardless of any assignment hereof,
Sublessee shall at all times remain fully responsible and liable for compliance
with its obligations under the terms of this Sublease. Sublessee shall not be
entitled to encumber its interest in this Sublease.

                                       3



         15.      Relationship of Parties. The relationship between the parties
under this Sublease is that of Sublessor and Sublessee. Nothing in this Sublease
shall be deemed to make either party a partner or associate of the other in the
conduct of its business, nor shall either party be liable for any debts incurred
by the other party in the conduct of such party's business.

         16.      Notices. Any notice received by Sublessor from the Landlord
shall be transmitted to Sublessee within five (5) business days.

         17.      Furniture: Sublessor will provide Sublessee with utilization
of its' existing furniture per Exhibit B. At the termination of the Sublease,
the furniture described in Exhibit B will remain in the Premises and the
property of Sublessor.

         18.      Liens No Landlord or Sublandlord lien shall be required and no
such lien will be filed against Sublessee or its property.

                [Remainder of this page intentionally left blank]

                                       4



         EXECUTED as of the day, month and year first above written.

                                  SUBLESSOR:

                                  Integrated Device Technology, Inc.

                                  By:    /s/ Jerry Fiddler
                                         ---------------------------------------
                                  Name:  Jerry Fiddler
                                  Its:   Vice President H.R. and Administration

                                  SUBLESSEE:

                                  Advanced Neuromodulation Systems

                                  By:    /s/ Kenneth Hawari
                                         ---------------------------------------
                                  Name:  Kenneth Hawari
                                  Its:   Executive Vice President

                                       5



                                    EXHIBIT A

                     (Drawing of office layout of premises)

                                       6



                                    EXHIBIT B

1.36  cubicles

2.36  task chairs

3.3   side chairs

4.01  first aid kit

5.01  reception furniture set

6.01  flag and pole

7.01  curtain set

8.01  refrigerator

9.01  lot misc. cubicle pieces

10.5  leather chairs and 2 side tables.

11.2  lab benches

12.1  Microwave (old)

13.30 Whiteboards

14.1  Table

15.2  Pinup boards

16.1  Data Rack

17.1  Phone Rack

                                       7

EX-10.21

                                                                   EXHIBIT 10.21


                              FIXED PRICE CONTRACT

CONTRACTOR: Trane, a Division of American Standard, Inc. CONTRACT DATE: December
            17, 2003

PROJECT:  Advance Neuromodulation Systems Building Automation System

CONTRACT TIME: All Work must be finally complete on or before April 15, 2004

CONTRACT SUM:  $ $208,457.00

PAYMENT WITHIN 30 calendar days after Final Completion

This Fixed Price Contract ("Contract") is executed to be effective on the date
set forth above ("Contract Date"). The parties to the Contract are:

         Advanced Neuromodulation Systems, Inc.                        ("Owner")
         6501 Windcrest Drive, Suite 100
         Plano, Texas 75024
         Owner's Representative: Myron Albert
         Telephone: (972) 309-8502  FAX: (972) 309-8150
         E-mail address:  m.albert@ans-medical.com

         Trane, a Division of American Standard, Inc.             ("Contractor")
         1400 Valwood Parkway, Suite 100
         Carrollton, TX  75006
         Contractor's Representative: Chris Koutalidis
         Telephone: (972) 406-6000FAX:  (972) 243-1398
         E-mail address:  cwkoutalidis@trane.com

1.       Contractor Obligations. In connection with the project described above
("Project"), Contractor shall furnish all materials, supplies, equipment,
machinery, fixtures, tools, fees, approvals, permits, governmental fees,
licenses, inspections, insurance, labor, and supervision necessary to perform
the work ("Work") described on Exhibit A. Contractor represents and warrants
that it is technically, financially, and legally ready, willing, and able to
perform the Work hereunder and that it is familiar with and knowledgeable about
the applicable laws and regulations, and government agency policy documents to
the extent necessary to carry out its duties in a professional, complete, and
compliant manner. Contractor further represents and warrants that Work performed
by or delivered through Contractor shall be in accordance with the generally
accepted standards of the profession at the time of performance and shall
conform to the provisions of this Contract. Contractor shall replace any part of
the Work that fails to comply with this Contract if such failure appears before
Final Completion (as defined in Section 3 below). Additionally, Contractor shall
remedy or replace any defects in the Work that appear within one year after
Final Completion. All subcontractors must be approved by Owner.

         1.1      Independent Contractor. Contractor is an independent
         contractor and not an employee or agent of the Owner. Accordingly,
         neither Contractor nor any of Contractor's representatives shall hold
         themselves out as, or claim to be acting in the capacity of, an
         employee, agent, partner or joint venturer of Owner.


                                       1


         1.2      Changes. From time to time, Owner may authorize changes in the
         Work, issue additional instructions, require additional Work or direct
         the omission of Work previously ordered. Only those changes in the Work
         that are approved on a written change order, shall be binding on Owner.

         1.3      Field Work - Contractor warrants that (a) field-related Work,
         labor and materials delivered by or through Contractor hereunder shall
         be performed, installed, completed and constructed in accordance with
         this Contract and all other documents provided to Contractor by Owner
         or Owner's engineer and performed in a safe, good and workmanlike
         manner, free from defects, and that any equipment utilized in
         connection with performance hereunder shall be in proper working order,
         and (b) any materials (provided by or through Contractor) incorporated
         in the Work shall be properly cleaned and decontaminated, and of
         generally accepted quality as required for the specific intended
         purpose (unless otherwise expressly consented to in advance and in
         writing by Owner).

         1.4      Compliance with Laws - Contractor warrants for itself and its
         officers, directors, employees, agents, subcontractors, and suppliers,
         at any tier, and their respective agents and employees, compliance with
         all applicable Federal, State, and local laws and regulations, as well
         as, but not limited to, permits and licenses concerning health, safety,
         and the protection of the environment and those concerning Equal
         Employment Discrimination Resulting from Age, and Utilization of
         Disadvantaged and Minority Business Enterprises (including, without
         limitation, the law commonly known as the Americans With Disabilities
         Act of 1990 and the Texas Accessibility Standards of the Architectural
         Barriers Act (Art. 9102, Texas Civil Statutes), and the regulations
         related thereto, as the foregoing may be amended from time to time).
         Without limiting the foregoing, Contractor shall also obtain all
         permits required to perform the Work in accordance with all laws and
         regulations.

         1.5      Patents - Contractor warrants that any Work furnished by or
         through Contractor shall be free of any claim of patent infringement.

         1.6      Warranty. Contractor warrants that, for a period of one year
         from the date of substantial completion (the "Warranty Period"),
         Contractor equipment installed hereunder and Work (i) shall be free
         from defects in material, manufacture, and workmanship and (ii) shall
         have the capacities and ratings set forth in Contractor's catalogs and
         bulletins. Substantial completion shall be the date that the Work is
         sufficiently complete so that Customer can utilize the Work for its
         intended use. If a defect is discovered within the Warranty Period,
         Contractor will correct the defect or furnish replacement equipment
         (or, at its option, parts therefor) and labor associated with the
         replacement of parts or equipment not conforming to this warranty.
         Liability shall be limited to Contractor's cost to correct and replace
         the defective Work and equipment. Contractor's warranties expressly
         exclude any remedy for damage or defect caused by abuse, modifications
         or repairs not performed by Contractor, improper operation, or normal
         wear and tear under normal usage. Contractor shall not be obligated to
         pay for the cost of lost refrigerant. THE WARRANTY AND LIABILITY SET
         FORTH IN THIS SECTION ARE IN LIEU OF ALL OTHER WARRANTIES AND
         LIABILITIES, WHETHER IN CONTRACT OR IN NEGLIGENCE, EXPRESS OR IMPLIED,
         IN LAW OR IN FACT, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND
         FITNESS FOR A PARTICULAR USE OR FITNESS FOR A


                                       2


         PARTICULAR PURPOSE. NO REPRESENTATION OR WARRANTY OF MERCHANTABILITY OR
         FITNESS OF PURPOSE IS MADE REGARDING PREVENTION BY THE SCOPE OF
         SERVICES, OR ANY COMPONENT THEREOF, OF MOLD, FUNGUS, BACTERIA,
         MICROBIAL GROWTH, OR ANY OTHER CONTAMINATES. CONTRACTOR SPECIFICALLY
         DISCLAIMS ANY LIABILITY IF THE SCOPE OF SERVICES OR ANY COMPONENT
         THEREOF IS USED TO PREVENT OR INHIBIT THE GROWTH OF SUCH MATERIALS.

2.       Contract Sum. Subject to the conditions set forth in this Contract, as
sole consideration for the proper and complete performance of the Work, Owner
agrees to pay Contractor the amounts set forth above and listed on Exhibit A,
("Contract Sum") . Contractor may request interim payments of the Contract Sum
as described in Section 4 below. Owner agrees to pay the Contract Sum (or the
unpaid balance of the Contract Sum if Owner has made any interim payments)
within 30-days following Final Completion.

3.       Contract Time. Unless otherwise instructed by Owner, Contractor shall
begin performance of the Work within three calendar days after the Contract
Date, and shall thereafter diligently proceed with and finally complete the Work
such that the Work is finally complete no later than April 15, 2004 (the
"Contract Time"). The Work shall be considered finally complete ("Final
Completion") when the Owner determines that all of the Work described on Exhibit
A, and any Work required by change order, has been fully (as opposed to
substantially) completed, including all punch list items, in accordance with
this Contract. If, after the Work has begun, any unexpected conditions are
encountered that will delay completion of the Work and which conditions cannot
be mitigated through the reasonable efforts of Contractor, Contractor shall give
Owner immediate written notice of such conditions, and if Owner approves same as
a permissible delay (which approval shall not be unreasonably withheld)
Contractor's sole and exclusive remedy shall be an equitable adjustment in the
Contract Time to the extent approved by Owner (unless such conditions are the
result of Owner's intentional and unjustifiable interference with the Work) but
there shall be no adjustment in the Contract Sum.

4.       Payment Schedule. Contractor shall submit an application for payment in
the form set forth in Exhibit B to Owner by the 30th day of the month for Work
performed through the 25th day of the current month. Subject to terms of this
Contract, Contractor shall receive payment on or about the 25th day of the
following month. Included with the submission of each Application and
Certificate for Payment, beginning with the second request for payment,
Contractor shall furnish to Owner a Contractor's "Partial Waiver of Liens" in
the form set forth in Exhibit C and a certified statement accounting for the
disbursement of funds received from Owner. Such statement shall itemize all
disbursements to subcontractors and vendors. As a condition precedent to Owner's
obligation to make any payment to Contractor, Owner will require that a Partial
Waiver of Liens or a "Final Waiver of Liens" in the form set forth in Exhibit D,
whichever is appropriate to the circumstances, be executed by Contractor and any
subcontractors. In addition, if Owner has reason to believe that Contractor is
not paying (or may not be able to pay) any of its subcontractors, Owner reserves
the right to make payments jointly to Contractor and such subcontractors to the
extent necessary to pay fully such subcontractors. Notwithstanding the
foregoing, however, Owner shall not be obligated to make any payments to
Contractor for Work which is defective or which is not performed in accordance
with this Contract. Owner further reserves the right to retain 10% of the
Contract Sum (and 10% of any interim payments) until 30-days following Final
Completion. Pending resolution of any dispute arising under this Contract (other
than a termination hereof), Contractor may not cease working and shall proceed
diligently with the performance of this Contract, and Owner shall continue to
make payments that are not in dispute in accordance with this Contract.


                                       3


5.       Insurance. Contractor shall satisfy the insurance obligations described
on Exhibit D. The cost of this insurance shall be at no cost to Owner.

6.       Contractor's Remedy. Contractor shall give written notice to Owner of
any alleged breach by Owner, and Owner shall have a reasonable time within which
to cure any alleged breach. If Owner is in breach of this Contract, Contractor's
exclusive remedies shall be (a) a reasonable extension of the Contract Time and
(b) a reasonable increase in the Contract Sum, which increase shall be limited
to the actual, out-of-pocket costs and expenses incurred by Contractor as a
direct result of Owner's breach.

7.       Indemnification. Contractor and Owner shall indemnify and hold each
other harmless from any and all claims, actions, costs, expenses, damages and
liabilities, including reasonable attorneys' fees, resulting from death or
bodily injury or damage to real or personal property, to the extent caused by
the negligence or misconduct of their respective employees or other authorized
agents in connection with their activities within the scope of this Contract.
Neither party shall indemnify the other against claims, damages, expenses or
liabilities to the extent attributable to the negligence or misconduct of the
other party. If the parties are both at fault, the obligation to indemnify shall
be proportional to their relative fault. The duty to indemnify will continue in
full force and effect, notwithstanding the expiration or early termination
hereof, with respect to any claims based on facts or conditions that occurred
prior to expiration or termination. NOTWITHSTANDING ANY CONTRARY PROVISION,
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL (INCLUDING WITHOUT LIMITATION LOST REVENUE OR PROFITS), OR
PUNITIVE DAMAGES.

8.       Safety. Contractor and its employees shall at all times comply with any
and all safety programs in effect on the Project.

9.       Hazardous Substances.

         9.1      "Hazardous Substances" means any substance defined in or
         included under or regulated by any Federal, State, or local laws,
         rules, ordinances or regulations pertaining to environmental
         regulation, contamination, clean-up or disclosure ("Environmental
         Laws"). Contractor shall not transport to, use, generate, dispose of,
         or install any Hazardous Substances on any property on which the Work
         is performed in violation of Environmental Laws. In performing the
         Work, Contractor shall not cause or permit any release of Hazardous
         Substances into, or contamination of, the environment, including the
         soil, the atmosphere, any water course or ground water in violation of
         Environmental Laws. If Contractor encounters any Hazardous Substances,
         Contractor shall immediately notify Owner and shall immediately stop
         Work until further written authorization from Owner. Contractor shall
         be required to resume performance of the Work in the affected area only
         in the absence of Hazardous Materials or when the affected area has
         been rendered harmless.

         9.2      Owner warrants and represents that it is not aware of any
         Hazardous Materials on the Work site that will affect Contractor's Work
         and Owner has disclosed to Contractor the existence and location of any
         Hazardous Materials in all areas within which Contractor will be
         performing the Work. As between Owner and Contractor, Owner shall be
         responsible for any claims arising out of or relating to any Hazardous
         Materials on or about the Work site, not brought onto the Work site by
         Contractor.

10.      Assignment. Contractor shall not assign this Contract (or any of its
rights, duties or remedies under this Contract) without the prior written
consent of Owner. Owner may, however, assign this


                                       4


Contract (and any of its rights, duties or remedies under this Contract) to any
person or entity without notice to Contractor.

11.      Termination. Owner reserves the right to terminate this Contract at any
time for any reason in Owner's sole and absolute discretion upon not less than
48 hours' written notice to Contractor. Upon any such termination, Contractor
shall immediately discontinue the Work and remove its equipment and employees
from the Project. In the event of such a termination, Contractor, as its sole
and exclusive remedy, shall be entitled to recover payment for all Work
satisfactorily completed through the date of termination.

12.      Entire Agreement. This Contract, together with all exhibits and
referenced documents, constitutes the entire agreement between the parties
regarding the performance of the Work and supersedes all prior understandings
and negotiations (whether written or oral). All exhibits referenced in this
Contract are attached hereto and incorporated herein by reference. This Contract
can only be amended in writing signed by both parties. When this Contract
requires a matter to be subject to the consent or approval of Owner, such
approval or consent must be in writing and may be granted or withheld at Owner's
option (unless expressly provided otherwise herein). All unperformed obligations
of Contractor shall survive the termination of this Contract. This Contract
shall be governed by the laws of the State of Texas. The invalidity or
unenforceability of any part of this Contract shall not invalidate or affect the
remainder, which shall continue to govern the relative rights and duties of the
parties as though the invalid or unenforceable part were not a part hereof.

13.      Notices. All notices given under this Contract must be in writing and
must be given to the parties at the addresses set forth above (or at such other
address as the parties may specify by giving written notice to the other party
in accordance with this Section). Notices given by mail shall be deemed
delivered three business days after deposited in the U. S. Mail, Registered or
Certified Mail, Return Receipt Requested. Notices given by any other means shall
be deemed delivered when acknowledged by the party receiving notice.

14.      Contract Price and Taxes. Contractor shall be responsible for standard
ground transportation and all applicable sales, consumer, use and similar taxes.
Contractor acknowledges that no sales tax is owed on the cleanroom control
system, which is treated as tax exempt manufacturing equipment. All taxes have
been included in the contract price as shown in Exhibit "A."

15.      Access. Contractor and its subcontractors shall be provided access to
the Project site during regular business hours, or such other hours as may be
requested by Contractor and acceptable to the Project site's owner or tenant for
the performance of the Work, including sufficient areas for staging,
mobilization, and storage. Contractor's access to correct any emergency
condition shall not be restricted.

16.      Utilities. Owner shall provide without charge to Contractor all water,
heat, and utilities required for performance of the Work.


                                       5


This Contract is executed to be effective as of the Contract Date set forth
above.

OWNER:

ADVANCED NEUROMODULATION SYSTEMS, INC.

_____________________________________________
By:      /s/ Kenneth G. Hawari
         ____________________________________
Name:    Kenneth G. Hawari
Title:   Executive Vice President

CONTRACTOR:

TRANE, A DIVISION OF AMERICAN STANDARD, INC.

_____________________________________________
By:      /s/ Roger D. Cotton
         ____________________________________
Name:    Roger D. Cotton
Title:   Contract Manager

ATTACHMENTS:

Exhibit A   --    Description of the Work and Contract Sum

Exhibit B   --    Application and Certificate for Payment

Exhibit C   --    Lien Waivers

Exhibit D   --    Insurance Requirements


                                       6


                                    Exhibit A

                    DESCRIPTION OF THE WORK AND CONTRACT SUM

A.   THE WORK: Contractor will perform the following Work under this Contract

1.   ENERGY MANAGEMENT CONTROL SYSTEM - SHELL
     ITEM: A1  QTY: 1

         Trane Tracer Summit control system for control of the following systems
and or equipment:

          -    (4) VAV RTUs including all points and diagnostics contained in
               the RTU's microprocessor

          -    (5) Constant Volume RTUs including all points and diagnostics
               contained in the RTU's microprocessor

          -    (44) Fan powered VAV terminal units - space sensors with override
               button coiled on boxes. All points and diagnostics available in
               units microprocessor.

          -    (9) Shutoff VAV terminal units - space sensors with override
               button mounted as shown on plans. All points and diagnostics
               available in units microprocessor.

          -    Exhaust Fans

          -    Split system A/C units

          -    Elevator pit water detection

          -    Fire Alarm system status

          -    Sump pump

          -    Irrigation system - through dry contacts. Based on 8 zones.

          -    Lighting - based upon interfacing via dry contacts to
               approximately 8 Interior zones and 2 exterior zones

          -    Switchgear/TVSS monitoring - based upon interfacing via Lonworks
               or Bacnet protocols.

        Building Control unit with modem for remote dial in capability.
        Personal computer workstation with Tracer Summit software with color
        graphic displays. Windows based operating system. Printer.
        CO2 sensors and other end devices required for sequence of operations
        Engineered submittal drawings
        Control wiring -installed as plenum rated cable in ceilings in within
        walls for sensors
        Programming
        Checkout
        Warranty
        Training - On-site based on 16 hours required training and an
        additional 24 hours for clean room training.

     NOT INCLUDED IN SCOPE OF WORK:

        Duct smoke detectors
        Monitoring of sprinkler system status. Command only will be shown at
        workstation.
        Any additional software for other computers for remote monitoring
        Phone line

2.   ENERGY MANAGEMENT CONTROL SYSTEM - CLEAN ROOM

     ITEM B1 QTY: 1

           Trane Tracer Summit control system for Clean Room, to control the
        following systems and or equipment:

          -    (1) Trane Air Cooled Chiller including all points and diagnostics
               contained in the Chiller's microprocessor

          -    (1) Variable Volume MAU with the following points

                               Exhibit A - Page 1


                  -        Outside air temp

                  -        Outside air humidity

                  -        Supply air temp

                  -        Supply air humidity

                  -        Duct static pressure

                  -        Outside air damper control

                  -        Humidifier control - humidifier to accept 0-10vdc
                           signal

                  -        3-way Cooling coil valve

                  -        Supply and return smoke detector alarm

                  -        Fan start/stop/status and speed control

                  -        Fan hi/lo static safety switches

                  -        Preheat control - 2-stage

                  -        Reheat control - 2-stage

                  -        Freezestat

                  -        Pre/After/HEPA filter pressure switches

          -    (5) Variable Volume RAHUs with the following points

                  -        Mixed air temp

                  -        Outside air damper and control

                  -        2-way Cooling coil valve

                  -        Supply and return smoke detector alarm

                  -        Fan start/stop/status and speed control

                  -        Fan lo static safety switches

                  -        Dirty Filter pressure switch

          -    Exhaust Fans start/stop/status and speed control

          -    Chill water system control including:

                  -        Start/stop/status of (2) PCHWPs

                  -        Start/stop/status and speed control of (2) SCHWPs

                  -        Medium temperature loop differential pressure sensor

                  -        MTL supply and return temperatures

                  -        MAU return water temperature

                  -        MTL return control valve

                  -        PCHW flow

          -    Space monitoring of (10) zones with the following points

                  -        Space humidity

                  -        Space temperature

                  -        Space static pressure

          -    Controls for (3) EDHs

          -    Provide and control bypass duct damper

        Building Control unit with unit mounted display and modem for remote
        dial in capability and network card for direct connection with laptop
        computer.
        Laptop computer with Tracer Summit software with color graphic
        displays. Windows based operating system.
        Engineered submittal drawings
        Control wiring -installed as plenum rated cable in ceilings in within
        walls for sensors Programming
        Checkout
        Warranty
        Training - On site based on 16 hours required training and an
        additional 24 hours set aside for clean room training.

     NOT INCLUDED IN CLEAN ROOM SCOPE OF WORK:

        Duct smoke detectors
        Any additional software for other computers for remote monitoring

                               Exhibit A - Page 2




         Phone line
         Air flow monitoring stations
         Variable flow control of primary pumps
         Clean room leak detection system

3.   Energy Management Control system - Tenant

     ITEM: C1 QTY: 1

     SCOPE OF WORK:

         1.   Add controls for approximately 64 VAVs and 3 FPVAVs.

         2.   Mount sensors for shell FPVAVs

         3.   Control of (3) exhaust fans

         4.   One additional 24 hr room control

         5.   Control of duct heaters, outside air dampers, and local override
              switches for (2) OR room split systems.

         6.   Communication interface to Leibert CRAC, UPS, PDUS, and ATS.
              LEIBERT EQUIPMENT TO BE PROVIDED WITH MODBUS INTERFACE NECESSARY
              FOR TRANE TO COMMUNICATE AND FULLY MONITOR AND CONTROL EQUIPMENT.

B.   CONTRACT SUM SUMMARY:

                                                                                        
TOTAL NET PRICE (SHELL) (INCLUDES USE TAX)                                                 $ 57,052.00
TOTAL NET PRICE - CLEAN ROOM CONTROLS (EXCLUDES ALL TAXES)                                 $ 88,540.00
TOTAL NET ADD FOR AIR FLOW MONITORING STATIONS (EXCLUDES ALL TAXES)                        $ 11,053.00
     Including supply air flow stations for the MAHU and RAHUs.
TOTAL NET ADD FOR TRACER SUMMIT WEBSERVER (EXCLUDES ALL TAXES)                             $  7,250.00
     This will enable the user to access the system via the internet. The webserver
will have to be on the internet via ANS network or dedicated DSL line. DSL line by
others
TOTAL NET ADD FOR BCU WITH DISPLAY FOR OFFICE AREA (INCLUDES USE TAX)                      $  1,212.00
TOTAL NET PRICE - TENANT CONTROLS (INCLUDING USE TAX)                                      $ 59,950.00
     Original Budget based on 73 boxes - $45,000
     Deduct for 6 boxes @ 475/box - <$2,850>
     Add for control of OR dampers, duct heaters, etc. - $3,000
     Communication interface to Leibert Units for full monitoring and control -
     $8,100.00
     Controller cost for Tenant VAVs, FPVAVs - $6,700.00
TOTAL PRICE ALL WORK                                                                       $225,057.00
     LESS VALUE ENGINEERING (SEE BREAKDOWN IN C. BELOW)                                    $ 16,600.00
TOTAL CONTRACT SUM                                                                         $208,457.00



C.   VALUE ENGINEERING

     The following will be deducted from the project per July 21 meeting:

         1.   Owner to furnish PC, Printer, and Laptop computer - $4,500

         2.   Remove (3) of the (10) space monitoring of temperature, humidity,
              and pressure. - $3,900

         3.   BAS will not indicate smoke detector alarms. Shutdown will remain.
              - $ 1,800

         4.   Hi/Lo static switches will be eliminated from RAHUs. - $ 1,900

         5.   Flow meter will be removed. - $1,800

         6.   Irrigation controls will be deleted - $2,100

         7.   Sump pump status and alarm will be deleted - $ 600
         The above items represent a savings of $16,600.00 from the total
         project. Breakdown is $4,900 for office and $11,700 for clean room.

                               Exhibit A - Page 3




                     APPLICATION AND CERTIFICATE FOR PAYMENT
                              FIXED PRICE CONTRACT

Contractor: Trane, a Division of American Standard, Inc.

Contract Date: October___, 2003

Project: Advanced Neuromodulation Systems Building Automation System

Date of Application ____________________________ Application No.______________

TO: _____________ ("Owner")

                                                                                                  
1.       ORIGINAL CONTRACT SUM.....................................................................  $_______________

2.       TOTAL CHANGE ORDERS.......................................................................  $_______________

3.       CONTRACT SUM TO DATE (Line 1 + 2).........................................................  $_______________

4.       TOTAL COMPLETED & STORED TO DATE..........................................................  $_______________

5.       RETAINAGE:

         a.   ____________    % of Completed Work..................................................  $_______________

         b.   ____________    % of Stored Material.................................................  $_______________

                  Total Retainage..................................................................  $_______________

6.       TOTAL EARNED LESS RETAINAGE...............................................................  $_______________
         (Line 4 less Line 5 Total)

7.       LESS PREVIOUS PAYMENTS....................................................................  $_______________

8.       CURRENT PAYMENT DUE.......................................................................  $_______________

9.       BALANCE TO FINISH, PLUS RETAINAGE.........................................................  $_______________
         (Line 3 less Line 6)



The undersigned Contractor represents that, to the best of Contractor's
knowledge, information, and belief, the Work covered by this application has
been completed in strict accordance with the above-referenced Contract, that all
amounts have been paid by Contractor for Work for which previous payments were
received from Owner, and that the current payment requested herein represents a
just estimate of reimbursement to Contractor. Contractor further represents that
there are no known mechanic's liens or materialmen's liens outstanding at the
date of this application, that all due and payable bills with respect to the
Work have been paid to date or are included in the amount requested in this
application, that, except for such bills not paid but so included, there is no
known basis for the filing of any mechanic's liens or

                               Exhibit B - Page 1




materialmen's liens on the Work or the Project and that effective waivers and
releases of liens have been obtained from all subcontractors.

This Application and Certificate for Payment is executed this _________________
day of __________________ , 20 _______ .

CONTRACTOR:

By:      __________________________________
Name:    __________________________________
Title:   __________________________________

THE STATE OF TEXAS        )
                          ) ss.
THE COUNTY OF _______     )

This instrument was acknowledged before me this __________ day of ____________ ,
20 ________ , by _____________ , , of __________________ , a
____________________ , on behalf of said ___________ .

                                 _______________________________________________
                                   Notary Public in and for the State of Texas

                               Exhibit B - Page 2




                             PARTIAL WAIVER OF LIENS
                              FIXED PRICE CONTRACT

Contractor: Trane, a Division of American Standard, Inc. Contract Date:
October___, 2003

Project: Advanced Neuromodulation Systems Building Automation System

         THAT the undersigned Contractor, in consideration of payment made to
the undersigned of all sums due the undersigned for labor and/or materials
supplied prior to, through and including the date of this waiver and release,
and in connection with the Project, which Project is owned or leased by Advanced
Neuromodulation Systems, Inc. or its affiliates ("Owner"), does hereby fully and
finally waive and release any and all liens, claims, actions, and demands, and
all rights to same, against Owner, the Project, the real property upon which the
Project is located, and any and all other property owned by Owner or its
affiliates, in connection with labor and/or services supplied by the undersigned
to the Project prior to and through the date hereof; and

         THAT the undersigned Contractor does hereby acknowledge and represent
that:

         1.       Through the date hereof, the undersigned Contractor has
                  received total payments in the amount of $________ for labor
                  and/or materials supplied to or for the Project; and

         2.       The undersigned Contractor hereby acknowledges receipt of
                  payment in full of all sums agreed and required to be paid to
                  the undersigned in connection with the Project for all labor
                  and/or materials supplied by the undersigned to or for the
                  Project prior to, through, and including the date hereof, it
                  being understood that retainage in the amount of $__________is
                  being withheld pursuant to the terms of the Contract.

         This instrument has been executed as of the _________ day of
____________ , 20 _______ .

CONTRACTOR:

By:      _____________________________
Name:    _____________________________
Title:   _____________________________

THE STATE OF TEXAS        )
                          ) ss.
THE COUNTY OF _______     )

This instrument was acknowledged before me this __________ day of ____________ ,
20 ________ , by _____________ , __________, of __________________ , a
____________________ , on behalf of said ___________ .

                                 _______________________________________________
                                   Notary Public in and for the State of Texas

                               Exhibit C - Page 1




                              FINAL WAIVER OF LIENS
                              FIXED PRICE CONTRACT

Contractor: Trane, a Division of American Standard, Inc. Contract Date:
October___, 2003

Project: Advanced Neuromodulation Systems Building Automation System

         THAT the undersigned Contractor, in consideration of payment made to
the undersigned of all sums due the undersigned for labor and/or materials
supplied prior to, through, and including the date of this waiver and release,
and in connection with the Project, which Project is owned or leased by Advanced
Neuromodulation Systems, Inc. or its affiliates ("Owner"), does hereby fully and
finally waive and release any and all liens, claims, actions, and demands, and
all rights to same, against Owner, the Project, the real property upon which the
Project is located, and any and all other property owned by Owner or its
affiliates, in connection with labor and/or services supplied by the undersigned
to the Project prior to and through the date hereof; and

         THAT the undersigned Contractor does hereby acknowledge and represent
that:

         1.       Through the date hereof, the undersigned Contractor has
                  received total payments in the amount of $ ____________
                  for labor and/or materials supplied to or for the Project; and

         2.       The undersigned Contractor hereby acknowledges receipt of
                  payment in full of all sums agreed and required to be paid to
                  the undersigned in connection with the Project for all labor
                  and/or materials supplied by the undersigned to or for the
                  Project prior to, through, and including the date hereof.

         This instrument has been executed as of the _______________ day of
_____________ , 20 ___________ .

CONTRACTOR:

By:      _____________________________
Name:    _____________________________
Title:   _____________________________

THE STATE OF TEXAS        )
                          ) ss.
THE COUNTY OF _______     )

This instrument was acknowledged before me this __________ day of ____________ ,
20 ________ , by _____________ , _____________, of __________________ , a
____________________ , on behalf of said ___________ .

                                 _______________________________________________
                                   Notary Public in and for the State of Texas

                               Exhibit D - Page 1




                             INSURANCE REQUIREMENTS

Contractor shall not commence the Work under this Contract until it has obtained
insurance in compliance to the following requirements:

- -    COVERAGE AND LIMITS

Contractor will purchase and maintain (with companies licensed to do business in
the State of Texas and having rates of Best's Insurance Guide A/VII, or better)
insurance coverages and amounts as set forth below:



            TYPE                             AMOUNT                                  OTHER REQUIREMENTS
- ---------------------------------------------------------------------------------------------------------------------
                                                              
1.  WORKER'S COMPENSATION     Texas Statutory Limits, if state      1.  Waiver of subrogation in favor of Insured
AND EMPLOYER'S LIABILITY      has no statutory limits then:         Parties (hereafter defined).
                              $1,000,000 each accident
                              $1,000,000 policy limit bodily
                              injury by disease
                              $1,000,000 each employee, bodily
                              injury by disease
- ---------------------------------------------------------------------------------------------------------------------
2.  COMMERCIAL GENERAL        $1,000,000 per occurrence             1.  ISO form CG 0001 0196, or equivalent
LIABILITY (OCCURRENCE BASIS)  $2,000,000 general aggregate          2.  Insured Parties will be named as "additional
                              $2,000,000 product-completed          insureds" on ISO Form CG 2026 1185, or equivalent
                              operations aggregate limit.           3.  Waiver of subrogation in favor of Insured
                              $50,000 fire legal liability          Parties
                              $5,000 medical expense limit
- ---------------------------------------------------------------------------------------------------------------------


- -    EVIDENCE OF INSURANCE REQUIRED

Contractor shall not commence any Work of any kind under this Contract until all
the insurance requirements contained in this Exhibit D have been provided and
complied with, and until a Certificate of Insurance has been provided to Owner.
Evidence to be delivered to Owner prior to commencing operations at the Site and
at least 5 days prior to the expiration of current policies. THE "ACORD FORM 25
CERTIFICATES OF LIABILITY INSURANCE" FOR LIABILITY COVERAGES, "ACORD FORM 27
EVIDENCE OF PROPERTY INSURANCE" FOR PROPERTY COVERAGES OR ANOTHER PRE-APPROVED
SUBSTITUTE IS THE REQUIRED FORM IN ALL CASES WHERE REFERENCE IS MADE HEREIN TO A
"CERTIFICATE OF INSURANCE". The Certificate of Insurance must specify the
additional insured status and waivers of subrogation, state the amounts of all
deductibles and self-insured retentions, set forth notice requirements for
cancellation, material change, or non-renewal of insurance and be accompanied by
copies of all required endorsements.

- -    INSURANCE REQUIRED FOR CONTRACT TIME

Any and all insurance required hereunder shall be maintained during the entire
Contract Time, including any extensions thereto.

- -    ADDITIONAL INSURED STATUS

Each insurance policy described herein permitting an additional insured
endorsement shall be endorsed, using additional insured endorsement CG 2026 (or
broader endorsement) to name as additional insureds Owner and each of its
partners, officers, directors, members, owners, agents, and employees
(collectively, the "INSURED PARTIES").

- -    PRIMARY COVERAGE

The coverage afforded the additional insureds shall be primary insurance. If any
additional insureds have other insurance applicable to the loss, such other
insurance shall be on an excess or contingent basis and shall apply only to such
additional insureds.

                                       1

EX-10.22

                                                                   EXHIBIT 10.22


                              FIXED PRICE CONTRACT

CONTRACTOR: Dallas Security Systems, Inc. CONTRACT DATE: December 10,2003

PROJECT: Advanced Neuromodulation Systems Building Access Control System

CONTRACT TIME: All Work must be finally complete on or before _______________

CONTRACT SUM: $ 127,560.28

PAYMENT WITHIN 30 calendar days after Final Completion

This Fixed Price Contract ("Contract") is executed to be effective on the date
set forth above ("Contract Date"). The parties to the Contract are:

         Advanced Neuromodulation Systems, Inc.                        ("Owner")
         6501 Windcrest Drive, Suite 100
         Plano, Texas 75024
         Owner's Representative: Myron Albert
         Telephone: (972) 309-8502  FAX:  (972) 309-8150
         E-mail address:  m.albert@ans-medical.com

         Dallas Security Systems, Inc.                            ("Contractor")
         10731 Rockwall Road
         Dallas, TX 75238
         Contractor's Representative: Joe Roza
         Telephone: (214) 553-6103 x137   FAX:  (214) 553-6110
         E-mail address:  jroza@dallassecurity.net

1.       Contractor Obligations. In connection with the project described above
("Project"), Contractor shall furnish all materials, supplies, equipment,
machinery, fixtures, tools, fees, approvals, permits, governmental fees,
licenses, inspections, insurance, labor, and supervision necessary to perform
the work ("Work") described on Exhibit A. Contractor represents and warrants
that it is technically, financially, and legally ready, willing, and able to
perform the Work hereunder and that it is familiar with and knowledgeable about
the applicable laws and regulations, and government agency policy documents to
the extent necessary to carry out its duties in a professional, complete, and
compliant manner. Contractor further represents and warrants that Work performed
by or delivered through Contractor shall be in accordance with the generally
accepted standards of the profession at the time of performance and shall
conform to the provisions of this Contract. Contractor shall replace any part of
the Work that fails to comply with this Contract if such failure appears before
Final Completion (as defined in Section 3 below). Additionally, Contractor shall
remedy or replace any defects in the Work that appear within one year after
Final Completion. All subcontractors must be approved by Owner.

         1.1      Independent Contractor. Contractor is an independent
         contractor and not an employee or agent of the Owner. Accordingly,
         neither Contractor nor any of Contractor's representatives shall hold
         themselves out as, or claim to be acting in the capacity of, an
         employee, agent, partner or joint venturer of Owner.


                                       1


         1.2 Changes. From time to time, Owner may authorize changes in the
         Work, issue additional instructions, require additional Work or direct
         the omission of Work previously ordered. Only those changes in the Work
         that are approved on a written change order, shall be binding on Owner.

         1.3      Field Work - Contractor warrants that (a) field-related Work,
         labor and materials delivered by or through Contractor hereunder shall
         be performed, installed, completed and constructed in accordance with
         this Contract and all other documents provided to Contractor by Owner
         or Owner's engineer and performed in a safe, good and workmanlike
         manner, free from defects, and that any equipment utilized in
         connection with performance hereunder shall be in proper working order,
         and (b) any materials (provided by or through Contractor) incorporated
         in the Work shall be properly cleaned and decontaminated, and of
         generally accepted quality as required for the specific intended
         purpose (unless otherwise expressly consented to in advance and in
         writing by Owner).

         1.4      Compliance with Laws - Contractor warrants for itself and its
         officers, directors, employees, agents, subcontractors, and suppliers,
         at any tier, and their respective agents and employees, compliance with
         all applicable Federal, State, and local laws and regulations, as well
         as, but not limited to, permits and licenses concerning health, safety,
         and the protection of the environment and those concerning Equal
         Employment Discrimination Resulting from Age, and Utilization of
         Disadvantaged and Minority Business Enterprises (including, without
         limitation, the law commonly known as the Americans With Disabilities
         Act of 1990 and the Texas Accessibility Standards of the Architectural
         Barriers Act (Art. 9102, Texas Civil Statutes), and the regulations
         related thereto, as the foregoing may be amended from time to time).
         Without limiting the foregoing, Contractor shall also obtain all
         permits required to perform the Work in accordance with all laws and
         regulations.

         1.5      Patents - Contractor warrants that any Work furnished by or
         through Contractor shall be free of any claim of patent infringement.

         1.6      Warranty. Contractor warrants that, for a period of one year
         from the date of substantial completion (the "Warranty Period"),
         Contractor equipment installed hereunder and Work (i) shall be free
         from defects in material, manufacture, and workmanship and (ii) shall
         have the capacities and ratings set forth in Contractor's catalogs and
         bulletins. Substantial completion shall be the date that the Work is
         sufficiently complete so that Customer can utilize the Work for its
         intended use. If a defect is discovered within the Warranty Period,
         Contractor will correct the defect or furnish replacement equipment
         (or, at its option, parts therefor) and labor associated with the
         replacement of parts or equipment not conforming to this warranty.
         Liability shall be limited to Contractor's cost to correct and replace
         the defective Work and equipment. Contractor's warranties expressly
         exclude any remedy for damage or defect caused by abuse, modifications
         or repairs not performed by Contractor, improper operation, or normal
         wear and tear under normal usage.

2.       Contract Sum. Subject to the conditions set forth in this Contract, as
sole consideration for the proper and complete performance of the Work, Owner
agrees to pay Contractor the amounts set forth above and listed on Exhibit A,
("Contract Sum"). Contractor may request interim payments of the Contract Sum as
described in Section 4 below. Owner agrees to pay the Contract Sum (or the
unpaid


                                       2


balance of the Contract Sum if Owner has made any interim payments) within
30-days following Final Completion.

3.       Contract Time. Unless otherwise instructed by Owner, Contractor shall
begin performance of the Work within three calendar days after the Contract
Date, and shall thereafter diligently proceed with and finally complete the Work
such that the Work is finally complete no later than April 15, 2004 (the
"Contract Time"). The Work shall be considered finally complete ("Final
Completion") when the Owner determines that all of the Work described on Exhibit
A, and any Work required by change order, has been fully (as opposed to
substantially) completed, including all punch list items, in accordance with
this Contract. If, after the Work has begun, any unexpected conditions are
encountered that will delay completion of the Work and which conditions cannot
be mitigated through the reasonable efforts of Contractor, Contractor shall give
Owner immediate written notice of such conditions, and if Owner approves same as
a permissible delay (which approval shall not be unreasonably withheld)
Contractor's sole and exclusive remedy shall be an equitable adjustment in the
Contract Time to the extent approved by Owner (unless such conditions are the
result of Owner's intentional and unjustifiable interference with the Work) but
there shall be no adjustment in the Contract Sum.

4.       Payment Schedule. Contractor shall submit an application for payment in
the form set forth in Exhibit B to Owner by the 30th day of the month for Work
performed through the 25th day of the current month. Subject to terms of this
Contract, Contractor shall receive payment on or about the 25th day of the
following month. Included with the submission of each Application and
Certificate for Payment, beginning with the second request for payment,
Contractor shall furnish to Owner a Contractor's "Partial Waiver of Liens" in
the form set forth in Exhibit C and a certified statement accounting for the
disbursement of funds received from Owner. Such statement shall itemize all
disbursements to subcontractors and vendors. As a condition precedent to Owner's
obligation to make any payment to Contractor, Owner will require that a Partial
Waiver of Liens or a "Final Waiver of Liens" in the form set forth in Exhibit D,
whichever is appropriate to the circumstances, be executed by Contractor and any
subcontractors. In addition, if Owner has reason to believe that Contractor is
not paying (or may not be able to pay) any of its subcontractors, Owner reserves
the right to make payments jointly to Contractor and such subcontractors to the
extent necessary to pay fully such subcontractors. Notwithstanding the
foregoing, however, Owner shall not be obligated to make any payments to
Contractor for Work which is defective or which is not performed in accordance
with this Contract. Owner further reserves the right to retain 10% of the
Contract Sum (and 10% of any interim payments) until 30-days following Final
Completion. Pending resolution of any dispute arising under this Contract (other
than a termination hereof), Contractor may not cease working and shall proceed
diligently with the performance of this Contract, and Owner shall continue to
make payments that are not in dispute in accordance with this Contract.

5.       Insurance. Contractor shall satisfy the insurance obligations described
on Exhibit D. The cost of this insurance shall be at no cost to Owner. Both
parties agree to a mutual waiver of subrogation but only to the extent of the
individual party's negligence.

6.       Contractor's Remedy. Contractor shall give written notice to Owner of
any alleged breach by Owner, and Owner shall have a reasonable time within which
to cure any alleged breach. If Owner is in breach of this Contract, Contractor's
exclusive remedies shall be (a) a reasonable extension of the Contract Time and
(b) a reasonable increase in the Contract Sum, which increase shall be limited
to the actual, out-of-pocket costs and expenses incurred by Contractor as a
direct result of Owner's breach.

7.       Indemnification. Contractor and Owner shall indemnify and hold each
other harmless from any and all claims, actions, costs, expenses, damages and
liabilities, including reasonable attorneys' fees, resulting from death or
bodily injury or damage to real or personal property, to the extent caused by
the


                                       3


negligence or misconduct of their respective employees or other authorized
agents in connection with their activities within the scope of this Contract.
Neither party shall indemnify the other against claims, damages, expenses or
liabilities to the extent attributable to the negligence or misconduct of the
other party. If the parties are both at fault, the obligation to indemnify shall
be proportional to their relative fault. The duty to indemnify will continue in
full force and effect, notwithstanding the expiration or early termination
hereof, with respect to any claims based on facts or conditions that occurred
prior to expiration or termination.

8.       Safety. Contractor and its employees shall at all times comply with any
and all safety programs in effect on the Project.

9.       Hazardous Substances.

         9.1      "Hazardous Substances" means any substance defined in or
         included under or regulated by any Federal, State, or local laws,
         rules, ordinances or regulations pertaining to environmental
         regulation, contamination, clean-up or disclosure ("Environmental
         Laws"). Contractor shall not transport to, use, generate, dispose of,
         or install any Hazardous Substances on any property on which the Work
         is performed in violation of Environmental Laws. In performing the
         Work, Contractor shall not cause or permit any release of Hazardous
         Substances into, or contamination of, the environment, including the
         soil, the atmosphere, any water course or ground water in violation of
         Environmental Laws. If Contractor encounters any Hazardous Substances,
         Contractor shall immediately notify Owner and shall immediately stop
         Work until further written authorization from Owner. Contractor shall
         be required to resume performance of the Work in the affected area only
         in the absence of Hazardous Materials or when the affected area has
         been rendered harmless.

         9.2      Owner warrants and represents that it is not aware of any
         Hazardous Materials on the Work site that will affect Contractor's Work
         and Owner has disclosed to Contractor the existence and location of any
         Hazardous Materials in all areas within which Contractor will be
         performing the Work. As between Owner and Contractor, Owner shall be
         responsible for any claims arising out of or relating to any Hazardous
         Materials on or about the Work site, not brought onto the Work site by
         Contractor.

10.      Assignment. Contractor shall not assign this Contract (or any of its
rights, duties or remedies under this Contract) without the prior written
consent of Owner. Owner may, however, assign this Contract (and any of its
rights, duties or remedies under this Contract) to any person or entity without
notice to Contractor.

11.      Termination. Owner reserves the right to terminate this Contract at any
time for any reason in Owner's sole and absolute discretion upon not less than
48 hours' written notice to Contractor. Upon any such termination, Contractor
shall immediately discontinue the Work and remove its equipment and employees
from the Project. In the event of such a termination, Contractor, as its sole
and exclusive remedy, shall be entitled to recover payment for all Work
satisfactorily completed through the date of termination.

12.      Entire Agreement. This Contract, together with all exhibits and
referenced documents, constitutes the entire agreement between the parties
regarding the performance of the Work and supersedes all prior understandings
and negotiations (whether written or oral). All exhibits referenced in this
Contract are attached hereto and incorporated herein by reference. This Contract
can only be amended in writing


                                       4


signed by both parties. When this Contract requires a matter to be subject to
the consent or approval of Owner, such approval or consent must be in writing
and may be granted or withheld at Owner's option (unless expressly provided
otherwise herein). All unperformed obligations of Contractor shall survive the
termination of this Contract. This Contract shall be governed by the laws of the
State of Texas. The invalidity or unenforceability of any part of this Contract
shall not invalidate or affect the remainder, which shall continue to govern the
relative rights and duties of the parties as though the invalid or unenforceable
part were not a part hereof.

13.      Notices. All notices given under this Contract must be in writing and
must be given to the parties at the addresses set forth above (or at such other
address as the parties may specify by giving written notice to the other party
in accordance with this Section). Notices given by mail shall be deemed
delivered three business days after deposited in the U. S. Mail, Registered or
Certified Mail, Return Receipt Requested. Notices given by any other means shall
be deemed delivered when acknowledged by the party receiving notice.

14.      Contract Price and Taxes. Contractor shall be responsible for all
applicable sales, consumer, use and similar taxes. All taxes have been included
in the Contract Price as shown in the attached Exhibit A.

15.      Access. Contractor and its subcontractors shall be provided access to
the Project site during regular business hours, or such other hours as may be
requested by Contractor and acceptable to the Project site's owner or tenant for
the performance of the Work, including sufficient areas for parking of
Contractor's and its subcontractors' vehicles, staging, mobilization, and
storage. Contractor's access to correct any emergency condition shall not be
restricted.

         15.1.    Access to Certain Areas. Contractor and its subcontractors
         shall be provided access to the wire chases and above-ceiling areas,
         when necessary, during regular business hours, or such other hours as
         may be requested by Contractor and acceptable to Owner for the
         performance of the Work.

16.      Utilities. Owner shall provide without charge to Contractor all water,
heat, and utilities, including all conduit and electrical "stub-ups" (unless
expressly provided otherwise herein), required for performance of the Work.

17.      Other Owner Obligations. Owner shall provide for any "saw-cutting"
and/or penetrations not otherwise specified for on Exhibit A.


                                       5


This Contract is executed to be effective as of the Contract Date set forth
above.

OWNER:

ADVANCED NEUROMODULATION SYSTEMS, INC.

_____________________________________________________
By:      /s/ F. Robert Merrill III
         ____________________________________________
Name:    F. Robert Merrill III
Title:   CFO

CONTRACTOR:

DALLAS SECURITY SYSTEMS, INC.

_____________________________________________________
By:      /s/ Ray Cherry
         ____________________________________________
Name:    Ray Cherry
Title:   V.P. Sales

ATTACHMENTS:

Exhibit A   --    Description of the Work and Contract Sum

Exhibit B   --    Application and Certificate for Payment

Exhibit C   --    Lien Waivers

Exhibit D   --    Insurance Requirements


                                       6


                    DESCRIPTION OF THE WORK AND CONTRACT SUM

See attached "Schedule of Equipment and Labor," which is fully incorporated
herein and made a part hereof by reference. Provided, however, the provision on
the last page of the schedule, page 37 of 37 entitled "ITEMS NOT NORMALLY
INCLUDED IN SCOPE OF WORK" and all items listed thereunder are hereby expressly
deleted and superceded by the terms of this Contract.

                               EXHIBIT A - PAGE 1



                     APPLICATION AND CERTIFICATE FOR PAYMENT
                              FIXED PRICE CONTRACT

Contractor: Dallas Security Systems, Inc. Contract Date: __________________

Project: Advanced Neuromodulation Systems Building Access Control System

Date of Application _________________________ Application No. _____________

TO:      _________________                                           ("Owner")

                                                                                                  
1.       ORIGINAL CONTRACT SUM.....................................................................  $_______________

2.       TOTAL CHANGE ORDERS.......................................................................  $_______________

3.       CONTRACT SUM TO DATE (Line 1 + 2).........................................................  $_______________

4.       TOTAL COMPLETED & STORED TO DATE..........................................................  $_______________

5.       RETAINAGE:

         a.       _________   % of Completed Work..................................................  $_______________

         b.       _________   % of Stored Material.................................................  $_______________

                  Total Retainage..................................................................  $_______________

6.       TOTAL EARNED LESS RETAINAGE...............................................................  $_______________
         (Line 4 less Line 5 Total)

7.       LESS PREVIOUS PAYMENTS....................................................................  $_______________

8.       CURRENT PAYMENT DUE.......................................................................  $_______________

9.       BALANCE TO FINISH, PLUS RETAINAGE.........................................................  $_______________
         (Line 3 less Line 6)



The undersigned Contractor represents that, to the best of Contractor's
knowledge, information, and belief, the Work covered by this application has
been completed in strict accordance with the above-referenced Contract, that all
amounts have been paid by Contractor for Work for which previous payments were
received from Owner, and that the current payment requested herein represents a
just estimate of reimbursement to Contractor. Contractor further represents that
there are no known mechanic's liens or materialmen's liens outstanding at the
date of this application, that all due and payable bills with respect to the
Work have been paid to date or are included in the amount requested in this
application, that, except for such bills not paid but so included, there is no
known basis for the filing of any mechanic's liens or

                               Exhibit B - Page 1




materialmen's liens on the Work or the Project and that effective waivers and
releases of liens have been obtained from all subcontractors.

This Application and Certificate for Payment is executed this _________________
day of __________________ , 20 _______ .

CONTRACTOR:

By:      _____________________________
Name:    _____________________________
Title:   _____________________________

THE STATE OF TEXAS         )
                           ) ss.
THE COUNTY OF _______      )

This instrument was acknowledged before me this __________ day of ____________ ,
20 ________ , by _____________ , ______________, of __________________ , a
____________________ , on behalf of said ___________ .

                                 _______________________________________________
                                   Notary Public in and for the State of Texas

                               Exhibit B - Page 2





                             PARTIAL WAIVER OF LIENS
                              FIXED PRICE CONTRACT

Contractor: Dallas Security Systems, Inc. Contract Date: __________________

Project: Advanced Neuromodulation Systems Building Access Control System

         THAT the undersigned Contractor, in consideration of payment made to
the undersigned of all sums due the undersigned for labor and/or materials
supplied prior to, through and including the date of this waiver and release,
and in connection with the Project, which Project is owned or leased by Advanced
Neuromodulation Systems, Inc. or its affiliates ("Owner"), does hereby fully and
finally waive and release any and all liens, claims, actions, and demands, and
all rights to same, against Owner, the Project, the real property upon which the
Project is located, and any and all other property owned by Owner or its
affiliates, in connection with labor and/or services supplied by the undersigned
to the Project prior to and through the date hereof; and

         THAT the undersigned Contractor does hereby acknowledge and represent
that:

         1.       Through the date hereof, the undersigned Contractor has
                  received total payments in the amount of $ __________for labor
                  and/or materials supplied to or for the Project; and

         2.       The undersigned Contractor hereby acknowledges receipt of
                  payment in full of all sums agreed and required to be paid to
                  the undersigned in connection with the Project for all labor
                  and/or materials supplied by the undersigned to or for the
                  Project prior to, through, and including the date hereof, it
                  being understood that retainage in the amount of $ ___________
                  is being withheld pursuant to the terms of the Contract.

         This instrument has been executed as of the ____________ day of
________, 20 _____ . CONTRACTOR:

CONTRACTOR:

By:      _____________________________
Name:    _____________________________
Title:   _____________________________

THE STATE OF TEXAS         )
                           ) ss.
THE COUNTY OF _______      )

This instrument was acknowledged before me this __________ day of ____________ ,
20 ________ , by _____________ , , of __________________ , a
____________________ , on behalf of said ___________ .

                                 _______________________________________________
                                   Notary Public in and for the State of Texas

                               Exhibit C - Page 1




                              FINAL WAIVER OF LIENS
                              FIXED PRICE CONTRACT

Contractor: Dallas Security Systems, Inc. Contract Date: ______________________

Project: Advanced Neuromodulation Systems Building Access Control System

         THAT the undersigned Contractor, in consideration of payment made to
the undersigned of all sums due the undersigned for labor and/or materials
supplied prior to, through, and including the date of this waiver and release,
and in connection with the Project, which Project is owned or leased by Advanced
Neuromodulation Systems, Inc. or its affiliates ("Owner"), does hereby fully and
finally waive and release any and all liens, claims, actions, and demands, and
all rights to same, against Owner, the Project, the real property upon which the
Project is located, and any and all other property owned by Owner or its
affiliates, in connection with labor and/or services supplied by the undersigned
to the Project prior to and through the date hereof; and

         THAT the undersigned Contractor does hereby acknowledge and represent
that:

         1.       Through the date hereof, the undersigned Contractor has
                  received total payments in the amount of $ _____________
                  for labor and/or materials supplied to or for the Project; and

         2.       The undersigned Contractor hereby acknowledges receipt of
                  payment in full of all sums agreed and required to be paid to
                  the undersigned in connection with the Project for all labor
                  and/or materials supplied by the undersigned to or for the
                  Project prior to, through, and including the date hereof.

         This instrument has been executed as of the ____________ day of
________, 20 _____ .

CONTRACTOR:

By:      _____________________________
Name:    _____________________________
Title:   _____________________________

THE STATE OF TEXAS         )
                           ) ss.
THE COUNTY OF _______      )

This instrument was acknowledged before me this __________ day of ____________ ,
20 ________ , by _____________ , _____________, of __________________ , a
____________________ , on behalf of said ___________ .

                                 _______________________________________________
                                   Notary Public in and for the State of Texas

                               Exhibit C - Page 2




                             INSURANCE REQUIREMENTS

Contractor shall not commence the Work under this Contract until it has obtained
insurance in compliance to the following requirements:

- -    COVERAGE AND LIMITS

Contractor will purchase and maintain (with companies licensed to do business in
the State of Texas and having rates of Best's Insurance Guide A/VII, or better)
insurance coverages and amounts as set forth below:



            TYPE                             AMOUNT                                  OTHER REQUIREMENTS
- -----------------------------------------------------------------------------------------------------------------------
                                                              
1.  WORKERS' COMPENSATION     Texas Statutory Limits, if state      1.  Waiver of subrogation in favor of Insured
AND EMPLOYER'S LIABILITY      has no statutory limits then:         Parties (hereafter defined).
                              $1,000,000 each accident
                              $1,000,000 policy limit bodily
                              injury by disease
                              $1,000,000 each employee, bodily
                              injury by disease
- -----------------------------------------------------------------------------------------------------------------------
2.  COMMERCIAL GENERAL        $1,000,000 per occurrence             1.  ISO form CG 0001 0196, or equivalent
LIABILITY (OCCURRENCE BASIS)  $2,000,000 general aggregate          2.  Insured Parties will be named as "additional
                              $2,000,000 product-completed          insureds" on ISO Form CG 2026 1185, or equivalent
                              operations aggregate limit.           3.  Waiver of subrogation in favor of Insured
                              $50,000 fire legal liability          Parties
                              $5,000 medical expense limit
- -----------------------------------------------------------------------------------------------------------------------


- -    EVIDENCE OF INSURANCE REQUIRED

Contractor shall not commence any Work of any kind under this Contract until all
the insurance requirements contained in this Exhibit D have been provided and
complied with, and until a Certificate of Insurance has been provided to Owner.
Evidence to be delivered to Owner prior to commencing operations at the Site and
at least 5 days prior to the expiration of current policies. THE "ACORD FORM 25
CERTIFICATES OF LIABILITY INSURANCE" FOR LIABILITY COVERAGES, "ACORD FORM 27
EVIDENCE OF PROPERTY INSURANCE" FOR PROPERTY COVERAGES OR ANOTHER PRE-APPROVED
SUBSTITUTE IS THE REQUIRED FORM IN ALL CASES WHERE REFERENCE IS MADE HEREIN TO A
"CERTIFICATE OF INSURANCE". The Certificate of Insurance must specify the
additional insured status and waivers of subrogation, state the amounts of all
deductibles and self-insured retentions, set forth notice requirements for
cancellation, material change, or non-renewal of insurance and be accompanied by
copies of all required endorsements.

- -    INSURANCE REQUIRED FOR CONTRACT TIME

Any and all insurance required hereunder shall be maintained during the entire
Contract Time, including any extensions thereto.

- -    ADDITIONAL INSURED STATUS

Each insurance policy described herein permitting an additional insured
endorsement shall be endorsed, using additional insured endorsement CG 2026 (or
broader endorsement) to name as additional insureds Owner and each of its
partners, officers, directors, members, owners, agents, and employees
(collectively, the "INSURED PARTIES").

- -    PRIMARY COVERAGE

The coverage afforded the additional insureds shall be primary insurance. If any
additional insureds have other insurance applicable to the loss, such other
insurance shall be on an excess or contingent basis and shall apply only to such
additional insureds.

EX-10.23

                                                                   EXHIBIT 10.23

                              AIA Document A101/CMa

                           Standard Form of Agreement
                          Between Owner and Contractor
                 where the basis of payment is a STIPULATED SUM
          1992 Construction Manager-Adviser Edition - Electronic Format

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN ATTORNEY
IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

The 1992 Edition of AIA Document A201/CMa, General Conditions of the Contract
for Construction, Construction Manager-Adviser Edition, is adopted in this
document by reference. Do not use with other general conditions unless this
document is modified.

Copyright 1975, 1980, (C) 1992 by The American Institute of Architects, 1735 New
York Avenue N.W., Washington D.C. 20006-5292. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will be subject to
legal prosecution.

AGREEMENT
made as of the 30 day of April in the year of 2003
(In words, indicate day, month and year)

BETWEEN the Owner:
(Name and address)
Advanced Neuromodulation Systems, Inc.
6501 Windcrest Drive, Suite 100
Plano, Texas 75024

and the Contractor:
(Name and address)
Roger's-O'Brien Construction Co., Inc.
1901 Regal Row
Dallas, Texas 75235

For the following Project:
(Include detailed description of Project, location, address and scope.)
Advanced Neuromodulation Systems, Inc.
at Legacy Business Park
Preston Road at Tennyson Drive
Plano, Texas 75024

The Construction Manager is:
(Name and address)
KDC-Legacy, L.P.
8411 Preston Rd., Su. 700
Dallas, TX 75225

The Architect is:
(Name and address)
Good Fulton & Farrell
2808 Fairmount, Suite 300
Dallas, Texas 75201

The Owner and Contractor agree as set forth below.

                                   ARTICLE 1
                             THE CONTRACT DOCUMENTS

The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary and other Conditions),

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/25/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                               1


Drawings, Specifications, Addenda issued prior to execution of this Agreement,
other documents listed in this Agreement and Modifications issued after
execution of this Agreement; these form the Contract, and are as fully a part of
the Contract as if attached to this Agreement or repeated herein. The Contract
represents the entire and integrated agreement between the parties hereto and
supersedes prior negotiations, representations or agreements, either written or
oral. An enumeration of the Contract Documents, other than Modifications,
appears in Article 9.

                                    ARTICLE 2
                            THE WORK OF THIS CONTRACT

The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, or as follows:

Construction of all work shown on the contract documents, as further clarified
or amended by the exhibits to this Agreement.

                                    ARTICLE 3
                 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

3.1      The date of commencement is the date from which the Contract Time of
Paragraph 3.2 is measured, and shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner.

(Insert the date of commencement, it it differs from the date of this Agreement
or, if applicable, state that the dale will he fixed in a notice to proceed.)

Date of commencement: April 30, 2003
Site mobilization: May 7, 2003
(reference Owner's Notice to Proceed dated April 30, 2003, with clarifying memo
dated May 5, 2003.)

Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner, through the Construction
Manager, in writing not less than five days before commencing the Work to permit
the timely filing of mortgages, mechanic's liens and other security interests.

3.2      The Contractor shall achieve Substantial Completion of the entire Work
not later than

(Insert the calendar date or number of calendar days after the date of
commencement. Also insert any requirements for earlier Substantial Completion of
certain portions of the Work, if not stated elsewhere in the Contract
Documents.)

Substantial Completion Date: February 11, 2004, based on receipt of permits from
the City of Plano as follows:

                                                 
GRADING PERMIT:                                     MAY 8, 2003

UTILITY PERMIT:                                     MAY 14, 2003

FOUNDATION & UNDERGROUND BUILDING PERMIT:           MAY 28, 2003

SHELL, SITE & CORE BUILDING PERMIT:                 JULY 23, 2003



, subject to adjustments of this Contract Time as provided in the Contract
Documents.

(Insert provisions, if any, for liquidated damages relating to failure to
complete on time.)

                                    ARTICLE 4
                                BASIS FOR PAYMENT

4.1      CONTRACT SUM

4.1.1    The Owner shall pay the Contractor the Contract Sum in current funds
for the Contractor's performance of the Contract. The Contract Sum is the Cost
of the Work as defined in Article 4.4 plus the Contractor's Fee.

4.1.2    The Contractor's Fee is: Three and One Quarter Percent (3.25%) of the
Cost of the Work.

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                               2


The Contractor's Fee for changes in the Work which result in a net increase in
the Cost of the Work shall be three and one quarter percent (3.25%) of such net
increase.

4.2      GUARANTEED MAXIMUM PRICE

4.2.1    The sum of the Cost of the Work and the Contractor's Fee is guaranteed
by the Contractor not to exceed SEVEN MILLION EIGHT HUNDRED ELEVEN THOUSAND ONE
HUNDRED TWENTY EIGHT DOLLARS ($ 7,811,128), subject to additions and deductions
by Change Order as provided in the Contract Documents. Such maximum sum is
referred to in the Contract Documents as the Guaranteed Maximum Price (GMP).
Costs which would cause the Guaranteed Maximum Price to be exceeded shall be
paid by the Contractor without reimbursement by the Owner. THE GMP IS BASED ON
THE COLUMN DATED MAY 5, 2003 IN EXHIBIT "A", SCHEDULE OF VALUES.

4.2.1.1   The Guaranteed Maximum Price includes an amount for Contractor's
general conditions expenses, as detailed in Exhibit B. General Conditions
expenses are guaranteed not to exceed TWO HUNDRED FIFTY THREE THOUSAND SIX
HUNDRED FORTY ONE DOLLARS ($ 253,641) in the Cost of the Work.

4.2.1.2  Savings, if any, between the final Guaranteed Maximum Price and the
final Cost of the Work, plus Contractor's Fees shall be split between the Owner
and the Contractor on the basis of seventy percent (70%) to the Owner and thirty
percent (30%) to the Contractor.

4.2.2    The Guaranteed Maximum Price is based on the following alternates, if
any, which are described in the Contract Documents and are hereby accepted,
rejected, or pending (deferred), as noted (pending or deferred alternates may be
accepted at a later date at the stated amount, if accepted within a time frame
allowing their inclusion into the scheduled sequence of the work).

         Reference Exhibit "A" for accepted, rejected, and pending (deferred)
alternates and value engineering. ALTERNATES ARE INCLUDED OR EXCLUDED, AS NOTED
IN EXHIBIT "A", IN THE AMOUNTS SHOWN IN THE COLUMN DATED MAY 5, 2003.

         Additional deferred alternate pricing:

         1) Provide pre-finished corrugated (horizontal) metal roof screen
panels in lieu of galvanized perforated metal panels.

         Add: Four Thousand Five Hundred Dollars ($4,500.00)

4.2.3    Unit prices, if any, are as follows:
Unit prices are inclusive of Cost of Work, General Conditions and Fees.

         Reference Exhibit "C" for unit prices.

4.2.4    Allowances, if any, are as follows:

         Reference Exhibit "D" for allowances.

4.2.5    Assumptions and clarifications, if any, on which the Guaranteed
Maximum Price is based are as follows:

         Reference Exhibit "E" for assumptions and clarifications

4.2.6    To the extent that the Drawings and Specifications are anticipated to
require further development by the Architect, the Contractor has provided in the
Guaranteed Maximum Price for such further development consistent with the
current Contract Documents and reasonably inferable therefrom. Such further
development does not include such things as changes in scope, systems, kinds and
quality of materials, finishes or equipment, all of which, if required, shall be
incorporated by Change Order.

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION-AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                               3


4.3      CHANGES IN THE WORK

4.3.1    Adjustments to the Guaranteed Maximum Price on account of changes in
the Work shall be authorized or agreed upon in writing and as allowed under
Article 7 of AIA Document A201 / CMa-1992, as amended and made a part of this
Agreement.

4.3.2    (Paragraph intentionally deleted)

4.3.3    In calculating adjustments to the Guaranteed Maximum Price, the terms
"cost" and "costs" as used in the above- referenced provisions of AIA Document
A201/CMa-1992 shall mean the Cost of the Work as defined in Article 4.4 of this
Agreement and the terms "fee and "a reasonable allowance for overhead and
profit" shall mean the Contractor's Fee as defined in Subparagraph 4.1.2 of this
Agreement.

4.4      COSTS TO BE REIMBURSED

4.4.1    COST OF THE WORK

The term Cost of the Work shall mean costs necessarily incurred by the
Contractor in the proper performance of the Work. Such costs shall be at rates
not higher than the standard paid at the place of the Project except with prior
consent of the Owner. The Cost of the Work shall include only the items set
forth in this Paragraph 4.4.

4.4.2    LABOR COSTS

4.4.2.1  Wages of construction workers directly employed by the Contractor to
perform the construction of the Work at the site or, with the Owner's prior
approval, at off-site workshops.

4.4.2.2  Wages or salaries of the Contractor's supervisory and administrative
personnel when stationed at the site with the Owner's approval. This shall
specifically include Contractor's Safety Manager in the prosecution of their
work for this specific project and for the time spent on this specific project
site. The number of employees in these classifications and the rates of pay
shall be subject to the prior approval of Owner.

4.4.2.3  Wages and salaries of the Contractor's supervisory or administrative
personnel engaged, at factories, workshops or on the road, in expediting the
production or transportation of materials or equipment required for the Work,
but only for that portion of their time required for the Work. The number of
employees in these classifications and the rates of pay shall be subject to the
prior approval of Owner.

4.4.2.4  Actual costs paid or incurred by the Contractor for taxes, insurance,
contributions, assessments and benefits required by law or collective bargaining
agreements and, for personnel not covered by such agreements, customary
benefits such as sick leave, medical and health benefits, holidays, vacations
and 401k matching payments, provided such

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                               4


costs are based on wages and salaries included in the Cost of the Work under
Subparagraphs 4.4.2.1 through 4.4.2.3 Performance incentives or bonuses paid to
Contractor's personnel shall not be included as part of the Cost of the Work
without Owner's written consent, obtained by Contractor prior to incurring such
costs for performance incentives or bonuses.

4.4.3    SUBCONTRACT COSTS

4.4.3.1  Payments made by the Contractor to Subcontractors in accordance with
the requirements of the subcontracts properly entered into under this Agreement.

Savings, bonuses or incentives paid for performance of Subcontractors; or by
subcontractors to their employees or Subcontractors shall be subject to the
written approval of the Owner, obtained in advance of Contractor incurring such
costs, and shall be so stipulated in each subcontract agreement.

4.4.4    COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED
         CONSTRUCTION

4.4.4.1  Costs, including transportation and storage, of materials and equipment
incorporated or to be incorporated in the completed construction.

4.4.4.2  Costs of materials described in the preceding Subparagraph 4.4.4.1 in
excess of those actually installed to allow for reasonable waste and spoilage.
Unused excess materials, if any, shall become the Owner's property at the
completion of the Work or, at the Owner's option, shall be sold by the
Contractor. Any amounts realized from such sales shall be credited to the Owner
as a deduction from the Cost of the Work.

4.4.5    COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND
         RELATED ITEMS

4.4.5.1  Costs, including transportation and storage, installation, maintenance,
dismantling and removal of materials, supplies temporary facilities, machinery,
equipment, and hand tools not customarily owned by construction workers, that
are provided by the Contractor at the site and fully consumed in the performance
of the Work; and cost (less salvage value) of such items if not fully consumed,
whether sold to others or retained by the Contractor. Cost for items previously
used by the Contractor shall mean fair market value.

4.4.5.2  Rental charges for temporary facilities, machinery, equipment, and hand
tools not customarily owned by construction workers that are provided by the
Contractor at the site, whether rented from the Contractor or others, and costs
of transportation, installation, minor repairs and replacements, dismantling and
removal thereof. Rates and quantities of equipment rented shall be subject to
the Owner's prior approval. Rental charges shall be consistent with those
generally prevailing in the location of the Project. (REFERENCE EXHIBIT " F" FOR
CONTRACTOR'S NOT-TO-EXCEED RATES).

4.4.5.3  Costs of removal of debris from the site.

4.4.5.4  Costs of document reproductions, facsimile transmissions and
long-distance telephone calls, postage and parcel delivery charges, telephone
service at the site, cellular phones utilized by employees stationed full time
at the site, and reasonable petty cash expenses of the site office.

4.4.5.5  That portion of the reasonable expenses of the Contractor's personnel
incurred while traveling out of town in discharge of duties connected with the
Work. All travel charges must be approved in writing by Owner in advance of
incurring such costs.

4.4.5.6  Costs of materials and equipment suitably stored off the site at a
mutually acceptable location, if approved in advance by the Owner.

Savings or incentives paid for performance by materials or equipment suppliers
shall be subject to the written approval of the Owner, obtained in advance of
incurring such costs, and shall be so stipulated in each agreement with
material or

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                               5


equipment suppliers.

4.4.5.7  Costs of all temporary jobsite utilities.

4.4.6    MISCELLANEOUS COSTS

4.4.6.1  That portion of insurace and bond premiums that: Contractor is
obligated to secure and maintain under the terms of the Contract Documents.

4.4.6.1.1 Subcontractor default insurance premiums directly attributable to this
Agreement, limited to a maximum cost of $25,000.

4.4.6.2  Sales, use or similar taxes imposed by a governmental authority that
are related to the Work.

4.4.6.3  Fees and assessments for the building permit and for other permits,
licenses and inspections for which the Contractor is required by the Contract
Documents to pay.

4.4.6.4  Fees of laboratories for tests required by the Contract Documents,
except those related to defective or nonconforming Work for which reimbursement
is excluded by Subparagraph 13.5.3 of AIA Document A201/CMa-1992 or other
provisions of the Contract Documents, and which do not fall within the scope of
Subparagraph 4.4.7.3.

4.4.6.5  Royalties and license fees paid for the use of a particular design,
process or product required by the Contract Documents: the cost of defending
suits or claims for infringement of patent right arising from such requirement
of the Contract Documents; and payments made in accordance with legal judgments
against the Contractor resulting from such suits or claims and payments of
settlements made with the Owner's consent. However, such costs of legal
defenses, judgments and settlements shall not be included in the calculation of
the Contractor's Fee or subject to the Guaranteed Maximum price. If such
royalties, fees and costs are excluded by the last sentence, of Subparagraph
3.17.1 of AIA Document A201/CMa-1992 or other provisions of the Contract
Documents, then they shall not be included in the Cost of the Work.

4.4.6.6

4.4.6.7  Deposits lost for causes other than the Contractor's negligence or
failure to fulfill a specific responsibility to the Owner as set forth in the
Contract Documents.

4.4.6.8

4.4.6.9  Expenses incurred in accordance with the Contractor's standard
personnel policy for relocation and temporary living allowances of personnel
required for the Work, if approved in advance by the Owner.

4.4.7    OTHER COSTS AND EMERGENCIES

4.4.7.1  Other costs incurred in the performance of the Work if and to the
extent approved in advance in writing by the Owner in advance of incurring such
costs.

4.4.7.2  Costs due to emergencies incurred in taking action to prevent
threatened damage, injury or loss in case of an emergency affecting the safety
of persons and property, as provided in Paragraph 10.3 of AIA Document
A201/CMa-1992, but excluding costs due to emergencies caused by Contractor's
negligence or breach of its obligations under this Agreement.

4.4.7.3  Costs of repairing or correcting damaged Work executed by the
Contractor, Subcontractors or suppliers, provided that such damaged Work was not
caused by negligence or failure to fulfill a specific responsibility of the
Contractor (or anyone employed by Contractor) and only to the extent that the
cost of repair or

(C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                               6


correction is not recoverable by the Contractor from insurance, sureties,
Subcontractors or suppliers, provided that the absence of collectible insurance
or bonds is not due to the Contractor's acts or omissions. Costs incurred after
Substantial Completion in connection with the repairs or corrections described
in this Subparagraph shall not be included in the Cost of the Work.

4.5      COSTS NOT TO BE REIMBURSED

4.5.1    The Cost of the Work shall not include:

4.5.1.1  Salaries and other compensation of the Contractor's personnel stationed
at the Contractor's principal office or offices other than the site office,
except as specifically provided in Subparagraphs 4.4.2.2 and 4.4 2.3, or as may
be provided in Article 7.

4.5.1.2  Expenses of the Contractor's principal office and offices other than
the site office.

4.5.1.3  Overhead and general expenses, except as may be expressly included in
Paragraph 4.4.

4.5.1.4  The Contractor's capital expenses, including interest on the
Contractor's capital employed for the Work.

4.5.1.5  Rental costs of machinery and equipment, except as specifically
provided in Subparagraph 4.4.5.2.

4.5.1.6  Except as provided in Subparagraph 4.4.7.3 of this Agreement, costs due
to the negligence or failure to fulfill a specific responsibility of the
Contractor, Subcontractors and suppliers or anyone directly or indirectly
employed by any of them or for whose acts any of them may be liable, including
but not limited to costs for correction of damaged, defective or nonconforminq
Work, disposal and replacement of materials and equipment incorrectly ordered or
supplied, and making good damage to property not forming part of the Work.

4.5.1.7  Any cost not specifically and expressly described in Paragraph 4.4.

4.5.1.8  Costs, other than costs included in Change Orders approved by the
Owner, that would cause the Guaranteed Maximum. Price to be exceeded,

4.5.1.10

Entertainment, meals and personal expenses of any kind, unless approved in
writing by the Owner in advance of incurring such costs.

4.5.1.11

Preconstruction budgeting, scheduling and plan review.

4.5.1.12

Employee or Subcontractor bonuses or incentive payments.

4.5.1.13

Any costs associated with the repair or replacement of the Work following
Substantial Completion in satisfaction of a warranty of the Work made to Owner.

4.5.1.14

Any costs or expense incurred under any indemnification obligation of the
Contractor hereunder.

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                               7


4.6.     DISCOUNTS, REBATES AND REFUNDS

4.6.4.1  Cash discounts obtained on payments made by the Contractor shall accrue
to the Owner if (1) before making the payment, the Contractor included them in
an Application for Payment and received payment therefor from the Owner, or (2)
the Owner has deposited funds with the Contractor with which to make payments:
otherwise, cash discounts shall accrue to the Contractor. Trade discounts,
rebates refunds and amounts received from sales of surplus materials and
equipment shall accrue to the Owner, and the contractor shall make provisions so
that they can be secured.

4.6.4.2  Amounts that accrue to the Owner in accordance with the provisions of
Paragraph 4.6.4.1 shall be credited to the Owner as a deduction from the Cost of
the Work.

4.6.4.3 Rebates or refunds paid to the Contractor on premiums for performance on
payment bonds shall accrue to the Owner. At the time Contractor submits its
request for final payment, an estimated credit amount for bond premium returns,
rebates or dividends shall be included, based on Contractor's best estimate and
experience in prior years. Contractor shall include a similar requirement in any
subcontracts that include a payment or performance bond.

4.7      SUBCONTRACTS AND OTHER AGREEMENTS

4.7.1    Those portions of the Work that the Contractor does not customarily
perform with the Contractor's own personnel shall be performed under
subcontracts or by other appropriate agreements with the Contractor. The Owner
may designate specific persons or entities from whom the Contractor shall obtain
bids. The Contractor shall obtain bids from Subcontractors and from suppliers of
materials or equipment fabricated especially for the Work and shall deliver such
bids to the Owner and Construction Manager. The Owner shall then determine, with
the advice of the Contractor and Construction Manager which bids will be
accepted. The Contractor shall not be required to contract with anyone to whom
the Contractor has reasonable objection.

4.7.2    If a specific bidder among those whose bids are delivered by the
Contractor to the Owner (1) is recommended to the Owner by the Contractor; (2)
is qualified to perform that portion of the Work; and (3) has submitted a bid
that conforms to the requirements of the Contract Documents without
reservations or exceptions AND WILL NOT CAUSE THE GUARANTEED MAXIMUM PRICE TO BE
EXCEEDED, but the Owner requires that another bid be accepted, then the
Contractor may require that a change Order be issued to adjust the Guaranteed
Maximum Price by the difference, if any, between the bid of the person or entity
recommended to the Owner by the Contractor and the amount of the subcontract or
other agreement actually signed with the person or entity designated by the
Owner.

4.7.3    Subcontracts or other agreements shall conform to the applicable
payment provisions of this Agreement, and shall not be awarded on the basis of
cost plus a fee without the prior consent of the Owner. Contractor's subcontract
and purchase order forms shall be subject to approval by Owner. Contractor shall
submit its proposed forms to Owner for approval prior to use in connection with
the Project and shall promptly deliver to Owner a copy of all executed
subcontracts and purchase orders entered into in connection with the Project.

4.8      ACCOUNTING RECORDS

The Contractor shall keep full and detailed accounts and exercise such controls
as may be necessary for proper financial management under this Contract, and the
accounting and control systems shall be satisfactory to the Owner. The Owner and
the Owner's accountants shall be afforded access to, and shall be permitted to
audit and copy, the Contractor's records, books, correspondence, instructions,
drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other
data relating to this Contract, and the Contractor shall preserve these for a
period of three years after final payment, or for such longer period as may be
required by law.

Contractor agrees to cooperate fully with Owner's right to audit Contractor's
financial records in submission of Contractor's request for payment.

Contractor's estimated Labor Burden rates are stated in Exhibit "G" to this
Agreement. Labor Burden charged to the Cost of the Work shall be based on
Contractor's actual cost, which shall not exceed the rates stated in Exhibit
"G". If Labor Burden rates charged to the Cost of the Work do not exceed the
rates stated in Exhibit "G", no further audit by the Owner

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                               8


of the labor burden costs shall apply.

                                    ARTICLE 5
                                PROGRESS PAYMENTS

5.1      Based upon Applications for Payment submitted to the Architect,
Construction Manager and Owner by the Contractor and Certificates for payment
issued by the Construction Manager and Architect, the Owner shall make progress
payments on account of the Contract Sum to the Contractor as provided below and
elsewhere in the Contract Documents.

5.2      The period covered by each Application for Payment shall be one
calendar month ending on the last day of the month, or as follows:

5.3      Provided that an Application for Payment is received by the Architect
and Construction Manager not later than the fifth (5th) day of a month, the
Owner shall make payment to the Contractor of the approved amount not later than
the twenty-fifth (25th) day of the same month. If an Application for Payment is
received by the Architect or Construction Manager after the application date
fixed above, payment shall be made by the Owner not later than thirty (30) days
after the Architect and Construction Manager receives the Application for
Payment.

5.4      With each Application for Payment, the Contractor shall submit, if
requested by Owner, payrolls, petty cash accounts, receipted invoices or
invoices with check vouchers attached, and any other evidence required by the
Owner or Construction Manager to demonstrate that cash disbursements already
made by the Contractor on account of the Cost of the Work equal or exceed (1)
progress payments already received by the Contractor: less (2) that portion of
those payments attributable to the Contractor's Fee: plus (3) payrolls for the
period covered by the present Application for Payment.

5.5      Each Application for Payment shall be based on the most recent schedule
of values submitted by the Contractor and approved by Owner in accordance with
the Contract Documents. The schedule of values shall allocate the entire
Guaranteed Maximum Price among the various portions of the Work, except that the
Contractor's Fee and the Contractor's general conditions shall each be shown as
a separate items, with the Contractor's general conditions being shown as a
detailed breakdown suitable to the Owner and Construction Manager. The schedule
of values shall be prepared in such form and supported by such data to
substantiate its accuracy as the Construction Manager and Owner may require.
This schedule, unless objected to by the Architect, Construction Manager or
Owner, shall be used as a basis for reviewing the Contractor's Applications for
Payment.

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                               9


5.6      Applications for Payment shall show the percentage of completion of
each portion of the Work as of the end of the period covered by the Application
for Payment. The percentage of completion shall be the lesser of (1) the
percentage of that portion of the Work which has actually been completed: or (2)
the percentage obtained by dividing (a) the expense that has actually been
incurred by the Contractor on account of that portion of the Work for which the
Contractor has made or intends to make actual payment prior to the next
Application for Payment by (b) the share of the Guaranteed Maximum Price
allocated to that portion of the Work in the schedule of values. The Schedule of
Values may be modified from time to time, with the Owner's approval,
by Contractor as needed to reallocate the GMP among the various portions of the
work. Contractor is not required to guarantee the cost of any specific portion
of the work other than the Contractor's fee, the General Conditions, labor
burden rates, and the overall GMP.

5.7      Subject to other provisions of the Contract Documents, the amount of
each progress payment shall be computed as follows:

5.7.1    take that portion of the Guaranteed Maximum Price properly allocable to
completed Work as determined in accordance with paragraph 5.6, less retainage of
ten percent (10%). Pending final determination of cost to the Owner of changes
in the Work, amounts not in dispute shall be included as provided in
Subparagraph 7.3.7 of AlA Document A201/CMa-1992:

5.7.2    add that portion of the guaranteed Maximum Price properly allocable to
materials and equipment delivered and suitably stored at the site for subsequent
incorporation in the Work, or if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing, less ten percent
(10%):

5.7.3    add the Contractor's Fee, less retainage of ten percent (10%).
The Contractor's Fee shall be computed upon the Cost of the Work described in
the two preceding Clauses at the rate stated in Subparagraph 4.1.2 or, if the
contractor's fee is stated as a fixed-sum in that Subparaqraph, shall be an
amount that bears the same ratio to that fixed sum fee as the Cost of the Work
in the two preceding Clauses bears to a reasonable estimate of the probable Cost
of the Work upon its completion:

5.7.4    subtract the aggregate of previous payments made by the Owner:

5.7.5     subtract the shortfall, if any, indicated by the contractor in the
documentation required by Paragraph 5.4 and 5.6 to substantiate prior
Applications for Payment, or resulting from errors subsequently discovered by
the Owner's accountants in such documentation: and

5.7.6    subtract amounts, if any, for which the Architect. Construction Manager
or Owner has withheld or nullified a Certificate for Payment as provided in
Paragraph 9.5 of AlA Document A201/CMa-1992.

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. MA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) -WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted beiow, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa 101ed5 aug6.aia -- 8/6/2003. AIA License
Number 1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                              10


5.8      Except with the Owner's prior written approval, payments by Contractor
to Subcontractors shall be subject to retainage of not less than ten percent
(10%).

5.8.1    Upon mutual agreement by Owner and Contractor, payment of previously
held retainage may be made to those Subcontractors whose work is fully completed
during the early stages of the Project. Such payments shall be subject to
approval by Owner's lender, if any.

5.9      In taking action on the Contractor's Applications for Payment, the
Architect and Owner shall be entitled to rely on the accuracy and completeness
of the information furnished by the Contractor and shall not be deemed to
represent that the Architect and Owner has made a detailed examination, audit or
arithmetic verification of the documentation submitted in accordance with
Subparaqraph 12.1.4 or other supporting data; that the Architect or Owner has
made exhaustive or continuous on-site inspections or that the Architect or Owner
has made examinations to ascertain how or for what purposes the Contractor has
used amounts previously paid on account of the contract. Such examinations,
audits and verifications, if required by the Owner, will be performed by the
Owner';s accountants acting in the sole interest of the Owner.

                                   ARTICLE 6
                                 FINAL PAYMENT

6.1      Final payment, constituting. the entire unpaid balance of the Contract
Sum, shall be made by the Owner to the Contractor 30 days after Final Completion
of the Work. Final Completion shall be deemed to have occurred when:

6.1.1    the Contractor has fully performed the Contract except for the
Contractor's responsibility to correct Work as provided in Subparagraph 12.2.2
of AIA Document A201/CMa-1992, and to satisfy other requirements, or as follows:
if any, which extend beyond final payment; and

6.1.2    a final Certificate for Payment has been issued by the Architect.

6.2      The Owner's final payment to the contractor shall be made 30 days after
the issuance of the Architect's final Certificate for payment, or as follows:
and Contractor's full performance and Final Completion of the Work.

6.3      The Owner's accountants will review and report in writing on the
Contractor's final accounting within 30 days after delivery of the final
accounting to the Architect, Construction Manager, and Owner by the Contractor.
Based upon such Cost of the Work as the Owner's accountants report to be
substantiated by the Contractor's final accounting, and provided the other
conditions of THE CONTRACT DOCUMENTS have been met, the Architect and
Construction Manager will, within seven days after receipt of the written report
of the Owner's accountants, either issue to the Owner a final Certificate for
Payment with a copy to the Contractor, or notify the Contractor and Owner in
writing of the Architect's or Construction Manager's reasons for withholding a
certificate.

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                              11


6.4      If the Owner's accountants report the Cost of the Work as substantiated
by the Contractor's final accounting to be less than claimed by the Contractor,
the Contractor shall be entitled to demand arbitration of the disputed amount
without a further decision of the Architect. Such demand for arbitration shall
be made by the Contractor within 30 days after the Contractor's receipt of a
copy of the Architect's final Certificate for Payment; failure to demand
arbitration within this 30-day period shall result in the substantiated amount
reported by the Owner's accountants becoming binding on the Contractor. Pending
a final resolution by arbitration, the Owner shall pay the Contractor the amount
certified in the Architect's final Certificate for Payment.

                                    ARTICLE 7
                            MISCELLANEOUS PROVISIONS

7.1      Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.

7.2      Payments due and unpaid under the Contract shall bear interest from the
date payment is due at the rate staled below, or in the absence thereof, at the
legal rate prevailing from lime to time at the place where the Project is
located.

(Insert rate of interest agreed upon, if any.)

(Usury laws and requirements under the federal Truth in Lending Act, similar
stale and local consumer credit laws and other regulations at the Owner's and
Contractor's principal places of business, the location of the Project and
elsewhere may affect the validity of this provision. Legal advice should be
obtained with respect to deletions or modifications, and also regarding
requirements such as written disclosures or waivers.)

7.3      TEMPORARY FACILITIES AND SERVICES:

(Here insert temporary facilities and services which are different from or in
addition to those included elsewhere in the Contract Documents.)

(not applicable)

7.4      Other Provisions:

(Here list any special provisions affecting the Contract.)

Reference the following Exhibits included by attachment of by reference as a
part of the Agreement:



EXHIBIT          TITLE
              
A                Schedule of Values, Alternates, and Value Engineering
B                General Conditions Detailed Cost Summary
C                Unit Prices
D                Allowances
E                Assumptions and Clarifications
F                Contractor's Rental Schedule (not-to-exceed rates)
G                Contractor's Estimated Labor Burden Rates (not-to-exceed rates)


(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                              12


              
H                Drawings and Addenda
I                Specifications
J                Geotechnical Investigation
K                Project Schedule
L                Anticipated Weather Impact Table



                                    ARTICLE 8
                            TERMINATION OR SUSPENSION

8.1      The Contract may be terminated by the Owner or the Contractor as
provided in Article 14 of the General Conditions.

8.2      The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.

                                    ARTICLE 9
                        ENUMERATION OF CONTRACT DOCUMENTS

9.1      The Contract Documents, except for Modifications issued after execution
of this Agreement, are enumerated as follows:

9.1.1    The Agreement is this executed Standard Form of Agreement Between Owner
and Contractor, AIA Document A101/CMa, 1992 Construction Manager-Adviser
Edition.

9.1.2    The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201/CMa, 1992 Construction Manager-Adviser Edition.,
as amended.

9.1.3    The Supplementary and other Conditions of the Contract are those
contained in the Project Manual dated (reference exhibit "I" ), and are as
follows:

Document                            Title                                  Pages

(Reference Exhibit "I")

9.1.4    The Specifications are those contained in the Project Manual dated as
in Subparagraph 9.1.3, and are as follows:

(Either list the Specifications here or refer to an exhibit attached to this
Agreement.)

Section                             Title                                  Pages

(Reference Exhibit "I")

9.1.5    The Drawings are as follows, and are dated (reference Exhibit "H")
unless a different date is shown below:

(Either list the Drawings here or refer to an exhibit attached to this
Agreement.)

Number                              Title                                  Pages

(Reference Exhibit "H")

9.1.6    The Addenda, if any, are as follows:

Number                              Title                                  Pages

(Reference Exhibit "H")

Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 9.

9.1.7    Other documents, if any, forming part of the Contract Documents are as
follows:

(List here any additional documents which are intended to form part of the
Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid, Instructions to Bidders, sample
forms and the Contractor's bid are not part of the Contract Documents unless
enumerated in this Agreement. They should be listed here only if intended to be
part of the Contract Documents.)

a) Geotechnical Report prepared by HBC Engineers, Reference Exhibit "J"

This Agreement is entered into as of the day and year first written above and is
executed in at least four original copies of which one is to be delivered to the
Contractor, one each to the Construction Manager and Architect for use in the
administration of the Contract, and the remainder to the Owner.

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                              13



OWNER                                     CONTRACTOR
/s/ F. ROBERT MERRILL III                 /s/ PRESTON MCAFEE
- --------------------------------------    --------------------------------------
(Signature)                               (Signature)

ADVANCED NEUROMODULATION SYSTEMS, INC.    ROGER'S-O'BRIEN CONSTRUCTION CO., INC.

F. ROBERT MERRILL, EXECUTIVE VICE         PRESTON MCAFEE
PRESIDENT, CFO                            PRESIDENT

(Printed name and title)                  (Printed name and title)

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.,
WASHINGTON D.C. 20006-5292. AIA DOCUMENT A101/CMa - OWNER-CONTRACTOR AGREEMENT -
CONSTRUCTION MANAGER-ADVISER EDITION - AIA(R) - WARNING: Unlicensed photocopying
violates U.S. copyright laws and is subject to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ansa101ed5 aug6.aia -- 8/6/2003. AIA License Number
1005237, which expires on 10/18/2003.

                                                 Electronic Format A101/CMa-1992

                                                                              14

EX-10.24

                                                                   EXHIBIT 10.24

                    AIA Document B141/CMa - Electronic Format

                       Standard Form of Agreement Between
                               Owner and Architect

               Where the Construction Manager is NOT a Constructor

                   1992 CONSTRUCTION MANAGER - ADVISER EDITION

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document is intended to be used in conjunction with the 1992 editions of
AIA Documents B801/CMa, A101/CMa and A201/CMa.

Copyright 1975,1980, (C) 1992 by The American Institute of Architects, 1735 New
York Avenue, N. W. Washington, D.C. 20006-5292. Reproduction of the material
herein or substantial quotation of its provisions without the written permission
of the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution.

AGREEMENT
made as of the 15th day of January in the year of 2003
(In words, indicate day, month and year.)

BETWEEN the Owner:
(Name and address)
Advanced Neuromodulation Systems
6501 Windcrest, Suite 100
Plano, TX 75024
ATTN: MR. MYRON ALBERT

and the Architect:
(Name and address)
Good Fulton & Farrell Architects
2808 Fairmount, Suite 300
Dallas, TX 75201
ATTN: JOSEPH J. PATTI

for the following Project:
(Include detailed description of Project, location, address and scope.)

A two-story building of approximately 143,500 S.F. as defined in the Project
Definition Requirements - Final Report dated 12.26.02, and incorporated herein
by reference, located on Lot 2 EDS Lakes Addition Block B, a 15.413-acre (10.00
acre net) tract, Plano, Texas.

The Construction Manager is:
(Name and address)
Koll Development Company
8411 Preston Rd., Suite 700
Dallas, Texas 75225
ATTN: MIKE ROSAMOND

The Owner and Architect agree as set forth below.

          TERMS AND CONDITIONS OF AGREEMENT BETWEEN OWNER AND ARCHITECT

                                    ARTICLE 1
                          ARCHITECT'S RESPONSIBILITIES

1.1      ARCHITECT'S SERVICES

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W.
WASHINGTON, D.C. 200016-5292. AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT
- - CONSTRUCTION MANAGER-ADVISER EDITION - 1992 EDITION - AIA(R) - WARNING:
Unlicensed photocopying violates U.S. copyright laws and will subject the
violator to legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced in accordance with your license
without violation until the date of expiration as noted below, expiration as
noted below, expiration as noted below, expiration as noted below, expiration as
noted below. User Document: ans b141cma v3.aia -- 6/16/2003. AIA License Number
1013444, which expires on 1/31/2004.

                                                 Electronic Format B141/CMa-1992

                                                                               1


1.1.1    The Architect's services consist of those services performed by the
Architect, Architect's employees and Architect's consultants as enumerated in
Articles 2 and 3 of this Agreement and any other services included in Article
12.

1.1.2    The Architect's services shall be provided in conjunction with the
services of a Construction Manager as described in the edition of AIA Document
B801/CMa, Standard Form of Agreement Between Owner and Construction Manager,
current as of the date of this Agreement. Architect agrees that it will
cooperate and consult with the Construction Manager, and will incorporate any
value engineering proposals where directed in writing by the Construction
Manager and approved by the Owner, and will incorporate such proposals in
accordance with the provisions of this Agreement.

1.1.3    The Architect's services shall be performed as expeditiously as is
consistent with professional skill and care and the orderly progress of the
Work. The Architect shall submit for the Owner's approval and the Construction
Manager's information a schedule for the performance of the Architect's services
which may be adjusted as the Project proceeds, and shall include allowances for
periods of time required for the Owner's and Construction Manager's review and
for approval of submissions by authorities having jurisdiction over the Project.
Time limits established by this schedule approved by the Owner shall not, except
for reasonable cause, be exceeded by the Architect or Owner.

1.1.4    The services covered by this Agreement are subject to the time
limitations contained in Subparagraph 11.5.1.

                                    ARTICLE 2
                       SCOPE OF ARCHITECT'S BASIC SERVICES

2.1      DEFINITION

2.1.1    The Architect's Basic Services consist of those described in 2.2
through 2.6 and any other services identified in Article 12 as part of Basic
Services, and include normal structural, civil, landscape architecture,
mechanical and electrical engineering services.

2.2      SCHEMATIC DESIGN PHASE

2.2.1    The Architect shall prepare the program and review the schedule and
construction budget furnished by the Owner to ascertain the requirements of the
Project and shall arrive at a mutual understanding of such requirements with the
Owner.

2.2.2    The Architect shall review with the Owner and Construction Manager
proposed site use and improvements; selection of materials, building systems and
equipment; and methods of Project delivery.

2.2.3    The Architect shall review with the Owner and Construction Manager
alternative approaches to design and construction of the Project.

2.2.4    Based on the mutually approved program, schedule and construction
budget requirements, the Architect shall prepare, for approval by the Owner,
Schematic Design Documents consisting of drawings and other documents
illustrating the scale and relationship of Project components.

2.2.5    At intervals appropriate to the progress of the Schematic Design Phase
and mutually agreeable to the Owner, Construction Manager and Architect, the
Architect shall provide schematic design studies for the Owner's review and the
Construction Manager's information.

2.2.6    In the further development of the drawings and specifications during
this and subsequent phases of design, the Architect shall be entitled to assume
the accuracy of the estimates of Construction Cost which are to be provided by
the Construction Manager under the Construction Manager's agreement with the
Owner.

2.2.7    Upon completion of the Schematic Design Phase, the Architect shall
provide drawings, outline specifications and other documents for the Owner's
approval and the Construction Manager's information.

2.3      DESIGN DEVELOPMENT PHASE

2.3.1    Based on the approved Schematic Design Documents and any adjustments
authorized by the Owner in the program, schedule or construction budget, the
Architect shall prepare Design Development Documents for the Construction
Manager's review and the Owner's approval. The Design Development Documents
shall be based upon data and estimates prepared by the Construction Manager and
shall consist of drawings and other documents that establish and describe the
size and character of the Project as to architectural, structural, mechanical
and electrical systems, materials and such other elements as may be appropriate.

2.3.2    At intervals mutually agreeable to the Owner, Construction Manager and
Architect, the Architect shall provide drawings and other documents which depict
the current status of design development for the Owner's review and the
Construction Manager's information.

2.3.3    Upon completion of the Design Development Phase, the Architect shall
provide drawings, outline specifications and other documents for the Owner's
approval and the Construction Manager's information.

2.4      CONSTRUCTION DOCUMENTS PHASE

2.4.1    Based on the approved Design Development Documents and any further
adjustments authorized by the Owner in the scope or quality of the Project or in
the construction budget, the Architect, utilizing data and estimates prepared by
the Construction Manager, shall prepare, for approval by the Owner, Construction
Documents consisting of Drawings and Specifications setting forth in detail the

AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C) 1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING:
Unlicensed photocopying violates U.S. copyright laws and will subject the
violator to legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced in accordance with your license
without violation until the date of expiration as noted below. User Document:
b141 01_15_03.aia -- 2/10/2003. AIA License Number 1009668, which expires on
3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                               2


requirements for the construction of the Project. The Architect will incorporate
value engineering items into the Construction Documents as directed in writing
by the Construction Manager and approved by Owner and will incorporate such
value engineering items in accordance with the provisions of this Agreement.

2.4.2    At intervals mutually agreeable to the Owner, Construction Manager and
Architect, the Architect shall provide Drawings and Specifications for the
Owner's and the Construction Manager's review.

2.4.3    Upon completion of the Construction Documents Phase, the Architect
shall provide Construction Documents for the Owner's approval and the
Construction Manager's information.

2.4.4    The Architect shall assist the Owner and Construction Manager in the
preparation of the necessary bidding information, bidding forms, the Conditions
of the Contracts, and the forms of Agreement between the Owner and the
Contractors. The Architect shall assist the Construction Manager in issuing
bidding documents to bidders and conducting prebid conferences with prospective
bidders. The Architect, with the assistance of the Construction Manager, shall
respond to questions from bidders, and shall issue addenda.

2.4.5    The Architect shall assist the Owner and Construction Manager in
connection with the Owner's responsibility for filing documents required for the
approval of governmental authorities having jurisdiction over the Project.

2.5      BIDDING OR NEGOTIATION PHASE

2.5.1    The Architect, following the Owner's approval of the Construction
Documents and of the Construction Manager's latest estimate of Construction
Cost, shall assist the Construction Manager in obtaining bids or negotiated
proposals and assist in preparing contracts for construction.

2.6      CONSTRUCTION PHASE-ADMINISTRATION OF THE CONSTRUCTION CONTRACT

2.6.1    The Architect's responsibility to provide Basic Services for the
Construction Phase under this Agreement commences with the award of the Contract
for construction and terminates 30 days after final completion of the Work.

2.6.2    The Architect shall provide administration of the Contract for
construction in cooperation with the Construction Manager as set forth below and
in the edition of AIA Document A20l/CMa, General Conditions of the Contract for
Construction, Construction Manager-Adviser Edition, as amended, current as of
the date of this Agreement.

Provided, however, with respect to the responsibilities and duties of the
Architect, the General Conditions shall be modified to be consistent with this
Agreement.

2.6.3    Duties, responsibilities and limitations of authority of the Architect
shall not be restricted, modified or extended without written agreement of the
Owner and Architect with consent of the Contractors and the Construction
Manager, which consent shall not be unreasonably withheld.

2.6.4    The Architect shall be a representative of and shall advise and consult
with the Owner (1) during construction until final payment to the Contractors is
due, and (2) as an Additional Service at the Owner's direction from time to time
during the correction period described in the Contracts for Construction. The
Architect shall have authority to act on behalf of the Owner only to the extent
provided in this Agreement unless otherwise modified by written instrument.

2.6.5    The Architect shall visit the site at regular intervals appropriate to
the stage of construction or as otherwise agreed by the Owner and Architect in
writing to become generally familiar with the progress and quality of the Work
completed and to determine in general if the Work is being performed in a manner
indicating that the Work when completed will be in accordance with the Contract
Documents. However, the Architect shall not be required to make exhaustive or
continuous on-site inspections to check the quality or quantity of the Work. On
the basis of on-site observations as an architect, the Architect shall keep the
Owner informed of the progress and quality of the Work, and defects and
deficiencies in the Work. The  Architect will exercise professional care and
customary  diligence in discovering and promptly reporting to the Construction
Manager and Owner any observable material defects or deficiencies in the Project
or the Work of the Contractors, any Subcontractors, or any sub-subcontractors,
their agents or employees, or any person performing any of the Work in the
construction of the Project. (More extensive site representation may be agreed
to as an Additional Service, as described in Paragraph 3.2.)

2.6.6    The Architect shall not have control over or charge of and shall not be
responsible for construction means, methods, techniques, sequences or
procedures, or for safety precautions and programs in connection with the Work,
since these are the Contractors' responsibility under the Contracts for
Construction. The Architect shall not be responsible for the Contractors'
schedules or failure to carry out the Work in accordance with the Contract
Documents. The Architect shall not be responsible for the performance by the
Construction Manager of the services required by the Construction Manager's
agreement with the Owner. The Architect shall not have control over or charge of
acts or omissions of the Contractors, Subcontractors, or their agents or
employees, or of any other persons performing services or portions of the Work,
but will promptly advise the Owner and Construction Manager of any material
wrongful or non conforming acts or omissions.

AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C) 1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING:
Unlicensed photocopying violates U.S. copyright laws and will subject the
violator to legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced in accordance with your license
without violation until the date of expiration as noted below. User Document:
b141 01_15_03.aia -- 2/10/2003, AIA License Number 1009668, which expires on
3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                               3



which the Architect discovers during the course of its duties under the
Contractor Documents.

2.6.7    The Architect shall at all times have access to the Work wherever it is
in preparation or progress.

2.6.8    Communications by and with the Architect's consultants shall be through
the Architect.

2.6.9    Based on the Architect's observations and evaluations of each
Contractor's Application for Payment, the Architect shall review and certify the
amounts due the respective Contractors.

2.6.9.1  The Architect's certification for payment shall constitute a
representation to the Owner, based on the Architect's observations at the site
as provided in Subparagraph 2.6.5, on the recommendations of the Construction
Manager and on the data comprising the Contractors' Applications for Payment,
that, to the best of the Architect's knowledge, information and belief, the Work
has progressed to the point indicated and the quality of the Work is in
accordance with the Contract Documents. The foregoing representations are
subject to an evaluation of the Work for conformance with the Contract Documents
upon Substantial Completion, to results of subsequent tests and inspections, to
minor deviations from the Contract Documents correctable prior to completion and
to specific qualifications expressed by the Architect. The issuance of a
Certificate for Payment shall further constitute a representation that the
Contractor is entitled to payment in the amount certified.

2.6.9.2  The issuance of a Certificate for Payment shall not be a representation
that the Architect has (1) made exhaustive or continuous on-site inspections to
check the quality or quantity of the Work, (2) reviewed construction means,
methods, techniques, sequences or procedures, (3) reviewed copies of
requisitions received from Subcontractors and material suppliers and other data
requested by the Owner to substantiate the Contractor's right to payment or (4)
ascertained how or for what purpose the Contractor has used money previously
paid on account of the Contract Sum.

2.6.10   The Architect shall have authority, after notification to the
Construction Manager, to reject Work which does not conform to the Contract
Documents. Whenever the Architect considers it necessary or advisable for
implementation of the intent of the Contract Documents, the Architect will have
authority, upon written authorization from the Owner, to require additional
inspection or testing of the Work in accordance with the provisions of the
Contract Documents, whether or not such Work is fabricated, installed or
completed. However, neither this authority of the Architect nor a decision made
in good faith either to exercise or not to exercise such authority shall give
rise to a duty or responsibility of the Architect to the Construction Manager,
Contractors, Subcontractors, material and equipment suppliers, their agents or
employees or other persons performing portions of the Work.

2.6.11   The Architect shall review and approve or take other appropriate action
upon Contractors' submittals such as Shop Drawings, Product Data and Samples,
but only for the limited purpose of checking for conformance with information
given and the design concept expressed in the Contract Documents. The
Architect's action shall be taken with such reasonable promptness as to cause no
delay in the Contractors' Work or in construction by the Owner's own forces,
while allowing sufficient time in the Architect's professional judgment to
permit adequate review. Review of such submittals is not conducted for the
purpose of determining the accuracy and completeness of other details such as
dimensions and quantities or for substantiating instructions for installation or
performance of equipment or systems designed by the Contractors, all of which
remain the responsibility of the Contractors to the extent required by the
Contract Documents. The Architect's review shall not constitute approval of
safety precautions or, unless otherwise specifically stated by the Architect, of
construction means, methods, techniques, sequences or procedures. The
Architect's approval of a specific item shall not indicate approval of an
assembly of which the item is a component. When professional certification of
performance characteristics of materials, systems or equipment is required by
the Contract Documents, the Architect shall be entitled to rely upon such
certification to establish that the materials, systems or equipment will meet
the performance criteria required by the Contract Documents.

2.6.12   The Architect shall review and sign or take other appropriate action on
Change Orders and Construction Change Directives prepared by the Construction
Manager for the Owner's approval and execution in accordance with the Contract
Documents.

2.6.13   The Architect may authorize minor changes in Work not involving an
adjustment in a Contract Sum or an extension of a Contract Time which are not
inconsistent with the intent of the Contract Documents. Such changes shall be
effected by written order issued through the Construction Manager.

2.6.14   The Architect, assisted by the Construction Manager, shall conduct
inspections to determine the date or dates of Substantial Completion and the
date of final completion. The Architect shall forward to the Owner warranties
and similar submittals required by the Contract Documents which have been
received from the Construction Manager. The Architect shall issue a final
Project Certificate for Payment upon compliance with the requirements of the
Contract Documents.

2.6.15   The Architect shall interpret and decide matters concerning performance
of the Owner and Contractor under the requirements of the Contract Documents on
written request of either the Owner or Contractor. The Architect's response to
such requests shall be made with reasonable promptness and within any time
limits agreed upon.

2.6.16   Interpretations and decisions of the Architect shall be consistent with
the intent of and reasonably inferable from the Contract Documents and shall be
in writing or in the form of drawings. When making such interpretations and
initial decisions, the Architect shall endeavor to secure faithful

AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C) 1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING:
Unlicensed photocopying violates U.S. copyright laws and will subject the
violator to legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced in accordance with your license
without violation until the date of expiration as noted below. User Document:
b141 01_15_ 03.aia--2/10/2003. AIA License Number 1009668, which expires on
3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                               4


performance by both Owner and Contractors, shall not show partiality to either,
and shall not be liable for results of interpretations or decisions so rendered
in good faith.

2.6.17   The Architect's decisions on matters relating to aesthetic effect shall
be final if consistent with the intent expressed in the Contract Documents,
unless a written objection is received from the Owner, which shall overrule the
decision of the Architect.

2.6.18   The Architect shall render written decisions within a reasonable time
on all claims, disputes or other matters in question between the Owner and
Contractors relating to the execution or progress of the Work as provided in the
Contract Documents.

2.6.19   The Architect's decisions on claims, disputes or other matters,
including those in question between the Owner and Contractors, except for those
relating to aesthetic effect as provided in Subparagraph 2.6.17, shall be
subject to arbitration as provided in this Agreement and in the Contract
Documents.

2.6.20   The Architect will respond to reasonable requests for information
submitted by the Contractor or others involved in the Project.

2.6.21   Owner will be provided a complete set of reproducible record drawings
and one set of Specifications ( together with a computer aided design disk
containing such Drawings and Specifications) showing all material changes in the
Work made during construction and revisions to the Drawings and Specifications
made by the Architect. Contractor shall provide record drawings to the Owner,
based on actual construction on site. Architect shall cooperate with Contractor
by providing electronic backgrounds for use by the Contractor in creating record
drawings, at no cost to the Owner or Contractor.

                                    ARTICLE 3
                               ADDITIONAL SERVICES

3.1      GENERAL

3.1.1    The services described in this Article 3 are not included in Basic
Services unless so identified in Article 12, and they shall be paid for by the
Owner as provided in this Agreement, in addition to the compensation for Basic
Services. The services described under Paragraphs 3.2 and 3.4 shall only be
provided if authorized or confirmed in writing and in advance by the Owner. If
services described under Contingent Additional Services in Paragraph 3.3 are
required due to circumstances beyond the Architect's control, the Architect
shall notify the Owner prior to commencing such services. If the Owner deems
that such services described under Paragraph 3.3 are not required, the Owner
shall give prompt written notice to the Architect. If the Owner indicates in
writing that all or part of such Contingent Additional Services are not
required, the Architect shall have no obligation to provide those services.
Provided, however, the Owner will not be required to pay and the Architect will
not be entitled to receive reimbursement or compensation for any Additional
Services or Contingent Additional Services, if such services were required due
to the fault of the Architect.

3.2      PROJECT REPRESENTATION BEYOND BASIC SERVICES

3.2.1    If more extensive representation at the site than is described in
Subparagraph 2.6.5 is required, the Architect shall provide one or more Project
Representatives to assist in carrying out such additional on-site
responsibilities.

3.2.2    Project Representatives shall be selected, employed and directed by the
Architect, and the Architect shall be compensated therefor as agreed by the
Owner and Architect. The duties, responsibilities and limitations of authority
of Project Representatives shall be as described in the edition of AIA Document
B352 current as of the date of this Agreement, unless otherwise agreed.

3.2.3    Through the observations by such Project Representatives, the Architect
shall endeavor to provide further protection for the Owner against defects and
deficiencies in the Work, but the furnishing of such project representation
shall not modify the rights, responsibilities or obligations of the Architect as
described elsewhere in this Agreement.

3.3      CONTINGENT ADDITIONAL SERVICES

3.3.1    Making revisions in Drawings, Specifications, or other documents when
such revisions are:

         .1       inconsistent with written approvals or instructions previously
                  given by the Owner, including revisions made necessary by
                  adjustments in the Owner's program or Project budget;

         .2       requested by the Owner because the Construction Manager's
                  estimate of Construction Cost exceeds the Owner's budget,
                  except where such excess is due to changes initiated by the
                  Architect in scope, capacities of basic systems, or the kinds
                  and quality of materials, finishes or equipment;

         .3       required by the enactment or revision of codes, laws or
                  regulations subsequent to the preparation of such documents;
                  or

         .4       due to changes required as a result of the Owner's failure to
                  render decisions in a timely manner provided that Owner was
                  notified at least 15 days prior thereto and given the right to
                  cure.

3.3.2    Providing services required because of significant changes in the
Project including, but not limited to, changes in size, quality, complexity, the
Owner's or Construction Manager's schedule, or the method of bidding or
negotiating

AIA DOCUMENT B141/CMa OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION-1992 EDITION - AIA(R)-(C)1992 -THE AMERICAN INSTITUTE OF ARCHITECTS,
1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicensed
photocopying violates U.S. copyright laws and will subject the violator to legal
prosecution. This document was electronically produced with permission of the
AIA and can be reproduced in accordance with your license without violation
until the date of expiration as noted below. User Document: b141 01_15_03.aia_ -
2/10/2003. AIA License Number 1009668, which expires on 3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                               5


and contracting for construction, except for services required under
Subparagraph 5.2.3.

3.3.3    Preparing Drawings, Specifications, and other documentation and
supporting data, evaluating Contractor's reasonable alternative proposals, and
providing other services in connection with Change Orders and Construction
Change Directives, which differ from the initial scope of the Work contemplated
by the Drawings and Specifications issued for construction, except for changes
necessitated by the Architect's negligent acts, errors or omissions.

3.3.4    Providing services in connection with evaluating substitutions proposed
by Contractors and making subsequent revisions to Drawings, Specifications and
other documentation resulting therefrom.

3.3.5    Providing consultation concerning replacement of Work damaged by fire
or other cause during construction, and furnishing services required in
connection with the replacement of such Work.

3.3.6    Providing services made necessary by the termination or default of the
Construction Manager or a Contractor, by major defects or deficiencies in the
Work of a Contractor, or by failure of performance of either the Owner or a
Contractor under a Contract for Construction.

3.3.7    Providing services in evaluating an extensive number of claims
submitted by a Contractor or others in connection with changes in the scope of
the Work.

3.3.8    Providing services in connection with a public hearing, arbitration
proceeding or legal proceeding except where the Architect is party thereto.

3.3.9    Preparing documents for alternate, separate or sequential bids or
providing services in connection with bidding, negotiation or construction prior
to the completion of the Construction Documents Phase.

3.4      OPTIONAL ADDITIONAL SERVICES

3.4.2    Providing financial feasibility or other special studies.

3.4.3    Providing planning surveys, site evaluations or comparative studies of
prospective sites.

3.4.4    Providing special surveys, environmental studies and submissions
required for approvals of governmental authorities or others having jurisdiction
over the Project.

3.4.5    Providing services relative to future facilities, systems and
equipment, other than building placement studies conducted as part of site
planning.

3.4.6    Providing services to investigate existing conditions or facilities or
to make measured drawings thereof.

3.4.7    Providing services to verify the accuracy of drawings or other
information furnished by the Owner.

3.4.8    Providing coordination of construction performed by the Owner's own
forces and coordination of services required in connection with construction
performed and equipment supplied by the Owner.

3.4.9    Providing services in connection with the work of separate consultants
retained by the Owner.

3.4.10   Providing estimates of Construction Cost.

3.4.11   Providing detailed quantity surveys or inventories of material and
equipment.

3.4.12   Providing analyses of owning and operating costs,

3.4.13   Providing interior design and other similar services required for or in
connection with the selection, procurement or installation of, accessories,
furnishings and related equipment.

3.4.14   Providing services for planning tenant or rental spaces.

3.4.15   Making investigations, inventories of materials or equipment, or
valuations and detailed appraisals of existing facilities.

3.4.16   Preparing a set of reproducible record drawings showing significant
changes in the Work made during construction based on marked-up prints, drawings
and other data furnished by Contractors.

3.4.17   Providing assistance in the utilization of equipment or systems such as
testing, adjusting and balancing, preparation of operation and maintenance
manuals, training personnel for operation and maintenance, and consultation
during operation.

3.4.18   Providing services after issuance to the Owner of the final Project
Certificate for Payment, or in the absence of a final Project Certificate for
Payment, more than 60 days after the date of Substantial Completion of the Work.

3.4.19   Providing services of consultants for other than architectural, civil,
landscape, structural, mechanical and electrical engineering portions of the
Project provided as a part of Basic Services.

3.4.20   Providing any other services not otherwise included in this Agreement
or not customarily furnished in accordance with generally accepted architectural
practice.

                                    ARTICLE 4
                            OWNER'S RESPONSIBILITIES

AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION
MANAGER-ADVISER EDITION - 1992 EDITION - AIA (R) - (C)1992 - THE AMERICAN
INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292.
WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject
the violator to legal prosecution. This document was electronically produced
with permission of the AIA and can be reproduced in accordance with your license
without violation until the date of expiration as noted below. User Document:
b141 01_15_03.aia -- 2/10/2003. AIA License Number 1009668, which expires on
3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                               6


4.1      The Owner shall provide full information regarding requirements for the
Project, including a-program data which shall set forth the Owner's objectives,
schedule, constraints and criteria, including space requirements and
relationships, flexibility, expandability, special equipment, systems, and site
requirements.

4.2      The Owner shall establish and update an overall budget for the Project
based on consultation with the Construction Manager and the Architect, which
shall include the Construction Cost, the Owner's other costs and reasonable
contingencies related to all of these costs.

4.3      If requested by the Architect, the Owner shall furnish evidence that
financial arrangements have been made to fulfill the Owner's obligations under
this Agreement.

4.4      The Owner hereby designates Myron Albert as its representative
authorized to act on the Owner's behalf with respect to the Project. The Owner
or such authorized representative shall render decisions in a timely manner
pertaining to documents submitted by the Architect in order to avoid
unreasonable delay in the orderly and sequential progress of the Architect's
services.

4.5      The Owner hereby designates Koll Development Company as its
construction manager to administer the Project. The Construction Manager's
services, duties and responsibilities will be as described in the edition of AIA
Document B801/CMa, Standard Form of Agreement Between Owner and Construction
Manager, current as of the date of this Agreement. The Terms and Conditions of
the Agreement between Owner and Construction Manager shall be furnished to the
Architect and shall not be modified without written consent of the Architect,
which consent shall not be unreasonably withheld. The Architect shall not be
responsible for actions taken by the Construction Manager.

4.6      The Owner shall furnish surveys describing physical characteristics,
legal limitations and utility locations for the site of the Project, and a
written legal description of the site. The surveys and legal information shall
include, as applicable, grades and lines of streets, alleys, pavements and
adjoining property and structures; adjacent drainage; rights-of-way,
restrictions, easements, encroachments, zoning, deed restrictions, boundaries
and contours of the site; locations, dimensions and necessary data pertaining to
existing buildings, other improvements and trees; and information concerning
available utility services and lines, both public and private, above and below
grade, including inverts and depths. All the information on the survey shall be
referenced to a Project benchmark.

4.7      The Owner shall furnish the services of geotechnical engineers when
such services are requested by the Architect. Such services may include but are
not limited to lest borings, test pits, determinations of soil bearing values,
percolation, evaluations of hazardous materials, and ground corrosion and
resistivity tests, including necessary operations for anticipating subsoil
conditions, with reports and appropriate professional recommendations.

4.7.1    The Owner shall furnish the services of other consultants when such
services are reasonably required by the scope of the Project and are requested
by the Architect.

4.8      The Owner shall furnish structural, mechanical, chemical, air and water
pollution tests, tests for hazardous materials, and other laboratory and
environmental tests, inspections and reports required by law or the Contract
Documents.

4.9      The Owner shall furnish all legal, accounting, and insurance counseling
services as may be necessary at any time or the Project, including auditing
services the Owner may require to verify the Contractor's Application for
Payment or to ascertain how or for what purposes the Contractor has used the
money paid by or on behalf of the Owner.

4.10     The services, information, surveys and reports required by Paragraphs
4.6 through 4.9 shall be furnished at the Owner's expense, and the Architect
shall be entitled to rely upon the accuracy and completeness thereof. However,
the Architect will review and, as appropriate, incorporate the pertinent
information from all such services, information, surveys, and reports as part of
the Basic Services and notify Owner of any material problems or inaccuracies
observed by the Architect.

4.11     Prompt written notice shall be given by the Owner to the Architect and
Construction Manager if the Owner becomes aware of any fault or defect in the
Project or nonconformance with the Contract Documents.

4.12 The proposed language of certificates or certifications requested of the
Architect or Architect's consultants shall be submitted to the Architect for
review and approval at least 14 days prior to execution. The Owner shall not
request certifications that would require knowledge or services beyond the scope
of this Agreement.

4.13     The Owner shall furnish the required information and services and shall
render approvals and decisions as expeditiously as necessary for the orderly
progress of the Architect's services and Work of the Contractors.

4.14     The Owner shall furnish the Architect copies of written communications
with the Construction Manager and Contractors.

                                    ARTICLE 5
                                CONSTRUCTION COST

5.1      DEFINITION

5.1.1    The Construction Cost shall be the total cost or estimated cost to the
Owner of all elements of the Project designed or specified by the Architect.

AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (c) 1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING:
Unlicensed photocopying violates U.S. copyright laws and will subject the
violator to legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced in accordance with your license
without violation until the date of expiration as noted below. User Document:
b141 01_15_03.aia -- 2/10/2003. AIA License Number 1009668, which expires on
3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                               7


5.1.2    The Construction Cost shall include the cost at current market rates of
labor and materials furnished by the Owner and equipment designed, specified,
selected or specially provided for by the Architect, plus a reasonable allowance
for the Contractors' overhead and profit. In addition, a reasonable allowance
for contingencies shall be included for market conditions at the time of bidding
and for changes in the Work during construction. Construction Cost shall also
include the compensation of the Construction Manager and Construction Manager's
consultants.

5.1.3    Construction Cost does not include the compensation of the Architect
and Architect's consultants, the costs of the land, rights-of-way, financing or
other costs which are the responsibility of the Owner as provided in Paragraphs
4.1 through 4.4 and 4.6 through 4.14.

5.2      RESPONSIBILITY FOR CONSTRUCTION COST

5.2.1    The Architect's review of the Owner's Project budget and of preliminary
estimates of Construction Cost or detailed estimates of Construction Cost
prepared by the Construction Manager is solely for the Architect's guidance in
the Architect's preparation of the Construction Documents. Accordingly, the
Architect cannot and does not warrant the accuracy of the estimates of the
Construction Manager, or warrant or represent that bids or negotiated prices
will not vary from the Owner's Project budget or from any estimate of
Construction Cost or evaluation reviewed by the Architect.

5.2.2    No fixed limit of Construction Cost shall be established as a condition
of this Agreement.

5.2.3    In the event that the Construction Manager's estimate or the lowest
bona fide bid or negotiated proposal received by the Owner exceeds the Owner's
budget for reasons other than those described in Paragraph 3.3, the modification
of Contract Documents shall be the limit of the Architect's responsibility. The
Architect shall be entitled to compensation in accordance with this Agreement
for all services performed whether or not the Construction Phase is commenced.

                                   ARTICLE 6
                          USE OF ARCHITECT'S DRAWINGS,
                       SPECIFICATIONS AND OTHER DOCUMENTS

6.1      The Drawings, Specifications and other documents (the "Drawings and
Specifications") prepared by the Architect for this Project are instruments of
the Architect's service for use solely with respect to this Project and, unless
otherwise provided, the Architect shall be deemed the author of these documents
and shall retain all common law, statutory and other reserved rights, including
the copyright. The Owner shall be permitted to retain copies, including
reproducible copies and computer aided design disks, of the Architect's
Drawings, Specifications and other documents for information and reference in
connection with the Owner's use and occupancy of the Project. Provided Owner is
not in breach under the terms of this Agreement, the Architect grants to the
Owner an exclusive license to reproduce the Architect's Instruments of Service
(excepting therefrom standard details from the Drawings and Specifications,
which are not unique to the Project and which Architect may use on other
projects) for purposes of construction, using and maintaining the Project,
provided that the Owner shall comply with all obligations, including prompt
payment of all sums when due, under this Agreement. The Architect shall obtain
similar exclusive licenses from the Architect's consultants consistent with this
Agreement. If this Agreement is terminated, the foregoing license shall remain
in effect and it is expressly agreed by the Architect that the Owner is
authorized to hire other similarly credentialed design professionals to
reproduce and make changes, corrections or additions to the Instruments of
Service for purposes of completing, using and maintaining the Project, and the
Architect agrees to supply necessary documentation confirming same. Owner agrees
to defend, indemnify and hold Architect harmless from any claim or liability
arising from any changes, corrections, or additions made to the Instruments of
Service by Owner or Owner's consultants.

6.2      Submission or distribution of documents to meet official regulatory
requirements or for similar purposes in connection with the Project is not to be
construed as publication in derogation of the Architect's reserved rights.

                                    ARTICLE 7
                                   ARBITRATION

7.1      Claims, disputes or other matters in question between the parties to
this Agreement arising out of or relating to this Agreement or breach thereof
shall be subject to and decided by arbitration in accordance with the
Construction Industry Arbitration Rules of the American Arbitration Association
currently in effect unless the parties mutually agree otherwise.

7.2      Demand for arbitration shall be filed in writing with the other party
to this Agreement and with the American Arbitration Association. A demand for
arbitration shall be made within a reasonable time after the claim, dispute or
other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations.

7.3      No arbitration arising out of or relating to this Agreement shall
include, by consolidation, joinder or in any other manner, an additional person
or entity not a party to this Agreement, except by written consent containing a
specific reference to this Agreement signed by the Owner, Architect, and any
other person or entity sought to be joined. Consent to arbitration involving an
additional person or entity shall not

ATA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION- AIA(R) - (C) 1992 -THE AMERICAN INSTITUTE OF ARCHITECTS,
1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicensed
photocopying violates U.S. copyright laws and will subject the violator to legal
prosecution. This document was electronically produced with permission of the
AIA and can be reproduced in accordance with your license without violation
until the date of expiration as noted below. User Document: b141 01_15_03.aia -
2/10/2003. AIA License Number 1009668, which expires on 3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                               8


constitute consent to arbitration of any claim, dispute or other matter in
question not described in the written consent or with a person or entity not
named or described therein. The foregoing agreement to arbitrate and other
agreements to arbitrate with an additional person or entity duly consented to by
the parties to this Agreement shall be specifically enforceable in accordance
with applicable law in any court having jurisdiction thereof. Notwithstanding
the foregoing, arbitration may involve the joinder of Construction Manager.
Contractor(s), Subcontractors), sub-subcontractor(s) and material suppliers

7.4      The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.

                                    ARTICLE 8
                     TERMINATION, SUSPENSION OR ABANDONMENT

8.1      This Agreement may be terminated by either party upon not less than
seven days' written notice should the other party fail substantially to perform
in accordance with the terms of this Agreement through no fault of the party
initiating the termination. In the event this Agreement is terminated as
provided in this Paragraph 8.1. the Architect, as its sole and exclusive remedy,
will be entitled to receive compensation for that portion of Basic and
Additional Services due for services property performed up to the date of
receipt of the termination notice and for any Reimbursable Expenses properly
incurred to the date of receipt of the termination notice.

8.2      If the Project is suspended by the Owner for more than 30 consecutive
days, the Architect shall be compensated for services performed prior to notice
of such suspension. When the Project is resumed, the Architect's compensation
shall be equitably adjusted to provide for expenses incurred in the interruption
and resumption of the Architect's services.

8.3      This Agreement may be terminated by the Owner upon not less than seven
days' written notice to the Architect,, for the Owner's convenience and without
cause. In the event this Agreement is terminated as provided in this Paragraph
8.3. the Architect, as its sole and exclusive remedy, will be entitled to
receive compensation for that portion of Basic and Additional Services due for
services properly performed up to the date of receipt of the termination notice
and for any Reimbursable Expenses properly incurred to the date of receipt of
the termination notice, which shall include any Reimbursable Expenses caused by
the termination.

8.4      Failure of the Owner to make payments to the Architect in accordance
with this Agreement shall be considered substantial nonperformance and cause for
termination.

8.5      If the Owner fails to make payment when due the Architect for services
and expenses, the Architect may, upon seven days' written notice to the Owner,
suspend performance of services under this Agreement. Unless payment in full is
received by the Architect within seven days of the date of the notice, the
suspension shall take effect without further notice. In the event of a
suspension of services, the Architect shall have no liability to the Owner for
delay or damage caused the Owner because of such suspension of services.

8.6      In the event of termination not the fault of the Architect, the
Architect shall be compensated for services properly performed performed prior
to termination, together with Reimbursable Expenses then due.

                                    ARTICLE 9
                            MISCELLANEOUS PROVISIONS

9.1      Unless otherwise provided, this Agreement shall be governed by the law
of the place where the Project is located.

9.2      Terms in this Agreement shall have the same meaning as those in the
edition of AIA Document A201/CMa, General Conditions of the Contract for
Construction, Construction Manager-Adviser Edition, current as of the date of
this Agreement.

9.3      Causes of action between the parties to this Agreement pertaining to
acts or failures to act shall be deemed to have accrued and the applicable
statutes of limitations shall commence to run not later than either the date of
Substantial Completion for acts or failures to act occurring prior to
Substantial Completion, or the date of issuance of the final Project Certificate
for Payment for acts or failures to act occurring after Substantial Completion.

AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA (R) - (c) 1992 -THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING:
Unlicensed photocopying violates U.S. copyright laws and will subject the
violator to legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced in accordance with your license
without violation until the date of expiration as noted below. User Document:
b141 01_15_03.aia -- 2/10/2003. AIA License Number 1009668, which expires on
3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                               9


9.4      The Owner and Architect waive all rights against each other and against
the Construction Manager, Contractors, and the consultants, agents and employees
of any of them for damages, but only to the extent covered by property insurance
during construction, except such rights as they may have to the proceeds of such
insurance as set forth in the edition of AIA Document A201/CMa, General
Conditions of the Contract for Construction, Construction Manager-Adviser
Edition, current as of the date of this Agreement. The Owner and Architect each
shall require similar waivers from their Construction Manager, Contractors,
consultants, agents, and persons or entities awarded separate contracts
administered under the Owner's own forces.

9.5      The Owner and Architect, respectively, bind themselves, their partners,
successors, assigns and legal representatives to the other party to this
Agreement and to the partners, successors, assigns and legal representatives of
such other party with respect to all covenants of this Agreement. Neither Owner
nor Architect shall assign this Agreement without the written consent of the
other.

9.6      This Agreement represents the entire and integrated agreement between
the Owner and Architect and supersedes all prior negotiations, representations
or agreements, either written or oral. This Agreement may be amended only by
written instrument signed by both Owner and Architect.

9.7      Nothing contained in the Agreement shall create a contractual
relationship with or a cause of action in favor of a third party against either
the Owner or Architect.

9.8      Unless otherwise provided in this Agreement, the Architect and
Architect's consultants shall have no responsibility for the discovery,
presence, handling, removal or disposal of or exposure of persons to hazardous
materials in any form at the Project site, including but not limited to
asbestos, asbestos products, polychlorinated biphenyl (PCB) or other toxic
substances.

9.9      The Architect shall not have the right to include representations of
the design of the Project, including photographs of the exterior and interior,
among the Architect's promotional and professional materials without the Owner's
express written consent, which may be withheld at Owner's sole discretion. The
Architect's materials shall not include the Owner's confidential or proprietary
information if the Owner has previously advised the Architect in writing of the
specific information considered by the Owner to be confidential or proprietary.
The Owner shall provide professional credit for the Architect on the
construction sign and in the promotional materials for the Project.

                                   ARTICLE 10
                            PAYMENTS TO THE ARCHITECT

10.1     DIRECT PERSONNEL EXPENSE

10.1.1   Direct Personnel Expense is defined as the direct salaries of the
Architect's personnel engaged on the Project and the portion of the cost of
their mandatory and customary contributions and benefits related thereto, such
as employment taxes and other statutory employee benefits, insurance, sick
leave, holidays, vacations, pensions and similar contributions and benefits.

10.2     REIMBURSABLE EXPENSES

10.2.1   Reimbursable Expenses are in addition to compensation for Basic and
Additional Services and include reasonable expenses incurred by the Architect
and Architect's employees and consultants in the interest of the Project, as
identified in the following Clauses.

10.2.1.1 Expense of transportation in excess of 50 miles in connection with the
Project; expenses in connection with authorized out-of-town travel;
long-distance communications; and fees paid for securing approval of authorities
having jurisdiction over the Project.

10.2.1.2 Expense of plots, reproductions, postage, express deliveries,
electronic facsimile transmissions and handling of Drawings, Specifications and
other documents.

10.2.1.3 If authorized in advance by the Owner, expense of overtime work
requiring higher than regular rales.

10.2.1.4 Expense of renderings, models and mock-ups requested by the Owner.

10.2.1.5 Expense of additional insurance coverage or limits, including
professional liability insurance, requested by the Owner in excess of that
normally carried by the Architect and Architect's consultants.

10.2.1.6 Expense of computer-aided design and drafting equipment lime when used
in connection with the Project

10.2.1.7 Taxes on goods or services.

10.2.1.8 The Architect understands that the Owner has established a $45,000
budget for reimbursable items and Architect commits to work with Owner to
achieve this goal, with the understanding that not all factors can be
anticipated at the time of this agreement; however, this amount will not be
exceeded without Owner's prior written approval.

10.3     PAYMENTS ON ACCOUNT OF BASIC SERVICES

10.3.1   An initial payment as set forth in Paragraph 11.1 is the minimum
         payment under this Agreement.

10.3.2   Subsequent payments for Basic Services shall be made monthly and, where
applicable, shall be in proportion to services performed within each phase type
of service, on the basis set forth in Subparagraph 11.2.1.

AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C) 1992 -THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING:
Unlicensed photocopying violates U.S. copyright laws and will subject the
violator to legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced in accordance with your license
without violation until the dale of expiration as noted below. User Document:
bl41 01_15_03.aia - 2/10/2003. AIA License Number 1009668, which expires on
3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                              10


10.3.3   If and to the extent that the time initially established in
Subparagraph 11.5.1 of this Agreement is exceeded or extended through no fault
of the Architect, compensation for any services rendered during the additional
period of time shall be computed in the manner set forth in Subparagraph 11.3.2.

10.3.4   When compensation is based on a percentage of Construction Cost and any
portions of the Project are deleted or otherwise not constructed, compensation
for those portions of the Project shall be payable to the extent services are
performed on those portions, in accordance with the schedule set forth in
Subparagraph 11.1.2, based on (I) the lowest bona fide bids or negotiated
proposals, or (2) if no such bids or proposals are received, the most recent
estimate of Construction Cost prepared by the Construction Manager for such
portions of the Project.

10.4     PAYMENTS ON ACCOUNT OF ADDITIONAL SERVICES AND REIMBURSABLE EXPENSES

10.4.1   Payments on account of the Architect's Additional Services and for
Reimbursable Expenses shall be made  within 30 days of the proper presentation
of the Architect's statement of services rendered or expenses incurred,
including all supporting and back-up invoices and documentation requested by
Owner.

10.5     PAYMENTS WITHHELD

10.5.1   No deductions shall be made from the Architect's compensation on
account of penalty, liquidated damages or other sums withheld from payments to
Contractors, or on account of the cost of changes in the Work other than those
for which the Architect has been found to be liable.

10.6     ARCHITECT'S ACCOUNTING RECORDS

10.6.1   Records of Reimbursable Expenses and expenses pertaining to Additional
Services and services performed on the basis of a multiple of Direct Personnel
Expense shall be available to the Owner or the Owner's authorized representative
at mutually convenient times.

                                   ARTICLE 11
                              BASIS OF COMPENSATION

The Owner shall compensate the Architect as follows:

11.1     AN INITIAL PAYMENT of zero Dollars ($ -0- ) shall be made upon
execution of this Agreement and credited to the Owner's account at final
payment.

11.2     BASIC COMPENSATION

11.2.1   FOR BASIC SERVICES, as described in Article 2, and any other services
included in Article 12 as part of Basic Services, Basic Compensation shall be a
Fixed Fee, not to exceed the following amounts for each phase of the Work:

(Insert basis of compensation, including stipulated sums, multiples or
percentages, and identify phases to which particular methods of compensation
apply, if necessary.)



           Phase                                     Fee
           -----                                   -------
                                                
Programming (Architectural)                         10,000
Programming (Consultants)                            8,200
SHELL SERVICES
Schematic Design                                    43,718
Design Development                                  60,530
Construction Documents                             161,405
Bidding                                              6,725
Construction Administration                         63,890
INTERIOR SERVICES
Schematic Design                                    38,925
Design Development                                  43,248
Construction Documents                              90,820
Bidding                                              6,487
Construction Administration                         36,760
Furniture Services                                  20,500
Move Support                                         9,000


AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C) 1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING:
Unlicensed photocopying violates U.S. copyright laws and will subject the
violator to legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced in accordance with your license
without violation until the date of expiration as noted below. User Document:
b141 01_15_03.aia - 2/10/2003. AIA License Number 1009668, which expires on
3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                              11


                                            
OPTIONAL SERVICES
See Article 12
Master Planning                                   3,500
Food service                                      7,370
Lighting                                          9,110
Audio/Visual                                      8,450
Acoustical                                        3,960
Structural Ground Floor                          10,090
                                                -------
   Total                                       $ 42,480
                                                =======



11.3     COMPENSATION FOR ADDITIONAL SERVICES

11.3.1   FOR PROJECT REPRESENTATION BEYOND BASIC SERVICES, as described in
Paragraph 3.2, compensation shall be computed as follows:

            Hourly rates equal to:
                Senior Principals:     $150.00
                Employees:             Two and Eighty-Five One-Hundredths
                                       (2.85) times Direct Personnel Expense

            For the purpose of this Agreement the Senior Principals are:
            R. Lawrence Good, FAIA; Duncan T. Fulton, FA1A;

            David M. Farrell, A1A; Joseph J. Patti, AIA. CS1: and Bryce A.
            Weigand, FAIA

11.3.2   FOR ADDITIONAL SERVICES OF THE ARCHITECT, as described in Articles 3
and 12, other than (i) Additional Project Representation, as described in
Paragraph 3.2, and (2) services included in Article 12 as part of Basic
Services, but excluding services of consultants, compensation shall be computed
as follows:

(Insert basis of compensation, including rates and/or multiples of Direct
Personnel Expense for Principals and employees, and identify Principals and
classify employees, if required. Identify specific services to which particular
methods of compensation apply, if necessary,)

            Hourly rates equal to:

                Senior Principals:     $150.00
                Employees:             Two and Eighty-Five One-Hundredths
                                       (2.85) times Direct Personnel Expense

            For the purpose of this Agreement the Senior Principals are;
            R. Lawrence Good, FAIA; Duncan T. Fulton, FAIA;

            David M. Farrell, AIA; Joseph J. Patti. AIA. CSI: and Bryce A.
            Weigand, FAIA

11.3.3   FOR ADDITIONAL SERVICES OF CONSULTANTS, including additional
structural, mechanical and electrical engineering services and those provided
under Subparagraph 3.4.19 or identified in Article 12 as part of Additional
Services, a multiple of One and One-Tenth ( 1.10) times the amounts billed to
the Architect for such services.

(Identify specific types of consultants in Article 12, if required.)

11.4     REIMBURSABLE EXPENSES

11.4.1   FOR REIMBURSABLE EXPENSES, as described in Paragraph 10.2, and any
other items included in Article 12 as Reimbursable Expenses, a multiple of one
and one tenth (1.10 ) times the expenses incurred by the Architect, the
Architect's employees and consultants in the interest of the Project.

11.5     ADDITIONAL PROVISIONS

11.5.1   IF THE BASIC SERVICES covered by this Agreement have not been completed
         within twelve (12) months of the date

AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (c) 1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING:
Unlicensed photocopying violates U.S. copyright laws and will subject the
violator to legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced in accordance with your license
without violation until the date of expiration as noted below. User Document:
b141 01_15_03.aia -- 2/10/2003. AIA License Number 1009668, which expires on
3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                              12


hereof, through no fault of the Architect, extension of the Architect's services
beyond that time shall be compensated as provided in Subparagraphs 10.3.3 and
11.3.2.

11.5.2   Payments are due and payable thirty (30 ) days from the date of the
Architect's invoice. Amounts unpaid thirty ( 30) days after the invoice date
shall bear interest at the rate entered below, or in the absence thereof at the
legal rate prevailing from time to time at the principal place of business of
the Architect.

(Insert rate of interest agreed upon.)

1.25% per month

(Usury laws and requirements under the Federal Truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Architect's principal places of business, the location of the Project and
elsewhere may affect the validity of this provision. Specific legal advice
should be obtained with respect to deletions or modifications, and also
regarding requirements such as written disclosures or waivers.)

11.5.3   The rates and multiples set forth for Additional Services shall be
annually adjusted in accordance with normal salary review practices of the
Architect.

                                   ARTICLE 12
                          OTHER CONDITIONS OR SERVICES

(Insert descriptions of other services, identify Additional Services included
within Basic Compensation, and insert modifications to the payment and
compensation terms included in this Agreement.)

         12.1     The following Optional Services,for the Fixed Fee set forth
         in Paragraph 11.2.1, may be required by the Owner, subject to written
         authorization from the Owner:

                  Master Planning
                  Food Service Consulting
                  Lighting Consulting
                  Audio Visual Consulting
                  Acoustical Consulting

         12.1.1   Master Planning shall consist of evaluating building
         footprint, parking placement, and other conceptual site lay out issues.
         The final deliverable from the Master Planning shall be a conceptual
         color site plan illustrating the preferred option.

         12.1.2   Food Service consulting shall consist of conceptual kitchen
         planning through Design Development to assess the infrastructure
         requirements (primarily utility, exhaust, and space requirements) for a
         2,000 S.F. kitchen /serving area, in order to design the shell to
         receive such facilities at a future date. In the event finish out
         construction documents are prepared for this area, the fees for such
         services shall be in addition to the Optional Fees set forth above.

         12.1.3   Lighting Consulting shall be for the Board Room, Amphitheater,
         Lobby, Sales Training Room, and Library Museum.

         12.1.4   Audio Visual Consulting Services shall be for the Sales
         Training Room. Amphitheater, Board Room, and the Cold OR.

         12.1.5   Architectural Acoustic consulting shall be for the
         Amphitheater, Board Room, and Sales Training Room.

         12.2     Basic Services are based on issuing a total of two (2) interim
         pricing packages and two (2) construction document packages; a shell
         package followed by interiors package with the two being produced
         sequentially by the same staff without any interruption.

         12.3     The Fixed Fee for Basic Services assumes a 46 week aggregate
         shell and interiors construction period through Substantial Completion,
         followed by a 4-week punch list /closeout period through final
         completion, with the same general contractor performing both the shell
         and interior construction. In the event separate shell and interior
         general contractors are selected, the additional services required to
         administer an additional contract shall be considered an Additional
         Service. If, through no fault of Architect, the aggregate construction
         period exceeds 46 weeks and such extension materially increases the
         Architect's obligations under Basic Services, such additional services
         shall be considered an Additional Service. No Additional Services shall
         be provided without the Owner's written approval in advance of any such
         services.

         12.4     Code required signage is included, however, all other signage,
         such as a project identification signage, shall be provided as an
         Additional Service.

         12.5     Basic Services include the necessary services to accommodate
         a 20,000 S.F. Clean Room into the shell. Consistent with customary
         practice when a self-contained specialty area is incorporated into a
         project (such as kitchens, data centers and the like), services
         required exclusively for the Clean Room, such as process flow planning,
         internal FF & E planning and the like will be provided by Owner's
         Clean Room Consultant.

         12.6     Civil engineering services which are included as a Basic
         Service arc on-site grading, and on-site utility plan only.

         12.7     Platting and platting assistance are not included as a Basic
         Service.

         12.8     Services regarding trenching operations are not included as
         part of this Agreement. This includes, but is not limited to, trench
         design, trench shoring design, consultation regarding trenching,
         observation of trenching operations. The Owner agrees to require the
         Contractor to make all provisions for trenching operations.

AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (c) 1992 -THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING:
Unlicensed photocopying violates U.S. copyright laws and will subject the
violator to legal prosecution. This document was electronically produced with
permission of the AIA and can be reproduced in accordance with your license
without violation until the date of expiration as noted below. User Document:
b141 01_15_03.aia -- 2/10/2003. AIA License Number 1009668, which expires on
3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                              13


         12.9     The Owner has, or will, retain via separate contract,
         qualified professionals to assess the property for hazardous materials
         (including providing an asbestos survey stipulated in the Texas
         Asbestos Health Protection Act) and removing any slich substance. As
         such, the Architect shall consider the building and site free of
         hazardous substances for the purposes of performing Architect's
         services.

         12.10    The Architect shall have the right to rely on the accuracy,
         thoroughness and completeness of all information provided by the Owner.
         Owner's Representative(s), or Construction Manager(s) including
         pricing, schedule, or other information provided by the contractor,
         construction/cost advisor or similar party during all phases of the
         project, including pre-construction. However. Architect will review all
         such information as part of the Basic Services and notify Owner of any
         observed problems or inaccuracies.

         12.11    The Owner agrees to limit the Architect's liability to the
         Owner due to the Architect's negligent acts, errors, or omission, such
         that the total aggregate liability of the Architect to all those named
         shall not exceed One Million Dollars ($1,000,000). Provided, however,
         Architect shall maintain Errors & Omission insurance coverage of not
         less than One Million Dollars ( $ 1,000,000), in full force and effect
         at all times services are being provided in connection with the
         Project, and continuing for a minimum of two years following final
         Completion of the Project.

         12.12    In the event the Owner ejects to divide the project into
         multiple packages to accelerate the construction process, the Owner
         acknowledges this entails certain inherent risks. These include, but
         are not limited to, the inability to coordinate early release work
         with that of Iater packages, an increased incidence of change orders
         and field coordination changes, incomplete code interpretations and
         work in progress modification. By utilizing multiple packages, the
         Owner agrees to accept these risks in order to achieve the benefits of
         reduced construction time.

         12.13    The Texas Board of Architectural Examiners, 333 Guadalupe,
         Suite 2-350, Austin, TX 78701-3942, Phone: 512/305-9000, has
         jurisdiction over individuals licensed under the Architects
         Registration Law, Article 249A, VTCS

This Agreement entered into as of the day and year first written above.
/s/ F. ROBERT MERRILL                    /s/ DUNCAN T. FULTON
- -----------------------------------      ---------------------------------------
OWNER (Signature)                        ARCHITECT (Signature)

F. ROBERT MERRILL                        DUNCAN T. FULTON, FAIA
EXECUTIVE VICE PRESIDENT, CFO            VICE PRESIDENT, GOOD FULTON & Farrell
                                         Architects

(Printed name and title)                 (Printed name and title)

AIA DOCUMENT B141/CMa - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R)-(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS,
1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicensed
photocopying violates U.S. copyright laws and will subject the violator to legal
prosecution. This document was electronically produced with permission of the
AIA and can be reproduced in accordance with your license without violation
until the date of expiration as noted below. User Document: b141 01_15_03.aia -
2/10/2003. AIA License Number 1009668, which expires on 3/28/2003.

                                                 Electronic Format B141/CMa-1992

                                                                              14

EX-10.25

                                                                   EXHIBIT 10.25

                    AIA Document B801/CMa - Electronic Format

                       Standard Form of Agreement Between
                         Owner and Construction Manager

               where the Construction Manager is NOT a Constructor

                                  1992 Edition

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document is intended to be used in conjunction with the 1992 editions of
AIA Documents B141/CMa, A101/CMa and A201/CMa.

Copyright 1973, 1980, (C) 1992 by The American Institute of Architects, 1735 New
York Avenue, N.W., Washington, D.C., 20006-5292. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution.

AGREEMENT
made as of the Fifteen day of October in the year of Two Thousand Two
(In words, indicate day, month and year)

BETWEEN the Owner:
(Name and address)
Advanced Neuromodulation Systems, Inc.
6501 Windcrest Drive, Suite #100
Plano, TX 75024

and the Construction Manager:
(Name and address)
Koll Development Company
8411 Preston Rd., Suite #700
Dallas, TX 75225

for the following Project:
(Include detailed description of Project, location, address and scope.)
Advanced Neuromodulation Systems, Inc.
at Legacy Business Park
Preston Rd. at Tennyson Drive
Plano, TX 75024

The Architect is:
(Name and address)

Good, Fulton & Farrell Architects
2808 Fairmount Street, Suite #300
Dallas, TX 75201

The Owner and Construction Manager agree as set forth below.

    Terms and Conditions of Agreement Between Owner and Construction Manager

                                    ARTICLE 1
                     CONSTRUCTION MANAGER'S RESPONSIBILITIES

1.1      CONSTRUCTION MANAGER'S SERVICES

(C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT B801/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R)- WARNING: Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below. expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr uyya -- 4/9/2003. AIA
License Number 1768076504, which expires on 10/30/2003.

                                                 Electronic Format B801/CMa-1992

                                                                               1


1.1.1    The Construction Manager's services consist of those services performed
by the Construction Manager, Construction Manager's employees and Construction
Manager's consultants as enumerated in Articles 2 and 3 of this Agreement and
any other services included in Article 14.

1.1.2    The Construction Manager's services shall be provided in conjunction
with the services of an Architect as described in the edition of AIA Document
B141/CMa, Standard Form of Agreement Between Owner and Architect, Construction
Manager-Adviser Edition, current as of the dale of this Agreement.

1.1.3    The Construction Manager shall provide sufficient organization,
personnel and management to carry out the requirements of this Agreement in an
expeditious and economical manner consistent with the interests of the Owner.

1.1.4    The services covered by this Agreement are subject to the lime
limitations contained in Subparagraph 13.5.1.

                                    ARTICLE 2
                 SCOPE OF CONSTRUCTION MANAGER'S BASIC SERVICES

2.1      DEFINITION

2.1.1    The Construction Manager's Basic Services consist of those described in
Paragraphs 2.2 and 2.3 and any other services identified in Article 14 as part
of Basic Services - including those further described in Exhibit A - CM Services
Responsibility Matrix.

2.2      PRE-CONSTRUCTION PHASE

2.2.1    The Construction Manager shall review the program furnished by the
Owner to ascertain the requirements of the Project and shall arrive at a mutual
understanding of such requirements with the Owner.

2.2.2    The Construction Manager shall provide a preliminary evaluation of the
Owner's program, schedule and construction budget requirements, each in terms of
the other.

2.2.3    Based on early schematic designs and other design criteria prepared by
the Architect, the Construction Manager shall prepare preliminary estimates of
Construction Cost for program requirements using area, volume or similar
conceptual estimating techniques. The Construction Manager shall provide cost
evaluations of alternative materials and systems.

2.2.4    The Construction Manager shall expeditiously review design documents
during their development and advise on proposed site use and improvements,
selection of materials, building systems and equipment, and methods of Project
delivery. The Construction Manager shall provide recommendations on relative
feasibility of construction methods, availability of materials and labor, time
requirements for procurement, installation and construction, and factors related
to construction cost including, but not limited to, costs of alternative designs
or materials, preliminary budgets, and possible economies.

2.2.5    The Construction Manager shall prepare and periodically update a
Project Schedule for the Architect's review and the Owner's acceptance. The
Construction Manager shall obtain the Architect's approval for the portion of
the preliminary project schedule relating to the performance of the Architect's
services. In the Project Schedule, the Construction Manager shall coordinate and
integrate the Construction Manager's services, the Architect's services and the
Owner's responsibilities with anticipated construction schedules, highlighting
critical and long-lead-time items.

2.2.6    As the Architect progress with the preparation of the Schematic, Design
Development and Construction Documents, the Construction Manager shall prepare
and update, at appropriate intervals agreed to by the Owner, Construction
Manager and Architect, estimates of Construction Cost of increasing detail and
refinement. The estimated cost of each Contract shall be indicated with
supporting detail. Such estimates shall be provided for the Architect's review
and the Owner's approval. The Construction Manager shall advise the Owner and
Architect if it appears that the Construction Cost may exceed the latest
approved Project budget and make recommendations for corrective action.

2.2.7    The Construction Manager shall consult with the Owner and Architect
regarding the Construction Documents and make recommendations whenever design
details adversely affect constructibility, cost or schedules.

2.2.8    The Construction Manager shall provide recommendations and information
to the Owner and Architect regarding the assignment of responsibilities for
temporary Project facilities and equipment, materials and services for common
use of the Contractors. The Construction Manager shall verify that such
requirements and assignment of responsibilities are included in the proposed
Contract Documents.

2.2.9    The Construction Manager shall provide recommendations and information
to the Owner regarding the allocation of responsibilities for safety programs
among the Contractors.

2.2.10   The Construction Manager shall advise on the division of the Project
into individual Contracts for various categories of Work, including the method
to be used for selecting Contractors and awarding Contracts. If multiple
Contracts are to be awarded, the Construction Manager shall review the
Construction Documents and make recommendations as required to provide that (1)
the Work of the Contractors is coordinated, (2) all requirements for the Project
have been assigned to the appropriate Contract, (3) the likelihood of
jurisdictional disputes has been minimized, and (4) proper coordination has been
provided for phased construction.

(C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C- 20006-5292. AIA DOCUMENT B801/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R)- WARNING: Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr uyya - 4/9/2003. AIA
License Number 1768076504, which expires on 10/30/2003.

                                                 Electronic Format B801/CMa-1992

                                                                               2


2.2.11   The Construction Manager shall prepare a Project construction schedule
providing for the components of the Work, including phasing of construction,
times of commencement and completion required of each Contractor, ordering and
delivery of products requiring long lead time, and the occupancy requirements of
the Owner. The Construction Manager shall provide the current Project
construction schedule for each set of bidding documents.

2.2.12   The Construction Manager shall expedite and coordinate the ordering and
delivery of materials requiring long lead time- through each Contractor.

2.2.13   The Construction Manager shall assist the Owner in selecting, retaining
and coordinating the professional services of surveyors, special consultants and
testing laboratories required for the Project.

2.2.14   The Construction Manager shall provide an analysis of the types and
quantities of labor required for the Project and review the availability of
appropriate categories of labor required for critical phases. The Construction
Manager shall make recommendations for actions designed to minimize adverse
effects of labor shortages.

2.2.15   The Construction Manager shall assist the Owner in obtaining
information regarding applicable requirements for equal employment opportunity
programs for inclusion in the Contract Documents.

2.2.16   Following the Owner's approval of the Construction Documents, the
Construction Manager shall update and submit the latest estimate of Construction
Cost and the Project construction schedule for the Architect's review and the
Owner's approval.

2.2.17   The Construction Manager shall submit the list of prospective bidders
for the Architect's review and the Owner's approval.

2.2.18   The Construction Manager shall develop bidders' interest in the Project
and establish bidding schedules. The Construction Manager, with the assistance
of the Architect, shall issue bidding documents to bidders and conduct prebid
conferences with prospective bidders. The Construction Manager shall assist the
Architect with regard to questions from bidders and with the issuance of
addenda.

2.2.19   The Construction Manager shall receive bids, prepare bid analyses and
make recommendations to the Owner for the Owner's award of Contracts or
rejection of bids.

2.2.20   The Construction Manager shall assist the Owner in preparing
Construction Contracts and advise the Owner on the acceptability of
Subcontractors and material suppliers proposed by Contractors.

2.2.21   The Construction Manager shall assist the Owner and Contractor in
obtaining building permits and special permits for permanent improvements,
except for permits required to be obtained directly by the various Contractors.
The Construction Manager shall verify that the Owner has paid applicable fees
and assessments. The Construction Manager shall assist the Owner and Architect
in connection with the Owner's responsibility for filing documents required for
the approvals of governmental authorities having jurisdiction over the Project.

2.3      CONSTRUCTION PHASE-ADMINISTRATION OF THE CONSTRUCTION CONTRACT

2.3.1    The Construction Phase will commence with the award of the initial
Construction Contract or purchase order and, together with the Construction
Manager's obligation to provide Basic Services under this Agreement, will end 30
days after final payment to all Contractors is due.

2.3.2    The Construction Manager shall provide administration of the Contracts
for Construction in cooperation with the Architect as set forth below and in the
modified version of the edition of AIA Document A201/CMa, General Conditions of
the Contract for Construction, Construction Manager-Adviser Edition, as agreed
upon between the Owner and Construction Manger.

2.3.3    The Construction Manager shall provide administrative, management and
related services to coordinate scheduled activities and responsibilities of the
Contractors with each other and with those of the Construction Manager, the
Owner and the Architect to endeavor to manage the Project in accordance with the
latest approved estimate of Construction Cost, the Project Schedule and the
Contract Documents

2.3.4    The Construction Manager shall schedule and conduct meetings to discuss
such matters as procedures, progress and scheduling. The Construction Manager
shall prepare and promptly distribute minutes to the Owner, Architect and
Contractors.

2.3.5    Utilizing the Construction Schedules provided by the Contractors, the
Construction Manager shall update the Project construction schedule
incorporating the activities of the Contractors on the Project, including
activity sequences and durations, allocation of labor and materials, processing
of Shop Drawings, Product Data and Samples, and delivery of products requiring
long lead time and procurement. The Project construction schedule shall include
the Owner's occupancy requirements showing portions of the Project having
occupancy priority. The Construction Manager shall update and reissue the
Project construction schedule as required to show current conditions. If an
update indicates that the previously approved Project construction schedule may
not be met, the Construction Manager shall recommend corrective action to the
Owner and Architect.

2.3.6    Consistent with the various bidding documents, and utilizing
information from the Contractors, the Construction Manager shall coordinate the
sequence of construction and assignment of space in areas where the Contractors
are performing Work.

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT B801/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R) - WARNING: Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr uyya -- 4/9/2003. AIA
License Number 1768076504, which expires on 10/30/2003,

                                                 Electronic Format B801/CMa-1992

                                                                               3


2.3.7    The Construction Manager shall endeavor to obtain satisfactory
performance from each of the Contractors. The Construction Manager shall
recommend courses of action to the Owner when requirements of a Contract are not
being fulfilled.

2.3.8    The Construction Manager shall monitor the approved estimate of
Construction Cost. The Construction Manager shall show actual costs for
activities in progress and estimates for uncompleted tasks by way of comparison
with such approved estimate.

2.3.9    The Construction Manager shall develop cash flow reports and forecasts
for the Project and advise the Owner and Architect as to variances between
actual and budgeted or estimated costs.

2.3.10   The Construction Manager shall maintain accounting records on
authorized Work performed under unit costs, additional Work performed on the
basis of actual costs of labor and materials, and other Work requiring
accounting records.

2.3.11   The Construction Manager shall develop and implement procedures for the
review and processing of applications by Contractors for progress and final
payments.

2.3.11.1 Based on the Construction Manager's observations and evaluations of
each Contractor's Application for Payment, the Construction Manager shall review
and certify the amounts due the respective Contractors.

2.3.11.2 The Construction Manager shall assemble and prepare  the Project
Application(s) for Payment based on the Contractors' Certificates for Payment.

2.3.11.3 The Construction Manager's certification for payment shall constitute a
representation to the Owner, based on the Construction Manager's determinations
at the site as provided in Subparagraph 2.3.13 and on the data comprising the
Contractors' Applications for Payment, that, to the best of the Construction
Manager's knowledge, information and belief, the Work has progressed to the
point indicated and the quality of the Work is in accordance with the Contract
Documents. The foregoing representations are subject to an evaluation of the
Work for conformance with the Contract Documents upon Substantial Completion, to
results of subsequent tests and inspections, to minor deviations from the
Contract Documents correctable prior to completion and to specific
qualifications expressed by the Construction Manager. The issuance of a
Certificate for Payment shall further constitute a representation that the
Contractor is entitled to payment in the amount certified.

2.3.11.4 The issuance of a Certificate for Payment shall be a representation
that the Construction Manager has (1) made or reasonable and continuous on-site
inspections to check the quality or quantity of the Work, (2) reviewed
construction means, methods, techniques, sequences for the Contractor's own
Work, or procedures, (3) reviewed copies of requisitions received from
Subcontractors and material suppliers and other data requested by the Owner to
substantiate the Contractor's right to payment and (4) ascertained for what
purpose the Contractor has used money previously paid on account of the Contract
Sum by means of review of pertinent lien waiver documentation.

2.3.12   The Construction Manager shall review the safety programs developed by
each of the Contractors for purposes of coordinating the safety programs with
those of the other Contractors. The Construction Manager's responsibilities for
coordination of safety programs shall not extend to direct control over or
charge of the acts or omissions of the Contractors, Subcontractors, agents or
employees of the Contractors or Subcontractors, or any other persons performing
portions of the Work and not directly employed by the Construction Manager.

2.3.13 The Construction Manager shall determine in general that the Work of each
Contractor is being performed in accordance with the requirements of the
Contract Documents, endeavoring to guard the Owner against defects and
deficiencies in the Work. As appropriate, the Construction Manager shall have
authority, upon written authorization from the Owner, to require additional
inspection or testing of the Work in accordance with the provisions of the
Contract Documents, whether or not such Work is fabricated, installed or
completed. The Construction Manager, in consultation with the Architect and
Owner, may reject Work which does not conform to the requirements of the
Contract Documents.

2.3.14   The Construction Manager shall schedule and coordinate the sequence of
construction in accordance with the Contract Documents and the latest approved
Project construction schedule.

2.3.15   With respect to each Contractor's own Work, the Construction Manager
shall have control over or charge of and shall be responsible for coordination
of the Contractor's construction means, methods, techniques, sequences or
procedures, and for safety precautions and programs by the Contractor in
connection with the Work of each of the Contractors. The Construction Manager
shall be responsible for a Contractor's failure to carry out the Work in
accordance with the respective Contract Documents. The Construction Manager
shall have control over or charge of acts or omissions of the Contractors,
Subcontractors, or their agents or employees, or any other persons performing
portions of the Work directly employed by the Construction Manager. The
aforementioned statement of control, charge and responsibility shall not
obligate the Construction Manager to assume any additional financial obligations
associated with the Work performed by the Contractors.Subcontractors, vendors,
agents or employees.

2.3.16   The Construction Manager shall transmit to the Architect requests for
interpretations of the meaning and intent of the Drawings and Specifications,
and assist in the resolution of questions that may arise.

(C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT B801/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R)- WARNING: Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr uyya -- 4/9/2003. AIA
License Number 1768076504, which expires on 10/30/2003.

                                                 Electronic Format B801/CMa-1992

                                                                               4


2.3.17   The Construction Manager shall review requests for changes, assist in
negotiating Contractors' proposals, submit recommendations to the Architect and
Owner, and, if they are accepted, prepare Change Orders and Construction Change
Directives which incorporate the Architect's modifications to the Documents.

2.3.18   The Construction Manager shall assist the Architect in the review,
evaluation and documentation of Claims.

2.3.19   The Construction Manager shall receive certificates of insurance from
the Contractors and forward them to the Owner with a copy to the Architect.

2.3.20   In collaboration with the Architect, the Construction Manager shall
establish and implement procedures for expediting the processing and approval of
Shop Drawings, Product Data, Samples and other submittals. The Construction
Manager shall review all Shop Drawings, Product Data, Samples and other
submittals from the Contractors. The Construction Manager shall coordinate
submittals with information contained in related documents and transmit to the
Architect those which have been approved by the Construction Manager. The
Construction Manager's actions shall be taken with such reasonable promptness as
to cause no delay in the Work or in the activities of the Owner or Contractors.

2.3.21   The Construction Manager shall record the progress of the Project. The
Construction Manager shall submit written progress reports to the Owner and
Architect including information on each Contractor and each Contractor's Work,
as well as the entire Project, showing percentages of completion. The
Construction Manager shall keep a daily log containing a record of weather, each
Contractor's Work on the site, number of workers, identification of equipment,
Work accomplished, problems encountered, and other similar relevant data as the
Owner may require.

2.3.22   The Construction Manager shall maintain at the Project site for the
Owner one record copy of all Contracts, Drawings, Specifications, addenda,
Change Orders and other Modifications, in good order and marked currently to
record changes and selections made during construction, and in addition,
approved Shop Drawings, Product Data, Samples and similar required submittals.
The Construction Manager shall maintain records, in duplicate, of principal
building layout lines, elevations of the bottom of footings, floor levels and
key site elevations certified by a qualified surveyor or professional engineer.
The Construction Manager shall make all such records available to the Architect
and upon completion of the Project shall deliver them to the Owner.

2.3.23   The Construction Manager shall coordinate with Contractor(s) for the
delivery, storage, protection and security of Owner-purchased materials, systems
and equipment that are a part of the Project until such items are incorporated
into the Project.

2.3.24   With the Architect and the Owner's maintenance personnel, the
Construction Manager shall observe the Contractors' final testing and start-up
of utilities, operational systems and equipment.

2.3.25   When the Construction Manager considers each Contractor's Work or a
designated portion thereof substantially complete, the Construction Manager
shall, jointly with the Contractor, prepare for the Architect a list of
incomplete or unsatisfactory items and a schedule for their completion. The
Construction Manager shall assist the Architect in conducting inspections to
determine whether the Work or designated portion thereof is substantially
complete.

2.3.26   The Construction Manager shall coordinate the correction and completion
of the Work. Following issuance of a Certificate of Substantial Completion of
the Work or a designated portion thereof, the Construction Manager shall
evaluate the completion of the Work of the Contractors and make recommendations
to the Architect when Work is ready for final inspection. The Construction
Manager shall assist the Architect in conducting final inspections.

2.3.27   The Construction Manager shall secure and transmit to the Architect
warranties and similar submittals required by the Contract Documents for
delivery to the Owner and deliver all keys, manuals, record drawings and
maintenance stocks to the Owner. The Construction Manager shall forward to the
Architect a final Project Application for Payment upon compliance with the
requirements of the Contract Documents.

2.3.28   Duties, responsibilities and limitations of authority of the
Construction Manager as set forth in the Contract Documents shall not be
restricted, modified or extended without written consent of the Owner,
Construction Manager, Architect and Contractors. Consent shall not be
unreasonably withheld.

                                    ARTICLE 3
                               ADDITIONAL SERVICES

3.1      GENERAL

3.1.1    The services described in this Article 3 are not included in Basic
Services unless so identified in Article 14, and they shall be paid for by the
Owner as provided in this Agreement, in addition to the compensation for Basic
Services. The Optional Additional Services described under Paragraph 3.3 shall
only be provided if authorized or confirmed in writing by the Owner. If services
described under Contingent Additional Services in Paragraph 3.2 are required due
to circumstances beyond the Construction Manager's control, the Construction
Manager shall notify the Owner prior to commencing such services. If the Owner
deems that such services described under Paragraph 3.2 are not required, the
Owner shall give prompt written notice to the Construction Manager. If the Owner
indicates in writing that all or part of such Contingent Additional Services are
not required, the Construction Manager shall have no obligation to provide those
services.

3.2      CONTINGENT ADDITIONAL SERVICES

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT B801/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R) - WARNING; Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr uyya - 4/9/2003. AIA
License Number 1768076504, which expires on 10/30/2003.

                                                 Electronic Format B801/CMa-1992

                                                                               5


3.2.1    Providing services required because of significant changes in the
Project including, but not limited to, changes in size, quality, complexity or
the Owner's schedule.

3.2.2    Providing consultation concerning replacement of Work damaged by fire
or other cause during construction, and furnishing services required in
connection with the replacement of such Work.

3.2.3    Providing services made necessary by the termination or default of the
Architect or a Contractor, by major defects or deficiencies in the Work of a
Contractor, or by failure of performance of either the Owner or Contractor under
a Contract for Construction.

3.2.4    Providing services in evaluating an extensive number of claims
submitted by a Contractor or others in connection with the Work.

3.2.5    Providing services in connection with a public hearing, arbitration
proceeding or legal proceeding except where the Construction Manager is party
thereto.

3.3      OPTIONAL ADDITIONAL SERVICES

3.3.1    Providing services relative to future facilities, systems and
equipment.

3.3.2    Providing services to investigate existing conditions or facilities or
to provide measured drawings thereof.

3.3.3    Providing services to verify the accuracy of drawings or other
information furnished by the Owner.

3.3.4    Providing services required for or in connection with the Owner's
selection, procurement or installation of furniture, furnishings and related
equipment.

3.3.5    (included in Basic Services)

3.3.6    Providing any other services not otherwise included in this Agreement.

                                    ARTICLE 4
                            OWNER'S RESPONSIBILITIES

4.1      The Owner shall provide full information regarding requirements for the
Project, including a program which shall set forth the Owner's objectives,
schedule, constraints and criteria, including space requirements and
relationships, flexibility, expandability, special equipment, systems, and site
requirements.

4.2      The Owner shall establish and update an overall budget for the Project
based on consultation with the Construction Manager and Architect, which shall
include the Construction Cost, the Owner's other costs and reasonable
contingencies related to all of these costs.

4.3      If requested by the Construction Manager, the Owner shall furnish
evidence that financial arrangements have been made to fulfill the Owner's
obligations under this Agreement.

4.4      The Owner shall designate a representative authorized to act on the
Owner's behalf with respect to the Project. The Owner, or such authorized
representative, shall render decisions in a timely manner pertaining to
documents submitted by the Construction Manager in order to avoid unreasonable
delay in the orderly and sequential progress of the Construction Manager's
services.

4.5      The Owner shall retain an architect whose services, duties and
responsibilities are described in the edition of AIA Document B141/Cma, Standard
Form of Agreement Between Owner and Architect, Construction Manager-Adviser
Edition, current as of the date of this Agreement. The Terms and Conditions of
the Agreement Between the Owner and Architect shall be furnished to the
Construction Manager and shall not be modified without written consent of the
Construction Manager, which consent shall not be unreasonably withheld. The
Construction Manager shall not be responsible for actions taken by the
Architect.

4.6      The Owner shall furnish structural, mechanical, chemical, air and water
pollution tests, tests for hazardous materials, and other laboratory and
environmental tests, inspections and reports required by law or the Contract
Documents.

4.7      The Owner shall furnish all legal, accounting and insurance counseling
services as may be necessary at any time for the Project, including auditing
services the Owner may require to verify the Contractors' Applications for
Payment or to ascertain how or for what purposes the Contractors have used the
money paid by or on behalf of the Owner.

4.8      The Owner shall furnish the Construction Manager with a sufficient
quantity of Construction Documents.

4.9      The services, information and reports required by Paragraphs 4.5
through 4.8 shall be furnished at the Owner's expense, and the Construction
Manager shall be entitled to rely upon the accuracy and completeness thereof.

4.10     Prompt written notice shall be given by the Owner to the Construction
Manager and Architect if the Owner becomes aware of any fault or defect in the
Project or nonconformance with the Contract Documents.

4.11     The Owner reserves the right to perform construction and operations
related to the Project with the Owner's own forces, and to award contracts in
connection with the Project which are not part of the Construction Manager's
responsibilities under this Agreement. The Construction Manager shall notify the
Owner if any such independent action will interfere with the Construction
Manager's ability to perform the Construction Manager's responsibilities under
this Agreement. When performing construction or operations related to the
Project, the Owner agrees to be subject to the same obligations and to have the
same rights as the Contractors.

4.12     Information or services under the Owner's control shall be furnished by
the Owner with reasonable promptness to

(C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292, AIA DOCUMENT B801/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R)- WARNING: Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr uyya - 4/9/2003. AIA
License Number 1768076504, which expires on 10/30/2003.

                                                 Electronic Format B801/CMa-1992

                                                                               6


avoid delay in the orderly progress of the Construction Manager's services and
the progress of the Work.

                                    ARTICLE 5
                                CONSTRUCTION COST

5.1      DEFINITION

5.1.1    The Construction Cost shall be the total cost or estimated cost to the
Owner of all elements of the Project designed or specified by the Architect.

5.1.2    The Construction Cost shall include the cost at current market rates of
labor and materials furnished by the Owner and equipment designed, specified,
selected or specially provided for by the Architect, plus a reasonable allowance
for the Contractors' overhead and profit. In addition, a reasonable allowance
for contingencies shall be included for market conditions at the time of bidding
and for changes in the Work during construction. Except as provided in
Subparagraph 5.1.3, Construction Cost shall also include the compensation of the
Construction Manager and Construction Manager's consultants.

5.1.3    Construction Cost does not include the compensation of the Architect
and Architect's consultants, costs of the land, rights-of-way, financing or
other costs which are the responsibility of the Owner as provided in Article 4.
If any portion of the Construction Manager's compensation is based upon a
percentage of Construction Cost, then Construction Cost, for the purpose of
determining such portion, shall not include the compensation of the Construction
Manager or Construction Manager's consultants.

5.2      RESPONSIBILITY FOR CONSTRUCTION COST

5.2.1    Evaluations of the Owner's Project budget, preliminary estimates of
Construction Cost and detailed estimates of Construction Cost prepared by the
Construction Manager represent the Construction Manager's best judgment as a
person or entity familiar with the construction industry. It is recognized,
however, that neither the Construction Manager nor the Owner has control over
the cost of labor, materials or equipment, over Contractors' methods of
determining bid prices, or over competitive bidding, market or negotiating
conditions. Accordingly, the Construction Manager cannot and does not warrant or
represent that bids or negotiated prices will not vary from the Project budget
proposed, established or approved by the Owner, or from any cost estimate or
evaluation prepared by the Construction Manager.

5.2.2    No fixed limit of Construction Cost shall be established as a condition
of this Agreement by the furnishing, proposal or establishment of a Project
budget unless such fixed limit has been agreed upon in writing and signed by the
parties hereto. If such a fixed limit has been established, the Construction
Manager shall be permitted to include contingencies for design, bidding and
price escalation, and shall consult with the Architect to determine what
materials, equipment, component systems and types of construction are to be
included in the Contract Documents, to suggest reasonable adjustments in the
scope of the Project, and to suggest inclusion of alternate bids in the
Construction Documents to adjust the Construction Cost to the fixed limit. Fixed
limits, if any, shall be increased in the amount of any increase in the Contract
Sums occurring after execution of the Contracts for Construction.

5.2.3    If the Bidding or Negotiation Phase has not commenced within 90 days
after submittal of the Construction Documents to the Owner, any Project budget
or fixed limit of Construction Cost shall be adjusted to reflect changes in the
general level of prices in the construction industry between the date of
submission of the Construction Documents to the Owner and the date on which
proposals are sought.

5.2.4    If a fixed limit of Construction Cost (adjusted as provided in
Subparagraph 5.2.3) is exceeded by the sum of the lowest bona fide bids or
negotiated proposals plus the Construction Manager's estimate of other elements
of Construction Cost for the Project, the Owner shall:

         .1       give written approval of an increase in such fixed limit;

         .2       authorize rebidding or renegotiating of the Project within a
                  reasonable time;

         .3       if the Project is abandoned, terminate in accordance with
                  Paragraph 9.3; or

         .4       cooperate in revising the Project scope and quality as
                  required to reduce the Construction Cost.

5.2.5    If the Owner chooses to proceed under Clause 5.2.4.4, the Construction
Manager, without additional charge, shall cooperate with the Owner and Architect
as necessary to bring the Construction Cost within the fixed limit, if
established as a condition of this Agreement.

                                    ARTICLE 6
                         CONSTRUCTION SUPPORT ACTIVITIES

6.1      Construction support activities, if provided by the Construction
Manager, shall be governed by separate contractual agreements unless otherwise
provided in Article 14.

6.2      Reimbursable expenses listed in Article 14 for construction support
activities may be subject to trade discounts, rebates, refunds and amounts
received from sales of surplus materials and equipment which shall accrue to the
Owner, and the Construction Manager shall make provisions so that they can be
secured.

                                   ARTICLE 7
                              OWNERSHIP AND USE OF
                      ARCHITECT'S DRAWINGS, SPECIFICATIONS
                              AND OTHER DOCUMENTS

7.1      The Drawings, Specifications and other documents prepared by the
Architect are instruments of the Architect's service through which the Work to
be executed by the Contractors is described. The Construction Manager may retain

(C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT B801/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R)- WARNING: Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr uyya -- 4/9/2003. AIA
License Number 1768076504, which expires on 10/30/2003.

                                                 Electronic Format B801/CMa-1992

                                                                               7


one record set. The Construction Manager shall not own or claim a copyright in
the Drawings, Specifications and other documents prepared by the Architect, and
unless otherwise indicated the Architect shall be deemed the author of them and
will retain all common law, statutory and other reserved rights, in addition to
the copyright. All copies of them, except the Construction Manager's record set,
shall be returned or suitably accounted for to the Architect, on request, upon
completion of the Project. The Drawings, Specifications and other documents
prepared by the Architect, and copies thereof furnished to the Construction
Manager, are for use solely with respect to this Project. They are not to be
used by the Construction Manager on other projects or for additions to this
Project outside the scope of the Work without the specific written consent of
the Owner and Architect. The Construction Manager is granted a limited license
to use and reproduce applicable portions of the Drawings, Specifications and
other documents prepared by the Architect appropriate to and for use in the
performance of the Construction Manager's services under this Agreement.

All copies made under this license shall bear the statutory copyright notice, if
any, shown on the Drawings, Specifications and other documents prepared by the
Architect. Submittal or distribution to meet official regulatory requirements or
for other purposes in connection with this Project is not to be construed as
publication in derogation of the Architect's copyright or other reserved rights.

                                    ARTICLE 8
                                   ARBITRATION

8.1      Claims, disputes or other matters in question between the parties to
this Agreement arising out of or relating to this Agreement or breach thereof
shall be subject to and decided by arbitration in accordance with the
Construction Industry Arbitration Rules of the American Arbitration Association
currently in effect unless the parties mutually agree otherwise.

8.2      Demand for arbitration shall be filed in writing with the other party
to this Agreement and with the American Arbitration Association. A demand for
arbitration shall be made within a reasonable time after the claim, dispute or
other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations.

8.3      No arbitration arising out of or relating to this Agreement shall
include, by consolidation, joinder or in any other manner, an additional person
or entity not a party to this Agreement, except by written consent containing a
specific reference to this Agreement signed by the Owner, Construction Manager,
and any other person or entity sought to be joined. Consent to arbitration
involving an additional person or entity shall not constitute consent to
arbitration of any claim, dispute or other matter in question not described in
the written consent or with a person or entity not named or described therein.
The foregoing agreement to arbitrate and other agreements to arbitrate with an
additional person or entity duly consented to by the parties to this Agreement
shall be specifically enforceable in accordance with applicable law in any court
having jurisdiction thereof.

8.4      The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.

                                    ARTICLE 9
                     TERMINATION, SUSPENSION OR ABANDONMENT

9.1      This Agreement may be terminated by either party upon not less than
seven days' written notice should the other party fail substantially to perform
in accordance with the terms of this Agreement through no fault of the party
initiating the termination.

9.2      If the Project is suspended by the Owner for more than 30 consecutive
days, the Construction Manager shall be compensated for services performed prior
to notice of such suspension. When the Project is resumed, the Construction
Manager's compensation shall be equitably adjusted to provide for expenses
incurred in the interruption and resumption of the Construction Manager's
services.

9.3      This Agreement may be terminated by the Owner upon not less than seven
days' written notice to the Construction Manager in the event that the Project
is permanently abandoned. If the Project is abandoned by the Owner for more than
90 consecutive days, the Construction Manager may terminate this Agreement by
giving written notice.

9.4      Failure of the Owner to make payments to the Construction Manager in
accordance with this Agreement shall be considered substantial nonperformance
and cause for termination.

9.5      If the Owner fails to make payment when due the Construction Manager
for services and expenses, the Construction Manager may, upon seven days'
written notice to the Owner, suspend performance of services under this
Agreement. Unless payment in full is received by the Construction Manager within
seven days of the date of the notice, the suspension shall lake effect without
further notice. In the event of a suspension of services, the Construction
Manager shall have no liability to the Owner for delay or damage caused to the
Owner because of such suspension of services.

9.6      In the event of termination not the fault of the Construction Manager,
the Construction Manager shall be compensated for services performed prior to
termination, together with Reimbursable Expenses then due and all Termination
Expenses as defined in Paragraph 9.7.

9.7      Termination Expenses are those costs directly attributable to
termination for which the Construction Manager is not otherwise compensated.

                                   ARTICLE 10

(C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292, AIA DOCUMENT B80l/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R)- WARNING: Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr uyya -- 4/9/2003. AIA
License Number 1768076504, which expires on 10/30/2003.

                                                 Electronic Format B801/CMa-1992

                                                                               8


                            MISCELLANEOUS PROVISIONS

10.1     Unless otherwise provided, this Agreement shall be governed by the law
of the place where the Project is located.

10.2     Terms in this Agreement shall have the same meaning as those in the
modified version of the edition of AIA Document A201/CMa, General Conditions of
the Contract for Construction, Construction Manager-Adviser Edition, as agreed
upon between the Owner and Construction Manger.

10.3     Causes of action between the parties to this Agreement pertaining to
acts or failures to act shall be deemed to have accrued and the applicable
statutes of limitations shall commence to run not later than either the date of
Substantial Completion for acts or failures to act occurring prior to
Substantial Completion, or the date of issuance of the final Project Certificate
for Payment for acts or failures to act occurring after Substantial Completion.

10.4     Waivers of Subrogation. The Owner and Construction Manager waive all
rights against each other and against the Contractors, Architect, consultants,
agents and employees of any of them, for damages, but only to the extent covered
by property insurance during construction, except such rights as they may have
to the proceeds of such insurance as set forth in the edition of AIA Document
A201/CMa, General Conditions of the Contract for Construction, Construction
Manager-Adviser Edition, current as of the date of this Agreement. The Owner and
Construction Manager each shall require similar waivers from their Contractors,
Architect, consultants, agents, and persons or entities awarded separate
contracts administered under the Owner's own forces.

10.5     The Owner and Construction Manager, respectively, bind themselves,
their partners, successors, assigns and legal representatives to the other party
to this Agreement and to the partners, successors, assigns and legal
representatives of such other party with respect to all covenants of this
Agreement. Neither Owner nor Construction Manager shall assign this Agreement
without the written consent of the other.

10.6     This Agreement represents the entire and integrated agreement between
the Owner and Construction Manager and supersedes all prior negotiations,
representations or agreements, either written or oral. This Agreement may be
amended only by written instrument signed by both Owner and Construction
Manager.

10.7     Nothing contained in this Agreement shall create a contractual
relationship with or a cause of action in favor of a third party against either
the Owner or Construction Manager.

10.8     Unless otherwise provided in this Agreement, the Construction Manager
and the Construction Manager's consultants shall have no responsibility for the
discovery, presence, handling, removal or disposal of or exposure of persons to
hazardous materials in any form at the Project site, including but not limited
to asbestos, asbestos products, polychlorinated biphenyl (PCB) or other toxic
substances.

                                   ARTICLE 11
                                    INSURANCE

11.1     CONSTRUCTION MANAGER'S LIABILITY INSURANCE

11.1.1   The Construction Manager shall purchase from and maintain in a company
or companies lawfully authorized to do business in the jurisdiction in which the
Project is located such insurance as will protect the Construction Manager from
claims set forth below which may arise out of or result from the Construction
Manager's operations under this Agreement and for which the Construction Manager
may be legally liable.

         .1       claims under workers compensation, disability benefit and
                  other similar employee benefit acts which are applicable to
                  the operations to be performed;

         .2       claims for damages because of bodily injury, occupational
                  sickness or disease, or death of the Construction Manager's
                  employees;

         .3       claims for damages because of bodily injury, sickness or
                  disease, or death of any person other than the Construction
                  Manager's employees;

         .4       claims for damages insured by usual personal injury liability
                  coverage which are sustained (1) by a person as a result of an
                  offense directly or indirectly related to employment of such
                  person by the Construction Manager, or (2) by another person;

         .5       claims for damages, other than to the Work itself, because of
                  injury to or destruction of tangible property, including loss
                  of use resulting therefrom;

         .6       claims for damages because of bodily injury, death of a person
                  or property damage arising out of ownership, maintenance or
                  use of a motor vehicle.

11.1.2   The insurance required by Subparagraph 11.1.1 shall be written for not
less than limits of liability specified in Article 14 or required by law,
whichever coverage is greater. Coverages, whether written on an occurrence or
claims-made basis, shall be maintained without interruption from date of
commencement of operations under this Agreement until date of final payment and
termination of any coverage required to be maintained after final payment.

                                   ARTICLE 12
                      PAYMENTS TO THE CONSTRUCTION MANAGER

12.1     DIRECT PERSONNEL EXPENSE

12.1.1   Direct Personnel Expense is defined as the direct salaries of the
Construction Manager's personnel engaged on the Project and the portion of the
cost of their mandatory and customary contributions and benefits related
thereto, such as employment taxes and other statutory employee benefits,
insurance, sick leave, holidays, vacations, pensions and similar contributions
and benefits.

(C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT B801/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R)- WARNING: Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below. expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr uyya - 4/9/2003. AIA
License Number 1768076504, which expires on 10/30/2003.

                                                 Electronic Format B801/CMa-1992

                                                                               9


12.2     REIMBURSABLE EXPENSES

12.2.1   Reimbursable Expense are in addition to compensation for Basic and
Additional Services and include expenses incurred by the Construction Manager
and Construction Manager's employees and consultants in the interest of the
Project, as identified in the following Clauses.

12.2.1.1 Expense of transportation in connection with the Project, expenses in
connection with authorized out-of-town travel; long-distance communications; and
fees paid for securing approval of authorities having jurisdiction over the
Project.

12.2.1.2 Expense of reproductions, express deliveries, and handling of Drawings,
Specifications and other documents.

12.2.1.3 If authorized in advance by the Owner, expense of overtime work
requiring higher than regular rates.

12.2.1.4 Expense of additional insurance coverage or limits requested by the
Owner in excess of that normally carried by the Construction Manager.

12.3     PAYMENTS ON ACCOUNT OF BASIC SERVICES

12.3.1   An initial payment as set forth in Paragraph 13.1 is the minimum
payment under this Agreement.

12.3.2   Subsequent payments for Basic Services shall be made monthly and, where
applicable, shall be in proportion to services performed within each phase of
service, on the basis set forth in Subparagraph 13.2.1.

12.3.3   If and to the extent that the time initially established in
Subparagraph 13.5.1 of this Agreement is exceeded or extended through no fault
of the Construction Manager, compensation for any services rendered during the
additional period of time shall be computed in the manner set forth in
Subparagraph 13.3.1.

12.3.4   When compensation is based on a percentage of Construction Cost and any
portions of the Project are deleted or otherwise not constructed, compensation
for those portions of the Project shall be payable to the extent services are
performed on those portions, in accordance with Subparagraph 13,2.1, based on
(1) the lowest bona fide bids or negotiated proposals, or (2) if no such bids or
proposals are received, the latest approved estimate of such portions of the
Project.

12.4     PAYMENTS ON ACCOUNT OF ADDITIONAL SERVICES AND REIMBURSABLE EXPENSES

12.4.1   Payments on account of the Construction Manager's Additional Services
and for Reimbursable Expenses shall be made monthly upon presentation of the
Construction Manager's statement of services rendered or expenses incurred.

12.5     PAYMENTS WITHHELD

12.5.1   No deductions shall be made from the Construction Manager's
compensation on account of penalty, liquidated damages or other sums withheld
from payments to Contractors, or on account of the cost of changes in Work other
than those for which the Construction Manager has been found to be liable.

12.6     CONSTRUCTION MANAGER'S ACCOUNTING RECORDS

12.6.1   Records of Reimbursable Expenses and expenses pertaining to Additional
Services and services performed on the basis of a multiple of Direct Personnel
Expense shall be available to the Owner or the Owner's authorized representative
at mutually convenient times.

                                   ARTICLE 13
                              BASIS OF COMPENSATION

The Owner shall compensate the Construction Manager as follows:

13.1     AN INITIAL PAYMENT of zero Dollars ($ -0- ) shall be made upon
execution of this Agreement and credited to the owner's account at final
payment.

13.2     BASIC COMPENSATION

13.2.1   FOR BASIC SERVICES, as described in Article 2, and any other services
included in Article 14 as part of Basic Services, Basic Compensation shall be
computed as follows:

For Pre-Construction Phase Services:

(Insert basis of compensation, including stipulated sums, multiples or
percentages.)

Fifteen thousand dollars ($15,000) per month.

Project organization, mobilization, consultant selection, design review
(estimated at 3 to 4 months) @ $15,000 per month.

For Construction Phase Services:

(Insert basis of compensation, including stipulated sums, multiples or
percentages.)

(C) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT B801/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R) - WARNING: Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below. expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr uyya -- 4/9/2003. AIA
License Number 1768076504, which expires on 10/30/2003.

                                                 Electronic Format B801/CMa-1992

                                                                              10


Twenty thousand dollars ($20.000) per month.

Management during construction (estimated at 12 months) @ $20,000 per month.

13.3     COMPENSATION FOR ADDITIONAL SERVICES

13.3.1   FOR ADDITIONAL SERVICES OF THE CONSTRUCTION MANAGER, as described in
Article 3, and any other services included in Article 14 as Additional Services,
compensation shall be computed as follows:

(Insert basis of compensation, including rates and/or multiples of Direct
Personnel Expense for Principals and employees, and identify Principals and
classify employees, if required. Identify specific services to which particular
methods of compensation apply, if necessary.)

Additional services shall be mutually agreed to by Owner and Construction
Manager.

The following rates for Construction Manager's key personnel shall apply:

Rick Heymann - $200 per day
Mike Rosamond - $300 per day
Murray Newton - $350 per day

13.4     REIMBURSABLE EXPENSES

13.4.1   FOR REIMBURSABLE EXPENSES, as described in Paragraph 12.2, and any
other items included in Article 14 as Reimbursable Expenses, a multiple of one (
1.0 ) times the expenses incurred by the Construction Manager and the
Construction Manager's employees and consultants in the interest of the Project.

13.5     ADDITIONAL PROVISIONS

13.5.1   IF THE BASIC SERVICES covered by this Agreement have not been completed
within Sixteen (16 ) months of the date hereof, through no fault of the
Construction Manager, extension of the Construction Manager's services beyond
that time shall be compensated as provided in Subparagraphs 12.3.3 and 13.3.1.

13.5.2   Payments are due and payable twenty ( 20 ) days from the date of the
Construction Manager's invoice. Amounts unpaid twenty ( 20 ) days after the
invoice date shall bear interest at the rate entered below, or in the absence
thereof at the legal rate prevailing from time to time at the principal place of
business of the Construction Manager.

(Insert rate of interest agreed upon.)

(Usury laws and requirements under the Federal Truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Construction Manager's principal places of business, the location of the Project
and elsewhere may affect the validity of this provision. Specific legal advice
should he obtained with respect to deletions or modifications, and also
regarding requirements such as written disclosures or waivers.)

13.5.3   The rales and multiples set forth for Additional Services shall be
annually adjusted in accordance with normal salary review practices of the
Construction Manager.

                                   ARTICLE 14
                          OTHER CONDITIONS OR SERVICES

(Insert descriptions of other services, identify Additional Services included
within Basic Compensation and modifications to the payment and compensation
terms included in this Agreement.)

The following exhibits to this Agreement shall apply:

Exhibit A- CM Services Responsibility Matrix

14.1     LIMITS ON INSURANCE

The insurance required by Article II shall be written for not less than the
following limits, or greater if required by law:

(Insert the specific dollar amounts for the appropriate insurance limits of
liability.)

14.1.1   Worker's Compensation:

         14.1.1.1 Minimum Limits:

                  (a)      Worker's Compensation - statutory limit

                  (b)      Employer's Liability:

                           (i)      $1,000,000 bodily injury for each accident

(C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT B801/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R)- WARNING: Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr uyya -- 4/9/2003. AIA
License Number 1768076504, which expires on 10/30/2003.

                                                 Electronic Format B801/CMa-1992

                                                                              11


                           (ii)     $1,000,000 bodily injury by disease for each
                                    employee

                           (iii)    $1,000,000 bodily injury disease aggregate

14.1.2   Commercial General Liability:

         14.1.2.1 Minimum Limits:

                  (a)      $1,000,000 each occurrence

                  (b)      $2,000,000 general aggregate

                  (c)      $2,000,000 products and completed operations
                           aggregate

         14.1.2.2 Coverages:

                  (a)      Products and completed operations coverage

                  (b)      Blanket contractual liability

                  (c)      Broad form property coverage

                  (d)      Severability of interest

                  (e)      Personal injury

                  (f)      Specific waiver of subrogation

14.1.3   Automobile Liability:

         14.1.3.1 Minimum Limits: $1.000.000 combined single limit each accident

         14.1.3.2 Coverages:

                  (a)      Additional insured endorsement

                  (b)      Specific waiver of subrogation

                  (c)      Contractual liability

14.1.4   Umbrella / Excess Liability:

         14.1.4.1 Minimum Limits: $25,000,000 combined single limit and
                  aggregate limit

This Agreement entered into as of the day and year first written above.

OWNER                                              CONSTRUCTION MANAGER

/s/ F. Robert Merrill                            /s/ Murray Newton
- ----------------------------------               -------------------------------
(Signature)                                      (Signature)

F. ROBERT MERRILL, EXECUTIVE                     MURRAY NEWTON, EXECUTIVE VICE
VICE PRESIDENT, CFO                              PRESIDENT
(Printed name and title)                          (Printed name and title)

(c) 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT B801/CMa - OWNER-CONSTRUCTION MANAGER
AGREEMENT - 1992 EDITION - AIA(R)- WARNING: Unlicensed photocopying violates
U.S. copyright laws and will subject the violator to legal prosecution. This
document was electronically produced with permission of the AIA and can be
reproduced in accordance with your license without violation until the date of
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below, expiration as noted below, expiration as noted below,
expiration as noted below. User Document: b801 dev agr apr 8.aia - 4/9/2003. AIA
License Number 1005237, which expires on 10/30/2003.

                                                 Electronic Format B801/CMa-1992

                                                                              12

EX-10.26

                                                                   EXHIBIT 10.26

CHANGE ORDER                                            OWNER                [X]
CONSTRUCTION MANAGER - ADVISER EDITION                  CONSTRUCTION MANAGER [X]
AIA Document G701/CMa - Electronic Format
                                                        ARCHITECT            [X]
                                                        CONTRACTOR           [X]
                                                        FIELD                [ ]
                                                        OTHER                [ ]

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

PROJECT:                                 CHANGE ORDER NO: One(1)
(Name and address)
Advanced Neuromodulation Systems, Inc.   INITIATION DATE: August 27, 2003
at Legacy Business Park                  PROJECT NOS.:
6901 Preston Rd.                         CONTRACT FOR: Shell, Core, and Site
Plano, TX 75024                                          Construction

                                         CONTRACT DATE: 30 April, 2003


TO CONTRACTOR:
(Name and address)
Rogers O'Brien Construction Co., Inc.
1901 Regal Row
Dallas, TX 75235

The Contract is changed as follows:

Revisions as shown on Plans and specifications dated May 23, 2003 and Addendum #
1 through #12, inclusive. (reference attached exhibit "A" for complete list of
plans and specifications)

Revisions to GMP shall be in accordance with attached exhibit "B", estimate "GMP
R1" dated August 27, 2003, and the associated pricing clarifications, also
included as a part of exhibit "B"

NET ADD FOR ALL REVISIONS: ONE HUNDRED FIFTY THREE THOUSAND THREE HUNDRED
SEVENTY SIX DOLLARS ($153,376)

NOT VALID UNTIL SIGNED BY THE OWNER, CONSTRUCTION MANAGER, ARCHITECT AND
CONTRACTOR.

                                                                               
The original (Guaranteed Maximum Price) was                                       $ 7,811,128

Net change by previously authorized Change Orders                                 $         0

The (Guaranteed Maximum Price) prior to this Change Order was                     $ 7,811,128

The (Guaranteed Maximum Price) will be (increased) by this Change Order           $   153,376

The new (Guaranteed Maximum Price) including this Change Order will be            $ 7,964,504



The Contract Time will be (unchanged) by zero (-0-) days.

The date of Substantial Completion as of the date of this Change Order therefore
is February 11, 2004

NOTE: This summary does not reflect changes in the Contract Sum, Contract Time
      or Guaranteed Maximum Price which have been authorized by Construction
      Change Directive.

- -------------------------
(C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT G701/CMa - CHANGE ORDER - CONSTRUCTION
MANAGER-ADVISER EDITION - 1992 EDITION - AIA(R)- WARNING: Unlicensed
photocopying violates U.S. copyright laws and will subject the violator to legal
prosecution. This document was electronically produced with permission of the
AIA and can be reproduced in accordance with your license without violation
until the date of expiration as noted below. User Document: CO #1 g701cma.aia
- --12/10/2003. AIA License Number 1005237, which expires on 10/7/2004.

                                                 Electronic Format G701/CMa-1992

                                                                               1


/s/ M. ROSAMOND                                 /s/ JOSEPH J. PATTI
- ------------------------------------            --------------------------------
CONSTRUCTION MANAGER                            ARCHITECT
KDC-Legacy, L.P.                                Good Fulton & Farrell

____________________________________            ________________________________
ADDRESS                                         ADDRESS
8411 Preston Rd.                                2808 Fairmount, Suite #300

Dallas, TX                                      Dallas, TX,75201
BY/s/ DATE 12.10.03                             BY DATE 12.30.03
/s/ PRESTON MCAFEE                              /s/ KENNETH HAWARI
- ------------------------------------            --------------------------------
CONTRACTOR                                      OWNER
Rogers O'Brien Construction Co., Inc.           Advanced Neuromodulation Systems

ADDRESS                                         ADDRESS

1901 Regal Row                                  6501 Windcrest, Suite #100
Dallas, TX 75235                                Plano, TX 75024

BY /s/ DATE 12/15/03                            BY DATE 1/7/04

                                                AS ITS EXECUTIVE VICE
                                                PRESIDENT AND GENERAL COUNSEL

(C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT G701/CMa - CHANGE ORDER - CONSTRUCTION
MANAGER-ADVISER EDITION - 1992 EDITION - AIA(R)- WARNING: Unlicensed
photocopying violates U.S. copyright laws and will subject the violator to legal
prosecution. This document was electronically produced with permission of the
AIA and can be reproduced in accordance with your license without violation
until the date of expiration as noted below. User Document: CO #1 g701cma.aia
- --12/10/2003. AIA License Number 1005237, which expires on 10/7/2004.

                                                 Electronic Format G701/CMa-1992

                                                                               2



                                   Exhibit "A"

                              ANS Corporate Campus

                        GMP List of Drawings and Addenda
                                    10/21/03



  Sheet #                      Description                   Issue Date  Addenda #1  Addenda #2  Addenda #3  Addenda #5
                                                                                           
Index         DRAWING INDEX                                   04/10/03
C-1           COVER SHEET                                     04/10/03
Plat-1        PRELIMINARY REPLAT & CONVEYANCE PLAT            04/10/03
Plat-2        PRELIMINARY REPLAT & CONVEYANCE PLAT            04/10/03
Final Site-1  FINAL SITE PLAN                                 04/10/03
Final Site-2  FINAL SITE PLAN                                 04/10/03
C-2           GENERAL NOTES                                   04/10/03
C-3           DIMENSIONS CONTROL PLAN                         04/10/03
C-4           PAVING AND STRIPING PLAN                        04/10/03
C-5           RIGHT AND LEFT TURN PAVING PLAN                 04/10/03
C-6           GRADING PLAN                                    04/10/03
C-7           DRAINAGE AREA MAP                               04/10/03
C-8           STORM SEWER PLAN                                04/10/03
C-9           STORM SEWER PROFILES                            04/10/03
C-10          WATER AND SANITARY SEWER PLAN                   04/10/03
C-11          SANITARY SEWER PROFILES                         04/10/03
C-12          EROSION CONTROL PLAN                            04/10/03
C-13          EROSION CONTROL DETAILS                         04/10/03
C-14          TX DOT CURB INLET TYPE 1 DETAILS-SHEET 1 OF 2    NO DATE
C-15          TX DOT CURB INLET TYPE 1 DETAILS-SHEET 2 OF 2    NO DATE

S-101 B       OFFICE WING FOUNDATION PLAN - BOTTOM STEEL      04/10/03                                        04/25/03
S-101 T       OFFICE WING FOUNDATION PLAN - TOP STEEL         04/10/03                                        04/25/03
S-102         2ND FLOOR OFFICE WING FRAMING PLAN              04/10/03                                        04/25/03
S-103         ROOF OFFICE WING FRAMING PLAN                   04/10/03                                        04/25/03
S-104         PARTIAL FLOOR PLANS                                                                             04/25/03
S-101HB       HIGH BAY FOUNDATION PLAN                        04/10/03                                        04/25/03
S-102HB       HIGH BAY MEZZANINE FRAMING PLAN                 04/10/03                                        04/25/03
S-103HB       ROOF HIGH BAY FRAMING PLAN                      04/10/03                                        04/25/03
S-104HB       PARTIAL FRAMING PLANS                                                                           04/25/03
S-105         PARTIAL PLANS                                                                                   04/25/03
S-106         PARTIAL FRAMING PLANS                                                                           04/25/03
S-201         NOTES                                           04/10/03                                        04/25/03
S-202         NOTES                                           04/10/03                                        04/25/03
S-203         DETAILS                                         04/10/03                                        04/25/03
S-204         DETAILS                                         04/10/03                                        04/25/03
S-205         DETAILS                                         04/10/03                                        04/25/03
S-206         DETAILS                                         04/10/03                                        04/25/03
S-207         DETAILS                                         04/10/03                                        04/25/03
S-208         DETAILS                                         04/10/03                                        04/25/03
S-209         TILT PANEL ELEVATIONS                           04/10/03                                        04/25/03
S-301         STRUCTURAL SLAB DETAILS                         04/10/03                                        04/25/03
S-302         FOUNDATION DETAILS                                                                              04/25/03
S-303         FOUNDATION DETAILS                                                                              04/25/03
S-304         FOUNDATION SECTIONS
S-401         FRAMING CONNECTION DETAILS                                                                      04/25/03
S-402         FRAMING CONNECTION DETAILS                                                                      04/25/03
S-403         FRAMING CONNECTION DETAILS                                                                      04/25/03
S-404         FRAMING CONNECTION DETAILS                                                                      04/25/03


Sheet #                       Description                      Addenda #8  Addenda #9  Addenda #10  Addenda #11  Addenda #12
                                                                                               
Index         DRAWING INDEX                                                 05/13/03     5/16/03                   6/12/03
C-1           COVER SHEET                                       05/09/03    05/13/03
Plat-1        PRELIMINARY REPLAT & CONVEYANCE PLAT              04/24/03
Plat-2        PRELIMINARY REPLAT & CONVEYANCE PLAT              04/24/03
Final Site-1  FINAL SITE PLAN                                    05/2003
Final Site-2  FINAL SITE PLAN                                    05/2003    05/13/03
C-2           GENERAL NOTES                                     05/09/03
C-3           DIMENSIONS CONTROL PLAN                           05/09/03
C-4           PAVING AND STRIPING PLAN                          05/09/03
C-5           RIGHT AND LEFT TURN PAVING PLAN                   05/09/03    05/13/03
C-6           GRADING PLAN                                      05/09/03
C-7           DRAINAGE AREA MAP                                 05/09/03
C-8           STORM SEWER PLAN                                  05/09/03
C-9           STORM SEWER PROFILES                              05/09/03    05/13/03
C-10          WATER AND SANITARY SEWER PLAN                     05/09/03
C-11          SANITARY SEWER PROFILES                           05/09/03
C-12          EROSION CONTROL PLAN                              05/09/03    05/13/03
C-13          EROSION CONTROL DETAILS                           05/09/03
C-14          TX DOT CURB INLET TYPE 1 DETAILS-SHEET 1 OF 2      NO DATE

C-15          TX DOT CURB INLET TYPE 1 DETAILS-SHEET 2 OF 2      NO DATE
S-101 B       OFFICE WING FOUNDATION PLAN - BOTTOM STEEL                                 4/25/03      5/23/03
S-101 T       OFFICE WING FOUNDATION PLAN - TOP STEEL                                    4/25/03      5/23/03
S-102         2ND FLOOR OFFICE WING FRAMING PLAN                                                      5/23/03
S-103         ROOF OFFICE WING FRAMING PLAN                                                           5/23/03
S-104         PARTIAL FLOOR PLANS HIGH BAY                                                            5/23/03
S-101HB       HIGH BAY FOUNDATION PLAN                                                   4/25/03      5/23/03
S-102HB       HIGH BAY MEZZANINE FRAMING PLAN                                                         5/23/03
S-103HB       ROOF HIGH BAY FRAMING PLAN                                                              5/23/03
S-104HB       PARTIAL FRAMING PLANS                                                                   5/23/03
S-105         PARTIAL PLANS                                                                           5/23/03
S-10S         PARTIAL FRAMING PLANS                                                                   5/23/03
S-201         NOTES                                                                      4/25/03      5/23/03
S-202         NOTES                                                                                   5/23/03
S-203         DETAILS                                                                    4/25/03      5/23/03
S-204         DETAILS                                                                                 5/23/03
S-205         DETAILS                                                                                 5/23/03
S-206         DETAILS                                                                                 5/23/03
S-207         DETAILS                                                                                 5/23/03
S-208         DETAILS                                                                                 5/23/03
S-209         TILT PANEL ELEVATIONS                                                                   5/23/03
S-301         STRUCTURAL SLAB DETAILS                                                    4/25/03      5/23/03
S-302         FOUNDATION DETAILS                                                         4/25/03      5/23/03
S-303         FOUNDATION DETAILS                                                         4/25/03      5/23/03
S-304         FOUNDATION SECTIONS                                                                     5/23/03
S-401         FRAMING CONNECTION DETAILS                                                              5/23/03
S-402         FRAMING CONNECTION DETAILS                                                              5/23/03
S-403         FRAMING CONNECTION DETAILS                                                              5/23/03
S-404         FRAMING CONNECTION DETAILS                                                              5/23/03


                                  Page 1 of 4



                                   Exhibit "A"

                              ANS Corporate Campus

                        GMP List of Drawings and Addenda
                                    10/21/03



  Sheet #                  Description                                Issue Date  Addenda #1  Addenda #2  Addenda #3  Addenda #5
                                                                                                    
AS-101    ARCHITECTURAL SITE PLAN
A-001     CODE REVIEW SHEET
A-002     CODE REVIEW SHEET
A-003     CODE REVIEW SHEET
A-104     ENLARGED MAIN ENTRY PLANS
A-105     1ST FLOOR OFFICE WING PLAN (CHANGED TO A-101)                04/10/03                            04/22/03
A-106     2ND FLOOR OFFICE WING PLAN (CHANGED TO A-102)                04/10/03    04/15/03
A-106HB   1ST FLOOR AND MEZZANINE HIGH BAY PLAN (CHANGED TO A-101HB)   04/10/03                            04/22/03
A-106HB   TOILET AND DOCK ENLARGED PLAN
A-107     OFFICE WING ROOF PLAN (CHANGED TO A-103)                     04/10/03
A-107HB   HIGH BAY ROOF PLAN (CHANGED TO A-107HB)                      04/10/03
A-108     ENLARGED REFLECTED CEILING PLAN                              04/10/03
A-108HB   ENLARGED REFLECTED CEILING PLAN                              04/10/03
A-109     ENLARGED REFLECTED CEILING PLAN                              04/10/03
A-110     OFFICE WING CORE RCP
A-110     ENLARGED STAIR PLAN (CHANGED TO A-107)                       04/10/03
A-111     OFFICE WING TOILET & ELEVATOR RCP
A-111     ENLARGED CORE PLAN (CHANGED TO A-105)                        04/10/03
A-111HB   TOILET AND DOCK RCP
A-112     STAIR RCP
A-112     ENLARGED CORE PLAN (CHANGED TO A-106)                        04/10/03
A-113     OFFICE WING CORE FINISH PLANS
A-114     OFFICE WING TOILET & ELEVATOR FINISH PLANS
A-114HB   TOILET & DOCK FINISH PLANS
A-115     STAIR 1 FINISH PLANS
A-201     OFFICE WING EXTERIOR ELEVATIONS                              04/10/03                                        04/25/03
A-202     HIGH BAY EXTERIOR ELEVATIONS                                 04/10/03                                        04/25/03
A-301     BUILDING SECTIONS                                            04/10/03
A-302     WALL SECTIONS                                                04/10/03
A-303     WALL SECTIONS                                                04/10/03
A-304     WALL SECTIONS - HIGHBAY
A-311     SECTION DETAILS
A-312     SECTION DETAILS
A-401     ENLARGED EXTERIOR ELEVATIONS                                 04/10/03                                        04/25/03
A-402     ENLARGED EXTERIOR ELEVATIONS                                                                                 04/25/03
A-403     ENLARGED EXTERIOR ELEVATIONS                                                                                 04/25/03
A-404     ENLARGED EXTERIOR ELEVATIONS
A-405     ENLARGED EXTERIOR ELEVATIONS
A-501     PLAN AND SECTION DETAILS                                     04/10/03
A-502     PLAN DETAILS
A-503     DETAILS
A-601     TYPICAL BATHROOM DETAILS                                     04/10/03
A-602     DOOR & FRAME SCHEDULE/ELEVATIONS/DETAILS
A-503     DOOR & FRAME DETAILS

MH101     1ST FLOOR OFFICE MECHANICAL
MH101HB   1ST FLOOR HIGHBAY MECHANICAL
MH102     2ND FLOOR OFFICE MECHANICAL
MH103     ROOF PLAN OFFICE MECHANICAL


Sheet #                    Description                                Addenda #8  Addenda #9  Addenda #10  Addenda #11  Addenda #12
                                                                                                      
AS-101    ARCHITECTURAL SITE PLAN                                                                           5/23/03
A-001     CODE REVIEW SHEET                                                                                 5/23/03
A-002     CODE REVIEW SHEET                                                                                 5/23/03
A-003     CODE REVIEW SHEET                                                                                 5/23/03
A-104     ENLARGED MAIN ENTRY PLANS                                                                         5/23/03
A-105     1ST FLOOR OFFICE WING PLAN (CHANGED TO A-101)                                       5/16/03       5/23/03
A-106     2ND FLOOR OFFICE WING PLAN (CHANGED TO A-102)                                       5/16/03       5/23/03
A-106HB   1ST FLOOR AND MEZZANINE HIGH BAY PLAN (CHANGED TO A-101HB)                          5/16/03       5/23/03      6/12/03
A-106HB   TOILET AND DOCK ENLARGED PLAN                                                                     5/23/03      6/12/03
A-107     OFFICE WING ROOF PLAN (CHANGED TO A-103)                                                          5/23/03
A-107HB   HIGH BAY ROOF PLAN (CHANGED TO A-107HB)                                                           5/23/03
A-108     ENLARGED REFLECTED CEILING PLAN
A-108HB   ENLARGED REFLECTED CEILING PLAN
A-109     ENLARGED REFLECTED CEILING PLAN
A-110     OFFICE WING CORE RCP                                                                              5/23/03
A-110     ENLARGED STAIR PLAN (CHANGED TO A-107)                                                            5/23/03
A-111     OFFICE WING TOILET & ELEVATOR RCP                                                                 5/23/03
A-111     ENLARGED CORE PLAN (CHANGED TO A-105)                                                             5/23/03
A-111HB   TOILET AND DOCK RCP                                                                               5/23/03
A-112     STAIR RCP                                                                                         5/23/03
A-112     ENLARGED CORE PLAN (CHANGED TO A-106)                                                             5/23/03
A-113     OFFICE WING CORE FINISH PLANS                                                                     5/23/03
A-114     OFFICE WING TOILET & ELEVATOR FINISH PLANS                                                        5/23/03
A-114HB   TOILET & DOCK FINISH PLANS                                                                        5/23/03
A-115     STAIR 1 FINISH PLANS                                                                              5/23/03
A-201     OFFICE WING EXTERIOR ELEVATIONS                                                                   5/23/03
A-202     HIGH BAY EXTERIOR ELEVATIONS                                                                      5/23/03
A-301     BUILDING SECTIONS                                                                                 5/23/03
A-302     WALL SECTIONS                                                                                     5/23/03
A-303     WALL SECTIONS                                                                                     5/23/03
A-304     WALL SECTIONS - HIGHBAY                                                                           5/23/03
A-311     SECTION DETAILS                                                                                   5/23/03
A-312     SECTION DETAILS                                                                                   5/23/03
A-401     ENLARGED EXTERIOR ELEVATIONS                                                                      5/23/03
A-402     ENLARGED EXTERIOR ELEVATIONS                                                                      5/23/03
A-403     ENLARGED EXTERIOR ELEVATIONS                                                                      5/23/03
A-404     ENLARGED EXTERIOR ELEVATIONS                                                                      5/23/03
A-405     ENLARGED EXTERIOR ELEVATIONS                                                                      5/23/03
A-501     PLAN AND SECTION DETAILS                                                                          5/23/03
A-502     PLAN DETAILS                                                                                      5/23/03
A-503     DETAILS                                                                                           5/23/03
A-601     TYPICAL BATHROOM DETAILS                                                                          5/23/03
A-602     DOOR & FRAME SCHEDULE/ELEVATIONS/DETAILS                                                          5/23/03
A-503     DOOR & FRAME DETAILS                                                                              5/23/03

MH101     1ST FLOOR OFFICE MECHANICAL                                                                       5/23/03
MH101HB   1ST FLOOR HIGHBAY MECHANICAL                                                                      5/23/03
MH102     2ND FLOOR OFFICE MECHANICAL                                                                       5/23/03
MH103     ROOF PLAN OFFICE MECHANICAL                                                                       5/23/03


                                  Page 2 of 4



                                   Exhibit "A"

                              ANS Corporate Campus

                        GMP List of Drawings and Addenda
                                    10/21/03



  Sheet #                   Description                                Issue Date  Addenda #1  Addenda #2  Addenda #3  Addenda #5
                                                                                                     
MH103HB    ROOF PLAN HIGHBAY MECHANICAL
M501       DETAILS
M601       SCHEDULES
M202A                                                                                           04/16/03
M202B                                                                                           04/16/03
M203       2ND FLOOR OFFICE WING PLAN - MECHANICAL (CHANGED TO MH102)   04/10/03
M204       2ND FLOOR HIGH BAY PLAN - MECHANICAL                         04/10/03
PP-100     UNDERFLOOR OFFICE PLUMBING
PP-100HB   UNDERFLOOR HIGH-BAY PLUMBING
PP-101     1ST FLOOR OFFICE WING PLAN - PLUMBING
PP-101HB   1ST FLOOR HIGH-BAY PLUMBING
PP-102     2ND FLOOR OFFICE WING PLAN - PLUMBING
PP-103     ROOF PLAN OFFICE PLUMBING
PP-103HB   ROOF PLAN HIGHBAY PLUMBING
P-201      1ST FLOOR OFFICE WING PLAN - PLUMBING (CHANGED TO PP101)     04/10/03
P-202      1ST FLOOR HIGH BAY PLAN - PLUMBING (CHANGED TO PP101HB)      04/10/03
P-203      2ND FLOOR OFFICE WING PLAN - PLUMBING (CHANGED TO PP-102)    04/10/03
P-401      ENLARGED PLAN - PLUMBING                                     04/10/03
P-501      SCHEDULES, DETAILS RISERS
P-601      RISER DIAGRAM - PLUMBING                                     04/10/03
P-701      SCHEDULES - PLUMBING (CHANGED TO P-501)                      04/10/03
ES101      SITE PLAN ELECTRICAL
ES102      SITE PLAN - PHOTOMETRIC
E-101      SITE PLAN - ELECTRICAL (CHANGED TO ES101)                    04/10/03
E-102      SITE PLAN - PHOTOMETRIC (CHANGED TO ES102)                   04/10/03
E-103      GROUNDING PLAN - ELECTRICAL                                  04/10/03
E-201      1ST FLOOR OFFICE WING PLAN - ELECTRICAL (CHANGED TO EP101)   04/10/03
E-202      1ST FLOOR HIGH BAY PLAN - ELECTRICAL (CHANGED TO EP101HB)    04/10/03
E-203      2ND FLOOR OFFICE WING PLAN - ELECTRICAL (CHANGED TO EP102)   04/10/03
E-205      ROOF PLAN - POWER (CHANGED TO EP103)                         04/10/03
E-301      1ST FLOOR OFFICE WING PLAN - LIGHTING (CHANGED TO EL101)     04/10/03
E-302      1ST FLOOR HIGH BAY PLAN - LIGHTING (CHANGED TO EL101HB)      04/10/03
E-303      2ND FLOOR OFFICE WING PLAN - LIGHTING (CHANGED TO EL102)     04/10/03
E-401      ENLARGED PLANS - ELECTRICAL                                  04/10/03
E-501      DETAILS
E-502      LEGEND & GENERAL NOTES
E-601      ONE LINE DIAGRAM - ELECTRICAL                                04/10/03
E-602      SCHEDULES
E-603      SCHEDULES
E-604      SCHEDULES
E-605      SCHEDULES
EP-100     UNDERFLOOR OFFICE POWER
EP-100HB   UNDERFLOOR HIGH-BAY POWER
EP101      1ST FLOOR OFFICE - POWER
EP101HB    1ST FLOOR HIGHBAY - POWER
EP102      2ND FLOOR OFFICE - POWER
EP103      ROOF PLAN OFFICE POWER
EP103HB    ROOF PLAN HIGHBAY POWER
EL101      1ST FLOOR OFFICE - LIGHTING
EL101HB    1ST FLOOR HIGHBAY - LIGHTING
LL102      2ND FLOOR OFFICE - LIGHTING


  Sheet #                   Description                                Addenda #8  Addenda #9  Addenda #10  Addenda #11  Addenda #12
                                                                                                       
MH103HB    ROOF PLAN HIGHBAY MECHANICAL                                                                       5/23/03
M501       DETAILS                                                                                            5/23/03
M601       SCHEDULES                                                                                          5/23/03
M202A
M202B
M203       2ND FLOOR OFFICE WING PLAN - MECHANICAL (CHANGED TO MH102)
M204       2ND FLOOR HIGH BAY PLAN - MECHANICAL
PP-100     UNDERFLOOR OFFICE PLUMBING                                                            5/16/03      5/23/03      6/12/03
PP-100HB   UNDERFLOOR HIGH-BAY PLUMBING                                                          5/16/03      5/23/03      6/12/03
PP-101     1ST FLOOR OFFICE WING PLAN - PLUMBING                                                              5/23/03
PP-101HB   1ST FLOOR HIGH-BAY PLUMBING                                                                        5/23/03      6/12/03
PP-102     2ND FLOOR OFFICE WING PLAN - PLUMBING                                                              5/23/03
PP-103     ROOF PLAN OFFICE PLUMBING                                                                          5/23/03
PP-103HB   ROOF PLAN HIGHBAY PLUMBING                                                                         5/23/03
P-201      1ST FLOOR OFFICE WING PLAN - PLUMBING (CHANGED TO PP101)
P-202      1ST FLOOR HIGH BAY PLAN - PLUMBING (CHANGED TO PP101HB)
P-203      2ND FLOOR OFFICE WING PLAN - PLUMBING (CHANGED TO PP-102)
P-401      ENLARGED PLAN - PLUMBING                                                                           5/23/03      6/12/03
P-501      SCHEDULES, DETAILS RISERS                                                                          5/23/03
P-601      RISER DIAGRAM - PLUMBING                                                                           5/23/03
P-701      SCHEDULES - PLUMBING (CHANGED TO P-501)
ES101      SITE PLAN ELECTRICAL                                                                               5/23/03
ES102      SITE PLAN - PHOTOMETRIC                                                                            5/23/03
E-101      SITE PLAN - ELECTRICAL (CHANGED TO ES101)
E-102      SITE PLAN - PHOTOMETRIC (CHANGED TO ES102)
E-103      GROUNDING PLAN - ELECTRICAL
E-201      1ST FLOOR OFFICE WING PLAN - ELECTRICAL (CHANGED TO EP101)
E-202      1ST FLOOR HIGH BAY PLAN - ELECTRICAL (CHANGED TO EP101HB)
E-203      2ND FLOOR OFFICE WING PLAN - ELECTRICAL (CHANGED TO EP102)
E-205      ROOF PLAN - POWER (CHANGED TO EP103)
E-301      1ST FLOOR OFFICE WING PLAN - LIGHTING (CHANGED TO EL101)
E-302      1ST FLOOR HIGH BAY PLAN - LIGHTING (CHANGED TO EL101HB)
E-303      2ND FLOOR OFFICE WING PLAN - LIGHTING (CHANGED TO EL102)
E-401      ENLARGED PLANS - ELECTRICAL                                                                        5/23/03
E-501      DETAILS                                                                                            5/23/03
E-502      LEGEND & GENERAL NOTES                                                                             5/23/03
E-601      ONE LINE DIAGRAM - ELECTRICAL                                                                      5/23/03
E-602      SCHEDULES                                                                                          5/23/03
E-603      SCHEDULES                                                                                          5/23/03
E-604      SCHEDULES                                                                                          5/23/03
E-605      SCHEDULES                                                                                          5/23/03
EP-100     UNDERFLOOR OFFICE POWER                                                              5/16/03       5/23/03
EP-100HB   UNDERFLOOR HIGH-BAY POWER                                                            5/16/03       5/23/03      6/12/03
EP101      1ST FLOOR OFFICE - POWER                                                                           5/23/03
EP101HB    1ST FLOOR HIGHBAY - POWER                                                                          5/23/03
EP102      2ND FLOOR OFFICE - POWER                                                                           5/23/03
EP103      ROOF PLAN OFFICE POWER                                                                             5/23/03
EP103HB    ROOF PLAN HIGHBAY POWER                                                                            5/23/03
EL101      1ST FLOOR OFFICE - LIGHTING                                                                        5/23/03
EL101HB    1ST FLOOR HIGHBAY - LIGHTING                                                                       5/23/03
ELL102     2ND FLOOR OFFICE - LIGHTING                                                                        5/23/03


                                  Page 3 of 4



                                   Exhibit "A"

                              ANS Corporate Campus

                        GMP List of Drawings and Addenda
                                    10/21/03



Sheet #                       Description                    Issue Date  Addenda #1  Addenda #2  Addenda #3  Addenda #5
                                                                                           
L.01         LANDSCAPE PLAN
L.02         TREE PRESERVATION PLAN
LT.01        TREE PRESERVATION/RELOCATION PLAN
LC.01        LANDSCAPE NOTES AND LEGEND                       04/10/03
LC.02        LANDSCAPE MATERIALS SCHEDULE                     04/10/03
LG.01        LANDSCAPE GRADING - SITE                         04/10/03
LG.02        LANDSCAPE GRADING ENLARGEMENT
LG.03        LANDSCAPE GRADING ENLARGEMENT
LG.04        LANDSCAPE GRADING ENLARGEMENT
LG.05        LANDSCAPE GRADING ENLARGEMENT
LS.01        LANDSCAPE SITEWORK                               04/10/03
LS.02        LANDSCAPE SITEWORK ENLARGEMENTS                  04/10/03
LS.03        LANDSCAPE SITEWORK ENLARGEMENTS                  04/10/03
LS.04        LANDSCAPE SITEWORK ENLARGEMENTS                  04/10/03
LS.05        LANDSCAPE SITEWORK ENLARGEMENTS                  04/10/03
LS.06        LANDSCAPE SITEWORK ENLARGEMENTS
LS.07        LANDSCAPE SITEWORK ENLARGEMENTS
LS.08        LANDSCAPE SITEWORK ENLARGEMENTS
LSD.01       LANDSCAPE SITEWORK DETAILS                       04/10/03
LSD.02       LANDSCAPE SITEWORK DETAILS
LSD.03       LANDSCAPE SITEWORK DETAILS
LSD.04       LANDSCAPE SITEWORK DETAILS
LSD.O5       LANDSCAPE SITEWORK DETAILS
LSD.06       LANDSCAPE SITEWORK DETAILS
LP.01        LANDSCAPE PLANTING - SITE                        04/10/03
LPD.01       LANDSCAPE PLANTING - PLANTING SCHEDULE           04/10/03
LL-01        LANDSCAPE LIGHTING PLAN
LLD-01       LANDSCAPE LIGHTING DETAILS
ALT.01       LANDSCAPE ALTERNATE
ALT.02       LANDSCAPE ALTERNATE DETAILS
IR-01        IRRIGATION PLAN

ADDENDA #1   ADDENDA #1                                       04/15/03
ADDENDA #2   ADDENDA #2                                       04/16/03
ADDENDA #3   ADDENDA #3                                       04/22/03
ADDENDA #4   ADDENDA #4                                       04/24/03
ADDENDA #5   ADDENDA #5                                       04/25/03
ADDENDA #6   ADDENDA #6                                       04/29/03
ADDENDA #7   ADDENDA #7                                       05/09/03
ADDENDA #8   ADDENDA #8                                       05/09/03
ADDENDA #9   ADDENDA #9                                       05/15/03
ADDENDA #10  ADDENDA #10                                      05/16/03
ADDENDA #11  ADDENDA #11                                      05/30/03
ADDENDA #12  ADDENDA #12                                      06/12/03


Sheet #                       Description                      Addenda #8  Addenda #9   Addenda #10  Addenda #11  Addenda #12
                                                                                                
                                                                 04/28/03   05/13/03                 5/23/03
L.01         LANDSCAPE PLAN                                      05/01/03   05/13/03                 5/23/03
L.02         TREE PRESERVATION PLAN                                         05/15/03
LT.01        TREE PRESERVATION/RELOCATION PLAN
LC.01        LANDSCAPE NOTES AND LEGEND                                                              5/23/03
LC.02        LANDSCAPE MATERIALS SCHEDULE                                                            5/23/03
LG.01        LANDSCAPE GRADING - SITE                                                                5/23/03
LG.02        LANDSCAPE GRADING ENLARGEMENT                                                           5/23/03
LG.03        LANDSCAPE GRADING ENLARGEMENT                                                           5/23/03
LG.04        LANDSCAPE GRADING ENLARGEMENT                                                           5/23/03
LG.05        LANDSCAPE GRADING ENLARGEMENT                                                           5/23/03
LS.01        LANDSCAPE SITEWORK                                                                      5/23/03
LS.02        LANDSCAPE SITEWORK ENLARGEMENTS                                                         5/23/03
LS.03        LANDSCAPE SITEWORK ENLARGEMENTS                                                         5/23/03
LS.04        LANDSCAPE SITEWORK ENLARGEMENTS                                                         5/23/03
LS.05        LANDSCAPE SITEWORK ENLARGEMENTS                                                         5/23/03
LS.06        LANDSCAPE SITEWORK ENLARGEMENTS                                                         5/23/03
LS.07        LANDSCAPE SITEWORK ENLARGEMENTS                                                         5/23/03
LS.08        LANDSCAPE SITEWORK ENLARGEMENTS                                                         5/23/03
LSD.01       LANDSCAPE SITEWORK DETAILS                                                              5/23/03
LSD.02       LANDSCAPE SITEWORK DETAILS                                                              5/23/03
LSD.03       LANDSCAPE SITEWORK DETAILS                                                              5/23/03
LSD.04       LANDSCAPE SITEWORK DETAILS                                                              5/23/03
LSD.O5       LANDSCAPE SITEWORK DETAILS                                                              5/23/03
LSD.06       LANDSCAPE SITEWORK DETAILS                                                              5/23/03
LP.01        LANDSCAPE PLANTING - SITE
LPD.01       LANDSCAPE PLANTING - PLANTING SCHEDULE
LL-01        LANDSCAPE LIGHTING PLAN                                                                 5/23/03
LLD-01       LANDSCAPE LIGHTING DETAILS                                                              5/23/03
ALT.01       LANDSCAPE ALTERNATE                                                                     5/23/03
ALT.02       LANDSCAPE ALTERNATE DETAILS                                                             5/23/03
IR-01        IRRIGATION PLAN                                                                         5/23/03

ADDENDA #1   ADDENDA #1
ADDENDA #2   ADDENDA #2
ADDENDA #3   ADDENDA #3
ADDENDA #4   ADDENDA #4
ADDENDA #5   ADDENDA #5
ADDENDA #6   ADDENDA #6
ADDENDA #7   ADDENDA #7
ADDENDA #8   ADDENDA #8
ADDENDA #9   ADDENDA #9
ADDENDA #10  ADDENDA #10
ADDENDA #11  ADDENDA #11
ADDENDA #12  ADDENDA #12


                                  Page 4 of 4



                                       ANS                          MAY 23, 2003

                        EXHIBIT "A" TO CHANGE ORDER ONE
                                 SPECIFICATIONS

                                  SECTION 00003

                                TABLE OF CONTENTS



                                                                            ORIGINAL ISSUE DATE   LATEST REVISION DATE
                                                                                            
DIVISION 0 - BIDDING REQUIREMENTS, CONTRACT FORMS, AND CONDITIONS OF THE CONTRACT

00002      Project Directory                                                      4/10/03                 5/23/03
00003      Table of Contents                                                      4/10/03                 5/23/03
00850      Drawing Index                                                          5/23/03                 5/23/03
00900      Addenda

DIVISION 1 - GENERAL REQUIREMENTS

01010      Summary of the Work                                                    5/23/03
01019      Contract Considerations                                                5/23/03
01030      Alternates                                                             5/23/03
01039      Coordination and Meetings                                              5/23/03
01050      Field Engineering / Surveying                                          5/23/03                 5/23/03
01090      Reference Standards                                                    5/23/03
01300      Submittals                                                             5/23/03                 5/23/03
01310      Schedules and Reports                                                  5/23/03
01315      CPM Scheduling                                                         5/23/03                 5/23/03
01380      Construction Photographs                                               5/23/03                 5/23/03
01400      Quality Control                                                        5/23/03
01410      Testing Laboratory Services                                            5/23/03                 5/23/03
01500      Construction Facilities and Temporary Controls                         5/23/03                 5/23/03
01600      Material and Equipment                                                 5/23/03
01601      General Contractor's Request for Substitution Form                     5/23/03
01631      Product Substitutions                                                  5/23/03
01650      Starting of Systems                                                    5/23/03
01700      Contract Closeout                                                      5/23/03
01720      Project Record Documents                                               5/23/03
01730      Operating and Maintenance Data                                         5/23/03
01740      Warranties                                                             5/23/03                 5/23/03

DIVISION 2 - SITEWORK

02210      Excavating, Backfilling & Compacting for the Building Pad              5/23/03
02234      Tree Protection and Pruning                                            4/10/03                 5/23/03
02310      Grading                                                                4/10/03                 5/23/03
02316      Fill and Backfill                                                      4/10/03                 5/23/03
02362      Drilled Piers                                                          5/23/03
02630      Drainage and Subdrainage                                               4/10/03                 5/23/03
02751      Site Concrete Paving                                                   4/10/03                 5/23/03
02783      Concrete Pavers                                                        4/10/03                 5/23/03
02810      Landscape Irrigation System                                            4/10/03                 5/23/03
02870      Site Furnishings                                                       4/10/03                 5/23/03
02910      Soil Preparation                                                       4/10/03                 5/23/03
02921      Seeding                                                                4/10/03                 5/23/03
02923      Sodding                                                                4/10/03                 5/23/03
02930      Trees, Shrubs, Vines and Ground covers                                 4/10/03                 5/23/03
02935      Landscape Establishment for Ninety (90) Days                           4/10/03                 5/23/03


                           TABLE OF CONTENTS 00003 - 1



                                     ANS                            MAY 23, 2003

                         EXHIBIT "A" TO CHANGE ORDER ONE
                                 SPECIFICATIONS

                                                                                                    
DIVISION 3 - CONCRETE

03100      Concrete Formwork                                                      5/23/03
03200      Concrete Reinforcement                                                 5/23/03
03300      Cast-in-Place Concrete                                                 5/23/03
03470      Tilt-Up Precast Concrete                                               4/10/03                 5/23/03

DIVISION 4 - MASONRY

Not used.

DIVISION 5 - METALS

05100      Structural Steel                                                       5/23/03
05210      Steel Joists and Joist Girders                                         5/23/03
05300      Metal Decking                                                          5/23/03
05500      Metal Fabrications                                                     5/23/03
05505      Architectural Quality Fabrications                                     4/10/03                 5/23/03
05510      Metal Stairs - Enclosed Fire Exit Stairs                               5/23/03
05515      Metal Stair - Architecturally Exposed Assembly                         4/10/03                 5/23/03
05520      Handrails and Guards                                                   4/10/03                 5/23/03
05521      Exterior Handrails and Railings                                        4/10/03                 5/23/03
05720      Ornamental Glass Guard System                                          4/10/03                 5/23/03
05805      Expansion Joint Assemblies                                             5/23/03

DIVISION 6 - WOOD AND PLASTICS

06114      Wood Blocking and Curbing                                              5/23/03
06411      Laminate Clad Wood Cabinets                                            4/10/03

DIVISION 7 - THERMAL & MOISTURE PROTECTION

07130      Bentonite Waterproofing                                                5/23/03
07213      Batt Insulation                                                        5/23/03
07536      Modified Bitumen Roofing-Hot Asphalt Application                       4/10/03                 5/23/03
07620      Sheet Metal Flashing and Trim                                          5/23/03
07724      Roof Hatches                                                           5/23/03
07840      Firestopping                                                           5/23/03
07900      Joint Sealers                                                          4/10/03                 5/23/03

DIVISION 8 - DOORS AND WINDOWS

08001      Door Schedule                                                          4/16/03                 VOID
08111      Standard Steel Doors                                                   4/10/03                 5/23/03
08112      Standard Steel Frames                                                  4/10/03                 5/23/03
08125      Interior Alum. Doors & Door & Sidelight Framing                        5/23/03
08211      Flush Wood Doors                                                       4/10/03                 5/23/03



                           TABLE OF CONTENTS 00003 - 2



                                        ANS                         MAY 23, 2003

                         EXHIBIT "A" TO CHANGE ORDER ONE
                                 SPECIFICATIONS

                                                                                                 
08305      Access Doors - Walls and Ceilings / Soffits                            5/23/03
08331      Overhead Coiling Doors                                                 5/23/03
08410      Aluminum Entrances and Storefronts                                     4/10/03                 5/23/03
08710      Door Hardware                                                          4/10/03                 5/23/03
08800      Glazing                                                                4/10/03                 5/23/03
08830      Mirrors                                                                5/23/03
08920      Glazed Aluminum Curtain Wall                                           4/10/03                 5/23/03

DIVISION 9 - FINISHES

09111      Metal Stud Framing System                                              5/23/03
09206      Soffit Metal Furring and Lathing                                       4/10/03                 5/23/03
09220      Portland Cement Plaster                                                4/10/03                 5/23/03
09260      Gypsum Board Systems                                                   5/23/03
09306      Floor Tile                                                             4/10/03                 5/23/03
09307      Wall Tile                                                              4/10/03                 5/23/03
09511      Suspended Acoustical Ceilings                                          4/16/03                 5/23/03
09678      Resilient Wall Base & Accessories                                      5/23/03
09800      Special Coatings                                                       4/10/03                 5/23/03
09900      Painting                                                               4/10/03                 5/23/03
09901      Exterior Painting                                                      4/10/03                 5/23/03
09960      Wall Covering                                                          4/10/03                 5/23/03
09980      Sanitary Wall and Ceiling Panels                                       4/10/03                 5/23/03

DIVISION 10 - SPECIALTIES

10165      Plastic Laminate Toilet Compartments                                   4/10/03                 5/23/03
10350      Flagpoles                                                              4/10/03                 5/23/03
10426      Signage                                                                4/10/03                 5/23/03
10522      Fire Extinguishers, Cabinets and Accessories                           4/10/03                 5/23/03
10532      Aluminum Walkway Covers                                                4/22/03                 5/23/03
10800      Toilet and Bath Accessories                                            4/10/03                 5/23/03

DIVISION 11 - EQUIPMENT

11160      Dock Levelers                                                          4/10/03                 5/23/03
11165      Dock Bumpers                                                           4/10/03                 5/23/03

DIVISION 12 - FURNISHINGS

12512      Horizontal Louver Blinds                                               4/10/03                 VOID
12692      Floor Mats                                                             4/10/03                 5/23/03

DIVISION 13 - SPECIAL CONSTRUCTION

Not used.

DIVISION 14 - CONVEYING SYSTEMS



                           TABLE OF CONTENTS 00003 - 3



                                        ANS                         MAY 23, 2003

                         EXHIBIT "A" TO CHANGE ORDER ONE
                                 SPECIFICATIONS
                                                                                                 
14245      Hydraulic Elevators - Passenger                                        4/10/03                 5/23/03

DIVISION 15 - MECHANICAL

15000      Mechanical Basis of Design                                             4/10/03                  VOID
15010      General Requirements for Mechanical Work                               5/28/03
15050      Basis Mechanical Materials & Methods                                   5/28/03
15051      Cleaning and Pressure Testing                                          5/28/03
15100      Valves                                                                 5/28/03
15140      Supports and Anchors                                                   5/28/03
15240      Vibration Control                                                      5/28/03
15250      Insulation                                                             5/28/03
15330      Automatic Sprinkler System                                             5/28/03
15420      Plumbing Systems and Equipment                                         5/28/03
15440      Plumbing Fixtures & Trim                                               5/28/03
15782      Packaged Rooftop Cooling/Heating Units                                 5/28/03
15880      Air Distribution                                                       5/28/03
15950      Temperature Controls & Energy Mgt. System                              5/28/03
15990      Testing, Adjusting & Balancing                                         5/28/03

DIVISION 16 - ELECTRICAL

16000      Electrical Basis of Design                                             4/10/03                   VOID
16010      General Requirements for Electrical Work                               5/28/03
16050      Basic Electrical Material & Methods                                    5/28/03
16110      Systems of Raceways                                                    5/28/03
16120      Wires & Cables                                                         5/28/03
16140      Wiring Devices                                                         5/28/03
16190      Supporting Devices                                                     5/28/03
16323      Lighting & Distribution Transformers                                   5/28/03
16324      Distribution Transformers for"K-13" Non-Linear Loads                   5/28/03
16390      Electrical Power System Studies                                        5/28/03
16400      Transient Voltage Surge Suppression/Filter Syst.                       5/28/03
16401      Power Service Entrance (600 Volts & Below)                                                     5/28/03
16426-1    Switchboards - Fixed                                                   5/28/03
16440      Disconnect Switches - Heavy Duty                                       5/28/03
16450      Grounding                                                              5/28/03
16470      Panelboards                                                            5/28/03
16480      Motor & Control Wiring                                                 5/28/03
16486      Lighting Control System                                                5/28/03
16500      Lighting Fixtures                                                      5/28/03
16670      Lighting Protection                                                    5/28/03
16720      Intelligent Fire Alarm System                                          6/11/03
16950      Testing                                                                5/28/03



                            TABLE OF CONTENTS 00003-4



                                       ANS                          MAY 23, 2003

                        EXHIBIT "A" TO CHANGE ORDER ONE
                                 SPECIFICATIONS

                              END OF SECTION 00003

                           TABLE OF CONTENTS 00003 - 5



ANS (Advanced Neuromodulation Systems)                                   8/27/03
PLANO, TEXAS

                       CHANGE ORDER ONE (1) - EXHIBIT "B"

COST ANALYSIS                                            143181



                                                          GMP R1                                   COMMENTS
ITEM                    DESCRIPTION                  AUGUST 27, 2003
NO.                                                     143,181 SF        $/SF      GMP - GMPR1
                                                                                       
             DIVISION 1 GEN. CONDITIONS
1     General Conditions                             $       253,641   $    1.77    $         -
2     Monument Sign Allowance                        $        12,000   $    0.08    $         -
3                                                                                   $         -
4            DIVISION II SITEWORK                                                   $         -
5                                                                                   $         -
6     Site Demolition                                $         8,408   $    0.06    $         -
7     Mass Excavation and Grading                    $       176,754   $    1.23    $         -
         Rock Check Dams                             $         1,200   $    0.01    $         -
         Slab Depression                             $           500   $    0.00    $         -
8     Site Concrete - Paving and Walks               $       450,182   $    3.14    $         -
9     Paver System at Grasscrete                     $        41,292   $    0.29    $         -
10    Pavement Markings                              $         6,724   $    0.05    $         -
11    Site Utilities                                 $       216,523   $    1.51    $         -
         Utility Inspection Fees                     $         5,700   $    0.04    $         -
         Concrete Encasement                         $         5,835   $    0.04    $         -

12    Miscellaneous Site Concrete                    $        69,818   $    0.49    $         -
         Header Curb                                 $             -   $       -    $ (9,350.00) To be included in Hardscape
                                                                                         Estimate if required
         Walks, Steps, and Walls                     $        22,520   $    0.16    $         -
13    Irrigation Sleeves                             $         4,500   $    0.03    $         -
14    Landscaping/Irrigation Allowance               $       375,000   $    2.62    $         -
15       Grass at Grasscrete                         $         5,500   $    0.04    $         -
16       Landscape/Irrigation repair                 $         5,000   $    0.03    $         -
         Tree Relocation and Protection              $         4,710   $    0.03    $         -
17       BB Court Surfacing and Goals                $        14,754   $    0.10    $ 14,754.00 Accepted Suggested Alternate # 1
18           DIVISION III CONCRETE                                                  $         -
19                                                                                  $         -
20    Concrete                                       $     1,131,502   $    7.90    $         -
         Mock-Up Panels                              $         5,578   $    0.04    $         -
         Slab Recess                                 $         1,250   $    0.01    $         -
         Rebar                                       $         3,595   $    0.03    $         -
         Pier Caps and Pilasters                     $         1,950   $    0.01    $         -
21       Casing Allowance                            $        50,000   $    0.35    $         -
22    Floor Sealer                                   $           255   $    0.00    $         -
23                                                                                  $         -
24           DIVISION V STRUCTURAL STEEL                                            $         -
25                                                                                  $         -
26    Structural/Miscellaneous Steel                 $       796,626   $    5.56    $         -
         Addendum #5                                 $        10,676   $    0.07    $         -
         Mezzanine Stair                             $         5,978   $    0.04    $         -
27    Miscellaneous Metal Installation               $         4,254   $    0.03    $         -
28    Monument Stair                                 $       100,000   $    0.70    $         -
29    Stair #1 and #3 Railing                        $        21,790   $    0.15    $         -
30    Interior Balcony Railing                       $        22,400   $    0.16    $         -
31    Exterior Balcony Railing                       $        24,360   $    0.17    $         -
32                                                                                  $         -
33           DIVISION VI ROUGH CARPENTRY                                            $         -
34                                                                                  $         -
35    Rough Carpentry                                $        12,148   $    0.08    $         -
36    Corian Countertops                             $        27,650   $    0.19    $         -
37                                                                                  $         -
38           DIVISION VII THERMAL & MOISTURE PRAT.                                  $         -
39                                                                                  $         -
40    RTU Screen Wall Panels                         $        28,000   $    0.20    $         -
41    Entry Canopy                                   $             -   $       -    $         -
42    Built-up Roofing                               $       349,010   $    2.44    $ 35,800.00 Accepted Suggested Alt # 6
                                                                                      (Torched Modified Roof)
         S.S. Overflow Scuppers                      $         9,610   $    0.07    $         -
43    Waterproof/Sealants                            $        33,647   $    0.23    $  3,520.00 Accepted Specified Alt. #3
                                                                                       (silicone joint sealant)
44                                                                                  $         -
45           DIVISION VIII DOOR AND WINDOWS                                         $         -
46                                                                                  $         -
47    Doors, Frames, Hardware                        $        55,117   $    0.38    $         -
48    Overhead Doors                                 $         8,068   $    0.06    $         -
49    Access Doors                                   $         1,000   $    0.01    $         -
50    Glass/Glazing                                  $       474,814   $    3.32    $ (2,453.00) Accepted Specified Alt #6 (glass
                                                                                       type C ilo A)
51                                                                                  $         -
52           DIVISION IX FINISHES                                                   $         -
53                                                                                  $         -
54    Plaster/EIFS                                   $        55,040   $    0.38    $         -
55    Drywall/Acoustical Ceilings                    $       308,362   $    2.15    $         -


                                   Page 1 of 2



ANS (Advanced Neuromodulation Systems)                                   8/27/03
PLANO, TEXAS

                       CHANGE ORDER ONE (1) - EXHIBIT "B"

COST ANALYSIS



                                                         143181
                                                         GMP R1                                   COMMENTS
ITEM                     DESCRIPTION                 AUGUST 27, 2003
NO.                                                    143,181 SF         $/SF       GMP-GMPR1
                                                                                   
56    Terrazzo                                       $        12,000     $  0.08    $         -
57    Tile                                           $        43,940     $  0.31    $         -
58    Painting                                       $       155,347     $  1.08    $         -
59                                                                                  $         -
60          DIVISION X - SPECIALTIES                                                $         -
61                                                                                  $         -
62    Toilet Partitions                              $        18,000     $  0.13    $         -
63    Flagpoles                                      $         7,500     $  0.05    $         -
64    Interior Signage                               $         1,500     $  0.01    $         -
65    Fire Extinguishers/Cabinets                    $         6,519     $  0.05    $         -
66    Canopies                                       $        31,675     $  0.22    $         -
67    Toilet Accessories                             $        16,100     $  0.11    $         -
68                                                                                  $         -
69          DIVISION XI - EQUIPMENT                                                 $         -
70                                                                                  $         -
71    Loading Dock Equipment                         $         2,500     $  0.02    $         -
72                                                                                  $         -
73          DIVISION XII - FURNISHINGS                                              $         -
74                                                                                  $         -
75    Floor Mats                                     $         1,870     $  0.01    $         -
76                                                                                  $         -
77          DIVISION XIV - CONVEYANCE                                               $         -
78                                                                                  $         -
79    Elevators                                      $        31,950     $  0.22    $         -
80    Cab Finishes Allowance                         $        10,000     $  0.07    $         -
81                                                                                  $         -
82          DIVISION XV MECHANICAL AND PLUMBING                                     $         -
83                                                                                  $         -
84    Fire Protection                                $       128,800     $  0.90    $
85    Plumbing                                       $       263,603     $  1.84    $ (4,997.00) Accepted Suggested Alternate #10
                                                                                        (Standard Water Heaters)
86    HVAC                                           $       672,816     $  4.70    $         -
87        EMS Allowance                              $       125,000     $  0.87    $         -
88        Future Cafeteria R-I Allowance             $        20,000     $  0.14    $         -
89                                                                                  $         -
90          DIVISION XVI ELECTRICAL                                                 $         -
91                                                                                  $         -
92    Electrical                                     $       616,496     $  4.31    $         -
93        Future Cafeteria R-I Allowance             $        20,000     $  0.14    $         -
94                                                                                  $         -
95    SUBTOTAL                                       $     7,408,857     $ 51.74    $ 37,274.00
96    Building Permit                                $        44,835     $  0.31    $         -
97    ABC/AGC Fees                                   $         4,073     $  0.03    $     20.00
98    Subguard Adjustment                            $        25,000     $  0.17    $         -
99    Liability and Other Insurance                  $        37,336     $  0.26    $ (9,132.00) Adjust cost back to original
                                                                                       premium rates
100   Fee (3.25%)                                    $       244,403     $  1.71    $    915.00
101   Contingency                                    $       200,000     $  1.40    $         -
102
103   TOTALS                                         $     7,964,504     $ 55.63    $    29,077

                                                     $  7,811,128.00

                                                     $  7,964,504.00

                                                     $    153,376.00


                                   Page 2 of 2



Rogers-O'Brien Construction

                         EXHIBIT "B" TO CHANGE ORDER ONE
                                 CLARIFICATIONS
                               ANS OFFICE BUILDING

                           REVISED-SEPTEMBER 17, 2003

The following is a list of qualifications/scope of work to be included with this
proposal.

         1.       Our proposal is contingent upon:

                  -        Owner furnishing contractor evidence satisfactory to
                           Contractor and its' surety of adequate interim
                           financing for this project.

                  -        Contract form and language mutually agreeable to
                           Owner and Contractor.

                  -        Bond forms and language mutually agreeable to Owner
                           and Contractor.

         2.       Unit prices and allowances presented below do not include
                  contractor's mark-up.

         3.       Testing of materials is excluded.

         4.       Includes an allowance of $ 50,000 for casing of drilled piers.

         5.       Price excludes all costs for impact fees; inspection fees;
                  pro-rata charges; utility connection and/or meter fees, etc.;
                  and all other such costs customarily paid for by the Owner.

         6.       Price excludes cost impacts relative to damage, repairs,
                  modification or relocation of any existing underground
                  infrastructure and/or other concealed conditions not
                  specifically shown on the project documents.

         7.       Price excludes the removal, remediation, or transportation of
                  any unknown contaminates on the job site.

 Miscellaneous

         -        Price includes Addenda #1 through #12.

         -        The following general allowances are included:

                  1. Monument Sign Allowance $12,000


General Conditions

         -        This project is based on a construction schedule of 288
                  calendar days for shell building.

Earthwork

         -        Building pad is included based on 9' of moisture conditioned
                  sub-grade with a 8" lime stabilized cap at the High Bay
                  Warehouse Building only. Building pad prep at the Office wing
                  consists only of cut/fill to grade, scarify, and re-compact.

         -        Price excludes water injection.


12/10/2003

         -        Lime stabilization is excluded.

         -        Strippings are stockpiled and re-used for backfill and
                  topsoil. Includes approximately 2,750 CY of respread topsoil.

Pavement Markings

         -        Included as indicated on plans.

Site Utilities

         -        All utility taps occur on the property side of project. Street
                  demolition and/or road bores are excluded.

Landscaping and Irrigation

         -        Landscaping and irrigation allowance of $ 375,000 is included.

         -        Maintenance of landscaping and irrigation is excluded.

         -        Bermuda sod and sandy loam backfill at "Grasscrete" firelane
                  is included in the base bid.

Miscellaneous Site Work

         -        Includes off-site median cut at Preston Road and Deceleration
                  Lanes as indicated.

         -        Excludes all paving upgrades. We assume the costs for this
                  work is included in the Landscape/Irrigation Allowance.

         -        Excludes concrete bollards indicated on Landscape plans.

         -        Excludes 4" traffic buttons indicated on Landscape plans.

         -        Excludes costs for any outdoor recreational facilities. See
                  Alternates.

         -        All site furnishings, including benches and trash receptacles,
                  are excluded. It is assumed these items are furnished in
                  landscape allowance.

Concrete Finishing

         -        Site concrete is included based on the following:

         -        Vehicular paving is included based on the civil plans.

         -        Pedestrian walks are included as standard gray concrete based
                  on the landscape site plan

         -        We take exception to note #8 under "Slab on Grade" notes sheet
                  S2.01. HBC has informed us that this requirement cannot be
                  achieved without significant concrete mix design changes.

Structural Steel

         -        All pricing included for ornamental railing at balconies and
                  Stairs #1, #2, and #3 is included based on the IGMP plans
                  dated April 25, 2003.

         -        Includes an allowance of $ 100,000 for open monument stair.
                  Includes a brushed finish for all stainless steel components.

         -        Includes standard painted pipe railing system at stairs #1 and
                  #3. Quality of work is equal to stairs at Intuit.

         -        Includes breakroom exterior shade structure as indicated in
                  Addendum #3.

         -        Price excludes all guardrail requirements at the High Bay
                  mezzanines.

                                        2


12/10/2003

Architectural Woodwork

         -        Includes 146 LF of corian counter tops at restrooms. Based on
                  sections indicated in the IGMP plans dated April 25, 2003.
                  Tops are based on Wilsonart Gibraltar, 1/2" thick solid
                  surface tops.

         -        Excludes millwork shown adjacent to Men's Restroom 105 between
                  column lines 5 and 5.8.

Waterproofing

         -        Sealants included at tiltwall panel joints and site expansion
                  and control joints.

         -        Includes waterproofing at elevator pits.

         -        Includes floor sealer at Clean Room slab depression.

         -        Excludes bituminous damproofing at foundation perimeter as
                  indicated on detail 3/LSD.02.

Metal Wall Panels

         -        Includes perforated, metal wall panels at all roof screens and
                  circular feature above main lobby.

Roofing - Built-up

         -        Roofing system includes a 4-ply built-up roof with
                  polyiso-board insulation with a thermal transmission of R-30
                  at both the Office Wing and High Bay Wing.

         -        Includes overflow scuppers based on an allowance of $ 525
                  (material only) per roof drain location.

Doors, Frames, Hardware

         -        Included as indicated on plans and specification.

         -        Includes two (2) - 8'x10' overhead doors and one (1) 10' x 10'
                  overhead door at the loading dock.

Glazing

         -        Included as specified.

         -        Includes wide stile doors in lieu of medium stile due to
                  specified lockset.

Plaster

         -        Includes plaster soffit at main entry soffit and truck dock
                  cover.

         -        Includes plaster at entry columns.

         -        Includes soffits at Stairs #1 and #3.

Drywall/Ceilings

         -        Ceiling grid is included at office areas as specified,
                  however, we assume the perimeter sheetrock will be installed
                  prior to grid tie-in at perimeter.

         -        Perimeter furring, and insulation is included at Office Wing.

         -        Ceiling grid and tile at the High Bay tenant areas is
                  excluded.

Tile/Stone

         -        All tile included based on the thin-set method.

         -        Restrooms to receive 3,800 SF of 12" x 12" porcelain floor
                  tile, 950 LF of 4" x 12" bullnose base, and 1,290 SF of 12" x
                  12" wainscot at wet walls only.

                                        3


12/10/2003

Flooring

         -        All floor finishes at the main lobby, staff lobby, stairs, and
                  miscellaneous core areas are excluded as specified.

Painting

         -        Painting is included at the exterior face of the tilt wall
                  panels based on a material and labor allowance of $ 1.50/SF of
                  wall area.

         -        Core areas are taped, bedded, and painted at core side only
                  and taped and bedded at the tenant side.

         -        All wall finishes at the main lobby, staff lobby, stairs, and
                  miscellaneous core areas are excluded as specified.

         -        Excludes painting of exposed structure.

         -        Multi-color paint finish at interior is excluded. None
                  scheduled.

Specialties

         -        Includes floor mounted, overhead braced toilet partitions.

         -        Includes fire extinguishers and cabinets as noted on sheet
                  A-102 and A - 101 HB (6/12/03). We assume the 1st Floor Office
                  requires the same quantity of extinguishers and cabinets as
                  the 2nd Floor.

         -        Includes an allowance of $ 1,500 for code required interior
                  signage.

         -        Includes three (3) ground mounted flagpoles. Excludes electric
                  operation of internal halyard. This option not offered by the
                  specified manufacturer.

Dock Equipment

         -        Price includes one dock leveler with related dock equipment.

Window Treatment

         -        Blind pockets per detail 3/A501 are excluded. It is assumed
                  this item is provided in the tenant finishes.

         -        Excludes all horizontal blinds.

Elevator

         -        Includes one (1), 3,500# passenger elevator with cab finish
                  allowance of $10,000.

Fire Protection Systems

         -        Fire protection system is included based on the following:

         -        Design shall be in accordance with the requirements of NFPA
                  #13,1999 and the City of Piano Fire Department for the
                  following occupancies;

         -        Office Area: Light Hazard. Upright brass sprinklers in 1"
                  bushed outlets on exposed piping.

                  -        Production Area (CLEAN ROOM) : Ordinary Hazard.
                           PROVIDE CONNECTION ADJACENT TO CLEAN ROOM FOR
                           INSTALLATION OF FIRE PROTECTION SYSTEM BY OTHERS.
                           BRANCH LINES AND HEADS IN THIS AREA DELETED IN FGMP
                           PRICING.

                  -        Warehouse Area: Rack storage of Class I through IV
                           commodities on standard pallets with 8 ft. aisles to
                           a maximum storage height of 12'-0".

         -        Pendant sprinklers dropped to the ceiling level are not
                  allowed by the Piano Fire Dept. unless all of the ceiling
                  tiles and lights are installed. The cost for dropping the
                  heads is included in the base bid,

                                       4


12/10/2003

                  however, this work may occur during the finish-out phase and
                  must be coordinated to avoid remobilization costs.

         -        No tenant finish is included except at the Entrance Lobby and
                  Restrooms.

         -        One (1) interior hose valve station is included at the
                  warehouse area.

         -        Proposal is based on an assumed minimum available water supply
                  of 74 psi static, 70 psi residual with 1,200 gpm flowing at
                  the connection to the city main.

         -        No sprinklers are included at exterior canopies except the
                  Loading Dock Canopy is to have sprinklers on an anti-freeze
                  loop.

         -        One wall mounted Fire Department Connection is included,
                  located adjacent to the riser.

         -        No special extinguishing systems, alarms or central station
                  alarm is included.

         -        Excludes fire pump.

         -        Excludes deluge system at windows located near the connector
                  lobby. Windows will be protected by a water curtain supplied
                  through the existing wet system.

Plumbing Systems

         -        Included as indicated on plans and specifications.

         -        Includes PVC in lieu of cast iron at all underground piping.

         -        Includes kitchen rough-in. See Alternates.

HVAC Systems

         -        Included as indicated on plans and specifications.

         -        Includes kitchen rough-in. See Alternates.

Electrical

         -        Included as indicated on plans and specifications.

         -        Includes kitchen rough-in. See Alternates.

         -        Includes 52 metal halide lights at warehouse which are not
                  shown on the plans. See Alternates.

                                        5



Rogers-O'Brien Construction

                         EXHIBIT "B" TO CHANGE ORDER ONE
                                   ALTERNATES

                                       ANS

                         June 25, 2003 (revised 9/17/03)

SPECIFIED ALTERNATES

         1.       Provide concrete form liner Type "B" in lieu of Type "A". NO
                  CHANGE

         2.       Provide concrete form liner Type "C" in lieu of Type "A". NO
                  CHANGE

         3.       Provide silicone exterior joint sealant in lieu of
                  polyurethane. ADD $ 3,655 ACCEPTED

         4.       Provide Stone Gray Duranar storefront mullion color in lieu of
                  Asti Duranar Sunstorm. ADD $ 2,618 REJECTED

         5.       Provide glass Type SG-B, Viracon in lieu of SG-A, Viracon. NO
                  CHANGE REJECTED

         6.       Provide glass Type SG-C, Guardian in lieu of SG-A, Viracon.
                  DEDUCT $ 2,550 ACCEPTED

         7.       Provide glass Type SG-E, Guardian in lieu of SG-D, Viracon NO
                  CHANGE ACCEPTED

         8.       Provide Asti Duranar curtainwall mullion color in lieu of Warm
                  Silver Sunstorm. NO CHANGE REJECTED

         9.       Provide Stone White Duranar curtainwall mullion color in lieu
                  of Warm Silver Sunstorm. ADD $ 1,675 REJECTED

         10.      Provide Louis Poulsen Type "B" light fixtures at 30' o.c.
                  along Grasscrete firelane in lieu of Type "C" at 60' o.c. ADD
                  $ 9,456 REJECTED

         11.      Provide reconstituted stone concrete paving in lieu of
                  integral colored concrete at Plaza. ADD $ 2,271 REJECTED

         12.      Provide Endicott Medium Ironspot pavers in lieu of Pavestone
                  Citystone II - Mesa pavers. ADD $ 524 TO BE INCLUDED IN
                  FUTURE LANDSCAPE ALLOWANCE ADJUSTMENT

         13.      Provide Endicott Dark Ironspot pavers in lieu of Pavestone
                  Citystone II - White Marble pavers. DEDUCT $ 2,366 TO BE
                  INCLUDED IN FUTURE LANDSCAPE ALLOWANCE ADJUSTMENT

         14.      Provide fitness circuit training equipment as specified. ADD $
                  7,882 DEFERRED

         15.      Provide Volleyball Court as specified. ADD $ 27,194 REJECTED

SUGGESTED ALTERNATES

         1.       Provide basketball court surfacing and goals. ADD $ 15,323
                  ACCEPTED

         2.       Provide 12,000 SF of paving upgrade finish C.2 as specified.
                  ADD $ 29,216 REJECTED

         3.       Provide 3,000 SF of paving upgrade finish C.3 as specified.
                  ADD $ 31,688 REJECTED

         4.       Provide unit pavers at pedestrian walks and vehicular paving
                  as specified. ADD $ 62,591 REJECTED

         5.       Provide previously proposed, mopped modified bitumen roofing
                  system in lieu of 4 ply built up roof. ADD $ 8,500 REJECTED

         6.       Provide specified torched modified bitumen roofing system in
                  lieu of 4 ply built up roof. ADD $ 37,180 ACCEPTED

         7.       Provide the specified paint system in lieu of the allowance.
                  DEDUCT $ 28,968 REJECTED

         8.       Provide Energy Management System as specified in lieu of the
                  allowance. DEDUCT $ 64,000 REJECTED

         9.       Provide kitchen rough-in as specified in lieu of the
                  allowance. DEDUCT $ 20,415 REJECTED

         10.      Provide standard water heaters and expansion tanks in lieu of
                  ASME rated. DEDUCT $ 5,190 ACCEPTED.



Rogers-O'Brien Construction

                         EXHIBIT "B" TO CHANGE ORDER ONE
                                   ALTERNATES

         11.      Delete warehouse light fixtures specified in RFP but not shown
                  on plans. DEDUCT $ 15,670 REJECTED

         12.      Delete hose valve stations at warehouse if not required based
                  on T.I. layout. DEDUCT $ 3,750 DEFERRED

         13.      Delete backflow preventor if not required based on T.I.
                  layout. DEDUCT $ 3,200 DEFERRED

         14.      Delete manual standpipe system if not required based on T.I.
                  layout. DEDUCT $ 9,000 DEFERRED

VALUE OF TENANT IMPROVEMENT WORK

                                                                    
1. Split system units and related work for Cold O. R.                  $ 21,500
2. Restrooms at Cold O. R.                                             $ 45,000
3. Locker Room restrooms.                                              $ 67,389
4. Fitness Room restrooms.                                             $ 66,447
5. Pump mezzanines at High Bay Warehouse.                              $  3,076
6. Storage mezzanines at High Bay Warehouse.                           $ 75,471
7. Ceiling grid labor and material                                     $ 48,000
8. Pre-stocked ceiling tile                                            $ 40,000
9. Interior code related signage                                       $  1,500
10.Testing and balancing                                               $ 20,000
11.2x4 parabolic fixtures stacked on the floor in office building      $ 38,086
12.2x4 parabolic fixtures stacked on the floor in the clean room
    support area                                                       $   5192
                                                                       --------
               Total                                                   $431,661




                                                                   EXHIBIT 10.27

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

                         1997 Edition -Electronic Format

                             AIA DOCUMENT A107-1997

Abbreviated Standard Form of Agreement Between Owner and Contractor for
Construction Projects of Limited Scope Where the basis of payment is a
STIPULATED SUM

AGREEMENT made as of the 25th day of June in the year 2003

(In words, indicate day, month and year)

BETWEEN the Owner:

Advanced Neuromodulation Systems, Inc.
6501 Windcrest Drive, Suite 100
Plano, Texas 75024
(Name, address and other information)

and the Contractor:
(Name, address and other information)
Performance Contracting, Inc.
2701 Gattis School Road, Bldg, D#100
Round Rock, TX 78664
Phone (512)341-2406
Fax (512)341-7824

The Project is:
(Name and location)

Medical Device Manufacturing Cleanroom for
Advanced Neuromodulation Systems, Inc.
at Legacy Business Park
Preston Road at Tennyson Drive
Plano, Texas 75024

The Architect is:
(Name, address and other information)
Class One Solutions, Inc.

The Owner and Contractor agree as follows.

ARTICLE 1 THE WORK OF THIS CONTRACT

         The Contractor shall fully execute the Work described in the Contract
         Documents, except to the extent specifically indicated in the Contract
         Documents to be the responsibility of others.

ARTICLE 2 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

         2.1      The date of commencement of the Work shall be the date of this
         Agreement unless a different date is stated below or provision is made
         for the date to be fixed in a notice to proceed issued by the Owner.

         Owner will cooperate with Contractor is scheduling all Work, including
         disconnections, reconnections, interruption of services and utilities,
         and similar matters. In the event

[LOGO]

(C)1997 AIA(R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER -CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               1


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         Owner requires Contractor to work outside of normal daytime business
         hours. Contractor shall be entitled to additional compensation for such
         overtime.

         (Insert the date of commencement, if it differs from the date of this
         Agreement or, if applicable, state that the date will be fixed in a
         notice to proceed.)'

         2.2      The Contract Time shall be measured from the date of
         commencement.

         2.3      The Contractor shall achieve Substantial Completion of the
         entire Work not later than days from the date of commencement, or as
         follows: February 29, 2004

         (Insert number of calendar days. Alternatively, a calendar date may be
         used when coordinated with the date of commencement. Unless stated
         elsewhere in the Contract Documents, insert any requirements for
         earlier Substantial Completion of certain portions of the Work.)

         , subject to adjustments of this Contract Time as provided in the
         Contract Documents. (Insert provisions, if any, for liquidated damages
         relating to failure to complete on time or for bonus payments for early
         completion of the Work.)

         The Contract Time is an essential element of the Contract. Failure to
         Substantially Complete the Work within the Contract Time will cause
         damage to the Owner, but such damage is difficult to establish. For
         each and every Calendar Day the Work shall remain uncompleted after
         February 29, 2004. the amount of $1,000 per Calendar Day will be
         assessed against the Contractor until Substantial Completion of the
         entire Work. Such amount shall be paid by the Contractor to the Owner
         upon demand and/or withheld by the Owner from amounts due the
         Contractor, as liquidated damages and not as a penalty: it being agreed
         by the Contractor and the Owner that such sum is a good faith, bona
         fide estimate of the amount of damages the Owner will sustain as a
         result of any such failure to timely complete the Work.

ARTICLE 3 CONTRACT SUM

         3.1      The Owner shall pay the Contractor the Contract Sum in current
         funds for the Contractor's performance of the Contract. The Contract
         Sum shall be Two Million Thirty-nine Thousand Two Hundred Sixty-five
         and no/100 Dollars ($ 2.039.265.00 ), subject to additions and
         deletions as provided in the Contract Documents. The Contract Sum is
         based upon 95% Design Documents prepared by Class One Solutions. Inc.
         If, after completion of the Design Documents, Contractor determines
         that the Contract Sum will change. Contractor will notify Owner of the
         anticipated change and obtain Owner's written approval for the change
         prior to proceeding any further with the Work.

         3.2      The Contract Sum is based upon the following alternates, if
         any, which are described in the Contract Documents and are hereby
         accepted by the Owner:

         (State the numbers or other identification of accepted alternates. If
         decisions on other alternates are to be made by the Owner subsequent to
         the execution of this Agreement, attach a schedule of such other
         alternates showing the amount for each and the date when that amount
         expires.)

         Alternate #1 through Alternate #14, as listed on the Contract
         Documents.

         3.3      Unit prices, if any, are as follows:

         N/A

ARTICLE 4 PAYMENTS

         4.1      PROGRESS PAYMENTS

         4.1.1    Based upon Applications for Payment submitted to the Owner by
         the Contractor, the Owner shall make progress payments on account of
         the Contract Sum, for the value of the Work properly completed less
         retainage of 5% of the total Application, to the Contractor as provided
         below and

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER -CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               2


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         elsewhere in the Contract Documents. The period covered by each
         Application for Payment shall be one calendar month ending on the last
         day of the month, or as follows:

         4.1.2    Provided that an Application for Payment is received by the
         Architect not later than the 30th day of a month, the Owner shall make
         payment to the Contractor not later than the 30th day of the following
         month. If an Application for Payment is received by the Architect after
         the date fixed above, payment shall be made by the Owner not later than
         30 days days after the Architect receives the Application for Payment.

         4.1.3.   Payments due and unpaid under the Contract shall bear interest
         from the date payment is due at the rate stated below, or in the
         absence thereof, at the legal rate prevailing from time to time at the
         place where the Project is located. (Insert rate of interest agreed
         upon, if any.)

         (Usury laws and requirements under the Federal Truth in Lending Act,
         similar state and local consumer credit laws and other regulations at
         the Owner's and Contractor's principal places of business, the location
         of the Project and elsewhere may affect the validity of this provision.
         Legal advice should be obtained with respect to deletions or
         modifications, and also regarding requirements such as written
         disclosures or waivers.)

         4.2      FINAL PAYMENT

         4.2.1    Final payment, constituting the entire unpaid balance of the
         Contract Sum, shall be made by the Owner to the Contractor when:

                  .1       the Contractor has fully performed the Contract
                  except for the Contractor's responsibility to correct Work as
                  provided in Paragraph 17.2, and to satisfy other requirements,
                  if any, which extend beyond final payment; and

                  .2       The Owner, or its representatives, have fully
                  inspected the Work and determined that the Work has been
                  completed in accordance with the specifications, and the Work
                  may be certified as meeting ISO 14644 Class 8 (16,800 square
                  feet) and ISO Class 7 (3,200 square feet) clean room
                  standards.

         4.2.2    The Owner's final payment, including any unpaid retainage to
         the Contractor shall be made as follow:

         Thirty days after Final Completion

ARTICLE 5 ENUMERATION OF CONTRACT DOCUMENTS

         5.1      The Contract Documents are listed in Article 6 and, except for
         Modifications issued after execution of this Agreement, are enumerated
         as follows:

         5.1.1    The Agreement is this executed 1997 edition of the Abbreviated
         Standard Form of Agreement Between Owner and Contractor, AIA Document
         A107-1997.

         5.1.2    The Supplementary and other Conditions of the Contract are
         those contained in the Design Documents prepared by Class One
         Solution, Inc. dated June 23, 2003, and are as follows:

         Document                 Title                       Pages

         See Exhibit "A" for Supplementary and other Conditions

         5.1.3    The Specifications are those contained in the Design Documents
         prepared by

[LOGO]

(C) 1997 AIA(R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER - CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               3


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         Class One Solutions, Inc. dated as in Subparagraph 5.1.2, and are as
         follows: (Either list the Specifications here or refer to an exhibit
         attached to this Agreement.)

         Section                Title                   Pages

         SEE Exhibit "A" for Specifications

         5.1.4    The Drawings are as follows, and are dated unless a different
         date is shown below: (Either list the Drawings here or refer to an
         exhibit attached to this Agreement.)

         Number                 Title                   Pages

         See Exhibit "B" for list of Drawings.

         5.1.5    The Addenda, if any, are as follows:

         Number                 Date                    Pages

         Portions of Addenda relating to bidding requirements are not part of
         the Contract Documents unless the bidding requirements are also
         enumerated in this Article 5.

         5.1.6    Other documents, if any, forming part of the Contract
         Documents are as follows: (List any additional documents which are
         intended to form part of the Contract Documents.)

         Pages 1 through 8 of the Contractor's Proposal, dated June 25. 2003,
         providing a 95% Design Documents Budget Proposal for the Work, as
         outlined in the Proposal.

GENERAL CONDITIONS

ARTICLE 6 GENERAL PROVISIONS

         6.1      THE CONTRACT DOCUMENTS

         The Contract Documents consist of this Agreement with Conditions of the
         Contract (General, Supplementary and other Conditions), Drawing,
         Specifications, Addenda issued prior to the execution of this
         Agreement, other documents listed in this Agreement and Modifications
         issued after execution of this Agreement. A Modification is (1) a
         written amendment to the Contract signed by both parties, (2) a Change
         Order, (3) a Construction Change Directive or (4) a written order for a
         minor change in the Work issued by the Architect. The intent of the
         Contract Documents is to include all items necessary for the proper
         execution and completion of the Work by the Contractor. The Contract
         Documents are complementary, and what is required by one shall be as
         binding as if required by all; performance by the Contractor shall be
         required to the extent consistent with the Contract Documents and
         reasonably inferable from them as being necessary to produce the
         indicated results.

         6.2      THE CONTRACT

         The Contract Documents form the Contract for Construction. The Contract
         represents the entire and integrated agreement between the parties
         hereto and supersedes prior negotiations, representations or
         agreements, either written or oral. The Contract may be amended or
         modified only by a Modification. The Contract Documents shall not be
         construed to create a contractual relationship of any kind between
         the Owner and a Subcontractor or sub-subcontractor, between any persons
         or entities other than the Owner and Contractor.

         6.3      THE WORK

         The term "Work" means the construction and services required by the
         Contract Documents, whether completed or partially completed, and
         includes all other labor, materials, equipment and services provided or
         to be provided by the Contractor to fulfill the Contractor's
         obligations.

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER - CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               4

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT
D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         The Work may constitute the whole or a part of the Project.

         6.4      EXECUTION OF THE CONTRACT

         Execution of the Contract by the Contractor is a representation that
         the Contractor has visited the site, become generally familiar with
         local conditions under which the Work is to be performed and correlated
         personal observations with requirements of the Contract Documents.

         6.5      OWNERSHIP AND USE OF ARCHITECT'S DRAWINGS, SPECIFICATIONS AND
                  OTHER INSTRUMENTS OF SERVICE

         The Drawings, Specifications and other documents, including those in
         electronic form, prepared by the Architect and the Architect's
         consultants are Instruments of Service through which the Work to be
         executed by the Contractor is described. The Contractor may retain one
         record set. Neither the Contractor nor any Subcontractor,
         sub-subcontractor or material or equipment supplier shall own or claim
         a copyright in the Drawings, Specifications and other documents
         prepared by the Architect or the Architect's consultants. All copies of
         them, except the Contractor's record set, shall be returned or suitably
         accounted for to the Owner, on request, upon completion of the Work.
         The Drawings, Specifications and other documents prepared by the
         Architect and the Architect's consultants, and copies thereof furnished
         to the Contractor, are for use solely with respect to this Project.
         They are not to be used by the Contractor or any Subcontractor,
         sub-subcontractor or material or equipment supplier on other projects
         or for additions to this Project outside the scope of the Work without
         the specific written consent of the Owner. The Contractor,
         Subcontractors, sub-subcontractors and material or equipment suppliers
         are authorized to use and reproduce applicable portions of the
         Drawings, Specifications and other documents prepared by the Architect
         and the Architect's consultants appropriate to and for use in the
         execution of their Work under the Contract Documents. All copies made
         under this authorization shall bear the statutory copyright notice, if
         any, shown on the Drawings, Specifications and other documents prepared
         by the Architect and the Architect's consultants. Submittal or
         distribution to meet official regulatory requirements or for other
         purposes in connection with this Project is not to be construed as
         publication in derogation of the Architect's or Architect's
         consultants' copyrights or other reserved rights.

ARTICLE 7 OWNER

         7.1      INFORMATION AND SERVICES REQUIRED OF THE OWNER

         7.1.1    The Owner shall make surveys and a legal description of the
         site- available if required for the Work.

         7.1.2    The Contractor shall be entitled to rely on the accuracy of
         information furnished by the Owner but shall exercise proper
         precautions relating to the safe performance of the Work.

         7.1.3    Except for permits and fees which are the responsibility of
         the Contractor under the Contract Documents, the Owner shall secure and
         pay for other necessary approvals, easements, assessments and charges
         required for the construction, use or occupancy of permanent structures
         or permanent changes in existing facilities.

         7.2      OWNER'S RIGHT TO STOP THE WORK

         If the Contractor fails to correct Work which is not in accordance with
         the requirements of the Contract Documents, or persistently fails to
         carry out the Work in accordance with the Contract Documents, the Owner
         may issue a written order to the Contractor to stop the Work, or any
         portion thereof, until the cause for such order is eliminated; however,
         the right of the Owner to stop the Work shall not give rise to a duty
         on the part of the Owner to exercise this right for the benefit of the
         Contractor or any other person or entity.

         7.3      OWNER'S RIGHT TO CARRY OUT THE WORK

[LOGO]

(C) 1997 AIA(R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER - CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               5

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT
D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         If the Contractor defaults or persistently fails or neglects to carry
         out the Work in accordance with the Contract Documents, or fails to
         perform a provision of the Contract, the Owner, after 10 days' written
         notice to the Contractor and without prejudice to any other remedy the
         Owner may have, may make good such deficiencies and may deduct the
         reasonable cost thereof, including Owner's expenses and compensation
         for the Architect's services made necessary thereby, from the payment
         then or thereafter due the Contractor.

ARTICLE 8 CONTRACTOR

         8.1      REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY
                  CONTRACTOR

         8.1.1    Since the Contract Documents are complementary, before
         starting each portion of the Work, the Contractor shall carefully study
         and compare the various Drawings and other Contract Documents relative
         to that portion of the Work, as well as the information furnished by
         the Owner pursuant to Subparagraph 7.1.1, shall take field measurements
         of any existing conditions related to that portion of the Work and
         shall observe any conditions at the site affecting it. These
         obligations are for the purpose of facilitating construction by the
         Contractor and are not for the purpose of discovering errors, omissions
         or inconsistencies in the Contract Documents; however, any errors,
         omissions or inconsistencies discovered by the Contractor shall be
         reported promptly to the Owner.

         8.1.1.2  Owner does not warrant the accuracy of any grades, elevations,
         dimensions, or locations given on any Drawings Specifications, or work
         installed by other contractors. Contractor shall verify applicable
         grades, elevations, dimensions, and locations prior to executing the
         Work. Errors due to the Contractor's failure to so verify such grades,
         elevations, dimensions, or locations shall be promptly rectified by the
         Contractor at no cost to the Owner

         8.1.2    Any design errors or omissions noted by the Contractor during
         this review shall be reported promptly to the Owner, but it is
         recognized that the Contractor's review is made in the Contractor's
         capacity as a contractor and not as a licensed design professional
         unless otherwise specifically provided in the Contract Documents.

         8.2      SUPERVISION AND CONSTRUCTION PROCEDURES

         8.2.1    The Contractor shall supervise and direct the Work, using the
         Contractor's best skill and attention. The Contractor shall be solely
         responsible for and have control over construction means, methods,
         techniques, sequences and procedures, and for coordinating all portions
         of the Work under the Contract. If the Contract Documents give specific
         instructions concerning construction means, methods, techniques,
         sequences or procedures, the Contractor shall be fully and solely
         responsible for the jobsite safety thereof unless the Contractor gives
         timely written notice to the Owner that such means, methods,
         techniques, sequences or procedures may not be safe.

         8.2.2    The Contractor shall be responsible to the Owner for acts and
         omissions of the Contractor's employees, Subcontractors and their
         agents and employees, and other persons or entities performing portions
         of the Work for or on behalf of the Contractor or any of its
         Subcontractors.

         8.3      LABOR AND MATERIALS

         8.3.1    Unless otherwise provided in the Contract Documents, the
         Contractor shall provide and pay for labor, materials, equipment,
         tools, construction equipment and machinery, water, heat, utilities,
         transportation, and other facilities and services necessary for proper
         execution and completion of the Work whether temporary or permanent and
         whether or not incorporated or to be incorporated in the Work. If the
         Work requires Owner to supply materials equipment or other property,
         then Owner warrants that such items shall be

[LOGO]

(C) 1997 AIA(R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER - CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               6

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         fit for the use for which they were intended. If such items do not
         conform. Contractor shall notify Owner within a reasonable time after
         Contractor's notice of the nonconformance and Contractor may request
         additional compensation by change order.

         8.3.2    The Contractor shall enforce strict discipline and good order
         among the Contractor's employees and other persons carrying out the
         Contract. The Contractor shall not permit employment of unfit persons
         or persons not skilled in tasks assigned to them.

         8.3.3    The Contractor shall deliver, handle, store and install
         materials in accordance with manufacturers' instructions.

         8.3.4    The Contractor may make substitutions only with the consent of
         the Owner, after evaluation by the Owner and in accordance with a
         Change Order.

         8.4      WARRANTY

         The Contractor warrants to the Owner and Architect that materials and
         equipment furnished under the Contract will be of good quality and new
         unless otherwise required or permitted by the Contract Documents, that
         the Work will be free from defects not inherent in the quality required
         or permitted, and that the Work will at Final Completion conform with
         the requirements of the Contract Documents and all Federal. State
         and/or Local regulations. Work not conforming to these requirements,
         including substitutions not properly approved and authorized, may be
         considered defective. The Contractor's warranty excludes remedy for
         damage or defect caused by abuse, modifications not executed by the
         Contractor, improper or insufficient maintenance, improper operation or
         normal wear and tear and normal usage. The Contractor's warranty as to
         all Work, including repair or replacement of any defective materials or
         faulty workmanship shall extend for one year after the date of Final
         Completion of the Work. As a condition of Substantial Completion, the
         Contractor shall provide Owner a list of firms authorized to respond to
         Owner's request for immediate, emergency repair for warranty work
         affecting safety of persons or property. For all other warranty work,
         the Contractor shall commence performance of the warranty work within
         ten (10) days of Owner's written request therefor. In the event the
         Contractor fails to commence the warranty work within ten (10) days,
         and diligently pursue the Work to completion thereafter. Contractor
         authorizes Owner to proceed to have the defects repaired and to bill
         Contractor for all labor and materials, expenses and charges necessary
         for the repair or replacement. Contractor shall pay Owner's invoices
         for such work within ten (10) days of receipt of such invoices

         8.5      TAXES

         The Contractor shall pay sales, consumer, use and other similar taxes
         which are legally enacted when bids are received or negotiations
         concluded.

         8.6      PERMITS, FEES AND NOTICES

         8.6.1    The Contractor shall secure and pay for the building permit
         and other permits and governmental fees, licenses and inspections
         necessary for proper execution and completion of the Work.

         8.6.2    The Contractor shall comply with and give notices required by
         laws, ordinances, rules, regulations and lawful orders of public
         authorities applicable to performance of the Work. The Contractor shall
         promptly notify the Architect and Owner if the Drawings and
         Specifications are observed by the Contractor to be at variance
         therewith. If the Contractor performs Work knowing it to be contrary to
         laws, statutes, ordinances, building codes, and rules and regulations
         without such notice to the Architect and Owner, the Contractor shall
         assume appropriate responsibility for such Work and shall bear the
         costs attributable to correction.

[LOGO]

(C) 1997 AIA(R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER - CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               7

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         8.7      SUBMITTALS

         8.7.1    The Contractor shall review for compliance with the Contract
         Documents, approve in writing and submit to the Architect Shop
         Drawings, Product Data, Samples and similar submittals required by the
         Contract Documents with reasonable promptness. The Work shall be in
         accordance with approved submittals.

         8.7.2    Shop Drawings, Product Data, Samples and similar submittals
         are not Contract Documents.

         8.8      USE OF SITE

         The Owner will prepare all Work areas so as to be acceptable for
         mobilization by Contractor. Contractor will not be called upon to start
         Work until sufficient areas are ready to ensure continued Work until
         job completion. The Contractor shall confine operations at the site to
         areas permitted by law, ordinances, permits and the Contract Documents
         and shall not unreasonably encumber the site with materials or
         equipment.

         Owner will provide at its expense sufficient storage space to
         Contractor, which is fully protective of materials and equipment
         furnished for the Work at the place of performance of the Work. Owner
         will provide at its expense all light, heat, power and water which is
         required by Contractor for performance of the Work in the custom and
         practice of Contractor's trade.

         Contractor shall, at Contractor's sole cost and expense, take all
         measures necessary to protect persons and property in or adjacent to
         the Project Work site.

         8.9      CUTTING AND PATCHING

         The Contractor shall be responsible for cutting, fitting or patching
         required to complete the Work or to make its parts fit together
         properly.

         8.10     CLEANING UP

         The Contractor shall keep the premises and surrounding area free from
         accumulation of waste materials or rubbish caused by operations under
         the Contract. At completion of the Work, the Contractor shall remove
         from and about the Project waste materials, rubbish, the Contractor's
         tools, construction equipment, machinery and surplus material.

         8.11     ROYALTIES, PATENTS AND COPYRIGHTS

         The Contractor shall pay all royalties and license fees; shall defend
         suits or claims for infringement of copyrights and patent rights and
         shall hold the Owner and Architect harmless from loss on account
         thereof, but shall not be responsible for such defense or loss when a
         particular design, process or product of a particular manufacturer or
         manufacturers is required by the Contract Documents, or where the
         copyright violations are contained in Drawings, Specifications or other
         documents prepared by the Owner or Architect, unless the Contractor has
         reason to believe that there is an infringement of patent or copyright
         and fails to promptly furnish such information to the Architect.

         8.12     ACCESS TO WORK

         The Contractor shall provide the Owner access to the Work in
         preparation and progress wherever located.

         8.13     INDEMNIFICATION

         8.13.1   To the fullest extent permitted by law and to the extent
         claims, damages, losses or expenses are not covered by Liability
         insurance purchased by the Contractor in accordance with the Contract
         Documents, the Contractor shall indemnify and hold harmless the Owner,
         Architect, Architect's consultants and agents and employees of any of
         them from and against claims, damages, losses and expenses, including
         but not limited to attorneys' fees, arising out of or resulting from
         performance of the Work,

[LOGO]

(C) 1997 AIA(R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER - CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               8

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         provided that such claim, damage, loss or expense is attributable to
         bodily injury, sickness, disease or death, or to injury to or
         destruction of tangible property (other than the Work itself), but only
         to the extent caused by the negligent acts or omissions of the
         Contractor, a Subcontractor, anyone directly or indirectly employed by
         them or anyone for whose acts they may be liable, regardless of whether
         or not such claim, damage, loss or expense is caused in part by a party
         indemnified hereunder. Such obligation shall not be construed to
         negate, abridge, or reduce other rights or obligations of indemnity
         which would otherwise exist as to a party or person described in this
         Paragraph 8.13.

         8.13.2   In claims against any person or entity indemnified under this
         Paragraph 8.13 by an employee of the Contractor, a Subcontractor,
         anyone directly or indirectly employed by them or anyone for whose acts
         they may be liable, the indemnification obligation under Subparagraph
         8.13.1 shall not be limited by a limitation on amount or type of
         damages, compensation or benefits payable by or for the Contractor or
         Subcontractor under workers' compensation acts, disability benefit acts
         or other employee benefit acts.

ARTICLE 9

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(C) 1997 AIA(R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER - CONTRACTOR AGREEMENT

The American Institute of Architects -1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               9

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         9.10     CLAIMS AND DISPUTES

         9.10.1   Claims, disputes and other matters in question arising out of
         or relating to this Contract, including those alleging an error or
         omission by the Architect but excluding those arising under Paragraph
         15.2, and except those waived as provided for in Paragraph 9.11 and
         Subparagraphs 14.5.3 and 14.5.4, shall be subject to mediation as a
         condition precedent to arbitration or the institution of legal or
         equitable proceedings by either party.

         9.10.2   If a claim, dispute or other matter in question relates to or
         is the subject of a mechanic's lien, the party asserting such matter
         may proceed in accordance with applicable law to comply with the lien
         notice or filing deadlines prior to resolution of the matter by
         mediation or by arbitration.

         9.10.3   The parties shall endeavor to resolve their disputes by
         mediation which, unless the parties mutually agree otherwise, shall be
         in accordance with the Construction Industry Mediation Rules of the
         American Arbitration Association currently in effect. Request for
         mediation shall be filed in writing with the other party to this
         Agreement and with the American Arbitration Association. The request
         may be made concurrently with the filing of a demand for arbitration
         but, in such event, mediation shall proceed in advance of arbitration
         or legal or equitable proceedings, which shall be stayed pending
         mediation for a period of 60 days from the date of filing, unless
         stayed for a longer period by agreement of the parties or court order.

         9.10.4   Claims, disputes and other matters in question arising out of
         or relating to the Contract that are not resolved by mediation, except
         matters relating to aesthetic effect and except those waived as
         provided for in Paragraph 9.11 and Subparagraphs 14.5.3 and 14.5.4,
         shall be decided by arbitration which, unless the parties mutually
         agree otherwise, shall be in accordance with the Construction Industry
         Arbitration Rules of the American Arbitration Association currently in
         effect. The demand for arbitration shall be filed in writing with the
         other party to this Agreement and with the American Arbitration
         Association and shall be made within a reasonable time after the
         dispute has arisen. The award rendered by the arbitrator or arbitrators
         shall be final, and judgment may be entered upon it in accordance with
         applicable law in any court having jurisdiction thereof. Except by
         written consent of the person or entity sought to be joined, no
         arbitration arising out of or relating to the Contract Documents shall
         include, by consolidation, joinder or in any other manner, any person
         or entity not a party to the Agreement under which such arbitration
         arises, unless it is shown at the time the demand for arbitration is
         filed that (1) such person or entity is substantially involved in a
         common question of fact or law, (2) the presence of such person or
         entity is required if complete relief is to be accorded in the
         arbitration, (3) the interest or responsibility of such person or
         entity in the matter is not insubstantial, and (4) such person or
         entity is not the Architect or any of the Architect's employees or
         consultants. The agreement herein among the parties to the Agreement
         and any other written agreement to arbitrate referred to herein shall
         be specifically enforceable under applicable law in any court having
         jurisdiction thereof.

         9.11     CLAIMS FOR CONSEQUENTIAL DAMAGES

         Notwithstanding anything in the Contract Documents to the contrary,
         neither party shall be liable for consequential, incidental, or
         indirect damages of any kind.

[LOGO]

(C)1997 AIA(R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER - CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              10

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

ARTICLE 10 SUBCONTRACTORS

         10.1     A Subcontractor is a person or entity who has a direct
         contract with the Contractor to perform a portion of the Work at the
         site.

         10.2     Unless otherwise stated in the Contract Documents or the
         bidding requirements, the Contractor, as soon as practicable after
         award of the Contract, shall furnish in writing to the Owner the names
         of the Subcontractors for each of the principal portions of the Work.
         The Contractor shall not contract with any Subcontractor to whom the
         Owner or Architect has made reasonable and timely objection. If the
         proposed but rejected Subcontractor was reasonably capable of
         performing the Work, the Contract Sum and Contract Time shall be
         increased or decreased by the difference, if any, occasioned by such
         change, and an appropriate Change Order shall be issued before
         commencement of the substitute Subcontractor's Work. The Contractor
         shall not be required to contract with anyone to whom the Contractor
         has made reasonable objection.

         10.3     Contracts between the Contractor and Subcontractors shall (1)
         require each Subcontractor, to the extent of the Work to be performed
         by the Subcontractor, to be bound to the Contractor by the terms of the
         Contract Documents, and to assume toward the Contractor all the
         obligations and responsibilities, including the responsibility for
         safety of the Subcontractor's Work, which the Contractor, by the
         Contract Documents, assumes toward the Owner and Architect, and (2)
         allow the Subcontractor the benefit of all rights, remedies and redress
         afforded to the Contractor by these Contract Documents.

ARTICLE 11 OWNER'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE CONTRACTS

         11.1     The Owner reserves the right to perform construction or
         operations related to the Project with the Owner's own forces, and to
         award separate contracts in connection with other portions of the
         Project or other construction or operations on the site under
         conditions of the contract identical or substantially similar to these,
         including those portions related to insurance and waiver of
         subrogation. If the Contractor claims that delay or additional cost is
         involved because of such action by the Owner, the Contractor shall make
         such claim as provided in Paragraph 9.10.

         11.2     The Contractor shall afford the Owner and separate contractors
         reasonable opportunity for introduction and storage of their materials
         and equipment and performance of their activities, and shall connect
         and coordinate the Contractor's activities with theirs as required by
         the Contract Documents.

         11.3     The Owner shall be reimbursed by the Contractor for costs
         incurred by the Owner which are payable to a separate contractor
         because of delays, improperly timed activities or

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER - CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              11

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH -RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         defective construction of the Contractor. The Owner shall be
         responsible to the Contractor for costs incurred by the Contractor
         because of delays, improperly timed activities, damage to the Work or
         defective construction of a separate contractor.

ARTICLE 12 CHANGES IN THE WORK

         12.1     The Owner, without invalidating the Contract, may order
         changes in the Work within the general scope of the Contract consisting
         of additions, deletions or other revisions, the Contract Sum and
         Contract Time being adjusted accordingly. Such changes in the Work
         shall be authorized by written Change Order signed by the Owner, and
         Contractor in advance, or by written Construction Change Directive
         signed by the Owner.

         12.2     The cost or credit to the Owner from a change in the Work
         shall be determined by mutual agreement of the parties or, in the case
         of a Construction Change Directive, by the Contractor's cost of labor,
         material, equipment, and reasonable overhead and profit.

         12.2.1   An Agreement on any Change Order shall constitute a final
         settlement of all matters relating to the change in the Work that is
         the subject of the Change Order, including, but not limited to, all
         direct and indirect costs associated with such change and any and all
         adjustments to the Contract Time. To the extent that a dispute arises
         between the Contractor and a Subcontractor, Sub-subcontractor, material
         supplier or equipment supplier over the terms of the Change Order, the
         Contractor is solely responsible for resolving this matter with the
         Subcontractor, Sub-subcontractor, material supplier or equipment
         supplier. Except where agreed to by the Owner in a valid Change Order,
         any increase in the amount payable to the Subcontractor,
         Sub-subcontractor, material supplier or equipment supplier shall be
         paid solely by Contractor and shall not be subject to reimbursement by
         the Owner.

         12.4     If concealed or unknown physical conditions are encountered at
         the site that differ materially from those indicated in the Contract
         Documents or from those conditions ordinarily found to exist, the
         Contract Sum and Contract Time shall be equitably adjusted.

         No adjustment in the Contract Time shall be permitted, however, in
         connection with a concealed or unknown condition that does not differ
         materially from those conditions disclosed or that reasonably should
         have been discovered by the Contractor's inspections, tests, reviews,
         and pre-construction investigation of the Project as required under the
         Contract Documents

ARTICLE 13 TIME

         13.1     Time limits stated in the Contract Documents are of the
         essence of the Contract. By executing the Agreement the Contractor
         confirms that the Contract Time is a reasonable period for performing
         the Work.

         13.2     The date of Substantial Completion is the date certified by
         the Architect in accordance with Subparagraph 14.4.2.

         13.3     If the Contractor is delayed at any time in the commencement
         or progress of the Work by changes ordered in the Work, by the Owner,
         other subcontractors, architect and/or engineer, delays in
         transportation, shortages of raw materials, civil disorders, acts of
         government, either in its sovereign or contractual capacity, labor
         disputes or

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER -CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.


                                                                              12


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED ASA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D40L

This document has been approved and endorsed by The Associated General
Contractors of America.

         shortages, vendor allocations, freight embargoes, fire, floods,
         epidemics, quarantine restrictions unusual delay in deliveries,
         abnormal adverse weather conditions not reasonably anticipatable,
         unavoidable casualties or any causes beyond the Contractor's control,
         or by other causes which the Owner determines may justify delay, then
         the Contract Time shall be extended by Change Order for such reasonable
         time as the Owner may determine, subject to the provisions of Paragraph
         9.10. Contractor shall be entitled to an equitable adjustment in the
         Contract Sum as a result of such delays, provided however. Contractor
         shall in no event be entitled to consequential, incidental, or indirect
         damages as a result of the delays.

ARTICLE 14 PAYMENTS AND COMPLETION

         14.1     APPLICATIONS FOR PAYMENT

         14.1.1   Payments shall be made as provided in Article 4 of this
         Agreement. Applications for Payment shall be in a form satisfactory to
         the Owner.

         14.1.2   The Contractor warrants that title to all Work covered by an
         Application for Payment will pass to the Owner no later than the time
         of payment. The Contractor further warrants that upon submittal of an
         Application for Payment all Work for which Certificates for Payment
         have been previously issued and payments received from the Owner shall,
         to the best of the Contractor's knowledge, information and belief, be
         free and clear of liens, claims, security interests or other
         encumbrances adverse to the Owner's interests.

         14.2     APPLICATIONS FOR PAYMENT

         14.2.1

         14.2.2   The issuance of a - an Application for Payment will constitute
         a representation by the Contractor to the Owner, based on the data
         comprising the Application for Payment, that the Work has progressed to
         the point indicated and that, to the best of the Contractor's
         knowledge, information and belief, the quality of the Work is in
         accordance with the Contract Documents. The foregoing representations
         are subject to an evaluation of the Work for conformance with the
         Contract Documents upon Substantial Completion, to results of
         subsequent tests and inspections, to correction of minor deviations
         from the Contract Documents prior to completion. The issuance of an
         Application for Payment will further constitute a representation that
         the Contractor is entitled to payment in the amount Specified.

         14.2.3   The owner may withhold payment of an Application for Payment
         in whole or in part, to the extent reasonably necessary to protect the
         Owner, if the representations to the Owner required by Subparagraph
         14.2.2 cannot be made.

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997. ABBREVIATED OWNER -CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. "Washington, D.C.
20006-5292

(C)  1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987 (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              13


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         to such extent as may be necessary to protect the Owner from loss for
         which the Contractor is responsible, including loss resulting from acts
         and omissions described in Subparagraph 8.2.2, because of:

                  .1       defective Work not remedied;

                  .2       third party claims filed or reasonable evidence
                           indicating probable filing of such claims unless
                           security acceptable to the Owner is provided by the
                           Contractor;

                  .3       failure of the Contractor to make payments properly
                           to Subcontractors or for labor, materials or
                           equipment;

                  .4       reasonable evidence that the Work has not been
                           completed as represented in the Application for
                           payment;

                  .5       damage to the Owner or another contractor;

                  .7       persistent failure to carry out the Work in
                           accordance with the Contract Documents.

         14.2.4   When the above reasons for withholding payment are removed,
                  payment will be made.

         14.3     PAYMENTS TO THE CONTRACTOR

         14.3.1   At each payment Contractor shall execute and deliver a release
         of lien in a form satisfactory to Owner. The Contractor shall promptly
         pay each Subcontractor, upon receipt of payment from the Owner, out of
         the amount paid to the Contractor on account of such Subcontractor's
         portion of the Work, the amount to which each Subcontractor is
         entitled, reflecting percentages actually retained from payments to the
         Contractor on account of such Subcontractor's portion of the Work, and
         secure a valid, executed unconditional lien release from same. The
         Contractor shall, by appropriate agreement with each Subcontractor,
         require each Subcontractor to make payments to sub-subcontractors in
         similar manner.

         14.3.2   The Owner shall have no obligation to pay or see to the
         payment of money to a Subcontractor except as may otherwise be required
         by law.

         14.3.3   A progress payment, or partial or entire use or occupancy of
         the Project by the Owner shall not constitute acceptance of Work not in
         accordance with the Contract Documents.

         14.4     SUBSTANTIAL COMPLETION

         14.4.1   Substantial Completion is the stage in the progress of the
         Work when the Work or designated portion thereof is sufficiently
         complete in accordance with the Contract Documents so that the Owner
         can occupy or utilize the Work for its intended use. Provided, however,
         that as a condition precedent to establishment of Substantial
         Completion, with respect to the Work performed by the Contractor, the
         Owner shall have received all certificates of occupancy and any other
         permits, approvals, licenses, or other documents from any governmental
         authority having jurisdiction over the Project and

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER -CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              14


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         necessary for the beneficial occupancy of the Project.

         14.4.2   When the Architect determines that the Work or designated
         portion thereof is substantially complete, the Architect will issue a
         Certificate of Substantial Completion which shall establish the date of
         Substantial Completion, which shall establish responsibilities of the
         Owner and Contractor for security, maintenance, heat, utilities, damage
         to the Work and insurance, and fix the time within which the Contractor
         shall finish all items on the list accompanying the Certificate.
         Warranties required by the Contract Documents shall commence on the
         date of Substantial Completion of the Work or designated portion
         thereof

         14.5     FINAL COMPLETION AND FINAL PAYMENT

         14.5.1   Within 30-days of Substantial Completion the Contractor shall
         complete all outstanding punch list items and finally complete the
         Work. ("Final Completion"). Upon receipt of written notice from
         Contractor that the Work has been completed in accordance with the
         specifications and is ready for final inspection and acceptance and
         upon receipt of a final Application for Payment, the Architect and the
         Owner _will promptly make such inspection and, when the Architect and
         the Owner finds the Work acceptable under the Contract Documents and
         the Contract fully performed, the Architect will promptly issue a final
         Certificate for Payment stating that to the best of the Architect's
         knowledge, information and belief, and on the basis of the Architect's
         on-site visits and inspections, the Work has been completed in
         accordance with terms and conditions of the Contract Documents. Owner
         will make final payment to the Contractor 30-days after Final
         Completion. Contractor shall present all warranties and guaranties
         required under the Contract Documents to the Owner as part of the final
         Application for Payment, the receipt of which is a condition precedent
         to the Owner's obligation to make final payment.

         14.5.2   Final payment shall not become due until the Contractor has
         delivered to the Owner a complete release of all liens arising out of
         this Contract or receipts in full covering all labor, materials and
         equipment for which a lien could be filed, or a bond satisfactory to
         the Owner to indemnify the Owner against such lien. If such lien
         remains unsatisfied after payments are made, the Contractor shall
         refund to the Owner all money that the Owner may be compelled to pay in
         discharging such lien, including costs and reasonable attorneys' fees.
         Contractor's final lien waiver and affidavit of bills paid shall be in
         a form acceptable to the Owner and the Owner's lender. Contractor shall
         also secure final lien waivers and affidavits of bills paid in a form
         acceptable to the Owner and the Owner's lender from each Subcontractor.
         Sub-subcontractor, material supplier and equipment supplier of every
         tier at delivery of the Owner's check to the applicable Subcontractor.
         Sub- subcontractor, material supplier or equipment supplier.

         14.5.3   The making of final payment shall constitute a waiver of
         claims by the Owner except those arising from:

                  .1       liens, claims, security interests or encumbrances
                           arising out of the Contract and unsettled;

                  .2       failure of the Work to comply with the requirements
                           of the Contract Documents; or

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER -CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              15


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAYBE MADE BY USING AIA DOCUMENT D4O1.

This document has been approved and endorsed by The Associated General
Contractors of America.

                  .3       terms of special warranties required by the Contract
                           Documents.

         14.5.4   Acceptance of final payment by the Contractor, a Subcontractor
         or material supplier shall constitute a waiver of claims by that payee
         except those previously made in writing and identified by that payee as
         unsettled at the time of final Application for Payment.

ARTICLE 15 PROTECTION OF PERSONS AND PROPERTY

         15.1     SAFETY PRECAUTIONS AND PROGRAMS

         The Contractor shall be responsible for initiating, maintaining and
         supervising all safety precautions and programs in connection with the
         performance of the Contract. The Contractor shall take reasonable
         precautions for safety of, and shall provide reasonable protection to
         prevent damage, injury or loss to:

                  .1       employees on the Work and other persons who may be
                           affected thereby;

                  .2       the Work and materials and equipment to be
                           incorporated therein; and

                  .3       other property at the site or adjacent thereto.

         The Contractor shall give notices and comply with applicable laws,
         ordinances, rules, regulations and lawful orders of public authorities
         bearing on safety of persons and property and their protection from
         damage, injury or loss. The Contractor shall promptly remedy damage and
         loss to property caused in whole or in part by the Contractor, a
         Subcontractor, a sub-subcontractor, or anyone directly or indirectly
         employed by any of them, or by anyone for whose acts they may be liable
         and for which the Contractor is responsible under Subparagraphs 15.1.2
         and 15.1.3, except for damage or loss attributable to acts or omissions
         of the Owner or by anyone for whose acts the Owner may be liable, and
         not attributable to the fault or negligence of the Contractor. The
         foregoing obligations of the Contractor are in addition to the
         Contractor's obligations under Paragraph 8.13.

         15.1.1   Cooperation and Safety: Contractor's Work shall be performed
         in accordance with all applicable requirements of the Environmental
         Protection Agency. OSHA and other Federal. State and Local regulations.
         Owner will cooperate with Contractor in all respects and take all
         necessary actions to enable Contractor to meet all such requirements
         with respect to the Work and the Project. Owner will cooperate with
         Contractor to assure that all areas where the Work is being performed
         are closed to access by unauthorized persons. Owner shall provide
         adequate security, including security personnel, to prevent
         unauthorized entry into Contractor's Work areas. The Owner will ensure
         that its employees, representatives, agents and tenants will abide by
         all safety procedures applied by Contractor on the Project. Contractor
         shall provide for its Work all safety signs, direction signs and
         warning signs for the Project in accordance with statutory
         requirements. All visitors to the Work areas shall be required to
         comply with Contractor's safety requirements. Owner agrees that
         Contractor's insurers' representatives shall have the right to inspect
         Contractor's Work and Project without hindrance.

         15.2     HAZARDOUS MATERIALS

         15.2.1   If reasonable precautions will be inadequate to prevent
         foreseeable bodily injury or death to persons resulting from a material
         or substance, including but not limited to asbestos or polychlorinated
         biphenyl (PCB), encountered on the site by the Contractor, the
         Contractor shall, upon recognizing the condition, immediately stop Work
         in the affected area and report the condition to the Owner and
         Architect in writing. When the material or substance has been rendered
         harmless, Work in the affected area shall resume upon written agreement
         of the Owner and Contractor. The Contract Time shall be extended
         appropriately and the Contract Sum shall be increased in the amount of
         the Contractor's reasonable additional costs of shutdown, delay and
         start-up, which adjustments shall be accomplished as provided in
         Article

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER - CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              16


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         12 of this Agreement.

         15.2.3   If the Contractor becomes aware that performance of the Work
         under this Agreement results in any exposure to hazardous material or
         environmental contamination. Contractor shall notify Owner and
         Architect immediately.

ARTICLE 16 INSURANCE

         16.1     The Contractor shall purchase from and maintain in a company
         or companies lawfully authorized to do business in the jurisdiction in
         which the Project is located insurance for protection from claims under
         workers' compensation acts and other employee benefit acts which are
         applicable, claims for damages because of bodily injury, including
         death, and claims for damages, other than to the Work itself, to
         property which may arise out of or result from the Contractor's
         operations under the Contract, whether such operations be by the
         Contractor or by a Subcontractor or anyone directly or indirectly
         employed by any of them. This insurance shall be written for not less
         than limits of liability specified in the Contract Documents or
         required by law, whichever coverage is greater, and shall include
         contractual liability insurance applicable to the Contractor's
         obligations. Certificates of Insurance acceptable to the Owner shall be
         filed with the Owner prior to commencement of the Work. Each policy
         shall contain a provision that the policy will not be canceled or
         allowed to expire until at least 30 days' prior written notice has been
         given to the Owner. The insurance shall contain an endorsement
         acceptable to Owner, listing the Owner as an additional insured.

         16.2     OWNER'S LIABILITY INSURANCE

         The Owner shall be responsible for purchasing and maintaining the
         Owner's usual liability insurance

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER -- CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              17


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         16.4     PROPERTY INSURANCE

         16.4.1   Unless otherwise provided, the Owner shall purchase and
         maintain, in a company or companies lawfully authorized to do business
         in the jurisdiction in which the Project is located, property insurance
         on an "all-risk" policy form, including builder's risk, in the amount
         of the initial Contract Sum, plus the value of subsequent modifications
         and cost of materials supplied and installed by others, comprising
         total value for the entire Project at the site on a replacement cost
         basis without optional deductibles. Such property insurance shall be
         maintained, unless otherwise provided in the Contract Documents or
         otherwise agreed in writing by all persons and entities who are
         beneficiaries of such insurance, until final payment has been made as
         provided in Paragraph 14.5 or until no person or entity other than the
         Owner has an insurable interest in the property required by this
         Paragraph 16.4 to be covered, whichever is later. This insurance shall
         include interests of the Owner, the Contractor, Subcontractors and sub
         subcontractors in the Project.

         16.4.2   The Owner shall file a copy of each policy with the Contractor
         before an exposure to loss may occur. Each policy shall contain a
         provision that the policy will not be canceled or allowed to expire,
         and that its limits will not be reduced, until at least 30 days' prior
         written notice has been given to the Contractor.

         16.5     WAIVERS OF SUBROGATION

         16.5.1   The Owner and Contractor waive all rights against (i) each
         other and any of their subcontractors, sub-subcontractors, agents and
         employees, each of the other, and (2) the Architect, Architect's
         consultants, separate contractors described in Article 11, if any, and
         any of their subcontractors, sub-subcontractors, agents and employees
         for damages caused by fire or other causes of loss to the extent
         covered by property insurance obtained pursuant to Paragraph 16.4 or
         other property insurance applicable to the Work, except such rights as
         they have to proceeds of such insurance held by the Owner as fiduciary.
         The Owner or Contractor, as appropriate, shall require of the
         Architect, Architect's consultants, separate contractors described in
         Article 11, if any, and the subcontractors, sub-subcontractors, agents
         and employees of any of them, by appropriate agreements, written where
         legally required for validity, similar waivers each in favor of other
         parties enumerated herein. The policies shall provide such waivers of
         subrogation by endorsement or otherwise. A waiver of subrogation shall
         be effective as to a person or entity even though that person or entity
         would otherwise have a duty of indemnification, contractual or
         otherwise, did not pay the insurance premium directly or indirectly,
         and whether or not the person or entity had an insurable interest in
         the property damaged.

         16.5.2   A loss insured under the Owner's property insurance shall be
         adjusted by the Owner as fiduciary and made payable to the Owner as
         fiduciary for the insureds, as their interests may appear, subject to
         requirements of any applicable mortgagee clause. The Contractor shall
         pay Subcontractors their just shares of insurance proceeds received by
         the Contractor, and by appropriate agreements, written where legally
         required for validity, shall require Subcontractors to make payments to
         their sub-subcontractors in similar manner.

         16.5.3   Upon the request and at the expense of Owner. Contractor will
         furnish performance and payment bonds written by a corporate surety.
         The cost of any such bonds is not included in the bid price and shall
         be paid for by Owner.

ARTICLE 17 CORRECTION OF WORK

         17.1     The Contractor shall promptly correct Work rejected by the
         Architect or failing to conform to the requirements of the Contract
         Documents, whether discovered before or after Substantial Completion
         and whether or not fabricated, installed or completed. Costs of

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER -CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              18



         correcting such rejected Work, including additional testing and
         inspections and compensation for the Architect's services and expenses
         made necessary thereby, shall be at the Contractor's expense.

         17.2     In addition to the Contractor's obligations under Paragraph
         8.4, if, within one year after the date of Substantial Completion of
         the Work or designated portion thereof or after the date for
         commencement of warranties established under Subparagraph 14.4.2, or by
         terms of an applicable special warranty required by the Contract
         Documents, any of the Work is found to be not in accordance with the
         requirements of the Contract Documents, the Contractor shall correct it
         promptly after receipt of written notice from the Owner to do so unless
         the Owner has previously given the Contractor a written acceptance of
         such condition. The Owner shall give such notice promptly after
         discovery of the condition. During the one-year period for correction
         of Work, if the Owner fails to notify the Contractor and give the
         Contractor an opportunity to make the correction, the Owner waives the
         rights to require correction by the Contractor and to make a claim for
         breach of warranty.

         17.3     If the Contractor fails to correct nonconforming Work within a
         reasonable time, the Owner may correct it in accordance with Paragraph
         7.3.

         17.4     The one-year period for correction of Work shall be extended
         with respect to portions of Work first performed after Substantial
         Completion by the period of time between Substantial Completion and the
         actual performance of the Work.

         17.5     The one-year period for correction of Work shall not be
         extended by corrective Work performed by the Contractor pursuant to
         this Article 17.

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

ARTICLE 18 MISCELLANEOUS PROVISIONS

         18.1     ASSIGNMENT OF CONTRACT

         Neither party to the Contract shall assign the Contract without written
         consent of the other.

         18.2     GOVERNING LAW

         The Contract shall be governed by the law of the place where the
         Project is located.

         18.3     TESTS AND INSPECTIONS

         Tests, inspections and approvals of portions of the Work required by
         the Contract Documents or by laws, ordinances, rules, regulations or
         orders of public authorities having jurisdiction shall be made at an
         appropriate time. Unless otherwise provided, the Contractor shall make
         arrangements for such tests, inspections and approvals with an
         independent testing laboratory or entity acceptable to the Owner, or
         with the appropriate public authority, and shall bear all related costs
         of tests, inspections and approvals. The Contractor shall give the
         Architect timely notice of when and where tests and inspections are to
         be made so that the Architect may be present for such procedures. The
         Owner shall bear costs of tests, inspections or approvals which do not
         become requirements until after bids are received or negotiations
         concluded.

         18.4     COMMENCEMENT OF STATUTORY LIMITATION PERIOD

         As between Owner and Contractor, any applicable statute of limitations
         shall commence to run and any alleged cause of action shall be deemed
         to have accrued:

                  .1       not later than the date of Substantial Completion for
                           acts or failures to act occurring prior to the
                           relevant date of Substantial Completion;

                  .2       not later than the date of issuance of the final
                           Certificate for Payment for acts or failures to act
                           occurring subsequent to the relevant date of
                           Substantial Completion and prior to the issuance of
                           the final Certificate for Payment; and

                  .3       not later than the date of the relevant act or
                           failure to act by the Contractor for acts or

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER -CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              19


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         failures to act occurring after the date of the final Certificate for
         Payment.

ARTICLE 19 TERMINATION OF THE CONTRACT

         19.1     TERMINATION BY THE CONTRACTOR

         If through no fault of the Contractor, the Owner fails to make payment
         within seven (7) days from the time payment should have been made as
         provided herein (except where such nonpayment is due to defective Work
         by Contractor or other material breach by Contractor), then Contractor
         may, without prejudice to any other remedy it may have, upon two (2)
         additional days' written notice to the Owner, stop its Work until
         payment of the amount owing has been received. In the event Contractor
         resumes its Work, the Schedule shall be equitably adjusted, and Owner
         shall incur no liability for such suspension. If. through no fault of
         the Contractor, the Contractor's Work is suspended for the more than
         sixty (60) days, the Contract Sum may be equitably adjusted by the
         amount of Contractor's reasonable costs of shutdown, delay and startup,
         the Contractor may, upon seven additional days' written notice to the
         Owner and the Architect, terminate the Contract and recover from the
         Owner payment for Work executed and for proven loss with respect to
         materials, equipment, tools, and construction equipment and machinery,
         including reasonable overhead, profit and damages applicable to the
         Project.

         19.2     TERMINATION BY THE OWNER

         19.2.1   The Owner may terminate the Contract if the Contractor:

                  .1       refuses or fails to supply enough properly skilled
                           workers or proper materials;

                  .2       fails to make payment to Subcontractors for materials
                           or labor in accordance with the respective agreements
                           between the Contractor and the Subcontractors;

                  .3       disregards laws, ordinances, or rules, regulations or
                           orders of a public authority having jurisdiction; or

                  .4       otherwise is guilty of breach of a provision of the
                           Contract Documents.

         19.2.2   When any of the above reasons exists, the Owner may,
         without prejudice to any other remedy the Owner may have and after
         giving the Contractor seven days' written notice, terminate the
         Contract and take possession of the site and of all materials,
         equipment, tools, and construction equipment and machinery thereon
         owned by the Contractor and may finish the Work by whatever reasonable
         method the Owner may deem expedient. Upon request of the Contractor,
         the Owner shall furnish to the Contractor a detailed accounting of the
         costs incurred by the Owner in finishing the Work.

         19.2.3   When the Owner terminates the Contract for one of the reasons
         stated in Subparagraph 19.2.1, the Contractor shall not be entitled to
         receive further payment until the Work is finished. If the Contractor's
         Work is terminated or suspended for the convenience of the Owner or any
         other party, (as opposed to termination for Contractor's default), then
         Contractor shall be paid for all Work performed to-date. and for
         equipment and materials already ordered. Contractor shall not be
         entitled to any additional payment for claimed termination damages or
         costs.

         19.2.4   If the unpaid balance of the Contract Sum exceeds costs of
         finishing the Work, including compensation for the Architect's services
         and expenses made necessary thereby, and other damages incurred by the
         Owner and not expressly waived, such excess shall be paid to the

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 -1997 ABBREVIATED OWNER -CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia --
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              20


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

         Contractor. If such costs and damages exceed the unpaid balance, the
         Contractor shall pay the difference to the Owner. The amount to be paid
         to the Contractor or Owner, as the case may be, shall be certified by
         the Architect, upon application, and this obligation for payment shall
         survive termination of the Contract.

ARTICLE 20 OTHER CONDITIONS OR PROVISIONS'

CONTRACTUAL CLARIFICATIONS:

- -        This Agreement is conditional upon acceptance of mutually agreed upon
         terms and conditions specified herein.

COMMERCIAL CLARIFICATIONS:

- -        This Agreement is based on a normal 40-hour week. No premium time has
         been included.

- -        Retention to be paid within 30 days after completion of Contractor's
         Work

- -        Contractor will be reimbursed for material received and stored in
         warehouse or pre-stocked at jobsite. following receipt of lien
         releases in a form acceptable to Owner for the materials.

- -        Temporary power, lighting, heating and potable water to be provided by
         Owner.

- -        Payment due for materials stored on site or approved warehouse upon
         delivery of materials and lien releases in a form acceptable to Owner
         for the materials.

- -        Bid is based upon materials received and stored on site in an area
         adjacent to work area. No offsite warehouse has been included.

- -        Insurance to be provided on Standard Accord Form.

- -        A clear, uninhibited entry of sufficient size to accommodate all clean
         room components shall be provided in close proximity to the clean room.

- -        Agreement is based upon award of the complete bid package.

- -        Performance and/or payment bonds are not included.

- -        PCI has included daily clean-up of cleanroom construction debris.

- -        If the project is canceled or put on hold. PCI shall be paid in full
         for Work properly performed up to the day of cancellation. If the
         project is extended in duration for more than sixty (60) days from the
         original contracted schedule. PCI shall be entitled to an equitable
         adjustment in the Contract Time and Contract Sum.

- -        All materials and connections provided by Owner are to be provided in a
         timely manner. PCI is not responsible for coordinating Owner provided
         material.

SCHEDULE

- -        Owner and Contractor mutually agree upon the schedule set forth herein
         in relation to releases, durations and site conditions.

- -        Contractor has been afforded the opportunity to establish the
         activities and working time necessary to perform and complete the Work
         pursuant to the terms of this Agreement.

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997 ABBREVIATED OWNER -CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects, Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              21


This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

This Agreement entered into as of the day and year first written above.

In the event Contractor is unable to finish the Work on or about the scheduled
completion date through no fault of Contractor, Contractor shall be entitled to
reasonable compensation for cost resulting from the delay

CHANGES:

- -        All changes must be agreed upon by Owner and Contractor in writing and
         in advance of any additional Work, modifications, or additions. The
         cost of any extra Work, modifications, or additions required by jobsite
         conditions or directed by Owner shall be added to contract price plus
         10% for overhead and 5% fee. Contractor shall be entitled to payments
         for said Work, as directed by Owner, whether issued verbally or in
         writing. The jobsite representative of Owner shall have authority to
         authorize extra Work, modifications, or additions as outlined above,
         and to commit to Owner to make payment therefor.

- -        No charges will be made to Contractor's account for Work performed or
         material furnished by others, without notifying Contractor and
         receiving its written approval before proceeding with such Work.

OWNER (Signature)                             CONTRACTOR (Signature)
/s/ KENNETH G. HAWARI                         /s/ HARRY SCOTT
- -----------------------------                 ----------------------------------
(Printed name and title)                      (Printed name and title)
Kenneth G. Hawari                             Harry Scott
Executive Vice President                      Branch Manager

[LOGO]

(C) 1997 AIA (R)

AIA DOCUMENT A107 -1997 ABBREVIATED OWNER -CONTRACTOR AGREEMENT

The American Institute of Architects 1735 New York Avenue N.W. Washington, D.C.
20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below, expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              22

EX-10.27

                                                                   EXHIBIT 10.27

                                   1997 Edition - Electronic Format
                                                      AIA DOCUMENT A107-1997

Abbreviated Standard Form of Agreement Between Owner and Contractor for
Construction Projects of Limited Scope Where the basis of payment is a
STIPULATED SUM

AGREEMENT made as of the 25th day of June in the year 2003
(In words, indicate day, month and year)

BETWEEN the Owner:
Advanced Neuromodulation Systems, Inc.
6501 Windcrest Drive, Suite 100
Plano, Texas 75024
(Name, address and other information)

and the Contractor:
(Name, address and other information)

Performance Contracting, Inc.
2701 Gattis School Road, Bldg. D#100
Round Rock, TX 78664
Phone (512) 341-2406
Fax (512) 341-7824

The Project is:
(Name and location)

Medical Device Manufacturing Cleanroom for
Advance Neuromodulation Systems, Inc.
at Legacy Business Park
Preston Road at Tennyson Drive
Plano, Texas 75024

The Architect is:
(Name, address and other information)

Class One Solutions, Inc.

The Owner and Contractor agree as follows.

ARTICLE 1 THE WORK OF THIS CONTRACT

         The Contractor shall fully execute the Work described in the Contract
         Documents, except to the extent specifically indicated in the Contract
         Documents to be the responsibility of others.

ARTICLE 2 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

         2.1 The date of commencement of the Work shall be the date of this
         Agreement unless a different date is stated below or provision is made
         for the date to be fixed in a notice to proceed issued by the Owner.

         Owner will cooperate with Contractor is scheduling all Work, including
         disconnections, reconnections, interruption of services and utilities,
         and similar matters. In the event

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               1





         Owner requires Contractor to work outside of normal daytime business
         hours. Contractor shall be entitled to additional compensation for such
         overtime.

         (Insert the date of commencement, if it differs from the date of this
         Agreement or, if applicable, state that the date will be fixed in a
         notice to proceed.)

         2.2 The Contract Time shall be measured from the date of commencement.

         2.3 The Contractor shall achieve Substantial Completion of the entire
         Work not later than days from the date of commencement, or as follows:
         February 29, 2004

         (Insert number of calendar days. Alternatively, a calendar date may be
         used when coordinated with the date of commencement. Unless stated
         elsewhere in the Contract Documents, insert any requirements for
         earlier Substantial Completion of certain portions of the Work.)

         , subject to adjustments of this Contract Time as provided in the
         Contract Documents. (Insert provisions, if any, for liquidated damages
         relating to failure to complete on time or for bonus payments for early
         completion of the Work.)

         The Contract Time is an essential element of the Contract. Failure to
         Substantially Complete the Work within the Contract Time will cause
         damage to the Owner, but such damage is difficult to establish. For
         each and every Calendar Day the Work shall remain uncompleted after
         February 29, 2004, the amount of $1,000 per Calendar Day will be
         assessed against the Contractor until Substantial Completion of the
         entire Work. Such amount shall be paid by the Contractor to the Owner
         upon demand and/or withheld by the Owner from amounts due the
         Contractor, as liquidated damages and not as a penalty; it being agreed
         by the Contractor and the Owner that such sum is a good faith, bona
         fide estimate of the amount of damages the Owner will sustain as a
         result of any such failure to timely complete the Work.

ARTICLE 3 CONTRACT SUM

         3.1 The Owner shall pay the Contractor the Contract Sum in current
         funds for the Contractor's performance of the Contract. The Contract
         Sum shall be Two Million Thirty-nine Thousand Two Hundred Sixty-five
         and no/100 Dollars ($2,039,265.00), subject to additions and deletions
         as provided in the Contract Documents. The Contract Sum is based upon
         95% Design Documents prepared by Class One Solutions, Inc. If, after
         completion of the Design Documents, Contractor determines that the
         Contract Sum will change, Contractor will notify Owner of the
         anticipated change and obtain Owner's written approval for the change
         prior to proceeding any further with the Work.

         3.2 The Contract Sum is based upon the following alternates, if any,
         which are described in the Contract Documents and are hereby accepted
         by the Owner:

         (State the numbers or other identification of accepted alternates. If
         decisions on other alternates are to be made by the Owner subsequent to
         the execution of this Agreement, attach a schedule of such other
         alternates showing the amount for each and the date when that amount
         expires.)

         Alternate #1 through Alternate #14 as listed on the Contract Documents.

         3.3 Unit prices, if any, are as follows:

         N/A

ARTICLE 4 PAYMENTS

         4.1 PROGRESS PAYMENTS

         4.1.1 Based upon Applications for Payment submitted to the Owner by the
         Contractor, the Owner shall make progress payments on account of the
         Contract Sum, for the value of the Work properly completed less
         retainage of 5% of the total Application, to the Contractor as provided
         below and

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               2







         elsewhere in the Contract Documents. The period covered by each
         Application for Payment shall be one calendar month ending on the last
         day of the month, or as follows:

         4.1.2 Provided that an Application for Payment is received by the
         Architect not later than the 30th day of a month, the Owner shall make
         payment to the Contractor not later than the 30th day of the following
         month. If an Application for Payment is received by the Architect after
         the date fixed above, payment shall be made by Owner not later than 30
         days after the Architect receives the Application for Payment.

         4.1.3. Payments due and unpaid under the Contract shall bear interest
         from the date payment is due at the rate stated below, or in the
         absence thereof, at the legal rate prevailing from time to time at the
         place where the Project is located.

         (Insert rate of interest agreed upon, if any.)

         (Usury laws and requirements under the Federal Truth in Lending Act,
         similar state and local consumer credit laws and other regulations at
         the Owner's and Contractor's principal places of business, the location
         of the Project and elsewhere may affect the validity of this provision.
         Legal advice should be obtained with respect to deletions or
         modifications, and also regarding requirements such as written
         disclosures or waivers.)

         4.2 FINAL PAYMENT

         4.2.1 Final payment, constituting the entire unpaid balance of the
         Contract Sum, shall be made by the Owner to the Contractor when:

                  .1 the Contractor has fully performed the Contract except for
                  the Contractor's responsibility to correct Work as provided in
                  Paragraph 17.2, and to satisfy other requirements, if any,
                  which extend beyond final payment; and

                  .2 The Owner, or its representatives, have fully inspected the
                  Work and determined that the Work has been completed in
                  accordance with the specifications, and the Work may be
                  certified as meeting ISO 14644 Class 8 (16,800 square feet)
                  and ISO Class 7 (3,200 square feet) clean room standards.

         4.2.2 The Owner's final payment, including any unpaid retainage, to the
         Contractor shall be made as follow:

         Thirty days after Final Completion

ARTICLE 5 ENUMERATION OF CONTRACT DOCUMENTS

         5.1 The Contract Documents are listed in Article 6 and, except for
         Modifications issued after execution of this Agreement, are enumerated
         as follows:

         5.1.1 The Agreement is this executed 1997 edition of the Abbreviated
         Standard Form of Agreement Between Owner and Contractor, AIA Document
         A107-1997.

         5.1.2 The Supplementary and other Conditions of the Contract are
         those contained in the Design Documents prepared by Class One
         Solutions, Inc. dated June 23, 2003, and are as follows:

         Document                       Title                      Pages

         See Exhibit "A" for Supplementary and other Conditions

         5.1.3 The Specifications are those contained in the Design Documents
         prepared by

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               3

         Class One Solutions, Inc. dated as in Subparagraph 5.1.2, and are as
         follows:

         (Either list the Specifications here or refer to an exhibit attached to
         this Agreement.)

         Section                      Title                             Pages

         See Exhibit "A" for Specifications

         5.1.4 The Drawings are as follows, and are dated unless a different
         date is shown below:

         (Either list Drawings here or refer to an exhibit attached to this
         Agreement.)

        Number                        Title                             Pages

         See Exhibit "B" for list of Drawings.

         5.1.5 The Addenda, if any, are as follows:

         Number                       Title                             Pages

         Portions of Addenda relating to bidding requirements are not part of
         the Contract Documents unless the bidding requirements are also
         enumerated in this Article 5.

         5.1.6 Other documents, if any, forming part of the Contract Documents
         are as follows: List any additional documents which are intended to
         form part of the Contract Documents.)

         Pages 1 through 8 of the Contractor's Proposal, dated June 25, 2003,
         providing a 95% Design Documents Budget Proposal for the Work, as
         outlined in the Proposal.

GENERAL CONDITIONS

ARTICLE 6 GENERAL PROVISIONS

         6.1 THE CONTRACT DOCUMENTS

         The Contract Documents consist of this Agreement with Conditions of the
         Contract (General, Supplementary and other Conditions), Drawings,
         Specifications, Addenda issued prior to the execution of this
         Agreement, other documents listed in this Agreement and Modifications
         issued after execution of this Agreement. A Modification is (1) a
         written amendment to the Contract signed by both parties, (2) a Change
         Order, (3) a Construction Change Directive or (4) a written order for a
         minor change in the Work issued by the Architect. The intent of the
         Contract Documents is to include all items necessary for the proper
         execution and completion of the Work by the Contractor. The Contractor
         Documents are complementary, and what is required by one shall be as
         binding as if required by all; performance by the Contractor shall be
         required to the extent consistent with Contract Documents and
         reasonably inferable from them as being necessary to produce the
         indicated results.

         6.2 THE CONTRACT

         The Contract Documents form the Contract for Construction. The Contract
         represents the entire and integrated agreement between the parties
         hereto and supersedes prior negotiations, representations or
         agreements, either written or oral. The Contract may be amended or
         modified only by a Modification. The Contract Documents shall not be
         construed to create a contractual relationship of any kind between the
         Owner and a Subcontractor or sub-subcontractor, or between any persons
         or entities other than the Owner and Contractor.

         6.3 THE WORK

         The term "Work" means the construction and services required by the
         Contract Documents, whether completed or partially completed, and
         includes all other labor, materials equipment and services provided or
         to be provided by the Contractor to fulfill the Contractor's
         obligations.

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.


                                                                               4



     The Work may constitute the whole or a part of the Project.

     6.4 EXECUTION OF THE CONTRACT

     Execution of the Contract by the Contractor is a representation that the
     Contractor has visited the site, become generally familiar with local
     conditions under which the Work is to be performed and correlated personal
     observations with requirements of the Contract Documents.

     6.5 OWNERSHIP AND USE OF ARCHITECT'S DRAWINGS, SPECIFICATIONS AND OTHER
     INSTRUMENTS OF SERVICE

     The Drawings, Specifications and other documents, including those in
     electronic form, prepared by the Architect and the Architect's consultants
     are Instruments of Service through which the Work to be executed by the
     Contractor is described. The Contractor may retain one record set. Neither
     the Contractor nor any Subcontractor, sub-subcontractor or material or
     equipment supplier shall own or claim a copyright in the Drawings,
     Specifications and other documents prepared by the Architect or the
     Architect's consultants. All copies of them, except the Contractor's record
     set, shall be returned or suitably accounted for to the Owner, on request,
     upon completion of the Work. The Drawings, Specifications and other
     documents prepared by the Architect and the Architect's consultants, and
     copies thereof furnished to the Contractor, are for use solely with respect
     to this Project. They are not to be used by the Contractor, Subcontractor,
     sub-subcontractor or material or equipment supplier on other projects or
     for additions to this Project outside the scope of the Work without the
     specific written consent of the Owner. The Contractor, Subcontractors,
     sub-subcontractors or material or equipment suppliers are authorized to use
     and reproduce applicable portions of the Drawings, Specifications and other
     documents prepared by the Architect and the Architect's consultants
     appropriate to and for use in the execution of their Work under the
     Contract Documents. All copies made under this authorization shall bear the
     statutory copyright notice, if any, shown on the Drawings, Specifications
     and other documents prepared by the Architect and the Architects's
     consultants. Submittal or distribution to meet official regulatory
     requirements or for other purposes in connection with this Project is not
     to be construed as publication in derogation of the Architect's or
     Architect's consultants' copyrights or other reserved rights.

ARTICLE 7 OWNER

     7.1 INFORMATION AND SERVICES REQUIRED OF THE OWNER

     7.1.1 The Owner shall make surveys and a legal description of the site
     available if required for the Work.

     7.1.2 The Contractor shall be entitled to rely on the accuracy of
     information furnished by the Owner but shall exercise proper precautions
     relating to the safe performance of the Work.

     7.1.3 Except for permits and fees which are the responsibility of the
     Contractor under the Contract Documents, the Owner shall secure and pay for
     other necessary approvals, easements, assessments and charges required for
     the construction, use or occupancy of permanent structures or permanent
     changes in existing facilities.

     7.2 OWNER'S RIGHT TO STOP THE WORK

     If the Contractor fails to correct Work which is not in accordance with the
     requirements of the Contract Documents, or persistently fails to carry out
     the Work in accordance with the Contract Documents, the Owner may issue a
     written order to the Contractor to stop the Work, or any portion thereof,
     until the cause for such order is eliminated; however, the right of the
     Owner to stop the Work shall not give rise  to a duty on the part of the
     Owner to exercise this right for the benefit of the Contractor or any other
     person or entity.

     7.3 OWNER'S RIGHT TO CARRY OUT THE WORK




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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               5



         If the Contractor defaults or persistently fails or neglects to carry
         out the Work in accordance with the Contract Documents, or fails to
         perform a provision of the Contract, the Owner, after 10 days' written
         notice to the Contractor and without prejudice to any other remedy the
         Owner may have, may make good such deficiencies and may deduct the
         reasonable cost thereof, including Owner's expenses and compensation
         for the Architect's services made necessary thereby, from the payment
         then or thereafter due the Contractor.

ARTICLE 8 CONTRACTOR

         8.1 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR

         8.1.1 Since the Contract Documents are complementary, before starting
         each portion of the Work, the Contractor shall carefully study and
         compare the various Drawings and other Contract Documents relative to
         that portion of the Work, as well as the information furnished by the
         Owner pursuant to Subparagraph 7.1.1, shall take field measurements of
         any existing conditions related to that portion of the Work and shall
         observe any conditions at the site affecting it. These obligations are
         for the purpose of facilitating construction by the Contractor and are
         not for the purpose of discovering errors, omissions, or
         inconsistencies in the Contract Documents; however, any errors,
         omissions or inconsistencies discovered by the Contractor shall be
         reported promptly to the Owner.

         8.1.1.2 Owner does not warrant the accuracy of any grades, elevations,
         dimensions, or locations given on any Drawings, Specifications, or work
         installed by other contractors. Contractor shall verify applicable
         grades, elevations, dimensions, and locations prior to executing the
         Work. Errors due to the Contractor's failure to so verify such grades,
         elevations, dimensions, or locations shall be promptly rectified by the
         Contractor at no cost to the Owner.

         8.1.2 Any design errors or omissions noted by the Contractor during
         this review shall be reported promptly to the Owner, but it is
         recognized that the Contractor's review is made in the Contractor's
         capacity as a contractor and not as a licensed design professional
         unless otherwise specifically provided in the Contract Documents.

         8.2 SUPERVISION AND CONSTRUCTION PROCEDURES

         8.2.1 The Contractor shall supervise and direct the Work, using the
         Contractor's best skill and attention. The Contractor shall be solely
         responsible for and have control over construction means, methods,
         techniques, sequences and procedures, and for coordinating all portions
         of the Work under the Contract. If the Contract Documents give specific
         instructions concerning construction means, methods, techniques,
         sequences or procedures, the Contractor shall be fully and solely
         responsible for the jobsite safety thereof unless the Contractor gives
         timely written notice to the Owner that such means, methods,
         techniques, sequences or procedures may not be safe.

         8.2.2 The Contractor shall be responsible to the Owner for acts and
         omissions of the Contractor's employees, Subcontractors and their
         agents and employees, and other persons or entities performing portions
         of the Work for or on behalf of the Contractor or any of its
         Subcontractors.

         8.3 LABOR AND MATERIALS

         8.3.1 Unless otherwise provided in the Contract Documents, the
         Contractor shall provide and pay for labor, materials, equipment,
         tools, construction equipment and machinery, water, heat, utilities,
         transportation, and other facilities and services necessary for proper
         execution and completion of the Work whether temporary or permanent and
         whether or not incorporated or to be incorporated in the Work. If the
         Work requires Owner to supply materials equipment or other property,
         then Owner warrants that such items shall be

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.



                                                                               6

         fit for the use for which they were intended. If such items do not
         conform, Contractor shall notify Owner within a reasonable time after
         Contractor's notice of the nonconformance and Contractor may request
         additional compensation by change order.

         8.3.2 The Contractor shall enforce strict discipline and good order
         among the Contractor's employees and other persons carrying out the
         Contract. The Contractor shall not permit employment of unfit persons
         or persons not skilled in tasks assigned to them.

         8.3.3 The Contractor shall deliver, handle, store and install materials
         in accordance with manufacturers' instructions.

         8.3.4 The Contractor may make substitutions only with the consent of
         the Owner, after evaluation by the Owner and in accordance with a
         Change Order.

         8.4 WARRANTY

         The Contractor warrants to the Owner and Architect that materials and
         equipment furnished under the Contract will be of good quality and new
         unless otherwise required or permitted by the Contract Documents, that
         the Work will be free from defects not inherent in the quality required
         or permitted, and that the Work will at Final Completion conform with
         the requirements of the Contract Documents and all Federal, State
         and/or Local regulations. Work not conforming to these requirements,
         including substitutions not properly approved and authorized, may be
         considered defective. The Contractor's warranty excludes remedy for
         damage or defect caused by abuse, modifications not executed by the
         Contractor, improper or insufficient maintenance, improper operation or
         normal wear and tear and normal usage. The Contractor's warranty as to
         all Work, including repair or replacement of any defective materials or
         faulty workmanship shall extend for one year after the date of Final
         Completion of the Work. As a condition of Substantial Completion, the
         Contractor shall provide Owner a list of firms authorized to respond to
         Owner's request for immediate, emergency repair for warranty work
         affecting safety of persons or property. For all other warranty work,
         the Contractor shall commence performance of the warranty work within
         ten (10) days of Owner's written request therefor. In the event the
         Contractor fails to commence the warranty work within ten (10) days,
         and diligently pursue the Work to completion thereafter, Contractor
         authorizes Owner to proceed to have the defects repaired and to bill
         Contractor for all labor and materials, expenses and charges necessary
         for the repair or replacement. Contractor shall pay Owner's invoices
         for such work within ten (10) days of receipt of such invoices.

         8.5 TAXES

         The Contractor shall pay sales, consumer, use and other similar taxes
         which are legally enacted when bids are received or negotiations
         concluded.

         8.6 PERMITS, FEES AND NOTICES

         8.6.1 The Contractor shall secure and pay for the building permit and
         other permits and governmental fees, licenses and inspections necessary
         for proper execution and completion of the Work.

         8.6.2 The Contractor shall comply with and give notices required by
         laws, ordinances, rules, regulations and lawful orders of public
         authorities applicable to performance of the Work. The Contractor shall
         promptly notify the Architect and Owner if the Drawings and
         Specifications are observed by the Contractor to be at variance
         therewith. If the Contractor performs Work knowing it to be contrary to
         laws, statutes, ordinances, building codes, and rules and regulations
         without such notice to the Architect and Owner, the Contractor shall
         assume appropriate responsibility for such Work and shall bear the
         costs attributable to correction.

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.



                                                                               7

         8.7 SUBMITTALS

         8.7.1 The Contractor shall review for compliance with the Contract
         Documents, approve in writing and submit to the Architect Shop
         Drawings, Product Data, Samples and similar submittals required by the
         Contract Documents with reasonable promptness. The Work shall be in
         accordance with approved submittals.

         8.7.2 Shop Drawings, Product Data, Samples and similar submittals are
         not Contract Documents.

         8.8 USE OF SITE

         The Owner will prepare all Work areas so as to be acceptable for
         mobilization by Contractor. Contractor will not be called upon to start
         Work until sufficient areas are ready to ensure continued Work until
         job completion. The Contractor shall confine operations at the site to
         areas permitted by law, ordinances, permits and the Contract Documents
         and shall not unreasonably encumber the site with materials or
         equipment.

         Owner will provide at its expense sufficient storage space to
         Contractor, which is fully protective of materials and equipment
         furnished for the Work at the place of performance of the Work. Owner
         will provide at its expense all light, heat, power and water which is
         required by Contractor for performance of the Work in the custom and
         practice of Contractor's trade.

         Contractor shall, at Contractor's sole cost and expense, take all
         measures necessary to protect persons and property in or adjacent to
         the Project Work site.

         8.9 CUTTING AND PATCHING

         The Contractor shall be responsible for cutting, fitting or patching
         required to complete the Work or to make its parts fit together
         properly.

         8.10 CLEANING UP

         The Contractor shall keep the premises and surrounding area free from
         accumulation of waste materials of rubbish caused by operations under
         the Contract. At completion of the Work, the Contractor shall remove
         from and about the Project waste materials, rubbish, the Contractor's
         tools, construction equipment, machinery and surplus material.

         8.11 ROYALTIES, PATENTS AND COPYRIGHTS

         The Contractor shall pay all royalties and license fees; shall defend
         suits or claims for infringement of copyrights and patent rights and
         shall hold the Owner and Architect harmless from loss on account
         thereof, but shall not be responsible for such defense or loss when a
         particular design, process or product of a particular manufacturer or
         manufacturers is required by the Contract Documents, or where the
         copyright violations are contained in Drawings, Specifications or other
         documents prepared by the Owner or Architect, unless the Contractor has
         reason to believe that there is an infringement of patent or copyright
         and fails to promptly furnish such information to the Architect.

         8.12 ACCESS TO WORK

         The Contractor shall provide the Owner access to the Work in
         preparation and progress wherever located.

         8.13 INDEMNIFICATION

         8.13.1 To the fullest extent permitted by law and to the extent claims,
         damages, losses or expenses are not covered by Liability insurance
         purchased by the Contractor in accordance with the Contract Documents,
         the Contractor shall indemnify and hold harmless the Owner, Architect,
         Architect's consultants and agents and employees of any of them from
         and against claims, damages, losses and expenses, including but not
         limited to attorneys' fees, arising out of or resulting from
         performance of the Work,

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.



                                                                               8

provided that such claim, damage, loss or expense is attributable to bodily
injury, sickness, disease or death, or to injury to or destruction of tangible
property (other than the Work itself), but only to the extent caused by the
negligent acts or omissions of the Contractor, a Subcontractor, anyone directly
or indirectly employed by them or anyone for whose acts they may be liable,
regardless of whether or not such claim, damage loss or expense is caused in
part by a party indemnified hereunder. Such obligation shall not be construed
to negate, abridge, or reduce other rights or obligations of indemnity which
would otherwise exist as to a party or person described in this Paragraph 8.13.

8.13.2  In claims against any person or entity indemnified under this Paragraph
8.13 by an employee of the Contractor, a Subcontractor, anyone directly or
indirectly employed by them or anyone for whose acts they may be liable, the
indemnification obligation under Subparagraph 8.13.1 shall not be limited by a
limitation on amount or type of damages, compensation or benefits payable by or
for the Contractor or Subcontractor under workers' compensation acts, disability
benefit acts or other employee benefit acts.

ARTICLE 9

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.



                                                                               9

         9.10 CLAIMS AND DISPUTES

         9.10.1 Claims, disputes and other matters in question arising out of or
         relating to this Contract, including those alleging an error or
         omission by the Architect but excluding those arising under Paragraph
         15.2, and except those waived as provided for in Paragraph 9.11 and
         Subparagraphs 14.5.3 and 14.5.4, shall be subject to mediation as a
         condition precedent to arbitration or the institution of legal or
         equitable proceedings by either party.

         9.10.2 If a claim, dispute or other matter in question relates to or is
         the subject of a mechanic's lien, the party asserting such matter may
         proceed in accordance with applicable law to comply with the lien
         notice or filing deadlines prior to resolution of the matter by
         mediation or by arbitration.

         9.10.3 The parties shall endeavor to resolve their disputes by
         mediation which, unless the parties mutually agree otherwise, shall be
         in accordance with the Construction Industry Mediation Rules of the
         American Arbitration Association currently in effect. Request for
         mediation shall be filed in writing with the other party to this
         Agreement and with the American Arbitration Association. The request
         may be made concurrently with the filing of a demand for arbitration
         but, in such event, mediation shall proceed in advance of arbitration
         or legal or equitable proceedings, which shall be stayed pending
         mediation for a period of 60 days from the date of filing, unless
         stayed for a longer period by agreement of the parties or court order.

         9.10.4 Claims, disputes and other matters in question arising out of or
         relating to the Contract that are not resolved by mediation, except
         matters relating to aesthetic effect and except those waived as
         provided for in Paragraph 9.11 and Subparagraphs 14.5.3 and 14.5.4,
         shall be decided by arbitration which, unless the parties mutually
         agree otherwise, shall be in accordance with the Construction Industry
         Arbitration Rules of the American Arbitration Association currently in
         effect. The demand for arbitration shall be filed in writing with the
         other party to this Agreement and with the American Arbitration
         Association and shall be made within a reasonable time after the
         dispute has arisen. The award rendered by the arbitrator or arbitrators
         shall be final, and judgment may be entered upon it in accordance with
         applicable law in any court having jurisdiction thereof. Except by
         written consent of the person or entity sought to be joined, no
         arbitration arising out of or relating to the Contract Documents shall
         include, by consolidation, joinder or in any other manner, any person
         or entity not a party to the Agreement under which such arbitration
         arises, unless it is shown at the time the demand for arbitration is
         filed that (1) such person or entity is substantially involved in a
         common question of fact or law, (2) the presence of such person or
         entity is required if complete relief is to be accorded in the
         arbitration, (3) the interest or responsibility of such person or
         entity in the matter is not insubstantial, and (4) such person or
         entity is not the Architect or any of the Architect's employees or
         consultants. The agreement herein among the parties to the Agreement
         and any other written agreement to arbitrate referred to herein shall
         be specifically enforceable under applicable law in any court having
         jurisdiction thereof.

         9.11 CLAIMS FOR CONSEQUENTIAL DAMAGES

         Notwithstanding anything in the Contract Documents to the contrary,
         neither party shall be liable for consequential, incidental, or
         indirect damages of any kind.

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.



                                                                              10

ARTICLE 10 SUBCONTRACTORS

     10.1 A Subcontractor is a person or entity who has a direct contract with
     the Contractor to perform a portion of the Work at the site.

     10.2 Unless otherwise stated in the Contract Documents or the bidding
     requirements, the Contractor, as soon as practicable after award of the
     Contract, shall furnish in writing to the Owner the names of the
     Subcontractors for each of the principal portions of the Work. The
     Contractor shall not contract with any Subcontractor to whom the Owner or
     Architect has made reasonable and timely objection. If the proposed but
     rejected Subcontractor was reasonably capable of performing the Work, the
     Contract Sum and Contract Time shall be increased or decreased by the
     difference, if any, occasioned by such change, and an appropriate Change
     Order shall be issued before commencement of the substitute Subcontractor's
     Work. The Contractor shall not be required to contract with anyone to whom
     the Contractor has made reasonable objection.

     10.3 Contracts between the Contractor and Subcontractors shall (1) require
     each Subcontractor, to the extent of the Work to be performed by the
     Subcontractor, to be bound to the Contractor by the terms of the Contract
     Documents, and to assume toward the Contractor all the obligations and
     responsibilities, including the responsibility for safety of the
     Subcontractor's Work, which the Contractor, by the Contract Documents,
     assumes toward the Owner and Architect, and (2) allow the Subcontractor the
     benefit of all rights, remedies and redress afforded to the Contractor by
     these Contract Documents.

ARTICLE 11 OWNER'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE CONTRACTS

     11.1 The Owner reserves the right to perform construction or operations
     related to the Project with the Owner's own forces, and to award separate
     contracts in connection with other portions of the Project or other
     construction or operations on the site under conditions of the contract
     identical or substantially similar to these, including those portions
     related to insurance and waiver of subrogation. If the Contractor claims
     that delay or additional cost is involved because of such action by the
     Owner, the Contractor shall make such claim as provided in Paragraph 9.10.

     11.2 The Contractor shall afford the Owner and separate contractors
     reasonable opportunity for introduction and storage of their materials and
     equipment and performance of their activities, and shall connect and
     coordinate the Contractor's activities with theirs as required by the
     Contract Documents.

     11.3 The Owner shall be reimbursed by the Contractor for costs incurred by
     the Owner which are payable to a separate contractor because of delays,
     improperly timed activities or


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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              11



     defective construction of the Contractor. The Owner shall be responsible to
     the Contractor for costs incurred by the Contractor because of delays,
     improperly timed activities, damage to the Work or defective construction
     of a separate contractor.

ARTICLE 12 CHANGES IN THE WORK

     12.1 The Owner, without invalidating the Contract, may order changes in
     the Work within the general scope of the Contract consisting of additions,
     deletions or other revisions, the Contract Sum and Contract Time being
     adjusted accordingly. Such changes in the Work shall be authorized by
     written Change Order signed by the Owner, and Contractor in advance, or by
     written Construction Change Directive signed by the Owner.

     12.2 The cost or credit to the Owner from a change in the Work shall be
     determined by mutual agreement of the parties or, in the case of a
     Construction Change Directive, by the Contractor's cost of labor, material,
     equipment, and reasonable overhead and profit.

     12.2.1 An Agreement on any Change Order shall constitute a final settlement
     of all matters relating to the change in the Work that is the subject of
     the Change Order, including, but not limited to, all direct and indirect
     costs associated with such change and any and all adjustments to the
     Contract Time. To the extent that a dispute arises between the Contractor
     and a Subcontractor, Sub-subcontractor, material supplier or equipment
     supplier over the terms of the Change Order, the Contractor is solely
     responsible for resolving this matter with the Subcontractor,
     Sub-subcontractor, material supplier or equipment supplier. Except where
     agreed to by the Owner in a valid Change Order, any increase in the amount
     payable to the Subcontractor, Sub-subcontractor, material supplier or
     equipment supplier shall be paid solely by Contractor and shall not be
     subject to reimbursement by the Owner.

     12.4 If concealed or unknown physical conditions encountered at the site
     that differ materially from those indicated in the Contract Documents or
     from those conditions ordinarily found to exist, the Contract Sum and
     Contract Time shall be equitably adjusted. No adjustment in the Contract
     Time shall be permitted, however, in connection with a concealed or unknown
     condition that does not differ materially from those conditions disclosed
     or that reasonably should have been discovered by the Contractor's
     inspections, tests, reviews, and pre-construction investigation of the
     Project as required under the Contract Documents.

ARTICLE 13 TIME

     13.1 Time limits stated in the Contract Documents are of the essence of the
     Contract. By executing the Agreement the Contractor confirms that the
     Contract Time is a reasonable period for performing the Work.

     13.2 The date of Substantial Completion is the date certified by the
     Architect in accordance with Subparagraph 14.4.2.

     13.3 If the Contractor is delayed at any time in the commencement or
     progress of the Work by changes ordered in the Work, by the Owner, other
     subcontractors, architect and/or engineer, delays in transportation,
     shortages of raw materials, civil disorders, acts of government, either in
     its sovereign or contractual capacity, labor disputes or

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              12




         shortages, vendor allocations, freight embargoes, fire, floods,
         epidemics, quarantine restrictions unusual delay in deliveries,
         abnormal adverse weather conditions not reasonably anticipatable,
         unavoidable casualties or any causes beyond the Contractor's control,
         or by other causes which the Owner determines may justify delay, then
         the Contract Time shall be extended by Change Order for such
         reasonable time as the Owner may determine, subject to the provisions
         of Paragraph 9.10. Contractor shall be entitled to an equitable
         adjustment in the Contract Sum as a result of such delays, provided
         however, Contractor shall in no event be entitled to consequential,
         incidental, or indirect damages as a result of the delays.

ARTICLE 14 PAYMENTS AND COMPLETION

         14.1 APPLICATIONS FOR PAYMENT

         14.1.1 Payments shall be made as provided in Article 4 of this
         Agreement. Applications for Payment shall be in a form satisfactory to
         the Owner.

         14.1.2 The Contractor warrants that title to all Work covered by an
         Application for Payment will pass to the Owner no later than the time
         of payment. The Contractor further warrants that upon submittal of an
         Application for Payment all Work for which Certificates for Payment
         have been previously issued and payments received from the Owner
         shall, to the best of the Contractor's knowledge, information and
         belief, be free and clear of liens, claims, security interests or
         other encumbrances adverse to the Owner's interests.

         14.2 APPLICATIONS FOR PAYMENT

         14.2.1

         14.2.2 The issuance of an Application for Payment will constitute a
         representation by the Contractor to the Owner, based on the data
         comprising the Application for Payment, that the Work has progressed
         to the point indicated and that, to the best of the Contractor's
         knowledge, information and belief, the quality of the Work is in
         accordance with the Contract Documents. The foregoing representations
         are subject to an evaluation of the Work for conformance with the
         Contract Documents upon Substantial Completion, to results of
         subsequent tests and inspections, to correction of minor deviations
         from the Contract Documents prior to completion. The issuance of an
         Application for Payment will further constitute a representation that
         the Contractor is entitled to payment in the amount specified.

         14.2.3 The Owner may withhold payment of an Application for Payment in
         whole or in part, to the extent reasonably necessary to protect the
         Owner, if the representations to the Owner required by Subparagraph
         14.2.2 cannot be made. The Owner may also withhold a Payment

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              13

         to such extent as may be necessary to protect the Owner from loss for
         which the Contractor is responsible, including loss resulting from acts
         and omissions described in Subparagraph 8.2.2, because of:

                  .1       defective Work not remedied;

                  .2       third party claims filed or reasonable evidence
                           indicating probable filing of such claims unless
                           security acceptable to the Owner is provided by the
                           Contractor;

                  .3       failure of the Contractor to make payments properly
                           to Subcontractors or for labor, materials or
                           equipment;

                  .4       reasonable evidence that the Work has not been
                           completed as represented in the Application for
                           Payment;

                  .5       damage to the Owner or another contractor;

                  .6

                  .7       persistent failure to carry out the Work in
                           accordance with the Contract Documents.

         14.2.4 When the above reasons for withholding payment are removed,
         payment will be made.

         14.3 PAYMENTS TO THE CONTRACTOR

         14.3.1 At each payment Contractor shall execute and deliver a release
         of lien in a form satisfactory to Owner. The Contractor shall promptly
         pay each Subcontractor, upon receipt of payment from the Owner, out of
         the amount paid to the Contractor on account of such Subcontractor's
         portion of the Work, the amount to which each Subcontractor is
         entitled, reflecting percentages actually retained from payments to the
         Contractor on account of such Subcontractor's portion of the Work, and
         secure a valid, executed unconditional lien release from same. The
         Contractor shall, by appropriate agreement with each Subcontractor,
         require each Subcontractor to make payments to sub-subcontractors in
         similar manner.

         14.3.2 The Owner shall have no obligation to pay or see to the payment
         of money to a Subcontractor except as may otherwise be required by law.

         14.3.3 A progress payment, or partial or entire use or occupancy of the
         Project by the Owner shall not constitute acceptance of Work not in
         accordance with the Contract Documents.

         14.4 SUBSTANTIAL COMPLETION

         14.4.1 Substantial Completion is the stage in the progress of the Work
         when the Work or designated portion thereof is sufficiently complete in
         accordance with the Contract Documents so that the Owner can occupy or
         utilize the Work for its intended use. Provided, however, that as a
         condition precedent to establishment of Substantial Completion, with
         respect to the Work performed by the Contractor, the Owner shall have
         received all certificates of occupancy and any other permits,
         approvals, licenses, or other documents from any governmental authority
         having jurisdiction over the Project and

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                               1



                                                                              14

         necessary for the beneficial occupancy of the Project.

         14.4.2 When the Architect determines that the Work or designated
         portion thereof is substantially complete, the Architect will issue a
         Certificate of Substantial Completion which shall establish the date of
         Substantial Completion, which shall establish responsibilities of the
         Owner and Contractor for security, maintenance, heat, utilities, damage
         to the Work and insurance, and fix the time within which the Contractor
         shall finish all items on the list accompanying the Certificate.
         Warranties required by the Contract Documents shall commence on the
         date of Substantial Completion of the Work or designated portion
         thereof.

         14.5 FINAL COMPLETION AND FINAL PAYMENT

         14.5.1 Within 30-days of Substantial Completion the Contractor shall
         complete all outstanding punch list items and finally complete the
         Work. ("Final Completion"). Upon receipt of written notice from
         Contractor that the Work has been completed in accordance with the
         specifications and is ready for final inspection and acceptance and
         upon receipt of a final Application for Payment, the Architect and the
         Owner will promptly make such inspection and, when the Architect and
         the Owner finds the Work acceptable under the Contract Documents and
         the Contract fully performed, the Architect will promptly issue a final
         Certificate for Payment stating that to the best of the Architect's
         knowledge, information and belief, and on the basis of the Architect's
         on-site visits and inspections, the Work has been completed in
         accordance with terms and conditions of the Contract Documents. Owner
         will make final payment to the Contractor 30-days after Final
         Completion. Contractor shall present all warranties and guaranties
         required under the Contract Documents to the Owner as part of the final
         Application for Payment, the receipt of which is a condition precedent
         to the Owner's obligation to make final payment.

         14.5.2 Final payment shall not become due until the Contractor has
         delivered to the Owner a complete release of all liens arising out of
         this Contract or receipts in full covering all labor, materials and
         equipment for which a lien could be filed, or a bond satisfactory to
         the Owner to indemnify the Owner against such lien. If such lien
         remains unsatisfied after payments are made, the Contractor shall
         refund to the Owner all money that the Owner may be compelled to pay in
         discharging such lien, including costs and reasonable attorneys' fees.
         Contractor's final lien waiver and affidavit of bills paid shall be in
         a form acceptable to the Owner and the Owner's lender. Contractor shall
         also secure final lien waivers and affidavits of bills paid in a form
         acceptable to the Owner and the Owner's lender from each Subcontractor.
         Sub-contractor, material supplier and equipment supplier of every tier
         at delivery of the Owner's check to the applicable Subcontractor.
         Sub-subcontractor, material supplier or equipment supplier.

         14.5.3 The making of final payment shall constitute a waiver of claims
         by the Owner except those arising from:

         .1       liens, claims, security interests or encumbrances arising out
                  of the Contract and unsettled;

         .2       failure of the Work to comply with the requirements of the
                  Contract Documents; or

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.


                                                                              15

                  .3 terms of special warranties required by the Contract
                  Documents.

         14.5.4 Acceptance of final payment by the Contractor, a Subcontractor
         or material supplier shall constitute a waiver of claims by that payee
         except those previously made in writing and identified by that payee as
         unsettled at the time of final Application for Payment.

ARTICLE 15  PROTECTION OF PERSONS AND PROPERTY

         15.1 SAFETY PRECAUTIONS AND PROGRAMS

         The Contractor shall be responsible for initiating, maintaining and
         supervising all safety precautions and programs in connection with the
         performance of the Contract. The Contractor shall take reasonable
         precautions for safety of, and shall provide reasonable protection to
         prevent damage, injury or loss to:

                  .1 employees on the Work and other persons who may be affected
                  thereby;

                  .2 the Work and materials and equipment to be incorporated
                  therein; and

                  .3 other property at the site or adjacent thereto.

         The Contractor shall give notices and comply with applicable laws,
         ordinances, rules, regulations and lawful orders of public authorities
         bearing on safety of persons and property and their protection from
         damage, injury or loss. The Contractor shall promptly remedy damage and
         loss to property caused in whole or in part by the Contractor, a
         Subcontractor, a sub-subcontractor, or anyone directly or indirectly
         employed by any of them, or by anyone for whose acts they may be liable
         and for which the Contractor is responsible under Subparagraphs 15.1.2
         and 15.1.3, except for damage or loss attributable to acts or omissions
         of the Owner or by anyone for whose acts the Owner may be liable, and
         not attributable to the fault or negligence of the Contractor. The
         foregoing obligations of the Contractor are in addition to the
         Contractor's obligations under Paragraph 8.13.

         15.1.1 Cooperation and Safety: Contractor's Work shall be performed in
         accordance with all applicable requirements of the Environmental
         Protection Agency, OSHA and other Federal, State and Local regulations.
         Owner will cooperate with Contractor in all respects and take all
         necessary actions to enable Contractor to meet all such requirements
         with respect to the Work and the Project. Owner will cooperate with
         Contractor to assure that all areas where the Work is being performed
         are closed to access by unauthorized persons. Owner shall provide
         adequate security, including security personnel, to prevent
         unauthorized entry into Contractor's Work areas. The Owner will ensure
         that its employees, representatives, agents and tenants will abide by
         all safety procedures applied by Contractor on the Project. Contractor
         shall provide for its Work all safety signs, direction signs and
         warning signs for the Project in accordance with statutory
         requirements. All visitors to the Work areas shall be required to
         comply with Contractor's safety requirements. Owner agrees that
         Contractor's insurers' representatives shall have the right to inspect
         Contractor's Work and Project without hindrance.

         15.2 HAZARDOUS MATERIALS

         15.2.1 If reasonable precautions will be inadequate to prevent
         foreseeable bodily injury or death to persons resulting from a material
         or substance, including but not limited to asbestos or polychlorinated
         biphenyl (PCB), encountered on the site by the Contractor, the
         Contractor shall, upon recognizing the condition, immediately stop Work
         in the affected area and report the condition to the Owner and
         Architect in writing. When the material or substance has been rendered
         harmless, Work in the affected area shall resume upon written agreement
         of the Owner and Contractor. The Contract Time shall be extended
         appropriately and the Contract Sum shall be increased in the amount of
         the Contractor's reasonable additional costs of shutdown, delay and
         start-up, which adjustments shall be accomplished as provided in
         Article

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.



                                                                              16


         12 of this Agreement.

         15.2.3 If the Contractor becomes aware that performance of the Work
         under this Agreement results in any exposure to hazardous material or
         environmental contamination, Contractor shall notify Owner and
         Architect immediately.

ARTICLE 16 INSURANCE

         16.1 The Contractor shall purchase from and maintain in a company or
         companies lawfully authorized to do business in the jurisdiction in
         which the Project is located insurance for protection from claims under
         workers' compensation acts and other employee benefit acts which are
         applicable, claims for damages because of bodily injury, including
         death, and claims for damages, other than to the Work itself, to
         property which may arise out of or result from the Contractor's
         operations under the Contract, whether such operations be by the
         Contractor or by a Subcontractor or anyone directly or indirectly
         employed by any of them. This insurance shall be written for not less
         than limits of liability specified in the Contract Documents or
         required by law, whichever coverage is greater, and shall include
         contractual liability insurance applicable to the Contractor's
         obligations. Certificates of Insurance acceptable to the Owner shall be
         filed with the Owner prior to commencement of the Work. Each policy
         shall contain a provision that the policy will not be canceled or
         allowed to expire until at least 30 days' prior written notice has
         been given to the Owner. The insurance shall contain an endorsement
         acceptable to Owner, listing the Owner as an additional insured.

         16.2 OWNER'S LIABILITY INSURANCE

         The Owner shall be responsible for purchasing and maintaining the
         Owner's usual liability insurance.

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.

                                                                              17

     16.4 PROPERTY INSURANCE

     16.4.1 Unless otherwise provided, the Owner shall purchase and maintain, in
     a company or companies lawfully authorized to do business in the
     jurisdiction in which the Project is located, property insurance on an
     "all-risk" policy form, including builder's risk, in the amount of the
     initial Contract sum, plus the value of subsequent modifications and cost
     of materials supplied and installed by others, comprising total value for
     the entire Project at the site in a replacement cost basis without optional
     deductibles. Such property insurance shall be maintained, unless otherwise
     provided in the Contract Documents or otherwise agreed in writing by all
     persons and entities who are beneficiaries of such insurance, until final
     payment has been made as provided in Paragraph 14.5 or until no person or
     entity other than the Owner has an insurable interest in the property
     required by this Paragraph 16.4 to be covered, whichever is later. This
     insurance shall include interest of the Owner, the Contractor,
     Subcontractors and sub-subcontractors.

     16.4.2 The Owner shall file a copy of each policy with the Contractor
     before an exposure to loss may occur. Each policy shall contain a provision
     that the policy will not be canceled or allowed to expire, and that its
     limits will not be reduced, until at least 30 days' prior written notice
     has been given to the Contractor.

     16.5 WAIVERS OF SUBROGATION

     16.5.1 The Owner and Contractor waive all rights against (i) each other and
     any of their subcontractors, sub-subcontractors, agents and employees, each
     of the other, and (2) the Architect, Architect's consultants, separate
     contractors described in Article II, if any, and any of their
     subcontractors, sub-subcontractors agents, and employees for damages caused
     by fire or other causes of loss to the extent covered by property insurance
     obtained pursuant to Paragraph 16.4 or other property insurance applicable
     to the Work, except such rights as they have to proceeds of such insurance
     held by the Owner as fiduciary. The Owner or Contractor, as appropriate,
     shall require of the Architect, Architect's consultants, separate
     contractors described in Article II, if any, and the subcontractors,
     sub-subcontractors, agents and employees of any of them, by appropriate
     agreements, written where legally required for validity, similar waivers
     each in favor of other parties enumerated herein. The policies shall
     provide such waivers of subrogation by endorsement or otherwise. A waiver
     of subrogation shall be effective as to a person or entity even though that
     person or entity would otherwise have a duty of indemnification,
     contractual or otherwise, did not pay the insurance premium directly or
     indirectly, and whether or not the person or entity had an insurable
     interest in the property damaged.

     16.5.2 A loss insured under the Owner's property insurance shall be
     adjusted by the Owner as fiduciary and made payable to the Owner as
     fiduciary for the insureds, as their interests may appear, subject to
     requirements of any applicable mortgagee clause. The Contractor shall pay
     Subcontractors their just shares of insurance proceeds received by the
     Contractor, and by appropriate agreements, written where legally required
     for validity, shall require Subcontractors to make payments to their
     subcontractors in similar manner.

     16.5.3 Upon the request and at the expense of Owner, Contractor will
     furnish performance and payment bonds written by a corporate surety. The
     cost of any such bonds is not included in the bid price and shall be paid
     for by Owner.

ARTICLE 17. CORRECTION OF WORK

     17.1 The Contractor shall promptly correct Work rejected by the Architect
     or failing to conform to the requirements of the Contract Documents,
     whether discovered before or after Substantial Completion and whether or
     not fabricated, installed or completed. Cost of

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.



                                                                              18




     correcting such rejected Work, including additional testing and inspections
     and compensation for the Architect's services and expenses made necessary
     thereby, shall be at the Contractor's expense.

     17.2 In addition to the Contractor's obligations under Paragraph 8.4, if,
     within one year after the date of Substantial Completion of the Work or
     designated portion thereof or after the date for commencement of warranties
     established under Subparagraph 14.4.2, or by terms of an applicable special
     warranty required by the Contract Documents, any of the Work is found to
     be not in accordance with the requirements of the Contract Documents, the
     Contractor shall correct it promptly after receipt of written notice from
     the Owner to do so unless the Owner has previously given the Contractor a
     written acceptance of such condition. The Owner shall give such notice
     promptly after discovery of the condition. During the one-year period for
     correction of Work, if the Owner fails to notify the Contractor and give
     the Contractor an opportunity to make the correction, the Owner waives the
     rights to require correction by the Contractor and to make a claim for
     breach of warranty.

     17.3 If the Contractor fails to correct noncoforming Work within a
     reasonable time, the Owner may correct it in accordance with Paragraph 7.3.

     17.4 The one-year period for correction of Work shall be extended with
     respect to portions of Work first performed after Substantial Completion by
     the period of time between Substantial Completion and the actual
     performance of the Work.

     17.5 The one-year period for correction of Work shall not be extended by
     corrective Work performed by the Contractor pursuant to the Article 17.

ARTICLE 18 MISCELLANEOUS PROVISIONS

     18.1 ASSIGNMENT OF CONTRACT

     Neither party to the Contract shall assign the Contract without written
     consent of the other.

     18.2 GOVERNING LAW

     The Contract shall be governed by the law of the place where the Project is
     located.

     18.3 TESTS AND INSPECTIONS

     Test, inspections and approvals of portions of the Work required by the
     Contract Documents or by laws, ordinances, rules, regulation or orders of
     public authorities having jurisdiction shall be made at an appropriate
     time. Unless otherwise provided, the Contractor shall make arrangements for
     such tests, inspections and approvals with an independent testing
     laboratory or entity acceptable to the Owner, or with the appropriate
     public authority, and shall bear all related costs of tests, inspections
     and approvals. The Contractor shall give the Architect timely notice of
     when and where tests and inspections are to be made so that the Architect
     may be present for such procedures. The Owner shall bear costs of tests,
     inspections or approvals which do not become requirements until after bids
     are received or negotiations concluded.

     18.4 COMMENCEMENT OF STATUTORY LIMITATION PERIOD

     As between Owner and Contractor, any applicable statute of limitations
     shall commence to run any alleged cause of action shall be deemed to have
     accrued:

          .1   not later than the date of Substantial Completion for acts or
               failures to act occurring prior to the relevant date of
               Substantial Completion;

          .2   not later than the date of issuance of the final Certificate for
               Payment for acts or failures to act occurring subsequent to the
               relevant date of Substantial Completion and prior to the issuance
               of the final Certificate for Payment; and

          .3   not later than the date of the relevant act or failure to act by
               the Contractor for acts or

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.




                                                                              19



     failures to act occurring after the date of the final Certificate for
     Payment.

ARTICLE 19 TERMINATION OF THE CONTRACT

     19.1 TERMINATION BY THE CONTRACTOR

     If through no fault of the Contractor, the Owner fails to make payment
     within seven (7) days from the time payment should have been made provided
     herein (except where such nonpayment is due to defective Work by Contractor
     or other material breach by Contractor), then Contractor may, without
     prejudice to any other remedy it may have, upon two (2) additional days'
     written notice to the Owner, stop its Work until payment of the amount
     owing has been received. In the event Contractor resumes its Work, the
     Schedule shall be equitably adjusted, and Owner shall incur no liability
     for such suspension. If, through no fault of the Contractor, the
     Contractor's Work is suspended for the more then sixty (60) days, the
     Contract Sum may be equitably adjusted by the amount of Contractor's
     reasonable costs of shutdown, delay and startup. The Contractor may, upon
     seven additional days' written notice to the Owner and the Architect,
     terminate the Contract and recover from the Owner payment for Work
     executed and for proven loss with respect to materials, equipment, tools,
     and construction equipment and machinery, including reasonable overhead,
     profit and damages applicable to the Project.

     19.2 TERMINATION BY THE OWNER

     19.2.1 The Owner may terminate the Contract if the Contractor:

          .1   refuses or fails to supply enough properly skilled workers or
               proper materials;

          .2   fails to make payment to Subcontractors for materials or labor in
               accordance with the respective agreements between the Contractor
               and the Subcontractors;

          .3   disregards laws, ordinances, or rules, regulations or orders of a
               public authority having jurisdiction; or

          .4   otherwise is guilty of breach of a provision of the Contract
               Documents.

     19.2.2 When any of the above reason exists, the Owner, may, without
     prejudice to any other remedy the Owner may have and after giving the
     Contractor seven days' written notice, terminate the Contract and take
     possession of the site and all materials, equipment, tools, and
     construction equipment and machinery thereon owned by the Contractor and
     may finish the Work by whatever reasonable method the Owner may deem
     expedient. Upon request of the Contractor, the Owner shall furnish to the
     Contractor a detailed accounting of the costs incurred by the Owner in
     finishing the Work.

     19.2.3 When the Owner terminates the Contract for one of the reasons stated
     in Subparagraph 19.2.1, the Contractor shall not be entitled to receive
     further payment until the Work is finished. If the Contractor's Work is
     terminated or suspended for the convenience of the Owner or any other
     party, (as opposed to termination for Contractor's default), then
     Contractor shall be paid for all Work performed to-date, and for equipment
     and materials already ordered. Contractor shall not be entitled to any
     additional payment for claimed termination damages or costs.

     19.2.4 If the unpaid balance of the Contract Sum exceeds costs of finishing
     the Work, including compensation for the Architect's services and expenses
     made necessary thereby, and other damages incurred by the Owner and not
     expressly waived, such excess shall be paid to the

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.



                                                                              20




     Contractor. If such costs and damages exceed the unpaid balance, the
     Contractor shall pay the difference to the Owner. The amount to be paid to
     the Contractor or Owner, as the case may be, shall be certified by the
     Architect, upon application, and this obligation for payment shall survive
     termination of the Contract.

ARTICLE 20 OTHER CONDITIONS OR PROVISIONS'

CONTRACTUAL CLARIFICATIONS:

o    This Agreement is conditional upon acceptance of mutually agreed upon terms
     and conditions specified herein.

COMMERCIAL CLARIFICATIONS:

o    This Agreement is based on a normal 40-hour week. No premium time has been
     included.

o    Retention to be paid within 30 days after completion of Contractor's Work

o    Contractor will be reimbursed for material received and stored in a
     warehouse or prestocked at jobsite, following receipt of lien releases in a
     form acceptable to Owner for the materials.

o    Temporary power, lighting, hearing and potable water to be provided by
     Owner.

o    Payment due for materials received and stored on site in an area adjacent
     to work area. No offsite warehouse has been included.

o    Insurance to be provided on Standard Accord Form.

o    A clear, uninhibited entry of sufficient size to accommodate all clean
     room components shall be provided in close proximity to the clean room.

o    Agreement is based upon award of the complete bid package.

o    Performance and/or payment bonds are not included.

o    PCI had included daily clean-up of cleanroom construction debris.

o    If the project is canceled or put on hold, PCI shall be paid in full for
     Work properly performed up to the day of cancellation. If the project is
     extended in duration for more than sixty (60) days from the original
     contracted schedule. PCI shall be entitled to an equitable adjustment in
     the Contract Time and Contract Sum.

o    All materials and connections provided by Owner are to be provided in a
     timely manner. PCI is not responsible for coordinating Owner provided
     material.

SCHEDULE

o    Owner and Contractor mutually agree upon the schedule set forth herein in
     relation to releases, durations and site conditions.

o    Contractor has been afforded the opportunity to establish the activities
     and working time necessary to perform and complete the Work pursuant to the
     terms of this Agreement.

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.




                                                                              21




In the event Contractor is unable to finish the Work on or about the scheduled
completion date through no fault of Contractor, Contractor shall be entitled to
reasonable compensation for cost resulting from the delay.

CHANGES:

o    All changes must be agreed upon by Owner and Contractor in writing and in
     advance of any additional Work, modifications, or additions. The cost of
     any extra Work, modifications, or additions required by jobsite conditions
     or directed by Owner shall be added to contract price plus 10% for overhead
     and 5% fee. Contractor shall be entitled to payments for said Work, as
     directed by Owner, whether issued verbally or in writing. The jobsite
     representative of Owner shall have authority to authorize extra Work,
     modifications, or additions as outlined above, and to commit to Owner to
     make payment therefor.

o    No charges will be made to Contractor's account for Work performed or
     material furnished by others, without notifying Contractor and receiving
     its written approval before proceeding with such Work.

This Agreement entered into as of the day and year first written above.

OWNER (Signature)                                   CONTRACTOR(Signature)

- ------------------------                            ----------------------------
(Printed name and title)                            (Printed name and title)

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

This Document includes abbreviated General Conditions and should not be used
with other general conditions.

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by The Associated General
Contractors of America.

(AIA LOGO)
(C) 1997 AIA (R)

AIA DOCUMENT A107 - 1997
ABBREVIATED OWNER -
CONTRACTOR AGREEMENT

The American Institute of Architects
1735 New York Avenue N.W.
Washington, D.C. 20006-5292

(C) 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987, (C)
1997 by The American Institute of Architects. Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution. WARNING: Unlicensed photocopying violates US
copyright laws and will subject the violator to legal prosecution. This document
was electronically produced with permission of the AIA and can be reproduced in
accordance with your license without violation until the date of expiration as
noted below. expiration as noted below. User Document: ans cleanroom.aia -
8/25/2003. AIA License Number 1013444, which expires on 1/31/2004.


                                                                              22

EX-10.28

EXHIBIT 10.28

CHANGE ORDER	OWNER	x
CONSTRUCTION MANAGER - ADVISER EDITION	CONSTRUCTION MANAGER	x
AIA Document G701/CMa - Electronic Format	ARCHITECT	x
	CONTRACTOR	x
	FIELD	o
	OTHER	o

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

PROJECT:	CHANGE ORDER NO: 2
(Name and address)
Advanced Neuromodulation Systems, Inc. at Legacy	INITIATION DATE: December 15, 2003
Business Park
6901 Preston Rd.	PROJECT NOS.: General Construction
Plano, TX 75024
	CONTRACT FOR:
	CONTRACT DATE: 30 April, 2003
TO CONTRACTOR:
(Name and address)
Rogers O’Brien Construction Co., Inc.
1901 Regal Row
Dallas, TX 75235

The Contract is changed as follows:

Add for interior construction at high bay building and office building (reference attached Exhibit “A” for complete list of plans & specifications. In accordance with accepted alternates & contractor’s clarifications (ref. Exhibit “B”).

Add for interior construction at 2 story office building = $3,095,733

Add for interior construction at High Bay Building = $491,657

Net Add for all revisions: Three million five hundred eighty seven thousand three hundred ninety dollars $3,587,390

Not valid until signed by the Owner, Construction Manager, Architect and Contractor.

The original (Guaranteed Maximum Price) was	$	7,811,128
Net change by previously authorized Change Orders	$	153,376
The (Guaranteed Maximum Price) prior to this Change Order was	$	7,964,504
The (Guaranteed Maximum Price) will be (increased) by this Change Order	$	3,587,390
The new (Guaranteed Maximum Price) including this Change Order will be	$	11,551,894

The Contract Time will be (increased) by ( as noted below ) days.

The date of Substantial Completion as of the date of this Change Order therefore is High Bay = March 5, 2004

Office Building = May 1, 2004

© 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292. AIA DOCUMENT G701/CMa - CHANGE ORDER - CONSTRUCTION MANAGER-ADVISER EDITION - 1992 EDITION - AIA® - WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced in accordance with your license without violation until the date of expiration as noted below, expiration as noted below. User Document: co 2 ans.aia – 3/12/2004. AIA License Number 1005237, which expires on 10/7/2004.

Electronic Format G701/CMa-1992

1

NOTE: This summary does not reflect changes in the Contract Sum, Contract Time or Guaranteed Maximum Price which have been authorized by Construction Change Directive.

CONSTRUCTION MANAGER	ARCHITECT
KDC-Legacy, L.P.	Good Fulton & Farrell
ADDRESS	ADDRESS
8411 Preston Rd. Suite 700	2808 Fairmount, Suite #300
Dallas, TX 75225	Dallas, TX 75201
BY                                                   DATE	BY                                                   DATE
/s/ M. ROSAMUND                    12/15/03	/s/ JOSEPH PATTI                       12/15/03
CONTRACTOR	OWNER
Rogers O’Brien Construction Co., Inc.	Advanced Neuromodulation Systems
ADDRESS	ADDRESS
1901 Regal Row	6501 Windcrest, Suite #100
Dallas, TX 75235	Plano, TX 75024
BY                                                   DATE	BY                                                   DATE
/s/ PRESTON MCAFEE              12/15/03	/s/ KENNETH HAWARI             12/15/03

© 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292. AIA DOCUMENT G701/CMa - CHANGE ORDER - CONSTRUCTION MANAGER-ADVISER EDITION - 1992 EDITION - AIA® - WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced, in accordance with your license without violation until the date of expiration as noted below, expiration as noted below. User Document: co 2 ans.aia – 3/12/2004. AIA License Number 1005237, which expires on 10/7/2004.

Electronic Format G701/CMa-1992

2

EX-10.29

EXHIBIT 10.29

CHANGE ORDER	OWNER	x
CONSTRUCTION MANAGER - ADVISER EDITION	CONSTRUCTION MANAGER	x
AIA Document G701/CMa - Electronic Format	ARCHITECT	x
	CONTRACTOR	x
	FIELD	o
	OTHER	o

THIS DOCUMENT HAS IMPORTANT LEGAL, CONSEQUENCES; CONSULTATION WITH AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION, AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

PROJECT:	CHANGE ORDER NO: 3
(Name and address)
Advanced Neuromodulation Systems, Inc. at Legacy	INITIATION DATE: February 20, 2004
Business Park
6901 Preston Rd.	PROJECT NOS.:
Plano, TX 75024
	CONTRACT FOR: General Construction
	CONTRACT DATE: 30 April, 2003
TO CONTRACTOR:
(Name and address)
Rogers O’Brien Construction Co., Inc.
1901 Regal Row
Dallas, TX 75235

The Contract is changed as follow’s:

Add for work indicated, in Rogers O’Brien Proposed Change Pricing items #:
2,7, 9, 10, 11, 13, 14, 15, 16, 17, 19, 20, 23, 24, 26, 27, 28, 29, 33, 35, 36, 38,

(Ref. Attached Exhibit “A” for breakdown and description)

Net Deduct for all revisions: One hundred ninety seven thousand eight hundred ninety five dollars $(197,895)

Not valid until signed by the Owner, Construction Manager, Architect and Contractor.

The original (Guaranteed Maximum Price) was	$	7,811,128
Net change by previously authorized Change Orders	$	3,740,766
The, (Guaranteed Maximum Price) prior to this Change Order was	$	11,551,894
The (Guaranteed Maximum Price) will be (decreased):
by this Change Order	$	(197,895	)
The new (Guaranteed Maximum Price) including this Change Order will be	$	11,353,999

The Contract Time will be (unchanged) by zero (-0-) days.

The date of Substantial Completion as of the date of this Change Order therefore is High Bay = March 5, 2004

Office Building = May 1, 2004

NOTE: This summary does not reflect changes in the Cantract Sum, Contract Time or Guaranteed Maximum Price which have been authorized by Construction Change Directive.

© 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292. AIA DOCUMENT G701/CMa-CHANGE ORDER - CONSTRUCTION MANAGER-ADVISER EDITION -1992 EDITION - AIA® - WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. This document was electronically produced with permission of the AIA can be reproduced in accordance with your license without violation until the date of expiration as noted below, expiration as noted below, expiration as noted below, User Document: co 3 ans.aia-3/12/2004. AIA License Number 1005237, which expires on 10/7/2004.

Electronic Format G701/CMa-1992

1

CONSTRUCTION MANAGER	ARCHITECT
KDC-Legacy, L.P.	Good Fulton & Farrell
ADDRESS	ADDRESS
8411 Preston Rd. Suite 700	2808 Fairmount, Suite #300
Dallas, TX 75225	Dallas, TX 75201
BY                                           DATE	BY                                           DATE
/s/ M. ROSAMUND                  02/20/04	/s/ JOSEPH PATTI                     02/20/04
CONTRACTOR	OWNER
Rogers O’Brien Construction Co., Inc.	Advanced Neuromodulation Systems
ADDRESS	ADDRESS
1901 Regal Row	6501 Windcrest, Suite #100
Dallas, TX 75235	Plano, TX 75024
BY                                           DATE	BY                                           DATE
/s/ PRESTON MCAFEE             02/20/04	/s/ KENNETH HAWARI             02/20/04

© 1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W. WASHINGTON, D.C. 20006-5292. AIA DOCUMENT G701/CMa - CHANGE ORDER - CONSTRUCTION MANAGER-ADVISER EDITION -1992 EDITION - AIA® - WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosection. This document was electronically produced with permission of the AIA and can be reproduced in accordance With your license without violation until the date of expiration as noted below, expiration as noted below, expiration as noted below, User Document: co 3 ans.aia – 3/12/2004, AIA License Number 1005237, which expires on 10/7/2004.

Electronic Format G701/CMa-1992

2

EX-14.1

EXHIBIT 14.1

Advanced Neuromodulation Systems, Inc.

Corporate Code of Conduct

(adopted effective as of January 1, 2004)

TABLE OF CONTENTS

1. INTRODUCTION TO THE PROGRAM
	A Letter from the President
	The Code’s Purpose
	Responsibilities
	Implementation
	Communicating Concerns and Handling Alleged Violations
2. CONFLICTS OF INTEREST
	Outside Business Interests
	Personal and Family Conflicts of Interest
	Gifts and Entertainment
	Improper Payments
	Political Contributions
3. RELATIONSHIPS WITH HEALTH CARE PROFESSIONALS
	Product Training and Education
	Supporting Third Party Educational Conferences
	Sales and Promotional Meetings
	Arrangements With Consultants
	Gifts
	Provision of Reimbursement and Other Economic Information and Assistance
	Grants and Other Charitable Donations
4. RELATIONSHIP WITH GOVERNMENTS AND GOVERNMENT REPRESENTATIVES
5. OUR PUBLIC COMPANY DISCLOSURE OBLIGATIONS
6. SECURITIES AND INSIDE INFORMATION
7. ANTITRUST
8. INTERNATIONAL TRADE RESTRICTIONS AND BOYCOTTS
9. INTELLECTUAL PROPERTY AND CONFIDENTIALITY
	Patents
	Trademarks
	Copyrights
	Works Generated by Employees
	Confidentiality
	Confidential Competitor Information
10. HUMAN RESOURCES
11. INTERNAL ACCOUNTING CONTROLS
12. BOOKS AND RECORDS
13. COMMERCIAL TRANSACTIONS
14. HEALTH AND SAFETY
Sublease Agreement dated as of June 18, 2003
Fixed Price Contract dated as of December 17, 2003
Fixed Price Contract dated as of December 10, 2003
Standard Form of Agreement-Owner and Contractor
Standard Form of Agreement-Owner and Architect
Standard Form of Agreement-Owner/Construction Mgr.
Change Order dated as of August 27, 2003
Abbreviated Standard Form of Agreement
Change Order dated as of December 15, 2003
Change Order dated as of February 20, 2004
Code of Ethics
Subsidiaries
Consent of Independent Auditors
Certification of the CEO Pursuant to Rule 13a-14
Certification of the CFO Pursuant to Rule 13a-14
Certification of the CEO Pursuant to Section 906
Certification of the CFO Pursuant Section 906

Advanced Neuromodulation Systems, Inc.

Corporate Code of Conduct

Table of Contents

1.	Introduction to the Program
	• LETTER FROM THE PRESIDENT
	• THE CODE’S PURPOSE
	• RESPONSIBILITIES
	• IMPLEMENTATION
	• COMMUNICATING CONCERNS AND HANDLING ALLEGED VIOLATIONS
2.	Conflicts of Interest, Bribes and Kickbacks
	• OUTSIDE BUSINESS INTERESTS
	• PERSONAL AND FAMILY CONFLICTS OF INTEREST
	• GIFTS AND ENTERTAINMENT
	• IMPROPER PAYMENTS
	• POLITICAL CONTRIBUTIONS
3.	Relationships With Health Care Professionals
	• PRODUCT TRAINING AND EDUCATION
	• SUPPORTING THIRD PARTY EDUCATIONAL CONFERENCES
	• SALES AND PROMOTIONAL MEETINGS
	• ARRANGEMENTS WITH CONSULTANTS
	• GIFTS
	• PROVISION OF REIMBURSEMENT AND OTHER ECONOMIC INFORMATION AND ASSISTANCE
	• GRANTS AND OTHER CHARITABLE DONATIONS
4.	Relationships With Governments and Government Representatives
5.	Our Public Company Disclosure Obligations
6.	Securities and Inside Information
7.	Antitrust
8.	International Trade Restrictions and Boycotts

9.	Intellectual Property and Confidentiality
	• PATENTS
	• TRADEMARKS
	• COPYRIGHTS
	• WORKS GENERATED BY EMPLOYEES
	• CONFIDENTIAL COMPETITOR INFORMATION
10.	Human Resources
11.	Internal Accounting Controls
12.	Books and Records
13.	Commercial Transactions
14.	Health and Safety

Advanced Neuromodulation Systems, Inc.

Corporate Code of Conduct

1. INTRODUCTION TO THE PROGRAM

A Letter from the President

Dear ANS Employee:

ANS’ success depends directly on your high-quality work performance and your personal integrity. Our Company has worked hard to earn a reputation for high ethical standards and performance quality within the medical device industry. It is critical that we maintain this standard of integrity and performance in all of our relationships, both inside and outside the Company.

As we continue to grow, we must continue to educate our new employees about our standards and to reinforce and build upon these standards with employees who have served the Company well for years. In addition, we must reflect new legal requirements and ethical guidelines into our corporate policies. This Corporate Code of Conduct (the “Code”) provides general legal and ethical guidelines for our business practices. Effective immediately, it replaces the existing Code of Ethics, which is summarized and attached to the Employee Guide.

As a member of our corporate family, you must comply with all laws and regulations and must conduct yourself and your business activities with integrity and according to the high ethical standards set forth in the newly-adopted Code. You are responsible for knowing and complying with the information in the Code. Additionally, managers and supervisors are responsible for ensuring their employees understand and follow compliance policies and guidelines. The Code is intended as a general overview of correct ethical and legal actions. It does not, and indeed cannot, provide an exhaustive, step-by-step guide for every situation. If you have any question whether a situation you are faced with might violate a legal or ethical policy, then you should discuss that situation with a supervisor, a compliance committee member, the General Counsel, or Human Resources. If you know that someone else is violating the Code, you have a responsibility under the Code to report that violation.

We encourage every employee to become familiar with the Code’s contents. Because of the nature and scope of their duties, however, nonexempt hourly-paid employees and nonexempt salaried employees are only required to read Sections 1, 2, 6, 9, 10, 12, and 14 of the Code. All other employees should read and become familiar with the Code in its entirety. Essentially, if you qualify for overtime pay, you are a nonexempt employee. If you have any question about which category you fall into, contact the Human Resources Department. We will conduct periodic training on various aspects of the Code. If you have any comments or questions, please do

not hesitate to contact a supervisor, compliance committee member, the General Counsel, or Human Resources.

If we all comply with these standards, ANS will remain a quality place to work, and we will continue to build and enhance our reputation and standard of excellence.

Christopher G. Chavez
President and Chief Executive Officer

The Code’s Purpose

Our Code of Conduct provides the minimum standards of conduct that each employee must meet, and it serves as a guide for carrying out our business within appropriate legal and ethical boundaries. We should strive to exceed these standards in every aspect of our business and to maintain the high degree of integrity, honesty, and fairness that our customers, suppliers, investors, contracting partners, and other members of the public expect from our Company.

The Code provides general guidance for conducting day-to-day activity. It is not a list of rules and regulations but rather a guide to good values and judgment. You may encounter situations that are not covered by a specific provision within the Code. If you have any question whether a course of conduct is legal or ethical, you should contact your supervisor, the General Counsel, Human Resources, or a compliance committee member. The compliance committee will be composed of three to five individuals selected by the President and will initially be comprised of the General Counsel, the Chief Financial Officer, and the Vice President – Human Resources. The Code also describes the process from the filing of an initial complaint through the investigation process and the range of possible disciplinary actions.

Some areas may be too complex to be covered within the Code. These areas may be discussed in greater detail in other publications or policies, which will be made available to employees directly involved in those subject areas. Examples of these are our Off-Label Promotion Policy and our Insider Trading Policy, both of which remain in effect.

Employees who do not comply with the Code and applicable laws may be subject to appropriate disciplinary action, including dismissal, and to individual and corporate legal liability.

Responsibilities

Department Heads/Supervisors

Department heads and supervisors are responsible for taking appropriate steps to see that employees under their supervision receive the Code and certify that they have read and understood it. Supervisors and department heads are accountable if they fail to detect violations of the Code that they reasonably should have discovered. Supervisors and department heads are also accountable if they fail to report an ethical or legal violation to the appropriate party or violate the Code themselves. It is their responsibility to ensure that their work environment encourages open communication concerning ethics policies. A supervisor or department head will be disciplined if they retaliate, or cause another to retaliate, against an employee who reports a violation.

All Employees

All employees must become familiar with the Code and our commitment to ethical business conduct. We require employees to follow the Code in their day-to-day activities. If an employee is uncertain about the proper course of conduct in any situation, he or she must consult with a supervisor, compliance committee member, the General Counsel, or Human Resources. Employees must attend any required training classes. Employees are required to certify that they have received and reviewed the Code and that they will comply with the Code. If an employee knows of a potential violation of the ethics policy, he or she must report it immediately to a supervisor, a compliance committee member, the General Counsel, or Human Resources.

Implementation

Compliance Officer

The Compliance Officer is the General Counsel of the Company. The Compliance Officer receives all reports of alleged violations and initiates investigations into those allegations. Upon conclusion of an investigation, the compliance committee and investigative team report their findings to the Compliance Officer and recommend a course of action. The Compliance Officer reviews the report and the recommendation and issues a preliminary determination of discipline to the Compliance Committee. The Compliance Committee then determines the appropriate discipline for violation of the Code. The Compliance Officer reports incidents of serious misconduct to the President and the Board of Directors.

Compliance Committee

As previously noted, the compliance committee will be composed of three to five individuals selected by the President and will initially be comprised of the General Counsel, the Chief Financial Officer, and the Vice President – Human Resources. Members of the compliance committee will investigate an allegation and present the facts of the investigation to the Compliance Officer, assess whether or not they feel the allegation has been substantiated, document any prior incidents concerning the affected individuals, and recommend the appropriate discipline. The compliance committee is also responsible for conducting periodic audits of the compliance program, which include an examination of disciplines imposed, incidents reported, and updates of the Code to change any problematic areas. The Compliance Committee is also responsible for implementing mandatory training programs and ensuring that all employees are familiar with the Code.

Communicating Concerns and Handling Alleged Violations

Reporting You should communicate any concerns about the ethical implications of past, present, or future conduct in the manner in which you feel most comfortable to any of the following: your supervisor, a compliance committee member, the General Counsel, or Human Resources. These persons will report any noncompliance or alleged noncompliance with the Code to the Compliance Officer. Please do not hesitate to contact any of these individuals with any question or concern you may have.

You may request confidentiality when reporting a suspected violation, or you may report anonymously. To the extent allowed by law, communications with compliance staff will be kept confidential.

Investigations

Persons appointed by the Compliance Officer or the Compliance Committee will investigate each allegation of wrongdoing. They will conduct inquiries and investigations with appropriate concern for the reputations of the individuals involved. If you are involved in an investigation, you should not discuss the situation with any other person. Discussing an investigation could damage the reputation of innocent persons or taint the fact-finding process. The Compliance Officer coordinates any findings from the investigation and recommends corrective action or changes that need to be made. All investigations are conducted promptly, with proper regard for the circumstances.

Discipline

Those employees who violate the Code may be subject to discipline. The discipline imposed will vary depending on the nature, severity, and frequency of the violation. Discipline may be imposed for violations of the Code, failure to report violations, and withholding relevant and material information concerning violations. Supervisors and department heads may also be disciplined for failure to report a violation that they knew, or reasonably should have known, occurred. Employees will be informed of the charges against them and will be given the opportunity to explain their actions before any disciplinary action is imposed.

The following disciplinary actions may be imposed:

• Verbal Warning

• Written Warning

• Written Reprimand

• Suspension

• Termination

Offenders may also be subject to criminal prosecution and civil liability, including paying the Company or other injured parties for their loss. Upon conclusion of an investigation, the Compliance Officer will review the findings of the investigative team and determine whether governmental authorities should be contacted.

Submitting False Reports

Any person who knowingly submits a false or misleading report will be subject to discipline. A person who appropriately voices an honest concern will not be disciplined even if the concern is discovered to be without merit.

Training Programs

To ensure that each employee is familiar with the Code and comfortable with making the correct ethical choices, the Compliance Committee will offer periodic training programs. Attendance at some training programs may be mandatory. Your supervisor

or the Compliance Committee will notify you when you are required to attend a training program. If you cannot attend a required training program, you must attend the next available training program on that issue.

Employee Evaluations

Your compliance with applicable laws, rules, regulations, and the Code, as well as training class participation, may form part of your yearly employee evaluation. We may also consider compliance when determining salaries, wages, and promotions. You must communicate any concerns with your supervisor, a compliance committee member, the General Counsel, or Human Resources so that you can make the correct ethical and legal choices.

2. CONFLICTS OF INTEREST

Outside Business Interests

You may engage in outside business activities or financial interests provided there is no actual, apparent, or potential conflict of interest and the activity does not adversely affect your ability to perform your job. You must obtain prior written approval from the Human Resources Vice President prior to accepting outside employment.

Personal and Family Conflicts of Interest

Personal conflicts of interest arise when actions occur that are influenced or are perceived to be influenced by a desire for personal gain (for you, a relative, or friend) to the detriment of the Company. A conflict may involve physicians or physician office staff, insurance or third party payor employees, hospital or ambulatory surgery center employees, customers, suppliers, fellow employees, shareholders, and others. You should avoid even the appearance of a conflict of interest.

Gifts and Entertainment

As an employee of the Company, you may not solicit or accept, from any interested party, any gratuity, use of property or facilities, loans, or things valued at over $100 for yourself or your family, friends, or associates. If an interested party offers you something of value (over $100 per calendar year), you must report it immediately to the Human Resources Vice President. You may accept breakfast, lunch, or dinner invitations to discuss legitimate business matters. You may also accept novelty gift items with nominal value.

The limitations on gifts and entertainment apply to anything given as a result of a business relationship, for which the recipient does not pay the fair market value. The guidelines apply at all times; they do not change during traditional gift giving seasons or during the planning of a company event. In determining whether it is appropriate to accept a gift, ask yourself the following questions:

• Is it clearly related to the conduct of business?

• Is it moderate, reasonable, and in good taste?

• Would I feel comfortable telling members of the media, customers, suppliers, or other employees that I received this gift?

• Do I feel any pressure to reciprocate this gift or grant special favors as a result of this gift?

• Am I certain the gift does not violate any law or business regulation?

Unless authorized in writing by the President or otherwise consistent with Section 3, gifts and other gratuities, personal favors, or benefits provided out of corporate funds or other corporate assets to persons not employed by the Company are prohibited except for business-related gifts of nominal value and reasonable business-related entertainment expenditures.

Improper Payments

Under no circumstances is it acceptable to offer, give, solicit, or receive any form of bribe, kickback, or inducement. A kickback means any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind that is provided directly or indirectly for the purpose of improperly obtaining or rewarding favorable consideration or treatment for the Company or any of its affiliates or employees. See also “Relationships With Health Care Professionals—Gifts” below.

Political Contributions

The making of contributions from corporate funds or other assets to or for the benefit of a political party, political committee, or other political organization or to or for the benefit of a candidate for political office, even if lawful, is prohibited unless specifically authorized by the President or the Board of Directors. Contributions include financial and non-financial donations. You may not make any contributions to political parties or candidates on behalf of the Company without prior authorization from the President or the Board of Directors. If you choose to make a private donation, you may not do anything to imply that you are acting on behalf of the Company, such as using the Company’s facilities, letterhead, properties, or logos.

As a responsible corporate citizen, the Company may occasionally speak out on issues of importance to the Company. Executive officers will develop the Company’s position on relevant legislative and regulatory issues and direct our government relations representatives to communicate these positions to government officials. Employees should always refer any requests for information from the news media concerning the Company’s position on public issues or about other business matters to a corporate officer.

3. RELATIONSHIPS WITH HEALTH CARE PROFESSIONALS

ANS is dedicated to the advancement of medical science, the improvement of patient care, and in particular to the contribution that high quality, cost-effective health care technology can make toward achieving these goals. In pursuing this mission, ANS recognizes that adherence to ethical standards and compliance with applicable laws are

critical to our ability to continue our collaboration with health care professionals. ANS encourages ethical business practices and socially responsible conduct related to our interactions with health care professionals. We also respect the obligation of health care professionals to make independent decisions regarding medical devices and related products and services. Consequently, ANS adopts the following standards to facilitate ethical interactions with those individuals or entities that purchase, lease, recommend, use, arrange for the purchase or lease of, or prescribe ANS’ products (“health care professionals”).

Between ANS and health care professionals, many forms of interactions exist that advance medical science or improve patient care, including the following:

• Advancement of Medical Technology. Developing cutting-edge medical technology and improving existing products are collaborative processes between ANS and health care professionals. Innovation and creativity are essential to the development and evolution of our devices and often occur outside our facilities.

• Safe and Effective Use of Medical Technology. The safe and effective use of our devices often requires ANS to offer health care professionals appropriate instruction, education, training, service, and technical support. Regulators may also require this type of training as a condition of product approval.

• Research and Education. ANS supports bona fide medical research, education, and enhancement of professional skills, which serve patient safety and increase access to new technology.

ANS may interact with health care professionals for many legitimate objectives other than selling, leasing, recommending, arranging for the sale or lease of, or prescribing products; and some of these relationships are not addressed in this Code. Any interpretation of the provisions of this Code, as well as ANS’ interactions with health care professionals not specifically addressed in this Code, should be made in light of the following principle: ANS encourages ethical business practices and socially responsible conduct and will not use any unlawful inducement to sell, lease, recommend, or arrange for the sale, lease, or prescription of our products.

Product Training and Education

     ANS has a responsibility to make product education and training available to health care professionals. In fact, the FDA mandates training and education to facilitate the safe and effective use of certain of our products. Such programs often necessitate out- of-town travel for some participants and may extend more than one day. With regard to programs focused on education and training in the safe and effective use of ANS products:

• Programs and events should be conducted in clinical, educational, conference, or other settings, including hotel or other commercially available meeting facilities conducive to the effective transmission of knowledge.

• Programs requiring hands-on training in medical procedures should be held at training facilities, medical institutions, laboratories, or other appropriate facilities. The training staff should have the proper qualifications and expertise to conduct such training.

• ANS may provide health care professional attendees with hospitality only in the form of reasonable meals and receptions in connection with these programs. Any such meals and receptions should be reasonable in value and subordinate in time and focus to the educational or training purpose of the meeting.

• ANS may pay for reasonable travel and lodging costs incurred by attending health care professionals.

• ANS may pay reasonable honoraria to program faculty members and reimburse their reasonable travel, lodging, and meal costs.

• It is generally not appropriate for ANS to pay for the meals, hospitality, travel, or other expenses for guests of health care professionals or for any other person who does not have a bona fide professional interest in the information being shared at the meeting.

Supporting Third Party Educational Conferences

Bona fide independent, educational, scientific, or policymaking conferences promote scientific knowledge, medical advancement, and the delivery of effective health care. These typically include conferences sponsored by national, regional, or specialty medical associations; conferences sponsored by accredited continuing medical education providers; and grand rounds.

ANS may support these conferences in various ways:

• Educational Grants. With the prior approval of the President, ANS may provide a grant either directly to the conference sponsor to reduce conference costs or to a training institution or the conference sponsor to allow attendance by medical students, residents, fellows, and others who are health care professionals in training. ANS may provide educational grants when: (1) the gathering is primarily dedicated to promoting objective scientific and educational activities and discourse; and (2) the training institution or the conference sponsor selects the attending health care professionals who are in training. Such grants should be paid only to organizations with a genuine educational purpose or function and may be used only to reimburse the legitimate expenses for bona fide educational activities. Such grants also should be consistent with relevant guidelines established by professional societies or organizations. The conference sponsor should be responsible for and control the selection of program content, faculty, educational methods, and materials.

• Reasonable Meals and Hospitality. ANS may provide funding to the conference sponsor to support the conference’s meals and hospitality. Also, ANS may itself provide meals and receptions for all health care professional attendees, but only

	if it is provided in a manner that is also consistent with the sponsor’s guidelines. Any meals, receptions, and hospitality should be reasonable in value and should be subordinate in time and focus to the purpose of the conference.
•	Faculty Expenses. ANS may make grants to conference sponsors for reasonable honoraria, travel, lodging, and meals for health care professionals who are bona fide conference faculty members.
•	Advertisements and Demonstration. ANS may purchase advertisements and lease booth space for company displays at conferences.

Sales and Promotional Meetings

It is appropriate for ANS to meet with health care professionals to discuss product features, contract negotiations, and sales terms. Often, these meetings occur at or close to the health care professional’s place of business. It is appropriate for ANS to pay for occasional hospitality in the form of reasonable meals and receptions for health care professional attendees that are conducive to the exchange of information. It is also appropriate to pay for reasonable travel costs of attendees when necessary (e.g., for executive office, manufacturing facility, or plant tours). However, it is generally not appropriate to pay for meals, hospitality, travel, or lodging of guests of health care professionals or any other person who does not have a bona fide professional interest in the information being shared at the meeting.

Arrangements With Consultants

Many health care professionals serve as consultants to ANS, providing valuable bona fide consulting services, including research, participation as advisors, presentations at ANS-sponsored training, and product collaboration. It is appropriate to pay health care professionals reasonable compensation for performing these services. The following factors support the existence of a bona fide consulting arrangement between ANS and health care professionals:

• Consulting arrangements should be written, signed by the parties, and specify all services to be provided.

• Compensation paid to consultants should be consistent with fair market value for the services provided.

• Consulting agreements should be entered into only where a legitimate need and purpose for the services is identified in advance.

• Selection of consultants should be on the basis of the consultants’ qualifications and expertise to address the identified purpose and should not be on the basis of volume or value of business generated by the consultants.

• The venue and circumstances for meetings with consultants should be appropriate to the subject matter of the consultation. These meetings should be conducted in clinical, educational, conference, or similar settings, including hotel

• Or other commercially available meeting facilities, conducive to the effective exchange of information.

• ANS-sponsored hospitality that occurs in conjunction with a consultant meeting should be reasonable in value and should be subordinate in time and focus to the primary purpose of the meeting.

• ANS may pay for reasonable and actual expenses incurred by consultants in carrying out the subject of the consulting arrangement, including reasonable and actual travel, meals, and lodging costs incurred by consultants attending meetings with, or on behalf of, ANS.

• When ANS contracts with a consultant for research services, there should be a written research protocol.

Gifts

ANS occasionally may provide modest gifts to health care professionals, but only if the gifts benefit patients or serve a genuine educational function. Other than the gift of medical textbooks or anatomical models used for educational purposes, gifts from an ANS employee should generally have a fair market value of less than $100, unless approved by the President. In addition, ANS may occasionally give health care professionals branded promotional items of minimal value related to the health care professional’s work or for the benefit of patients. Gifts may not be given in the form of cash or cash equivalents.

Provision of Reimbursement and Other Economic Information and Assistance

ANS may support accurate and responsible billing to Medicare and other payors by providing reimbursement information to health care professionals regarding ANS’ products, including identifying appropriate coverage, coding, or billing of ANS products or of procedures using those products. ANS may also provide information designed to offer technical or other support intended to aid in the appropriate and efficient use or installation of ANS’ products. In a circumstance when the hospital or ambulatory surgery center indicates that it has experienced difficulty in obtaining full or adequate reimbursement of device costs or is unwilling or unable to assume the risk of non-reimbursement for our products, ANS may offer the benefits provided by the Risk-Free Equipment Program or similar programs. However, it is ANS’ policy to not affirmatively promote the RFE Program without such an indication from the hospital or surgery center. It is inappropriate for ANS to provide technical or other support for the purpose of unlawfully inducing health care professionals to purchase, lease, recommend, use, or arrange for the purchase, lease, or prescription of ANS’ products.

Grants and Other Charitable Donations

With the prior approval of the President, ANS may make donations for a charitable purpose, such as supporting genuine independent medical research for the advancement of medical science or education, indigent care, patient education, public education, or the sponsorship of events where proceeds are intended for charitable purposes. Donations should be made only to charitable organizations or, in exceptional

instances, to individuals engaged in genuine charitable missions for the support of that mission. It is not appropriate for ANS to make such donations for the purpose of unlawfully inducing health care professionals to purchase, lease, recommend, use, or arrange for the purchase, lease, or prescription of ANS’ products. All donations should be appropriately documented.

Examples of appropriate charitable grants and related considerations follow:

• Advancement of Medical Education. ANS may make grants to support the genuine medical education of medical students, residents, and fellows participating in fellowship programs, which are charitable or have an academic affiliation, or where consistent with the preamble to this section, other medical personnel. (For additional considerations regarding educational grants, see “Supporting Third Party Educational Conferences.”)

• Support of Research With Scientific Merit. ANS may make research grants to support genuine medical research. The purpose of the grant must be clearly documented. (For guidance as to the limitations that apply when ANS contracts with a health care professional to provide research on behalf of ANS, see “Arrangements With Consultants.”)

• Public Education. ANS may make grants for the purpose of supporting education of patients or the public about important health care topics.

4. RELATIONSHIP WITH GOVERNMENTS AND GOVERNMENT REPRESENTATIVES

Government Investigations

The Company will fully cooperate with any appropriate government investigations. The General Counsel will coordinate all interaction with government officials pertaining to government investigations. If you receive any inquiries, requests, or subpoenas at work or at home, you must notify the General Counsel before responding. Do not furnish untrue or misleading information, destroy or alter records, or do anything to obstruct a government investigation. You should not attempt to cause another colleague to fail to provide accurate information or obstruct, mislead, or delay the communication of information or records relating to a possible violation of law.

Hiring of Current and Former Government Employees

The recruitment and employment of former or current U.S. government employees is subject to complex rules. Similar rules may also apply to state and local government employees and legislators. Each situation should be handled on an individual basis, and the General Counsel or Human Resources Vice President must be consulted.

Foreign Governments

The Company requires that all business dealings fully comply with all applicable laws and regulations everywhere we operate. The Foreign Corrupt Practices Act prohibits

you from making an offer or making any payments or giving gifts or favors of any value to any foreign government official or politician (including candidates for office or political parties), or to a member of their staff, in exchange for or in an effort to obtain favorable business treatment for the Company or any other person or to affect any government decision. This also includes government agencies or department heads, any foreign government monopoly or corporation, political candidates and any intermediaries or third parties who may influence or transfer the gift to someone in the government. Although exceptions to this law exist, the President and the General Counsel must approve any gift.

5. OUR PUBLIC COMPANY DISCLOSURE OBLIGATIONS

The information in the Company’s public communications, including SEC filings, must be full, fair, accurate, timely, and understandable. All directors and employees of the Company are responsible for acting to further this policy. In particular, the directors and officers of the Company should be generally familiar with the disclosure requirements applicable to the Company and themselves; and directors and officers of the Company are prohibited from knowingly misrepresenting, omitting, or causing others to misrepresent or omit material facts about the Company to others, whether within or outside the Company, including the Company’s independent auditors. In addition, any director or officer who has a supervisory role in the Company’s disclosure process has an obligation to discharge such supervisory responsibilities in good faith and in the Company’s best interest.

The Company has a Disclosure Committee, whose functions are as follows:

• Review the Company’s existing disclosure controls and determine what disclosure improvements, if any, are necessitated by the Securities Exchange Act of 1934, as amended, and related SEC rules.

• Consider the materiality of information and determine disclosure obligations on a timely basis as required by applicable laws and NASDAQ requirements.

• Review existing procedures, and if necessary, design and establish additional procedures that ensure that (1) information required to be disclosed to the SEC and other written information that the Company will disclose to the investment community is recorded, processed, summarized, and reported accurately and on a timely basis; and (2) information is accumulated and communicated to executive officers of the Company, including the CEO and the CFO, as appropriate to allow timely decisions regarding such required disclosure.

• Monitor the integrity and effectiveness of these Disclosure Controls.

• Review and help supervise the preparation of the Company’s (1) periodic and current reports, proxy statements, information statements, registration statements, and any other information filed with the SEC, (2) press releases

	containing financial information, earnings guidance, information about material acquisitions or dispositions, or other information material to the Company’s security holders, (3) correspondence broadly disseminated to shareholders and the investment community, (4) presentations to analysts, and (5) disclosure policies for the Company’s corporate/investor relations Web sites.
•	Evaluate the effectiveness of these Disclosure Controls within 90 days prior to the filing of the Company’s Annual Report on Form 10-K and each Quarterly Report on Form 10-Q (collectively, the Periodic Reports). Each evaluation should determine whether any changes to the Disclosure Controls are necessary or advisable in connection with the preparation of the Company’s upcoming Periodic Reports or other Disclosure Statements, taking into account developments since the most recent meeting, including changes in the Company’s organization and business lines and any change in economic or industry conditions.
•	All directors and employees of the Company are responsible for assisting the Disclosure Committee in accomplishing its functions.

6. SECURITIES AND INSIDE INFORMATION

In the course of your employment, you may obtain information about the Company that is important and not generally known to the public. That information may be material to an investor’s decision to buy, sell, or hold Company securities and is commonly referred to as “material inside information.” Examples of material inside information include information regarding the following:

• Significant developments in financial results or financial condition

• Acquisition or loss of a significant customer relationship or contract

• Significant new product or discovery

• FDA approvals or decisions impacting product marketability

• Significant disputes with customers, suppliers, or business partners

• Clinical trial results

• Mergers, acquisitions, or joint ventures

• Declaration of dividends or changes in dividend policy

• Stock splits or stock dividends

• Change in control or significant change in management

• Borrowing a significant amount of money

• Public or private sale of securities

• Change in capital investment plans

• Plans to repurchase Company securities

• Tender offers or proxy contests involving other companies

• Changes in insurance coverage or reimbursement policy

You may not discuss this information with anyone outside of the Company. Within the Company, you should discuss this information on a strictly “need-to-know” basis with other colleagues who require this information to perform their jobs.

You may not profit from material inside information about the Company or any company with which we do business. If you trade Company securities or exercise stock options based on non-public, material inside information, or if someone you know trades Company securities based on information you have disclosed, you will violate insider trading laws. Certain employees who the Company has deemed “insiders” may not buy or sell the Company’s stock except during trading windows, which are announced internally and after the transaction has been pre-cleared. For further information, consult the Company’s Insider Trading Policy.

All transactions in Company stock by members of the Board of Directors, Leadership Team, and certain other identified employees who have access to material inside information must be pre-cleared regardless of whether such transactions are scheduled to occur during a period when trading is permitted. Transactions by these employees may not take place outside of designated trading windows without the express written consent of the General Counsel or Chief Financial Officer as provided in the Company’s Insider Trading Policy. For further clarification, consult the Insider Trading Policy.

7. ANTITRUST

Federal and state antitrust laws are designed to preserve and foster fair and honest competition within the free enterprise system. To accomplish this goal, the language of these laws is deliberately broad, prohibiting such activities as “unfair methods of competition,” agreements or conspiracies “in restraint of trade,” and price-fixing. Under no circumstance will an employee, officer, or agent of the Company authorize a violation of antitrust law. Further, ANS policy requires avoidance of even the appearance of conduct or activities contrary to antitrust laws.

Relations With Competitors, Customers and Suppliers

• Communications between representatives of competitors should be avoided unless they concern a true customer-supplier relationship, coordination on other legitimate business activities (for example, coordinating a response to the Center for Medicare & Medicaid Services regarding proposed reimbursement rates), or legal and proper trade association activities (for example, AdvaMed or MDMA activities). We will not engage in any communications with competitors that could result, or even appear to result, in price-fixing; bid rigging (including complimentary bidding); allocation of customers, markets, or territories; boycotts; or production limits to restrain trade.

• The antitrust laws recognize our need to be aware of market conditions, and we may discuss these with customers, retailers, wholesalers, and brokers provided they are not our competitors.

• ANS will not interfere with our customers’ freedom to determine their own resale prices, cash discounts, profit margins, and other terms and conditions of sale. We will not act in concert with a customer to interfere with the business decisions of another customer.

8. INTERNATIONAL TRADE RESTRICTIONS AND BOYCOTTS

The ability of American companies and their foreign affiliates to trade in the world market is governed and occasionally restricted by regulations issued by the U.S. government. For example, American companies are prohibited from participating in economic boycotts directed against friendly countries while trade with certain countries is restricted or prohibited. Therefore, ANS will fully support all federal anti-boycott regulations or statutes. It will not directly or indirectly engage in any activity that reasonably could have the effect of promoting a restrictive international trade practice unless such practice is required by federal statute or regulation.

Anti-boycott regulations are complex and any suggestion of boycott activity, even the giving of information that may benefit a boycotting or boycotted country, may be illegal. You must contact a corporate officer if you receive any requests to participate in a boycott or documents that may contain boycott-related language.

9. INTELLECTUAL PROPERTY AND CONFIDENTIALITY

Patents

Patents are among the most valuable assets of our Company. A patent gives the patent holder the right to exclude others from making, using, offering for sale, or selling the patented invention in the United States or importing the invention into the United States. Patented products may be sold or licensed. If licensed, they should be used in compliance with their licensed uses only. Patented inventions inherent in the products we manufacture and sell should not be appropriated for personal or third-party use; likewise, patented inventions inherent in the components we buy from third parties or products of third parties that we use should not be appropriated for Company, personal, or third-party use unless specifically authorized.

Trademarks

Trademarks are also valuable assets. Proper use of all of our trademarks will maintain and enhance their strength and selling power. Failure to use our trademarks correctly and consistently may result in the trademarks being diluted and may even cause our trademarks to enter the public domain as common terms that could be used by anyone—including our competitors. It is essential that all reasonable and necessary steps be taken to ensure their protection. The General Counsel or Director of Intellectual Property must approve all uses of our trademarks. Trademarks belonging to other corporations should also be used correctly. Generally, another corporation’s stylized trademark should not be used without its permission.

Copyrights

U.S. and international copyright laws prohibit the copying, distribution, use, and display of a copyrighted work without the prior permission of the owner. These materials include computer software, books, audio and videotapes, trade journals, magazines, and many others. Slides, training materials, management models, and problem-solving frameworks produced by outside consultants or organizations may also be copyrighted. Employees may also create copyrighted works within the scope of their employment, which becomes the property of the Company. A violation can occur by creating a different work from the copyrighted work or from compiling the copyrighted materials of third parties. You must not illegally copy, for personal or Company use, computer software licensed to the Company, and you should not bring your personal software (or any copies) to use at the Company. If you are concerned about a potential violation of copyright law or protecting the Company’s copyrights, you should consult your supervisor, a compliance committee member, the General Counsel, or Human Resources.

Works Generated by Employees

All work generated by an employee of the Company related to any aspect of the Company’s business during the time of employment or with Company resources is considered the Company’s property.

Confidentiality

Confidential information about business activities of the Company, its employees, and others must be safeguarded during and after your employment. In connection with employment with the Company, we require employees to sign a Confidentiality Agreement. Examples of confidential information include, but are not limited to, the following:

• Proprietary products, product designs, and product ideas

• Marketing Strategies and Plans

• Unpublished financial reports

• Personnel and salary data

• Operations Manuals

• Training Materials

Employees are responsible for the internal security of Company information and must limit communication of confidential information to employees who have a legitimate need to know the information to fulfill the requirements of their position.

As employees, we are individually accountable and responsible for protecting the integrity of our business information. ANS employees will not make inappropriate modifications to information or destroy, disfigure, or disclose information. Documents containing sensitive data will be handled carefully during working hours and properly secured when not in use. ANS employees will observe all requirements necessary to protect the security and integrity of data stored on computer systems, including the

nondisclosure of any passwords. Any instances of unrecognized or unauthorized individuals using computer terminals in your area must be reported to your supervisor.

Confidential Competitor Information

You should not accept confidential information about a competitor without prior authorization from the General Counsel, whether this information comes from the owner, an ex-employee, or another person affiliated with the competitor. It is not acceptable to seek proprietary or confidential information when doing so would require anyone to violate a contractual agreement, such as a confidentiality agreement with a prior employer. If you possess confidential information about a competitor, which was obtained by virtue of a prior relationship, you should not use or disclose it to the Company.

10. HUMAN RESOURCES

Equal Employment Opportunity

The Company is committed to the principles of equal employment opportunity. All employment decisions are made on the basis of individual qualifications, without regard to race, color, sex, religion, national origin, age, disability, marital status, sexual orientation, AIDS/HIV, or veteran status as defined by law. The Company seeks to ensure that all personnel activities, such as compensation, benefits, transfers, promotions, demotions, reductions in the work force, discipline, recreational programs, Company-sponsored training, education, and social programs, are administered on a fair and equal basis. We will make reasonable accommodations to the known physical and mental limitations of otherwise qualified individuals with disabilities. Every employee is expected to treat others with fairness, dignity, and respect in connection with their employment.

Freedom from Harassment

The Company firmly believes that all employees and applicants have an unconditional right to work in an environment free from harassment. We will not tolerate harassment by anyone based on the diverse characteristics or cultural backgrounds of those who work with us. Sexual harassment, including any unwelcome sexual advances, requests for sexual favors, or other unwelcome verbal or physical conduct of a sexual nature, will result in discipline. Other harassment, including unwelcome verbal or physical conduct that belittles, shows hostility, or ridicules an individual because of race, color, sex, religion, national origin, age, disability, marital status, sexual orientation, or veteran status as defined by law will also result in prompt disciplinary action. Harassment also includes incidents of workplace violence, including robbery and other commercial crimes, stalking, violence directed at the employer, terrorism, and hate crimes. We prohibit employees from possessing firearms, other weapons, explosive devices, or other dangerous materials on Company-owned property.

11. INTERNAL ACCOUNTING CONTROLS

Accounting practices will be conducted in full compliance with the accounting recordkeeping and internal control requirements stipulated by the Chief Financial Officer, which are in accordance with generally accepted accounting principles and applicable laws and regulations.

No officer, employee, or other person acting on our behalf will engage in any activity that circumvents ANS corporate or accounting policies or systems of internal control.

No payments or receipts will be approved, made, or accepted with the intention or understanding that any part of such payment is to be used for a purpose other than described by the documents supporting the transaction. “Slush funds,” or similar funding or accounts where no accounting for receipts or expenditures is made on the books of ANS, are strictly prohibited.

All disbursements of funds will be made by check and will be payable to the ultimate payee, except nominal disbursements drawn from established and properly recorded petty cash accounts or properly approved wire transfers. No checks will be drawn to cash or bearer except as specified in the existing procedure governing this policy. Both the Chief Financial Officer and the Chief Executive Officer must approve all exceptions in advance.

Consultants or agents will not be retained without the prior approval of ANS’ President or designee, unless the services being rendered are to be performed solely in the United States or Canada. Before approval is granted, a written contract between ANS and the consultant or agent must be submitted and a review conducted to confirm that he or she is technically capable of performing the contracted service. The review must further establish, either independently or by the consultant’s or agent’s written certification, that he or she is neither a candidate for office nor a current office holder in any government or political party. If the consultant or agent is in fact a candidate for office or a current government or political office holder, he or she must submit written certification that the consultant’s or agent’s contracted services will not violate any applicable law or regulation.

12. BOOKS AND RECORDS

Falsification of Records

All payments and other transactions must be properly authorized by the officer or manager with authority to do so and must be accurately and completely recorded in accordance with generally accepted accounting principles. The Company strictly prohibits making any false or artificial entries in any of the books or records of the Company or in any public record. No payment or receipt of payment may be transacted with the intention or understanding that any part of the payment or receipt is to be used

for a purpose other than that described in the documents supporting that transaction. Off-book accounts are strictly prohibited.

Records Retention

All records should be retained and destroyed according to the Company Records Retention Policy. In addition, when litigation or a government investigation or audit is pending or imminent, relevant records must not be destroyed until the matter is resolved. Destruction of records to avoid disclosure in a legal proceeding could constitute a criminal offense.

13. COMMERCIAL TRANSACTIONS

All commercial agreements should follow the corporate contract procedures, which include submitting an executive contract summary, along with supporting documentation, to the General Counsel prior to entering into a relationship with the other party. Both the President and the General Counsel must approve any consulting or similar agreement or arrangement with a physician or other health care professional. Employees should avoid oral contracts, letters of understanding or intent, handshake deals, and general acceptance letters. The accounting department will not pay invoices for transactions that have not gone through the contract procedure prior to entering into the relationship. Individuals who fail to follow the contract procedure will be reported to the President. You should always act within the scope of your authority and never make unauthorized promises or assurances to others.

14. HEALTH AND SAFETY

Environmental Responsibility

The Company is committed to acting in an environmentally responsible manner by complying with all federal, state, and local environmental laws and regulations. We must comply with all environmental laws by constructing and operating each of our facilities with the necessary permits, approvals, and controls. If you are uncertain about what is required in order to comply with environmental laws, contact the General Counsel before taking action.

Product Quality

We must strive to meet the high expectations of ANS’ customers by meeting all of our quality standards. Our products must be manufactured, packaged, and delivered in full compliance with all applicable FDA, TUV, safety, health, and consumer protection laws. All product inspections and testing must be timely, accurate, and complete. ANS and its employees will adhere to and fully comply with the regulations and requirements of the FDA concerning Quality System Regulation of Medical Device Manufacturers and any other applicable regulations.

Health and Safety

Every employee is entitled to a safe working environment. You are responsible for preventing accidents by reporting any unsafe working conditions, adhering to safe work

procedures, and complying with OSHA regulations. If you have any questions about the safety of your work environment or compliance with OSHA regulations, you must immediately report such concerns to your supervisor or a compliance committee member.

CERTIFICATE OF COMPLIANCE

I acknowledge that I have received and read the provisions of The Corporate Code of Conduct applicable to me.

I agree to abide by the provisions of the Code while employed by the Company, and I will not use any confidential or proprietary information after I leave the Company. I also understand that signing this Certificate and complying with the Code does not guarantee my continued employment or alter my status as an at-will employee.

LAST NAME (Please Print)	FIRST NAME			M.I.
SOCIAL SECURITY NUMBER		DEPARTMENT NAME
SIGNATURE			DATE

Please return this Certificate as instructed by the Company.

Advanced Neuromodulation Systems, Inc.

Corporate Code of Conduct

The Company requires all members of the Leadership Team, Director-level employees, Regional Sales Directors, and certain other designated employees to read the attached Corporate Code of Conduct (the Code) and to then complete and sign this Certificate of Compliance (also attached). You may also be asked periodically to respond to the compliance Questionnaire and certify compliance with the Code as the Company deems appropriate. It is important that you respond honestly and completely to the statements that follow. When you respond, you imply that you are answering for yourself and any family member or relative. Responses should encompass the period from when you first completed a Certificate of Compliance up to the present.

If you, an immediate family member, or relative are not in compliance with any of the areas described below, please attach an explanation of your situation. If you are not sure about how to interpret a statement or question whether you are in compliance, contact the Company’s General Counsel, a supervisor, or a compliance committee member.

If future changes place you in conflict with the Code, you should immediately contact the General Counsel in writing.

	TRUE	OTHER
	(Without Exception)	(Explain)
CONFLICTS OF INTEREST
1) I have not accepted any financial compensation (e.g., salaries, fees, commissions, rebates, or monetary rewards) from anyone doing business with the Company, including vendors, suppliers, customers, distributors, sales representatives, contractors, consultants, or other people or firms doing business with the Company.	o	o
2) I have not offered or received favors or any preferential treatment that may result in personal financial gain or that violate any law or the Code.	o	o
3) I have not received gifts or entertainment (not including meals) in any 12-month period from a single business source that would violate the Code.	o	o
4) I have not conducted Company business with a family member or relative or with any business affiliated with a family member or relative, except as authorized by the Company.	o	o
5) I am not financially indebted or have any obligation to any competitors, vendors, suppliers, customers, distributors, sales representatives, contractors, consultants, or other people or firms doing business with the Company.	o	o
6) I do not own any stock or have any ownership interest in a competitor (or a company I know is a potential future competitor), a material supplier, or a material customer, except for interests that do not constitute a “controlling interest” (as “control” is defined by federal securities laws) or as approved by the President.	o	o
7) I have not, to the best of my knowledge, become involved in a conflict of interest in violation of the Code.	o	o

	TRUE	OTHER
	(Without Exception)	(Explain)
CONFIDENTIALITY
8) I have not communicated any proprietary information regarding, but not limited to, patent applications, trade secrets, products, technology, sales or marketing strategies, development plans, or unpublished financial, personnel, or salary data to any unapproved person or entity.	o	o
9) I have not wrongfully obtained any confidential information about a competitor, prospective competitor, or anyone else that may violate the Code.	o	o
10) I have not exchanged inside information with anyone outside the Company except as authorized by the Company’s General Counsel.	o	o
11) I have not used inside information for personal gain.	o	o
GOVERNMENT REGULATIONS
12) I have not made any unauthorized political contributions on behalf of the Company, nor have I used Company property for personal political activities.	o	o
13) I have not lobbied on behalf of the Company, without advance approval, or lobbied for any personal issues while on Company time.	o	o
14) I have not violated any rules regarding government contracts, reporting, or investigations.	o	o
15) I have not given financial compensation to foreign parties in violation of the Foreign Corrupt Practices Act.	o	o
COMMERCIAL TRANSACTIONS
16) I have not engaged in any commercial agreements that are not in accordance with Company guidelines or entered into any commercial agreements beyond the level of my authority.	o	o
17) I have not violated any antitrust laws or trade regulations.	o	o
RELATIONSHIPS WITH HEALTH CARE PROFESSIONALS
18) I have not engaged in any improper payments, gifts, entertainment, sales and marketing practices, or other activities that violate the Code pertaining to relationships with health care professionals.	o	o
ACCOUNTING AND FINANCIAL REPORTING
19) I have reported all financial information accurately and promptly and in accordance with generally accepted accounting principles.	o	o

	TRUE	OTHER
	(Without Exception)	(Explain)
20) I have not established or maintained any secret or unrecorded funds or assets.	o	o
GENERAL
21) I have not violated any other section of the Code.	o	o

Please attach a separate sheet if you need more space to explain an answer to any of the statements.

CERTIFICATE OF COMPLIANCE

I acknowledge that I have received and read the Corporate Code of Conduct and that I have answered the statements completely and truthfully.

I agree to abide by the provisions of the Code while employed by the Company, and will not use any confidential or proprietary information after I leave the Company. I will notify the General Counsel in writing if something happens to change my answers to any of the statements in this Certificate or that places me in conflict with the Code.

I also understand that signing this Certificate and complying with the Code does not guarantee my continued employment or alter my status as an at-will employee.

LAST NAME (Please Print)	FIRST NAME			M.I.
SOCIAL SECURITY NUMBER		DEPARTMENT NAME
SIGNATURE			DATE

Please return this Certificate as instructed by the Company.

NOTE: Incomplete Certificates will be returned to the employee for completion. EX-21.1 14 d13606exv21w1.htm SUBSIDIARIES

EXHIBIT 21.1

Subsidiaries

Hi-tronics Designs, Inc.
New Jersy Corporation

MicroNet Medical, Inc.
Minnesota Corporation

  EX-23.1 15 d13606exv23w1.htm CONSENT OF INDEPENDENT AUDITORS

EXHIBIT 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 2-82414) pertaining to the Advanced Neuromodulation Systems, Inc. 1979 Amended and Restated Employees’ Stock Option Plan; (Form S-8 No. 2-91410) pertaining to the Advanced Neuromodulation Systems, Inc. Directors’ Stock Option Plan; (Form S-8 No. 333-00967) pertaining to the Advanced Neuromodulation Systems, Inc. 1995 Stock Option Plan and the Advanced Neuromodulation Systems, Inc. Sales and Marketing Employees Stock Option Plan; (Form S-8 No. 333-75879) pertaining to the Advanced Neuromodulation Systems, Inc. 1998 Stock Option Plan; (Form S-8 No. 333-61240) pertaining to the Advanced Neuromodulation Systems, Inc. 2000 Stock Option Plan; (Form S-8 No. 333-85968) pertaining to the Advanced Neuromodulation Systems, Inc. 2001 Employee Stock Option Plan; (Form S-3 No. 333-53440 and Post Amendment No. 1) pertaining to the registration of 1,835,738 shares of Common Stock issued pursuant to an Agreement and Plan of Merger dated November 30, 2000 between the Company and Hi-tronics Designs, Inc. and an Asset Purchase Agreement dated as of January 2, 2001 between the Company and Implantable Devices Limited Partnership, ESOX Technology Corporation and Implantable Devices, Inc.; (Form S-3 No. 333-101911) pertaining to the registration of 234,453 shares of Common Stock issued pursuant to an Agreement and Plan of Merger dated November 4, 2002 between the Company and MicroNet Medical, Inc.; (Form S-3 No. 333-104182) pertaining to the registration of 112,500 shares of Common Stock issued pursuant to an Agreement and Plan of Merger dated November 4, 2002 between the Company and MicroNet Medical, Inc.; (Form S-8 No. 333-107309) pertaining to the Advanced Neuromodulation Systems, Inc. 2002 Stock Option Plan and the related Prospectuses of our report dated March 8, 2004, with respect to the consolidated financial statements and schedule of Advanced Neuromodulation Systems, Inc. and Subsidiaries, included in the Annual Report for the year ended December 31, 2003.

	/s/ Ernst & Young LLP
	Ernst & Young LLP
Dallas, Texas March 12, 2004

  EX-31.1 16 d13606exv31w1.htm CERTIFICATION OF THE CEO PURSUANT TO RULE 13A-14

EXHIBIT 31.1

Certification

Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002

I, Christopher G. Chavez, certify that:

1. I have reviewed this annual report on Form 10-K of Advanced Neuromodulation Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2004
	/s/ Christopher G. Chavez
	Name: Christopher G. Chavez Title: Chief Executive Officer

  EX-31.2 17 d13606exv31w2.htm CERTIFICATION OF THE CFO PURSUANT TO RULE 13A-14

EXHIBIT 31.2

Certification

Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002

I, F. Robert Merrill III, certify that:

1. I have reviewed this annual report on Form 10-K of Advanced Neuromodulation Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2004
	/s/ F. Robert Merrill III
	Name: F. Robert Merrill III Title: Chief Financial Officer

  EX-32.1 18 d13606exv32w1.htm CERTIFICATION OF THE CEO PURSUANT TO SECTION 906

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
(AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

          In connection with the Annual Report of Advanced Neuromodulation Systems, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher G. Chavez, Chief Executive Officer of the Company, certify to the best of my knowledge and in my capacity as an officer of the Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

          1.     The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

          2.     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

          IN WITNESS WHEREOF, the undersigned has executed this Certificate, effective as of March 15, 2004.

/s/ Christopher G. Chavez

Name: Christopher G. Chavez
Title: Chief Executive Officer

  EX-32.2 19 d13606exv32w2.htm CERTIFICATION OF THE CFO PURSUANT SECTION 906

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
(AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

          In connection with the Annual Report of Advanced Neuromodulation Systems, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, F. Robert Merrill III, Chief Financial Officer of the Company, certify to the best of my knowledge and in my capacity as an officer of the Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

          1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

          2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

          IN WITNESS WHEREOF, the undersigned has executed this Certificate, effective as of March 15, 2004.

/s/ F. Robert Merrill III

Name: F. Robert Merrill III
Title: Chief Financial Officer

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