**Exhibit 10.1**

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**EMPLOYMENTAGREEMENT**

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**THIS EMPLOYMENT AGREEMENT** (“Agreement”) is made effective  July 16, 2008 by and between ProUroCareInc., a Minnesota corporation with its principal place of business in GoldenValley, Minnesota (the “Company”), and Richard C. Carlson (“Employee”).

 

**WHEREAS**, the Company is in the business of developing andmarketing products to treat prostate conditions;

 

**WHEREAS**, the Company desires to employ the Employee as itsChief Executive Officer, in accordance with the following terms, conditions andprovisions; and,

 

**WHEREAS**, the Employee desires to perform such services forthe Company, all in accordance with the following terms, conditions andprovisions;

 

**NOW THEREFORE**, in consideration of the mutual covenants hereincontained, it is agreed as follows:

 

**1.**                                      EMPLOYMENT AND DUTIES.

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The Company hereby continues the Employee’semployment, and the Employee hereby accepts and agrees to serve the Company asthe Company’s Chief Executive Officer. The Employee’s duties shall be to direct the Company’s strategicinitiatives, oversee its operations, manage the Company’s relationships withthe investment community, participate in recruiting senior management, andother reasonable duties subject to review and modification from time to time atthe direction of the Company’s Board of Directors. The Employee shall apply hisbest efforts, and devote his full time and attention to the Company’s affairs.

 

**2.**                                      TERM.

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Subject to Paragraph 5, the term of this Agreement andthe Employee’s employment under this Agreement shall commence on July 16,2008, and shall continue thereafter until December 31, 2009. Upon theexpiration of the original term; this Agreement may be renewed by mutualagreement.

 

**3.**                                      COMPENSATION.

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The Company shall compensate the Employee for hisservices at the following salary, bonus and benefits:

 

**3.1          Base Salary.**

 

The Employee shall be paid aminimum annualized base salary of $150,000 per year, payable on the Company’snormal payroll cycle, less all required and authorized withholdings and taxes,through December 31, 2009. This base salary is the minimum salary duringthe respective time period of the term of this Agreement, and may be 

 

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increasedfrom time to time at the discretion of the Board of Directors. The Employeeshall be considered an exempt employee under federal and state law.

 

**3.2          Bonus.**

 

The Employee is eligible toearn a bonus of up to 40% of his annual base salary, less all required andauthorized withholdings and taxes. The annual bonus criteria will be set by theCompensation Committee of the Board of Directors.

 

**3.3          Stock Options.**

 

The Employee shall beeligible to participate in the annual grant of Company stock options,consistent with the terms and conditions of the 2002 and 2004 Stock OptionPlans, and with amounts of options, including exercise price and vestingprovisions, determined by the Compensation Committee of the Board of Directorsfrom time to time. The stock options are also subject to Sections 5 and 6 ofthis Agreement.

 

**3.4          Employee Benefits Plans.**

 

Employee shall be eligiblefor fringe benefits offered to other executive-level employees of the Company,subject to the Company’s policies and the terms, restrictions, limitations andrequirements of any summary plan description and/or plan documents. Nothingherein shall alter, modify or change any such policy, summary plan descriptionor plan document.

 

**3.5          Life Insurance.**

 

During the term of thisAgreement, the Company shall secure and pay the premium for a term lifeinsurance policy assignable to the Employee in the amount of two times theEmployee’s annual base salary or, at the Employee’s written request, theCompany shall reimburse the Employee for comparable premiums on an existingpolicy for the same rating.

 

**4.**                                      EXPENSES.

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The Company will reimburse the Employee for reasonableexpenses incurred by the Employee in connection with the business of theCompany upon presentation by the Employee of appropriate substantiation forsuch expenses.

 

**5.**                                      TERMINATION.

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This Agreement shall terminate upon the occurrence ofany of the following:

 

**5.1.**         **Termination or DecisionNot to Renew this Agreement by the Company for Reasons Other than Cause**.

 

The Company may terminatethis Agreement or not renew this Agreement prior to any renewal date forreasons other than Cause, upon 30 days’ notice by the Company.  If 

 

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theCompany so terminates or fails to renew the Agreement, the Employee shall beentitled to severance payments and benefits described in Section 6.

 

**5.2.         Termination by Employee.**

 

Employee may terminate thisAgreement at any time, upon 30 days’ notice to the Company.  In the event Employee terminates thisAgreement for other than Good Reason or Change in Control as set forth inSections 5.3 and 5.7 below, the Company shall pay Employee all salary, bonuses,and other benefits earned and accrued up to the date of termination.

 

**5.3.         Termination by the Employee for GoodReason**.

 

In the event EmployeeTerminates this Agreement for Good Reason, Employee shall be entitled toseverance payments and benefits provided for in Section 6.  The Employee must provide notice of theexistence of the Good Reason condition within a period not to exceed 90 days ofits initial existence.  Upon receivingsuch notice, the Company shall have 30 days to remedy the Good Reasoncondition.

 

For purpose of thisAgreement, “Good Reason” shall be defined as the occurrence of any of thefollowing events without the express written consent of Employee:

 

(a)   amaterial reduction in Employee’s base salary during the initial term of thisAgreement;

 

(b)   achange in Employee’s title or position or a material diminution in Employee’sduties or the assignment of duties on a regular basis which are not customarilyassociated with or consistent with the title of Chief Executive Officer; or

 

(c)   abreach by the Company of any of its material payment obligations to Employeeunder this Agreement or any Exhibits to this Agreement.

 

**5.4.         Termination upon Employee’s Death**.

 

Under circumstances of theEmployee’s death, the Company agrees to make any earned, but unpaid, salary andbonus payments to the Employee’s designated beneficiaries. Additionally, anyunexercised, vested stock options which were available to the Employeeimmediately prior to date of death shall be exercisable by beneficiaries inaccordance with the Company’s stock option plan.

 

**5.5.         Termination in the Event of Disability**.

 

The Company may terminatethis Agreement, upon 30 days’ notice, if the Employee is not able to performthe essential functions of Employee’s position(s), with reasonableaccommodation, for a continuous period in excess of ninety (90) days.

 

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**5.6.         Termination by the Company for Cause**.

 

For purposes of thisAgreement, “Cause” shall be defined as:

 

(a)   Failureof the Employee to substantially perform any duties reasonably required by theCompany that are consistent with the Employee’s position and failure to curethe breach within ten (10) days of written notice of the breach by theCompany;

 

(c)   Thecommission by the Employee of any criminal act, or act of fraud or dishonestyby the Employee as determined solely by the Company to be related to or inconnection with his employment by the Company; or,

 

(c)   If theEmployee materially breaches the Employee’s other covenants contained in thisAgreement and fails to cure the breach within ten (10) days of writtennotice of the breach by the Company.

 

**5.7.****                           ****TerminationDue to Change in Control**.

 

(a)   If, during a one (1) year period subsequent to a “Change inControl” as defined below, the Employee separates from employment with the thencontrolling company for one of the following reasons, the then controllingcompany agrees to continue Employee’s then current salary for six (6) monthsand one (1) additional month for each full year of service with theCompany, with a maximum accumulated severance of twelve (12) months, andimmediately vest all unvested stock options held by Employee:

 

(i)            termination without “cause”;

 

(ii)           unacceptable demotion;

 

(iii)          Employee is asked to assume duties or responsibilitieswhich are substantially lower in status and unacceptable to the Employee; or

 

(iv)          the Employee is asked to relocate geographically to alocation more than 100 miles away from Employee’s work location prior to thechange of control and is unacceptable to Employee.

 

(b)   For purposes of this Agreement, a “Change inControl” will be defined as follows:

 

(i)            When any “person” as defined in Section 3(a)(9) ofthe Securities Exchange Act as used in Sections 13(d) and 14(d) thereof,including a “group” as defined in Section 13(d) of the SecuritiesExchange Act, but excluding the Company or any subsidiary or parent or anyemployee benefit plan sponsored or maintained by the Company or any subsidiaryor parent (including any trustee of such plan acting as trustee), directly orindirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 underthe Securities Exchange Act, as amend time to time) of securities of theCompany 

 

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representinggreater than fifty (50) percent of the combined voting power of the Company’sthen outstanding securities; or,

 

(ii)           When, subsequent to the effectivedate of this Agreement, the individuals who, at the beginning of such period,constitute the Board of Directors (“Incumbent Directors”) cease for any reasonother than death to constitute at least a majority thereof, provided, however,that a Director who was not a Director at the beginning of this period will bedeemed to have satisfied the definition of “Incumbent Director” if suchDirector was elected by, or with the approval of at least sixty (60) percent ofthe Directors who then qualified as Incumbent Directors; or,

 

(iii)          The approval by the shareholders ofany sale, lease, exchange or other transfer (in one transaction or a series ofrelated transactions) of all or substantially all of the assets of the Company,the adoption of any plan or proposal for the liquidation or dissolution of theCompany, or, any consolidation or merger involving the Company whereby theCompany is not the continuing or surviving entity or the Company’s shares areconverted into cash, securities or other property, provided, however, thisprovision shall not apply if the shareholders of the Company have the sameproportionate share of the surviving entity after the transaction.

 

**6.****                                     ****SEVERANCEPAYMENTS**

 

**6.1          Severance Pay**

 

Inthe event that the Company terminates or decides not to renew this Agreementwithout Cause pursuant to Section 5.1 or that Employee terminates thisAgreement with Good Reason pursuant to Section 5.3, Employee shall beentitled to severance payments and benefits as follows:

 

(a)   Ifterminated or not renewed during any term of this Agreement, the Company shallcontinue to pay to Employee the equivalent of Employee’s then current salaryfor a continuation period of six (6) months plus one (1) month peryear of service up to a maximum of twelve (12) months, such continuation periodto include the 30 day notice provision in Section 5.1.

 

(b)   Allstock options granted but still subject to vesting at the time of terminationshall be immediately vested and shall be exercisable according to the terms ofthe Stock Option Agreement.

 

(c)   TheCompany shall pay to Employee all bonuses or other benefits earned and accruedup to the date of termination or expiration upon nonrenewal.

 

(d)   TheCompany shall continue to pay its portion of any contribution to Employee’shealth and life insurance premiums for six (6) months (including the 30day notice provision in Section 5.1).

 

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**6.2          Employee Service Date**

 

Forpurposes of computing years of service pursuant to Section 5.7(a) and6.1(a), the Employee’s date of hire shall be January 1, 2005.

 

**7.****                                     ****RESTRICTIVECOVENANTS, TRADE SECRETS AND PROPRIETARY RIGHTS.**

 

**7.1          Definitions.**

 

The following phrases, whenused in this Agreement, will have the meanings set forth below:

 

(a)   “ConfidentialInformation” means materials, records, data and other information that is notgenerally known about or that is personal, sensitive or proprietary to theCompany, its shareholders, the Company’s clients, prospective clients and theirdependents, and information that the Company is obligated to treat asproprietary or confidential. This information includes, without limitation:

 

(i)            trade secret information about the Company and itsproducts, planned and/or future products;

 

(ii)           “Inventions,” as defined in Section 7.1(b) below;

 

(iii)          information concerning the Company’s business, as theCompany has conducted it, or as it may conduct it in the future;

 

(iv)          information concerning any of the Company’s past, current,planned or future products, services, costs, prices and other financialinformation, including (without limitation) information about the Company’sresearch, development, engineering, purchasing, servicing, finances, marketingor selling;

 

(v)           the identity of the Company’s clients, prospective clientsand their dependents, and their pricing, buying history, tendency, and theirhealth information;

 

(vi)          information that the Company’s clients, prospective clientsand their dependents consider confidential, whether notified by the client,prospective client or dependent or not, so long that a prudent person wouldconsider the information confidential;

 

(vii)         information regarding any patents developed, owned or usedby or licensed to the Company; and,

 

(viii)        the Company’s procedures, manuals,financial, cost and sales data, business opportunities for new or developingbusiness, reports, . customer lists and contracts.

 

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(b)   “Inventions”means any discoveries, modifications, designs, methods, know-how, systems orimprovements (whether or not they are in writing or reduced to practice) orworks of authorship (whether or not they can be patented or copyrighted) thatthe Employee makes, authors, or conceives (either alone or with others) andthat:

 

(i)            concern the Company’s current, planned and/or futureproducts, research, testing or development;

 

(ii)           result from any work the Employee performs for theCompany; and/or

 

(iii)          in which the Company’s equipment, facilities, or tradesecret information were used.

 

“Inventions” does notinclude discoveries, modifications, designs or improvements developed: (1) entirelyon the Employee’s own time which do not relate to any of the Company’sproducts, including those in development stages, or services that the Companyprovides to its clients; (2) in which the Company’s equipment, facilities,supplies or trade secret information were not used in any way, and; (3) donot directly relate to the Company’s business or the Company’s actual ordemonstrably anticipated research or development, or does not result from anywork the Employee performed under this Agreement.

 

(c)   “ComparableTechnology” means

 

(i)            anypressure sensing technology or system that is used to measure the elasticity ofsoft tissue in the prostate or related urologic organs (i.e., kidney, uretersor bladder);

 

(ii)           anypressure sensing technology or system that is used to create two or threedimensional images for the purpose of identifying abnormal lesions and forguiding biopsy in prostate or related urologic organs; and/or

 

(iii)          anyEIT (electrical impedance tomography) technology or system that is used for thepurpose of measuring heat propagation and/or electrical conductivity in theprostate or related urologic organs.

 

(iv)          anyother applications for which the Company (1) has made a direct investment;(2) has obtained licensing rights to acquire such technology; and (3) isactively engaged in research and development (or has been so engaged during thepast twelve (12) months).

 

**7.2          Return of Confidential Information.**

 

The Employee will not,during or after the Employee’s relationship with the Company, use anyConfidential Information (except as required by the Employee’s duties 

 

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withthe Company), or communicate, divulge or disclose any Confidential Informationto any person or organization, except as authorized in writing by the Board ofDirectors of the Company. Upon termination of the Employee’s relationship withthe Company, Employee agrees to return and/or leave with the Company allmaterial concerning any Confidential Information in the Employee’s possessionor control, including, but not limited to, any records, manuals, books,documents, letters, reports, data, and client lists, whether prepared by theEmployee or others, whether originals or copies, whether in -hard copy orstored on a diskette or hard drive or otherwise, including drawings, blueprintsand other reproductions.

 

**7.3          Property Rights.**

 

With the exception of work,tests, research, materials, processes or systems conducted, developed or used bythe Employee that do not directly or indirectly relate to the Company’sbusiness or the Company’s actual or demonstrably anticipated research and/ordevelopment, the Company will own and have all right and title in allInventions, Confidential Information, work, tests, research, materials,processes or systems conducted, developed or used by the Employee under thisAgreement or during the course of the performance of the Employee’s duties withthe Company prior to the date of this Agreement (collectively, the “CompanyWorks”).  To the extent that the Employeeretains any rights, title and/or interest, including, without limitation, allownership rights, copyright rights, trademark rights, patentable inventionrights, and trade secret rights in any Company Works (collectively, the “IPRights”), or acquires any such IP Rights, the Employee hereby forever assigns,transfers and conveys to the Company all current and future ownership interestand all current and future rights in, to and arising out of the such IP Rightsand grants to the Company an irrevocable, nonexclusive, worldwide, royalty-freelicense to use, execute and copy any Company Works. The assignment, transfer,grant, conveyance and setting over to the Company as made in the precedingsentence shall include the assignment of all rights to recover all damages,attorneys’ fees, and lost profits associated with the loss or infringement ofany of the IP Rights, as well as the right to seek injunctive relief (bothpreliminary and permanent) with respect to the foregoing and the right toreceive any and all other remedies available at law or in equity. Employeeagrees not to disclose, use, market or sell, either directly or indirectly, anyCompany Works to any person or entity. The Employee shall take reasonableprecautions and measures to protect the Confidential Information, Company Worksand IP Rights related thereto. The rights and obligations under this Section 7.3are perpetual in nature.

 

**7.4          Inventions**.

 

(a)   TheEmployee agrees that all Inventions that the Employee: (1) makes, developsor collaborates on during the term of this Agreement; or, (2) made,developed or collaborated on during the course of his work with the Companystarting in January 2005, before the term of this Agreement, are the soleand exclusive property of the Company. Upon executing this Agreement, theEmployee. will, with respect to any such Invention:

 

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(i)            provide the Company with current, accurate, and completerecords of any and all Invention(s) which records will belong to theCompany and be kept and stored on the Company’s premises by the Company;

 

(ii)           promptly and fully disclose the existence and describe thenature of any Invention(s) to the Company in writing (and withoutrequest);

 

(iii),         assign, and the Employee does herebyassign, to the Company any and all of the Employee’s rights to theInvention(s), and applications the Employee makes for patents or copyrights inany country, and any patents or copyrights granted to the Employee in anycountry.

 

(iv)          acknowledge and deliver promptly to the Company any writteninstruments, and perform any other reasonable acts necessary in the Company’sopinion and at its expense to preserve property rights in the Invention(s) againstforfeiture, abandonment, or loss and to obtain and maintain letters patentand/or copyrights on the Invention(s) and to vest the entire right andtitle to the Invention(s) in the Company, provided that the Employee makesno warranty or representation to the Company as to rights against third partieshereunder.

 

(b)   TheEmployee hereby represents and agrees that at the time of entering thisAgreement there are no Inventions which relate to the business of the Companyor to the Company’s research or development that the Employee has an obligationto assign to anyone except the Company.

 

(c)   TheEmployee hereby represents and agrees that at the time of entering thisAgreement there are no Inventions which relate to the business of the Companyor to the Company’s research or development that the Employee made or conceivedprior to the Employee’s employment by the Company,.

 

**7.5          Covenants Against Competition andSolicitation.**

 

In view of the unique valueto the Company of the services to be performed by the Employee, inconsideration of the Confidential Information to be obtained by or disclosed tothe Employee, and as a material inducement to the Company to enter into thisAgreement and to pay and provide the Employee the compensation and benefitsprovided for herein, the Employee covenants and agrees that, from and after thedate hereof and until one (1) year after the Employee’s employment withthe Company terminates for whatever reason, the Employee will not; directly orindirectly, anywhere in the world in which the Company is conducting businessduring the term of Employee’s employment:

 

(a)   own,manage, operate or control, prepare or plan to own, manage, operate or control,or participate in the ownership, management, operation or control of anybusiness engaged in the research, development, production or marketing of anyComparable Technology;

 

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(b)   conductor assist any person or entity to conduct any business engaged in the research,development, production or marketing of any Comparable Technology;

 

(c)   seek,accept or act, either as an employee, shareholder, partner, member, jointventurer, agent or other equity holder of or consultant or advisor, to businessengaged in the research, development, production or marketing of any ComparableTechnology;

 

(d)   solicitor divert, attempt to solicit or divert, or otherwise interfere in any fashionwith, any former or existing customer, client, account, partner or otherbusiness source, or business prospect for the purpose of selling to such personany product or service of any Comparable Technology; or,

 

(e)   induce,influence, solicit, hire, or engage or attempt to induce, influence, solicit,hire or engage any employee of, or consultant to, the Company to do any of theforegoing or to discontinue such person’s association with the Company orobtain such person as an employee, consultant or in a similar capacity for anyother business.

 

Employee acknowledges thatthe covenants in this Section 7.5 are fair, necessary, andreasonable, in both scope and duration, for the consideration provided for inthis Agreement.

 

**7.6          Blue Pencil Doctrine.**

 

If the duration or geographical extent of, or business activitiescovered by Section 7.5 are in excess of what is valid and enforceableunder applicable law, then such provision shall be construed to cover only thatduration, geographical extent or activities that are valid and enforceable.Employee acknowledges the uncertainty of the law in this respect and expresslystipulates that this Agreement be given the construction which renders itsprovisions valid and enforceable to the maximum extent (not exceeding itsexpress terms) possible under applicable law.

 

**7.7          Breach****.**

 

The Employee acknowledgesthat any breach, violation or evasion by the Employee of the terms of Section 7may result in an immediate and irreparable injury and harm to the Company, andwill cause the Company to suffer damages in amounts difficult to ascertain.Accordingly, the Company shall be entitled to the remedies of injunction andspecific performance, or either of such remedies, as well as other legal orequitable remedies and damages to which the Company may be entitled. TheCompany shall also be entitled to its costs and attorneys’ fees for any breachof Section 7 by the Employee.

 

**8.**                                      OTHER BUSINESS ACTIVITIES.

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The Employee may not serve as an officer or directorof any other organization without express prior written approval by the Company’sBoard of Directors.

 

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**9.**                                      AGREEMENT AND ACKNOWLEDGEMENT.

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The Employee represents that the Employee is free toenter into this Agreement and the acceptance of the relationship with theCompany does not violate any agreement between the Employee and any thirdparty.

 

**10.**                               COOPERATION IN CLAIMS.

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Both during Employee’s employment and thereafter, theEmployee agrees that in the event of a legal action against the Company, orlegal action initiated by the Company against another party, in which theEmployee is deemed by the Company to be a material witness or affiant, theEmployee agrees to make reasonable and best efforts to cooperate with theCompany in such matters. If the Employee is no longer employed, Company willreimburse the Employee for time and expenses incurred as a result ofcooperation for this purpose.

 

**11.**                               INDEMNIFICATION.

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The Company agrees to make its best efforts toindemnify and hold harmless the Employee from liability incurred as a result ofperformance of duties as an officer and member of the Board of Directors. Thisincludes but is not limited to applicable statute, as well as efforts to securecoverage under pertinent insurance policies.

 

**12.**                               NOTICES.

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All notices, requests, demands and othercommunications provided for by this Agreement shall be in writing and shall bedeemed to have been given when mailed at any general or branch United StatesPost Office enclosed in a certified postpaid envelope, return receiptrequested, and addressed to the address of the respective.

 

If to the Employee:

 

Richard C. Carlson810 Lake Susan Hills DriveChanhassen, MN 55317

 

If to the Company:

 

Chairman of the Compensation CommitteeProUroCare Medical Inc.5500 Wayzata Blvd., Suite 310

Golden Valley, MN 55416

 

Any notices of change of address shall only beeffective, however, when received.

 

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**13.**                               SUCCESSORS AND ASSIGNS.

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This Agreementshall inure to the benefit of, and be binding upon, the Company, its successorsand assigns, including, without limitation, any corporation which may acquireall or substantially all of the Company’s assets and business or into which theCompany may be consolidated or merged, and the Employee, his heirs, executors,administrators and legal representatives. The Employee may assign his right to payment,and his obligations, under this Agreement.

 

**14.**                               APPLICABLE LAW.

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This Agreement shall be governed by the laws of theState of Minnesota without regard to any conflict of law analysis. The Partiesagree that any dispute arising out or related to this Agreement shall be venuedin the State of Minnesota and the Parties consent to the exclusive jurisdictionof the Minnesota state or federal courts for such disputes.

 

**15.**                               OTHER AGREEMENTS.

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This Agreement supersedes all prior understandings andagreements between the parties. It may be amended only by a writing signed bythe parties hereto.

 

**16.**                               NON-WAIVER.

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No delay or failure by either party in exercising anyright under this Agreement, and no partial or single exercise of that right,shall constitute a waiver of that or any other right.

 

**17.**                               HEADINGS.

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Headings in this Agreement are for convenience onlyand shall not be used to interpret or construe its provision.

 

**18.**                               COUNTERPARTS.

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This Agreement may be executed in two or morecounterparts, each of which shall be deemed an original but all of whichtogether shall constitute one and the same instrument.

 

**19.**                               SURVIVORSHIP.

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The Parties’ obligations and rights set forth inSections 7, 10, 11 12, 13, 14, 15, and 16 shall survive the termination of thisAgreement.

 

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|   | **PROUROCARE INC.**    |
|--------|------------------------|
|   |                   |
|   | By:                    | /s/David F. Koenig |
|   |                   |  David F. Koenig |
|   |                   |  Its:  Chairman,  Compensation Committee |
|   |                   |
|   |                   |
|   | **EMPLOYEE**           |
|   | ** **             |
|   |                   |
|   | /s/ Richard C. Carlson |
|   | Richard C. Carlson     |

 

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