<PAGE>   1

** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO CERTAIN INFORMATION
   CONTAINED IN THIS DOCUMENT. CONFIDENTIAL PORTIONS (MARKED [**] HAVE BEEN
   OMITTED FROM THE PUBLIC FILING AND HAVE BEEN FILED SEPARATELY WITH THE
   SECURITIES AND EXCHANGE COMMISSION.

                                                                   EXHIBIT 10.16

                                   OEM PRODUCT

                        DEVELOPMENT AND SUPPLY AGREEMENT


        This Agreement (the "Agreement") is entered into effective as of March
10, 1997 (the "Effective Date") by and between CardioGenesis Corporation
("CardioGenesis"), a Delaware corporation, and Carl Baasel Lasertechnik GmbH, a
corporation organized under the laws of Germany ("Baasel").

                                 R E C I T A L S

        A. CardioGenesis has undertaken considerable efforts in the application
of lasers, and particularly holmium:YAG ("Ho:YAG") lasers, in conjunction with a
medical treatment called transmyocardial revascularization ("TMR"), and holds
certain patents and patent applications in relation thereto, especially with
respect to the use of catheters for directing laser energy to the heart.

        B. CardioGenesis is in the process of establishing its business
worldwide, including sales of its products for TMR uses to customers such as,
but not limited to, hospitals, catheter laboratories and other appropriate
medical products end-users.

        C. The CardioGenesis Products, as defined below, currently include a
laser, which currently is a Ho:YAG laser.

        D. Baasel has certain expertise with respect to the generation and
control of high power laser pulses, and has extensive experience in the
development and manufacture of both industrial and medical solid state lasers,
and especially of Ho:YAG lasers, and holds certain patents and patent
applications in relation thereto.

        E. CardioGenesis desires to partake of such experience and expertise of
Baasel, and Baasel desires to cooperate with CardioGenesis, under the terms and
conditions of this Agreement, in order: (1) to allow for the development by
Baasel, in cooperation with CardioGenesis, of a laser, based upon an existing
laser product of Baasel, which will be suitable, as a result of such
development, for use in and as a part of CardioGenesis Products, worldwide in
the CardioGenesis Use, as hereinafter defined, and (2) to allow for manufacture
and sale to CardioGenesis by Baasel, on an original equipment manufacturer (OEM)
basis, of such developed laser product, as provided herein.

        Now, therefore, in consideration of the mutual covenants contained in
this Agreement, CardioGenesis and Baasel agree as follows:

        1.     OEM PRODUCT DEVELOPMENT.

               (a) General. The parties acknowledge that at the request of, and
with the cooperation of, CardioGenesis, Baasel has undertaken, and CardioGenesis
has funded, prior to the Effective Date, and, at the request of CardioGenesis,
Baasel may continue during all or a part of the term hereof, research and
development efforts (such efforts both before the Effective Date and during the
term hereof referred to herein as the "Development Efforts") intended to allow
the manufacture of a laser (the "OEM Product"), described generally on Exhibit A
attached hereto and incorporated herein by reference, that will meet the
specifications for such OEM Product as set forth on Exhibit A hereto, including
without limitation specifications related to approval of


<PAGE>   2

the OEM Product as may be required under regulations of the U.S. Food & Drug
Administration (the "FDA") and other applicable U.S. and international
regulatory standards and requirements. The parties acknowledge that the OEM
Product will be a key component in CardioGenesis' laser-based surgical products,
as they now exist and as they may exist in the future, including systems
consisting of various component products or subassemblies (collectively, the
"CardioGenesis Products"), for use worldwide in all cardiothoracic human and
animal applications and/or involving pulsing of the laser, including without
limitation TMR (such use generically referred to herein as the "CardioGenesis
Use"), and as spares and replacements for CardioGenesis Products incorporating
such OEM Product.

               (b) OEM Product Development Program; OEM Product Specifications;
Change of OEM Product Specifications by CardioGenesis.

                      (i) OEM Product Development Program. Commencing on the
Effective Date, Baasel will continue, and CardioGenesis will, subject to the
further terms and conditions of this Agreement, pay for, such further research
and development work during the term hereof as CardioGenesis determines in good
faith to be necessary to finalize the OEM Product and to make the OEM Product
commercially salable by CardioGenesis as incorporated into CardioGenesis
Products. Such research and development work will be conducted pursuant to the
Development Program described in Exhibit B attached hereto and incorporated
herein by reference (the "Schedule"), including the Phases set forth therein
(each a "Phase"). Baasel will use its good faith best efforts to complete each
of the Phases set forth in Exhibit B hereto. At the completion of each Phase of
the Development Program, CardioGenesis will have the sole right to determine
whether the Development Program will continue. CardioGenesis will immediately
notify Baasel in writing of CardioGenesis' determination to continue, or not to
continue, the Development Program.

                      (ii) OEM Product Specifications. The specifications for
the OEM Product as set forth in Exhibit A hereto were arrived at by mutual
consensus of Baasel and CardioGenesis, and include, as attached to and included
in Exhibit A, Baasel's specification offer documents denoted as MD0230/96 and
MD0254/96 (the "Baasel Proposed Specifications"), and CardioGenesis'
specification response documents denoted as DS000701 and DS000801 (the
"CardioGenesis Proposed Specifications"). In the event of a conflict between the
contents of the Baasel Proposed Specifications and the CardioGenesis Proposed
Specifications, the CardioGenesis Proposed Specifications will control. In the
event of a conflict between the contents of the Baasel Proposed Specifications
and/or the CardioGenesis Proposed Specifications, on the one hand, and remaining
contents of Exhibit A, on the other hand, such remaining contents of Exhibit A
will control.

                      (iii) Change of OEM Product Specifications By
CardioGenesis. If CardioGenesis changes the specifications or requirements for
the OEM Product from those set forth in Exhibit A hereto in a manner that is, in
Baasel's good faith judgment after consultation with CardioGenesis, materially
different from the specifications and requirements for the OEM Product as set
forth in Exhibit A hereto, Baasel may request that CardioGenesis and Baasel
execute an amendment of Exhibit B hereto to reflect a commercially reasonable
adjustment of the payments to be made by CardioGenesis for such research and
development work, to account for such changes. CardioGenesis will consider such
request in good faith. If the parties reach agreement on such adjustment of
payments, they will reflect such agreement in a mutually-

                                      -2-

<PAGE>   3

signed amendment to Exhibit B hereto. If the parties do not reach agreement in
writing on such adjustment of payments, [ ** ]

                      (iv) Materially Increased Actual Cost of Development
Efforts. If, in the course of performing the Development Efforts, the actual
amount expended by Baasel to complete the Development Efforts, as set forth in
Exhibit B hereto, exceeds [ ** ], then the parties will negotiate in good faith
for a commercially reasonable increase in such total of payments. If the parties
reach agreement on such increased amount, they will so reflect it in a written
amendment to Exhibit B hereto. If the parties do not reach such agreement, then
either party may immediately terminate this Agreement by written notice to the
other.

               (c) Payment by CardioGenesis To Baasel For the Development
Efforts. The amount to be paid by CardioGenesis to Baasel for Baasel's work in
the Development Efforts from and after the Effective Date, if the relevant Phase
has been successfully completed by meeting the technical specifications set
forth on Exhibit B hereto upon for such Phase, is set forth for such Phase on
Exhibit B hereto; provided, however, that payment by CardioGenesis for the [ **
] units of commercial production OEM Product to be ordered by CardioGenesis in
its Initial Order (as provided and defined in Section 5(b) hereof) will be paid
for as provided in Section 5(b) hereof, is not included in such payment for the
Development Efforts. CardioGenesis will pay to Baasel the relevant amount
required under Exhibit B within forty-five (45) days after the date of delivery
by Baasel to CardioGenesis of the deliverable under Exhibit B to which such
payment relates. The payment by CardioGenesis to Baasel of the relevant payment
for each Phase as provided herein will be the entire payment of CardioGenesis to
Baasel for the Development Efforts. Baasel acknowledges receipt of a total of [
** ] in cash from CardioGenesis prior to the Effective Date for Development
Efforts undertaken by Baasel at CardioGenesis' request prior to the Effective
Date. Such advance payment will be credited against any amount due from
CardioGenesis to Baasel at the completion of Phase 4 or as a result of and
following any termination of this Agreement by CardioGenesis prior to completion
of the Development Efforts.

               (d) Expenses; Project Manager and Project Engineer.. The parties
will pay their own respective expenses in performance of their obligations
hereunder, provided that the reasonable travel and lodging expenses of Baasel
personnel in connection with the review provided for in Section 1(f) hereof will
be paid by CardioGenesis, and provided that CardioGenesis will pay or will at
Baasel's written request accompanied by an invoice therefor in reasonable
detail, reimburse Baasel for, over the course of the Development Efforts:

                      (i) Project Manager. A total of up to [ ** ], for the
aggregate amount of Baasel's costs, including consulting fees and reasonable
travel and lodging and other customary incidental costs, while working on the
Development Efforts, of a Project Manager who will be a consultant acceptable to


                                      -3-
<PAGE>   4




CardioGenesis, which acceptance will not be unreasonably withheld or delayed,
and who will be supplied by Baasel for the Development Efforts, provided that
the parties will discuss and negotiate in good faith, and will reflect any
agreement between them in writing as an amendment to this Agreement, as to any
increases in the amount provided above for the Project Manager if, in the good
faith judgment of Baasel, such amount needs to be increased to assist the
Development Efforts; and

                      (ii) Project Engineer. Up to a total of [ ** ] for the
salary and Baasel's customary general and administrative overhead costs related
thereto, and reasonable travel and lodging and other customary incidental costs,
but no other costs or charges, while working on the Development Efforts, of a
Project Engineer who will be supplied by Baasel for the Development Efforts.
Such amount will be paid in [ ** ] installments of [ ** ] each, one of which
will be paid to Baasel at the same time as the payment for the Development
Efforts that is due to be paid under Exhibit B hereto next after the Effective
Date, and the second of which will be paid to Baasel at the same time as the
next succeeding payment for the Development Efforts that is due to be paid under
Exhibit B hereto.

                      At CardioGenesis' reasonable and good faith request,
Baasel will supply, or will cause the Project Manager and/or the Project
Engineer to supply, to CardioGenesis customary receipts and records of such
travel and lodging costs appropriate for CardioGenesis' accounting and income
tax supporting documentation purposes.

               (e) Certain Reimbursement by CardioGenesis to Baasel. Pursuant to
the Schedule, the starting and scheduled final points of the Phases will overlap
each other. In consideration of Baasel ordering long-lead items for use in such
Phases and of the overlapping of such Phases, upon any such early termination by
either party, CardioGenesis will reimburse Baasel all reasonable expenses,
including, but not limited to development, material and labor costs (at Baasel's
then current hourly rates for development engineers) through such termination,
and for all penalties and amounts required to be paid by Baasel under agreements
by Baasel with third parties which Baasel cannot cancel without such penalty or
payment applying. Baasel will use its diligent efforts to effect such required
cancellations without penalty.

               (f) Cooperation. The parties will cooperate in good faith to
attempt to allow the completion of the Development Efforts according to the
Schedule, and to allow Baasel to meet each Phase fully. In connection therewith,
the parties will cooperate with each other, each at their own respective
expense, provided that the costs required of Baasel for any such action are in
reasonable relation to the amount of work that has been then undertaken by
Baasel in the Development Efforts, with respect to all commercially reasonable
requests made in good faith by one party to the other concerning documentation,
and execution and delivery by the other party of documents and instruments to
obtain, preserve and protect the proprietary rights of the requesting party,
including, without limitation, actions in connection with patent, trademark,
copyright and mask work registration and prosecution. The primary liaison person
for Baasel initially will be Dr. Werner Falkenstein. The primary liaison person
for CardioGenesis initially will be Dr. Kenneth Aron. The parties will promptly
notify each other in writing of any change during the term of this Agreement in
such primary liaison personnel designations. Members of the Baasel technical
team that are designated by CardioGenesis in writing to Baasel will meet

                                      -4-
<PAGE>   5

with CardioGenesis' technical staff at CardioGenesis' corporate headquarters to
perform the second design review of the OEM Product, at times mutually
convenient for the parties.

               (g) New Developments by Baasel. During the term of this
Agreement, Baasel will:

                      (i) Awareness of New Developments. Keep CardioGenesis
apprised of new developments in Baasel products or technologies which have
potential application to the OEM Product, which disclosures will be subject to
the confidentiality provisions of Section 11 hereof, and

                      (ii) Availability of New Developments to CardioGenesis.
Make available such new developments for incorporation into the OEM Product,
subject to written agreement between CardioGenesis and Baasel as to such
incorporation into the OEM Product, and to commercially appropriate adjustments,
if any, in the purchase price for the OEM Product to CardioGenesis as the
parties may agree in writing by an amendment to Exhibit C attached hereto. All
such developments will remain the sole property of Baasel, and Baasel will not
be limited in the worldwide use of such developments, subject to such rights as
Baasel may grant in writing to CardioGenesis.

               (h) Functional, Prototype and Pilot Units. Baasel will provide to
CardioGenesis the following [ ** ] units, each having the respective
specifications set forth for such relevant unit in Exhibit B hereto:

                      (i) Functional Units. [ ** ] functional pre-production
units of the OEM Product, with such housing as Baasel deems appropriate, [ ** ]
of which units will be shipped by Baasel to CardioGenesis Ex Works, as defined
in Incoterms 1990 ("Ex Works"), Starnberg, Germany, on or before March 12, 1997,
or as soon thereafter as possible if shipment cannot be made on March 12, 1997
due to carrier unavailability (Baasel will notify CardioGenesis in writing
promptly of any such unavailability, and of the revised expected shipment date),
and [ ** ] of which units will remain with Baasel in Germany; and

                      (ii) Prototype Units. [ ** ] prototype pre-production
units of the OEM Product, [ ** ] of which units will have Baasel Model BLM 1000
housings, will be shipped by Baasel on or before May 15, 1997 Ex Works
Starnberg, Germany, to CardioGenesis, and [ ** ] of which units, with the OEM
Product housing, will remain with Baasel in Germany; and

                      (iii) Pilot Units. [ ** ] pilot production units of the
OEM Product, each of which will have the OEM Product housing, will be shipped by
Baasel Ex Works Starnberg, Germany, to CardioGenesis as follows: [ ** ] units,
without the CE Mark marking, will be shipped on or before August 4, 1997, and [
** ] additional units, each with the CE Mark marking applied, will be shipped on
or before August 18, 1997.

               Functional and prototype units may differ from the final
commercial production version of the OEM Product in appearance and assembly, but
will be representative of such final commercial production version of the OEM
Product in fit and function, and will have the general characteristics for such
functional and prototype units as are set forth in Exhibit B hereto or as
otherwise agreed in writing by the parties.

                                      -5-

<PAGE>   6

               The full payment by CardioGenesis to Baasel for all functional,
prototype and pilot units is included within the relevant payments made prior to
and after the Effective Date by CardioGenesis for the Development Efforts, and
CardioGenesis will not be liable for any other payment or charge for any such
functional prototype or pilot units.

               (i) Modification of OEM Product. As required under regulations of
the FDA or under other applicable U.S. and international regulatory standards
and requirements, no engineering modifications will be initiated or implemented
by Baasel to the OEM Product without prior approval in writing by CardioGenesis,
provided that nothing herein will limit or prevent Baasel from initiating and
implementing such changes as Baasel desires to Baasel's products apart from the
OEM Product.

               (j) Limitations on Baasel. In view of the investment by
CardioGenesis in development of the OEM Product, during the term of this
Agreement and for a period of one (1) year thereafter, Baasel will not make a
laser, or any major subassembly of a laser, that has been specifically designed
according to CardioGenesis' requirements for the CardioGenesis Use or in any
other way substantially similar, in the good faith and commercially reasonable
judgment of CardioGenesis, to the OEM Product, for supply to another party for
uses competitive with the CardioGenesis Use, and any such manufacture or supply
by Baasel after such one-year period will in any event be subject to the
provisions of this Agreement with respect to proprietary rights ownership by the
parties as provided in Section 2 hereof and to the parties' obligations of
confidentiality as provided in Section 11 hereof.

        2.     PROPRIETARY RIGHTS OWNERSHIP.

               (a) Baasel Ownership. All Baasel Proprietary Information will
belong to Baasel, subject to the licenses granted herein to CardioGenesis. For
purposes of this Agreement, "Baasel Proprietary Information" means all
proprietary and confidential information and intellectual property rights of
Baasel related to and used for its laser products, including without limitation
Baasel Software and Updates as defined in Section 3(b)(ii) hereof, and all
intellectual property rights however arising, whether under trademark, trade
name, copyright, maskwork, patent or trade secret, and whether under statute or
common law, and whether applied for, pending or issued by any relevant
governmental authority, and whether belonging wholly to Baasel or whether
subject to license or other grant of rights either by Baasel as licensor or as
licensee, and as otherwise specifically set forth on Exhibit D hereto, but not
including any CardioGenesis Proprietary Information.

               (b) CardioGenesis Ownership. All CardioGenesis Proprietary
Information and all OEM Product Improvements (each as hereinafter defined) will
belong to CardioGenesis, subject to the licenses granted herein to Baasel. For
purposes of this Agreement (i) "CardioGenesis Proprietary Information" is
defined as all proprietary and confidential information and intellectual
property rights, however arising, whether under trademark, trade name,
copyright, maskwork, patent or trade secret, and whether under statute or common
law, and whether applied for, pending or issued by any relevant governmental
authority, and whether belonging wholly to CardioGenesis or whether subject to
license or other grant of rights either by CardioGenesis as licensor or as
licensee, and as otherwise specifically set forth on Exhibit D

                                      -6-

<PAGE>   7

hereto, but not including any Baasel Proprietary Information, in each case as
related to and used for the creation of OEM Product Improvements, and (ii) "OEM
Product Improvements" is defined as all modifications to Baasel's preexisting
laser products, as such laser products existed prior the commencement by Baasel
of the Development Efforts, including such work prior to and through the
Effective Date, and that may be undertaken during the term of this Agreement, as
part of the Development Efforts, in connection with allowing the production of
the OEM Product by Baasel with the specifications as may be agreed by Baasel in
writing pursuant to this Agreement that are desired and proposed by
CardioGenesis (alone, as opposed to such specifications as result from the
desires or requests of other customers of Baasel and which are, to the extent
lawfully permitted to Baasel, and with CardioGenesis' written consent in
defining the OEM Product specifications from time to time, included within the
OEM Product), and includes, without limitation, user manuals, service manuals,
and documents relating to software and hardware design modification and all
proprietary information and intellectual property as so developed.

               (c) Cooperation. The parties will cooperate with each other, each
at their own expense, with respect to all commercially reasonable requests made
in good faith by one party to the other concerning documentation, and execution
and delivery by the other party of documents and instruments to obtain, preserve
and protect the proprietary rights of the requesting party, including, without
limitation, actions in connection with patent, trademark, copyright and mask
work registration and prosecution.

        3.     LICENSES BY CARDIOGENESIS AND BAASEL.

               (a) Development and Manufacturing License From CardioGenesis to
Baasel. CardioGenesis hereby grants to Baasel a nonexclusive, nontransferable,
royalty-free license during the term of this Agreement, and with respect to
Baasel's work on the Development Efforts prior to the Effective Date, revocable
only for the failure of Baasel to perform its obligations under this Agreement,
to use CardioGenesis Proprietary Information (as defined in Section 2(b) hereof)
solely as necessary (i) with respect to work completed under the Development
Efforts by collaboration between CardioGenesis and Baasel, in order to attempt
to develop the OEM Product, and (ii) to undertake and complete further
development work on the OEM Product under the Development Efforts as is deemed
necessary by the parties hereto after the Effective Date, and (iii) to
manufacture and supply OEM Products and Parts to CardioGenesis pursuant to this
Agreement.

               (b) License From Baasel to CardioGenesis For Certain Use of
Baasel Proprietary Information. The parties intend that all software of Baasel
that is necessary for the operation of the OEM Product, as such software may be
modified during the Development Efforts, will be embedded in the OEM Product, in
an electrically erasable programmable read-only memory integrated circuit
(EEPROM) or similar device. Therefore:

                      (i) General Grant of License. Baasel hereby grants to
CardioGenesis the following licenses, in each case including all rights
necessary in connection with the use by CardioGenesis, the customers of
CardioGenesis, and third-party licensees permitted under this Agreement, to
Baasel Software and Updates, as defined below:

                                      -7-

<PAGE>   8

                             (A) Royalty-Free License. An exclusive,
royalty-free worldwide license in perpetuity, revocable only for the failure of
CardioGenesis to perform its obligations under this Agreement, with respect to
such Baasel Proprietary Information (as defined in Section 2(a) hereof) as is
necessary for the sale by CardioGenesis of OEM Products and Parts as
incorporated into CardioGenesis Products or on a stand-alone basis, including in
such license the right to use such Baasel Proprietary Information as is
necessary for training with respect to and maintenance of the OEM Product;

                             (B) Royalty-Bearing License. An exclusive,
worldwide license in perpetuity, revocable only for the failure of CardioGenesis
to perform its obligations under this Agreement, bearing the royalties set forth
in Section 10(b) hereof, with the right to sublicense to third party
manufacturers, for the manufacture and sale by CardioGenesis and/or by such
third parties, of OEM Products and/or Parts, including training with respect to
and maintenance of the OEM Products only while the Manufacturing License is in
use by CardioGenesis pursuant to the terms of Section 10(b) of this Agreement.

                      (ii) Software License From Baasel.

                             (A) License Grant. Subject to the terms and
conditions of this Agreement and limited to the CardioGenesis Use, Baasel hereby
grants CardioGenesis a nonexclusive, royalty-free worldwide license revocable
only for the failure of CardioGenesis to perform its obligations under this
Agreement (the "Baasel Software License") to:

                                    (1) During the term of this Agreement, use
the proprietary software of Baasel ("Baasel Software") and error corrections,
updates, enhancements and/or other changes to Baasel Software (collectively, the
"Updates"), in each case as embedded in the OEM Product and/or in Parts, in
conjunction with the use of OEM Products, for CardioGenesis' internal purposes
only, in connection with CardioGenesis' distribution, demonstration, marketing
and support of the CardioGenesis Products, and of the OEM Products and Parts as
permitted by this Agreement;

                                    (2) During the term of this Agreement, grant
to end-users of OEM Products and Parts, a nonexclusive nontransferable
sublicense to use Baasel Software as embedded in, and in conjunction with the
use of, OEM Products and Parts, which sublicense will survive the termination or
expiration of this Agreement; and

                                    (3) Copy and distribute the Updates to
end-users of OEM Products and Parts as embedded therein.

                             (B) Updates. Baasel will provide to CardioGenesis a
master copy of Updates upon CardioGenesis' written request, and CardioGenesis
will pay such payment for such master copy production [ ** ]. CardioGenesis may
reproduce copies from the master copy solely for the purpose of distribution to
end-users of CardioGenesis Products and/or OEM Products and/or Parts, to be used
as embedded therein.

                                      -8-

<PAGE>   9




                             (C) User Licensing. CardioGenesis will take all
commercially reasonable steps to protect Baasel's proprietary rights in Baasel
Software and Updates. If CardioGenesis licenses, under a separate software
license to its customers, any rights to CardioGenesis software in connection
with, and/or as embedded in, OEM Products and Parts, such license by
CardioGenesis will be prepared so as to apply to and equally protect Baasel
Software and Updates. If such separate license is used, then in the United
States and in the other jurisdictions where an enforceable copyright covering
Baasel Software and Updates exists, such license agreement may be a written
agreement signed by the customer or a written agreement in the package
containing Baasel Software and Updates or the user documentation for Baasel
Software and Updates that is fully visible to the customer and that the customer
accepts by opening the package, but in all other jurisdictions such agreement
must be a written agreement signed by the customer.

                             (D) Restrictions. Except as set forth in this
Agreement or as may be permitted in writing by Baasel, CardioGenesis will not
provide or otherwise make available Baasel Software or Updates or any part or
copies thereof to any third party nor use Baasel Software or Updates for any
purposes not specifically set forth in this Agreement. CardioGenesis will take
appropriate action by instruction to or written agreement with its employees who
are permitted access to Baasel Software or Updates to fulfill such obligations
of CardioGenesis. CardioGenesis will use its commercially reasonable efforts to
prevent any violation of Baasel's or Baasel's licensors' or suppliers' copyright
in Baasel Software or Updates. Except as such source code or other confidential
information may be used under the Manufacturing License in accordance with the
terms of Section 10(b) of this Agreement, CardioGenesis will not, and the terms
and conditions of sale or other transfer by CardioGenesis and of any third party
sellers permitted under this Agreement, will prohibit, reverse assembly,
decompiling or otherwise attempting to derive source code or other confidential
information from Baasel Software or Updates.

               (c) Trademark License From CardioGenesis to Baasel. CardioGenesis
grants to Baasel a nonexclusive, royalty-free, worldwide license during the term
of this Agreement, revocable only for the failure of Baasel to perform its
obligations under this Agreement, to use CardioGenesis' trademarks, including
without limitation those trademark and names which CardioGenesis may choose to
claim as trademark as listed in Exhibit E attached hereto, to the extent
necessary for Baasel to perform Baasel's obligations under this Agreement.
Baasel may apply CardioGenesis' trademarks only to OEM Products and Parts,
instruction manuals for OEM Products and Parts, cartons for OEM Products and
Parts and other relevant documents and packaging sold by Baasel to CardioGenesis
under the terms of this Agreement or otherwise as authorized in writing by
CardioGenesis from time to time. CardioGenesis may, at CardioGenesis' election,
but only for the CardioGenesis Use, market the OEM Products and/or Parts, as
incorporated in CardioGenesis Products, or on a stand-alone basis, under
CardioGenesis' own name and trademarks.

               (d) Noncompeting Use License by CardioGenesis to Baasel.
CardioGenesis hereby grants to Baasel a nonexclusive, royalty-free worldwide
license in perpetuity, revocable only for the failure of Baasel to perform its
obligations under this Agreement, to use solely such CardioGenesis Proprietary
Information, as defined in Section 2(b) hereof, as is necessary in order

                                      -9-

<PAGE>   10

for Baasel to develop and manufacture and sell, for Baasel's own account or for
others, laser products for uses other than the CardioGenesis Use, provided that
no CardioGenesis Proprietary Information, whether included in the OEM Product
Improvements or not, will be disclosed to any third party without the prior
written consent of CardioGenesis or unless such third party is bound, prior to
such disclosure to such party, by a customary nondisclosure agreement in favor
of CardioGenesis, with respect to such CardioGenesis Proprietary Information,
the form of which nondisclosure agreement has been approved by CardioGenesis,
whose approval will not be unreasonably withheld. Baasel will not, and will not
grant to third parties any right to, reverse assemble, decompile or otherwise
attempt to derive source code or other Confidential Information from the
CardioGenesis Proprietary Information.

               (e) No Other License Rights. Other than the specific license
rights granted herein by the parties to each other, neither party will have any
express or implied license or other rights to any confidential or proprietary
rights of the other. This Agreement grants neither party any rights to use the
other party's trademarks, trade names or service marks other than those rights
which are explicitly granted in this Agreement. Neither party will, nor will
attempt to, acquire the other's names, marks, logos, symbols, or the like, or
any that are confusingly similar thereto.

        4.     MANUFACTURE AND SUPPLY OF OEM PRODUCTS AND PARTS BY BAASEL.

               (a) Manufacture and Supply of OEM Products by Baasel. Pursuant to
the terms hereof and following the completion of Phase 4 (or following the
completion of Phase 3 if the parties so agree in writing), Baasel will
manufacture and supply OEM Products to CardioGenesis, on an original equipment
manufacturer (OEM) basis. [ ** ]. In addition, if pursuant to Section 1(c)
hereof, CardioGenesis agrees in writing to any proposed engineering modification
to the OEM Product, CardioGenesis will have the opportunity, in its discretion,
to obtain an appropriate end-of-product-life purchase from Baasel of affected
OEM Products in unmodified form, for use in CardioGenesis Products, at the
purchase price in effect for such OEM Products immediately before such agreement
in writing by CardioGenesis. Baasel will not manufacture the OEM Product for,
nor will it sell the OEM Product to, any third party without the express prior
written consent of CardioGenesis.

               (b) Supply Of Parts by Baasel. During the term hereof, and, if
CardioGenesis declines to use the Manufacturing License provided for in Section
10(b) hereof, then also for a [ ** ] period after Baasel discontinues the
manufacture of the OEM Products, Baasel will sell the replacement parts listed
in Exhibit F attached hereto (the "Parts") for OEM Products


                                      -10-
<PAGE>   11



purchased by CardioGenesis, to CardioGenesis, or, at CardioGenesis' written
request to Baasel, to such customers of CardioGenesis as are specified in such
request. During any use by CardioGenesis of the Manufacturing License hereunder,
and at CardioGenesis' written request, Baasel will furnish vendor and part
number information for commercially available Parts and for all other spare
parts for OEM Products that have been purchased by CardioGenesis and by
CardioGenesis' customers.

               (c) Notices. CardioGenesis will have the right, subject to the
remainder of this Section 4(c), to remove Baasel's trademarks, trade names, and
other Baasel identification appearing on such OEM Products, and all Baasel
warranty cards and other Baasel documentation accompanying same before resale of
such OEM Product, provided that (i) CardioGenesis will consult with Baasel in
good faith as to any such removal, and (ii) CardioGenesis will only effect such
removal to the extent permitted by law, and (iii) commercially reasonable and/or
legally required proprietary notices incorporated in, marked on, or affixed to
the OEM Products and Parts by Baasel will not be removed or obliterated by
CardioGenesis without Baasel's prior written consent, and (iv) CardioGenesis
will affix such other commercially reasonable proprietary notices to the OEM
Products and Parts on Baasel's behalf, at CardioGenesis' expense, as Baasel
reasonably requests.

               (d) Discontinued or Obsolete OEM Products. If Baasel intends to
discontinue the manufacture or sale of, or otherwise render or treat as
obsolete, the OEM Product, Baasel will give at least one (1) year's prior
written notice thereof to CardioGenesis (a "Baasel Discontinue/Obsolete
Notice").

               (e) Manufacturing Standards For OEM Products and Parts.

                      (i) OEM Products and Parts For Sale and/or Distribution
Outside the United States. All OEM Products and Parts ordered by CardioGenesis
hereunder for sale and/or distribution outside the United States will be
manufactured and assembled by Baasel, in accordance with applicable regulations
and standards for such manufacturing. OEM Products and Parts manufactured
outside of the United States may, subject to specific written agreement by the
parties, be drop-shipped to CardioGenesis' customer by Baasel at CardioGenesis'
expenses and will be subject to quality assurance procedures established in
writing by CardioGenesis on the basis of applicable standards (ISO 9000 and
MDDE) which written procedures have been delivered to and approved by Baasel,
whose approval will not be unreasonably withheld or delayed.

                      (ii) OEM Products and Parts For Sale and/or Distribution
Within the United States. All OEM Products and Parts ordered by CardioGenesis
hereunder for sale and/or distribution in the United States will be manufactured
by Baasel or by such subcontractor(s) as may be approved by Baasel and
CardioGenesis in writing in advance (which approval will not unreasonably be
withheld or delayed), to such level of, and under such conditions of,
manufacturing as Baasel and CardioGenesis will agree in writing, [ ** ].
CardioGenesis will, at its own expense, either itself, through a
regulatory-qualified subcontract manufacturer acceptable to Baasel, whose
acceptance will not be

                                      -11-
<PAGE>   12




unreasonably withheld or delayed, complete the manufacture of such OEM Product
and/or Part as is required, under applicable U.S. government standards,
including applicable regulations of the FDA and of all other applicable U.S.
agencies, governing manufacturing thereof for such sale within the United
States.

               (f) Regulatory Approval. Each of CardioGenesis and Baasel will be
responsible at its own expense for obtaining and maintaining during the term of
this Agreement, and after the term of this Agreement to the extent required by
law as to OEM Products and Parts manufactured or sold as provided in this
Agreement, all regulatory approvals required, whether U.S. or international, in
order for the obtaining party to use and/or sell or otherwise distribute, in the
case of CardioGenesis, the OEM Product and Parts, and in the case of Baasel, any
products referred to in Section 3(d) hereof, including without limitation CE
mark approval. Each party will render to the other party such commercially
reasonable assistance and cooperation, at the expense of the rendering party, as
the requesting party reasonably and in good faith, requests in connection with
the obtaining and maintenance of such approvals. The parties will as promptly as
possible inform each other in writing with respect to, and will furnish the
other with a copy of, all such approvals related to OEM Products and Parts, or
by Baasel as to products referred to in Section 3(d) hereof, obtained by the
notifying party during the term of this Agreement. CardioGenesis will, to the
extent lawfully permitted, promptly supply to Baasel all CardioGenesis clinical
trials data and other relevant similar information of CardioGenesis requested by
Baasel in writing in good faith in connection with Baasel's performance of
Baasel's obligations hereunder with respect to regulatory compliance including
obtaining and maintaining CE Mark approval. Baasel assumes no responsibility for
any clinical trials of CardioGenesis, nor for the validity, acceptance and
conformity of any clinical trials data to be provided by CardioGenesis to Baasel
or to any third party for purposes of any regulatory approval, or for the effect
upon obtaining and maintaining any such approval, including CE Mark approval,
caused by any delay in obtaining or furnishing, or by the content of, any such
clinical trials data.

        5.     ORDER AND ACCEPTANCE.

               (a)    General.

                      (i) Form of Purchase Orders. All orders for OEM Products
and Parts submitted by CardioGenesis during the term hereof will be subject to
the terms and conditions of this Agreement, except as otherwise agreed to in a
writing signed by both parties, and will be initiated by written purchase
orders, on CardioGenesis' then-standard form of purchase order, sent by
CardioGenesis to Baasel. Orders may initially be placed by CardioGenesis by
facsimile provided that CardioGenesis will deliver a confirming written copy of
such purchase order to Baasel within ten (10) days after such facsimile order is
sent by CardioGenesis. In the event of a conflict between the terms of any
CardioGenesis purchase order or Baasel acknowledgment and the terms of this
Agreement, the terms of this Agreement will control.

                      (ii) Acceptance or Rejection of Orders By Baasel. No
purchase order placed by CardioGenesis will be binding upon Baasel until
accepted by Baasel in writing, which may be by facsimile with original to follow
by air mail to CardioGenesis, and Baasel will have no liability to CardioGenesis
with respect to purchase orders, or portions thereof, that are not so


                                      -12-

<PAGE>   13

accepted. Baasel will notify CardioGenesis promptly of the acceptance or
rejection by Baasel of a CardioGenesis purchase order, or portion thereof, and
of the agreed assigned delivery date for accepted orders. Baasel will be deemed
to have accepted a CardioGenesis purchase order, or any portion thereof, to
which Baasel has not objected to CardioGenesis in writing (i) no later than
fifteen (15) business days (a "business day" being defined for purposes of this
Agreement as a day when Baasel's headquarters offices in Germany are open for
business at the normal level of Baasel's operations) after the date of such
CardioGenesis purchase order, if sent first by CardioGenesis by facsimile or
(ii) no later than twenty (20) business days after the date of such
CardioGenesis purchase order, if such purchase order is first sent by
CardioGenesis by airmail or courier.

                      (iii) Partial Shipments; Delivery Dates. Partial shipments
will be allowed only to the extent agreed in writing by CardioGenesis before
such partial shipment is shipped. Baasel will use its best efforts to deliver
OEM Products and Parts at the times specified in its written acceptance of
CardioGenesis' purchase orders. CardioGenesis will inform Baasel at the
beginning of each calendar quarter in writing of the detailed delivery dates of
all OEM Products under that portion of Rolling Purchase Orders (as hereinafter
defined) that have become binding, as further provided in this Section 5, and
that are, according to CardioGenesis' records, to be shipped by Baasel in the
consecutive calendar quarter.

                      (iv) Orders of Less Than [ ** ] Units. CardioGenesis will
use its commercially reasonable efforts, but will not be obligated, to (A) order
at least [ ** ] units of OEM Product as to any Rolling Purchase Order (as
hereinafter defined) as initially placed by CardioGenesis, and (B) not reduce
below [ ** ] the total number of OEM Products in any Rolling Purchase Order
after it is initially placed. CardioGenesis will give Baasel as much notice in
writing in advance as is commercially reasonable with respect to any Rolling
Purchase Order which CardioGenesis anticipates placing of less than [ ** ]
units, and as to any such anticipated reduction.

               (b) Initial Order. CardioGenesis has, on the Effective Date,
placed a written binding purchase order with Baasel (the "Initial Order") for
[ ** ] units of commercial production-level OEM Products for delivery in 1997,
which order is accepted by Baasel's countersignature hereof. Such ordered units
are apart from, and additional to, the total of [ ** ] functional, prototype and
pilot units, together, ordered by CardioGenesis under Section 1(h) hereof.
Payment for the OEM Products ordered by the Initial Order will be made as
specified in Section 6(f) hereof.

               (c) Rolling Purchase Orders.

                      (i) General. CardioGenesis will deliver to Baasel a
written purchase order on CardioGenesis' standard form of purchase order (the
"Rolling Purchase Order") [ ** ], for OEM Products and, as applicable, Parts.
Each such Rolling Purchase Order (i) will be for the [ ** ] period commencing
[** ] after the date on which the order is delivered to Baasel, and (ii) will
be a [ ** ]


                                      -13-
<PAGE>   14



[ ** ], and (iii) will set forth the desired delivery dates, subject to the
provisions of Section 5(c)(viii) hereof with respect to rescheduling, by
calendar date, or grouped by calendar week, for those units of OEM Product for
which delivery is requested by CardioGenesis during such [ ** ] period. One such
Rolling Purchase Order for such [ ** ] will be delivered to Baasel no later than
[ ** ] of such year, beginning with [ ** ], and the other such Rolling Purchase
Order for such [ ** ] will be delivered to Baasel no later than [ ** ] of such
year, beginning with [ ** ].

                      (ii) Rolling Purchase Order For Deliveries During The
Period From [ ** ] Through [ ** ]. No later than [ ** ], CardioGenesis will
deliver to Baasel a Rolling Purchase Order for OEM Products, and Parts as
applicable, with delivery dates requested during the period from and including
[ ** ] through and including [ ** ] (the "[ ** ] Purchase Order"). [ ** ]

                      (iii) Rolling Purchase Order For Deliveries During The
Period From [ ** ] Through [ ** ]. No later than [ ** ], CardioGenesis will
deliver to Baasel a Rolling Purchase Order for OEM Products, and Parts as
applicable, with delivery dates requested during the period from and including
[ ** ] through and including [ ** ] (the "[ ** ] Purchase Order"). [ ** ]

                      (iv) Rolling Purchase Order For Deliveries During The
Period From [ ** ] Through [ ** ]. No later than [ ** ], CardioGenesis will
deliver to Baasel a Rolling Purchase Order for OEM Products, and Parts as
applicable, with delivery dates requested during the period from and including
[ ** ] through and including [ ** ] (the "[ ** ] Purchase Order"). [ ** ]


                                      -14-
<PAGE>   15



[ ** ]

                      (v) Rolling Purchase Order For Deliveries During Periods
After [ ** ]. If the parties have agreed on unit pricing for OEM Products to be
sold by Baasel to CardioGenesis hereunder for delivery after [ ** ], and after
[ ** ] of the relevant then-current year thereafter, or if such pricing has been
set by application of Section 6(c)(iv) hereof, then thereafter, on a rolling
calendar year basis, CardioGenesis will place Rolling Purchase Orders for OEM
Products and/or Parts, in the manner provided herein, which [ ** ].

                      (vi) Increase in Number of Units Ordered. Additional
quantities up to and including [ ** ] of the quantity of OEM Products and/or
Parts originally set forth in any Rolling Purchase Order may be ordered by
CardioGenesis no later than [ ** ] prior to the relevant scheduled shipment
dates for such original quantity; additional quantities greater than [ ** ] and
through [ ** ] of the previous order quantities may be ordered by CardioGenesis
no later than [ ** ] prior to the relevant scheduled shipment dates; and
additional quantities greater than [ ** ] of such previous order (i.e., more
than [ ** ]) may be ordered by CardioGenesis no later than [ ** ] prior to the
relevant scheduled shipment dates.

                      (vii) Delay of Shipments Upon CardioGenesis' Request.
CardioGenesis may by written notice to Baasel delivered at least [ ** ] prior to
Baasel's scheduled shipment date therefor, delay the shipment of not more than
[ ** ] of the portion of any Rolling Purchase Order which has [ ** ] by the
application of Section 5(c)(i) hereof, by up to [ ** ] after the originally
scheduled delivery. Any further delay of delivery beyond such [ ** ] period that
may be requested by CardioGenesis will be in writing and will be deemed as
shipment of such delayed portion by Baasel to CardioGenesis, and CardioGenesis
will, in addition to paying the relevant purchase price for the OEM Products
and/or Parts, if so requested by Baasel in writing pay to Baasel, or for the
account of Baasel, commercially reasonable storage and handling fees for the
portion so delayed until shipped on the delayed date requested by CardioGenesis.

        6.     PRICING AND PAYMENT.

               (a) General Pricing Conditions. All pricing of OEM Products and
Parts from Baasel to CardioGenesis will be commercially reasonable prices. Upon
the purchase by CardioGenesis of OEM Products and/or Parts from Baasel during
the term hereof while CardioGenesis is not using the Manufacturing License as
provided in Section 10(b) hereof, CardioGenesis may sell or otherwise
distribute, on a worldwide, exclusive basis, OEM Products and/or Parts either as
incorporated into CardioGenesis Products, or on a stand-alone basis to third
parties, for no fee or royalty or other amount additional to the purchase price
therefor charged by Baasel to CardioGenesis pursuant to this Agreement.

                                      -15-

<PAGE>   16



               (b) Exchange Rate; Exchange Range. All OEM Product and Parts
pricing will be in United States dollars unless the parties otherwise agree in
writing. Prices for deliveries scheduled during the [ ** ] of a given Rolling
Purchase Order will be based on an exchange rate of United States dollars ($) to
German deutschemarks (DM) (the "Exchange Rate"), determined as provided in this
Section 6(b), at the date upon which Baasel receives the Rolling Purchase Order
to which such [ ** ] relates. The initial Exchange Rate will be [ ** ]. At the
time each Rolling Purchase Order is placed, commencing with the [ ** ]Purchase
Order to be placed by CardioGenesis by [ ** ], the following will apply to
prices for the [ ** ] of such Rolling Purchase Order:

                      (i) [ ** ]

                      (ii) [ ** ]

                      (iii) [ ** ]


                                      -16-
<PAGE>   17



[ ** ]

        Baasel will promptly notify CardioGenesis in writing, by facsimile, of
any such change in the Exchange Rate and the Exchange Range, setting forth in
such notice the new Exchange Rate and new Exchange Range and the effective date
thereof, and referring in reasonable detail to the binding portion of the
relevant Rolling Purchase Order to which such new Exchange Rate and new Exchange
Range will apply.

               (c) OEM Product Prices From Baasel to CardioGenesis.

                      (i) General. Baasel's prices to CardioGenesis for OEM
Products will be Ex `Works as set forth in Exhibit C hereto, as such Exhibit C
may be amended after the Effective Date by mutual execution of the parties of an
updated version thereof. OEM Product prices as set forth on Exhibit C do not
include the costs or charges of any installation, service, repair or training
for OEM Products.

                      (ii) Two-Tier Pricing. The parties intend, as is reflected
in the prices set forth in Exhibit C, that the pricing to CardioGenesis for OEM
Products sold by Baasel to CardioGenesis pursuant to this Agreement will be
based upon a two-tier structure contemplating completion of (A) a
commercially-salable top-level OEM Product (the "Full-Feature Product") expected
to be in production in September, 1997, and having the specifications set forth
in Exhibit A hereto, and the initial pricing as set forth in Exhibit C hereto,
and (B) a commercially-salable cost-reduced OEM Product (the "Cost-Reduced
Product"), expected to be in production in January, 1998, with specifications to
be agreed in writing by CardioGenesis and Baasel prior to January 31, 1998,
which agreed specifications will be attached as an amendment to Exhibit A
hereto.

                      (iii) Quantity Discounts; Calculation of Unit Prices. The
prices for OEM Products sold by Baasel to CardioGenesis hereunder will be based
upon a decreasing price for greater numbers of units ordered in a given Rolling
Purchase Order, with certain agreed pricing level division points, as is
reflected in Exhibit C as attached hereto at the Effective Date. In determining
the relevant price for units of OEM Product based upon the quantity ordered in a
given Rolling Purchase Order, the calculation will be made separately in the
Rolling Purchase Order for Full-Feature Products and Cost-Reduced Products
according to the respective number of each type of unit in the relevant Rolling
Purchase Order.

                      (iv) Pricing of Cost-Reduced Product. Baasel will use its
commercially diligent efforts to achieve a price to CardioGenesis for the
Cost-Reduced Product of [ ** ] or less, and such figure is reflected in Exhibit
C hereto as the price by Baasel to CardioGenesis for over [ ** ] units of
Cost-Reduced Product scheduled for delivery in 1998. [ ** ]


                                      -17-
<PAGE>   18



[ ** ] The parties also will discuss in good faith, and will use their
commercially reasonable efforts to agree upon in writing, as an amended Exhibit
C, the prices from Baasel to CardioGenesis for quantities of Cost-Reduced
Product of [ ** ] units, [ ** ] through [ ** ] units, and [ ** ] through [ ** ],
provided that Baasel will be under no obligation to accept orders from
CardioGenesis for less than [ ** ] units of Cost-Reduced Product until pricing
for quantities less than [ ** ] units has been so agreed by the parties in
writing.

                      (iii) OEM Product Prices For Deliveries Scheduled in 1997
and 1998. The OEM Product unit prices from Baasel to CardioGenesis for
deliveries under the binding portion of a Rolling Purchase Order for delivery in
1997 and 1998 are set forth in Exhibit C hereto as attached at the Effective
Date, subject to possible adjustment as further provided in this Agreement.

                      (iv) Pricing For Calendar Years 1999 And Beyond. Prices
for OEM Products scheduled for delivery after December 31, 1998 will reflect the
quantity discount concept, according to the number of units ordered, and using
the quantity levels, reflected in the OEM Product prices for deliveries in 1997
and 1998 as set forth in Exhibit C hereof as attached on the Effective Date. If
the parties have not agreed in writing, as an amendment hereto, prior to June 30
of the then current calendar year (commencing with June 30, 1998 as to calendar
1999), as to prices from Baasel to CardioGenesis for OEM Products for deliveries
scheduled in the next calendar year under the binding portion of the Rolling
Purchase Order for such next calendar year, then the pricing from Baasel to
CardioGenesis for OEM Products for deliveries scheduled in such next calendar
year will be the pricing for OEM Products for deliveries scheduled in the
then-current calendar year with such adjustment thereto as results from the
application to such relevant current-year prices of the applicable factor
provided by the German federal statistical authorities and known in German as
the "Preisgleitklausel," rounded downward to the nearest whole dollar.

               (d) Parts Pricing. Baasel will sell Parts to CardioGenesis on a
most-favored customer basis, regardless of quantity ordered by CardioGenesis,
for Parts which are not unique to the OEM Product, and will charge CardioGenesis
a price for any such unique Parts as bear a commercially reasonable proportional
relation to such most-favored customer price for the non-unique Part nearest in
form and functionality to such unique Part. The initial prices for Parts have
not been determined by the parties as of the Effective Date, but will be agreed
upon by the parties in good faith as soon as possible after the Effective Date,
and no later than by the completion by Baasel of Phase 4 under the Development
Efforts, with such agreement to be evidence by an amended executed Exhibit F
hereto.

               (e)    Taxes; Certain Price Adjustments.

                      (i) Taxes. The purchase price from Baasel for OEM Products
and Parts does not include any taxes or duties that may be applicable to the OEM
Products. When Baasel has the legal obligation to collect such taxes, the
appropriate amount will be added to and clearly identified in Baasel's invoice
to CardioGenesis and will be paid by CardioGenesis unless


                                      -18-
<PAGE>   19



CardioGenesis provides Baasel with a valid tax exemption certificate authorized
by the appropriate taxing authority.

                      (ii) Certain Price Adjustments. During the term of this
Agreement the parties may determine to effect certain adjustments to the prices
charged by Baasel to CardioGenesis for OEM Products and/or Parts as follows, as
well as any other price adjustments which the parties may, but are not required
to, mutually agree in writing:

                             (A) Certain Royalties. The parties will discuss in
good faith, and evidence in writing any agreement by them as to, the inclusion,
within the price to be charged by Baasel to CardioGenesis hereunder for OEM
Products and Parts, of any royalties which Baasel may be required to pay to
third parties after the Effective Date, relating to the license to or other
acquisition by Baasel after the Effective Date of intellectual property rights
which are determined by CardioGenesis and Baasel to be essential or expedient
for the then-current or future OEM Products, and/or Parts within the
CardioGenesis Use, but not including any royalties required to be paid to any
third party by Baasel by judicial order or binding settlement agreement arising
from any allegation by such third party of infringement by Baasel of such third
party's proprietary rights. There will be added to the prices otherwise shown on
Exhibit C hereto, and CardioGenesis will pay to Baasel as part of the purchase
price for, each OEM Product unit that is scheduled for delivery into, or which
is otherwise intended for sale or other distribution within, the United States,
a commercially reasonable amount, prorated per unit, to account for any
royalties which Baasel, or Baasel's United States subsidiary, in Baasel's good
faith and after consultation with its legal counsel, actually is paying or in
good faith believes it will be required to pay, under so-called Patlex patent
arrangements with respect to a certain third-party general laser patent, with
respect to such OEM Product unit.

                             (B) Regulatory Changes. If during the term hereof,
regulatory requirements are changed so as to impose an increased burden on a
manufacturer of OEM Products and/or Parts than the burden previously existing,
Baasel and CardioGenesis will, on a timely basis, negotiate and agree in good
faith, and will execute and deliver such written documents as the other party
requests in good faith, with respect to any appropriate adjustments in the price
charged to CardioGenesis by Baasel for OEM Products and Parts, which the
relevant party, in its good faith judgment after consultation with the other
party, believes would be appropriate in view of such greater burden, in order to
meet regulatory requirements, than the requesting party was required to bear
prior thereto. In such determination there will be taken into account any such
increased burden upon CardioGenesis as to any final manufacturing it may perform
for OEM Products and Parts to be sold within the United States.

                             (C) Costs of Certain Baasel Insurance Premiums.
There is not included in the prices for OEM Products and Parts set forth herein
the amount of any insurance premium that Baasel may be required to pay in order
to maintain product liability insurance covering Baasel in an amount
appropriate, in Baasel's good faith judgment, after appropriate consultation
with its legal counsel and products liability insurance advisors, to insure
against any products liability of Baasel that may arise from the sale and
distribution by CardioGenesis of OEM Products and/or Parts within the United
States. The parties will discuss and agree in writing upon any adjustment to
prices charged by Baasel to CardioGenesis for OEM Products

                                      -19-

<PAGE>   20

and/or Parts that may be requested by Baasel in good faith if Baasel so
determines to obtain and maintain such insurance coverage.

                             (D) Orders Of Less Than [ ** ] Units Of OEM
Product. If the [ ** ] of any Rolling Purchase Order placed by CardioGenesis is
for less than [ ** ] units of OEM Product (as distinguished from any reduction
to [ ** ] or less units of any binding order previously placed), and if in
Baasel's good faith judgment, after consultation with CardioGenesis, [ ** ],
then Baasel may, by giving written notice to CardioGenesis given at least ten
(10) days before the shipment by Baasel of any unit of OEM Product in such
order, [ ** ].

                      (iii) Effect of Increases or Decreases in Rolling
Purchase Orders.

                             (A) Effect of Increases Requested By CardioGenesis
To Previously-Delivered Rolling Purchase Orders For Delivery in 1998. If, in the
binding Rolling Purchase Order for deliveries in the period [ ** ] through
[ ** ], CardioGenesis increases the number of units of OEM Product therein, not
later than [ ** ] before the relevant scheduled delivery date for such order,
by not more than [ ** ] of the number of units of OEM Product that were
represented in the such portion of such Rolling Purchase Order [ ** ].

                             (B) [ ** ]

                             (C) Effect of Decreases In Number Of Units of OEM
Products Ordered. If CardioGenesis decreases the number of units of OEM Product
in any nonbinding portion of a Rolling Purchase Order in making it a binding
Rolling Purchase Order, no

                                      -20-

<PAGE>   21



downward adjustment to prices previously determined for such order will be made,
but CardioGenesis will pay to Baasel, or to such third parties as Baasel directs
CardioGenesis in writing, the amount of all cancellation charges, including
penalties and liquidated damages, paid or payable by Baasel to such third
parties as a result of material or inventory cancellation due to such reduction.
Baasel will use its commercially reasonable efforts to minimize the amount of
such cancellation charges.

               (f) Payment. Except as the parties may otherwise specifically
agree in writing, and except as to the Initial Order, CardioGenesis will pay
Baasel for units of OEM Products and/or Parts ordered by CardioGenesis hereunder
under the binding portion of the relevant Rolling Purchase Order, on September
30, and December 31, and March 31, and June 30, of each year, in an amount equal
to fifty percent (50%) of the aggregate purchase price for the total number of
units of OEM Products and/or Parts scheduled under such binding portion to be
delivered during the calendar quarter commencing immediately after three (3)
months after such payment date. The balance of payment for each binding Rolling
Purchase Order will be paid, as to portions of such order shipped, within
forty-five (45) days after the date of shipment by Baasel of each such portion
of such order according to the delivery dates of such relevant order. Baasel
will invoice CardioGenesis with each shipment for such balance of the order
payment. Set forth below is the agreed payment schedule for the first 50% of the
binding portion of the relevant Rolling Purchase Order for delivery within the
time periods shown; such model, with appropriate calendar year changes, will
apply to the binding portion of Rolling Purchase Orders scheduled for delivery
after December 31, 1998.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
   Payment Due Date
    (No Later Than)                       Amount of Payment
--------------------------------------------------------------------------------
<S>               <C>
   [   **   ]
                  [ ** ] of the aggregate purchase price for the total number of
                  units of OEM Product in the Initial Order.
--------------------------------------------------------------------------------
   [   **   ]     [ ** ] of the aggregate purchase price for the total number of
                  units of OEM Product in such [ ** ] scheduled to be delivered
                  from and including [ ** ] through and including [ ** ].
--------------------------------------------------------------------------------
   [   **   ]     [ ** ] of the aggregate purchase price for the total number of
                  units of OEM Product in such [ ** ] scheduled to be delivered
                  from and including [ ** ] through and including [ ** ].
--------------------------------------------------------------------------------
   [   **   ]     [ ** ] of the aggregate purchase price for the total number of
                  units of OEM Product in such [ ** ] scheduled to be delivered
                  from and including [ ** ] through and including [ ** ].
--------------------------------------------------------------------------------
   [   **   ]     [ ** ] of the aggregate purchase price for the total number of
                  units of OEM Product in such [ ** ] scheduled to be delivered
                  from and including [ ** ] through and including [ ** ].
--------------------------------------------------------------------------------
</TABLE>
               (g) Service Charges; Cost and Expenses; Refusal to Deliver. Any
invoiced amount not received by Baasel within twenty (20) days after its due
date thereafter will be subject, until paid, to a service charge of the lesser
of one and one-half percent (1.5%) per month or the maximum permissible rate
under applicable law. CardioGenesis will pay all of Baasel's reasonable costs
and expenses, including reasonable fees and costs of attorneys, to the extent


                                      -21-

<PAGE>   22

permitted by law, to enforce and preserve Baasel's rights under this Section
6(g). Baasel may refuse to deliver OEM Products and/or Parts to CardioGenesis if
and to the extent that CardioGenesis fails to make timely payment as required
hereunder.

        7.     DELIVERY; INSTALLATION, INSPECTION AND ACCEPTANCE; TRAINING.

               (a) Preferential Allocation. CardioGenesis will receive
preferential allocation, among Baasel's customers, of all OEM Products and Parts
necessary to meet the relevant delivery dates and quantities set forth in the
binding portion of the relevant Rolling Purchase Order.

               (b) Shipping. All OEM Products and Parts delivered by Baasel
pursuant to the terms of this Agreement will be:

                      (i) Acceptance Criteria. Only units of OEM Product and
Parts which have passed the Acceptance Criteria (as defined in Section 7(c)
hereof.

                      (ii) Packaging. Suitably packed for air freight shipment,
or other appropriate common carrier as may be communicated by CardioGenesis in
writing to Baasel reasonably in advance of Baasel's planned shipment date, in
Baasel's standard shipping cartons for such items, which in each case will meet
all packaging validation requirements worldwide for shipment of OEM Products and
Parts as communicated by CardioGenesis to Baasel in writing reasonably in
advance of Baasel's planed shipment date; and

                      (iii) Marking. Marked for shipment to CardioGenesis'
address set forth on the signature page hereof, or to the end of the address of
such customer of CardioGenesis as CardioGenesis and Baasel agree in writing; and

                      (iv) Delivery. Delivered to CardioGenesis, or to
CardioGenesis' customer, or CardioGenesis' carrier agent Ex Works Baasel's main
manufacturing plant. Unless otherwise instructed in writing by CardioGenesis,
Baasel will select the carrier.

                      All freight, insurance, and other shipping expenses, as
well as any special (non-Baasel standard) packing expense, will be paid by
CardioGenesis.

               (c) Installation, Inspection and Acceptance. OEM Products and
Parts will be delivered to CardioGenesis or to the relevant CardioGenesis
customer (if drop-shipped by Baasel to such customer at CardioGenesis' written
request), as the case may be, and installed and made operational, pursuant to,
and along with a written copy of, commercially reasonable receiving and
inspection protocols and acceptance criteria (collectively, the "Acceptance
Criteria"), including ISO 9000 and MDDE, and installation procedures, as will be
agreed upon in writing by CardioGenesis and Baasel no later than (10) days
before CardioGenesis' first Rolling Purchase Order is placed after the Initial
Order. The Acceptance Criteria will be attached to this Agreement, upon such
written agreement by the parties, as Exhibit G. Such written Acceptance Criteria
will (i) provide that inspection and acceptance testing will be performed by an
individual or individuals who have received what CardioGenesis and Baasel will
agree, and which they will set forth in such inspection protocols and acceptance
criteria, is proper training with respect


                                      -22-

<PAGE>   23

thereto, and (ii) which of CardioGenesis, Baasel and/or third party personnel
will perform such installation, and (iii) how the costs of such installation,
and of any inspection not performed by the customer, are to be billed and paid.
The Acceptance Criteria will set forth the time period after CardioGenesis', or
its customer's, receipt of the relevant OEM Product and Parts within which
inspection must be made. The installation procedures will require Baasel, at its
expense, to provide such commercially reasonable level of technical assistance
by providing instruction manuals and other customary similar documents free of
charge, and providing telephone and facsimile assistance, (but not involving
travel of any Baasel personnel or any other costs of such assistance except as
Baasel may specifically agree in writing), to CardioGenesis and/or such
third-party installation personnel as may be provided in the installation
procedures, to afford the best opportunity for a successful and timely
installation. The installation procedures and inspection criteria will contain
Baasel's standard inspection testing procedures for such OEM Product, with such
modifications thereto as CardioGenesis reasonably and in good faith requests of
Baasel in writing and which lawfully may be made. Any OEM Product or Part not
lawfully rejected by CardioGenesis or such customer, as the case may be, within
the relevant period provided by such inspection protocols and acceptance
criteria, after compliance with the relevant installation procedures and with
such inspection protocols and acceptance criteria, will be deemed to have been
accepted by CardioGenesis or such customer, as the case may be.

               (d) Training. Baasel will provide, at Baasel's premises, to a
limited, commercially reasonable number of CardioGenesis' personnel (up to two
persons per session) at reasonable periodic intervals: (i) training as to proper
installation, service and repair of the OEM Products and Parts, and, at the
specific written request of CardioGenesis as to those CardioGenesis employees
whom CardioGenesis believes in good faith have a need to know, full access to
the OEM Product and Parts manufacturing process of Baasel. The frequency, format
and content of the training will be determined by Baasel in consultation with
CardioGenesis. Such training with respect to the manufacturing process will be
designed to enable CardioGenesis to be able, upon any proper exercise of the
Manufacturing License, reasonably to use and to instruct its subcontractor
manufacturers to use, the Manufacturing License should it become necessary to do
so under the terms of this Agreement. CardioGenesis will pay its own costs of
its personnel for travel, food, and lodging during such training. CardioGenesis
also will pay to Baasel, upon the written request of Baasel, setting forth the
calculation of the following amounts in reasonable detail, (1) Baasel's
customary training fees for such training, and (2) the reasonable actual costs,
without profit, of Baasel in preparing manuals and other training materials for
the training to such CardioGenesis personnel . Each such CardioGenesis
individual will execute such customary mutual nondisclosure agreement with
Baasel with respect to such training as Baasel may reasonably request, provided
that no such nondisclosure agreement will diminish or limit the rights of
CardioGenesis to fully use the Manufacturing License should it become necessary
to do so under the terms of this Agreement.

        8. WARRANTY. Baasel will extend to CardioGenesis a standard medical
laser products warranty on the OEM Products and Parts, which warranty is as set
forth in Exhibit H attached hereto and incorporated herein by reference.
Baasel's warranty will always be of at least one (1) year on labor and parts, in
each case after the date shipped by Baasel (or, as to Parts supplied to Baasel
by third parties, such longer period as such third party provides for warranty
for the relevant Part). Such warranty will provide, at a minimum, that Baasel
will, at the expense

                                      -23-

<PAGE>   24

of Baasel, including inbound and outbound shipping costs but excluding duties
and import or export clearance fees or taxes, repair or replace OEM Products and
Parts found defective upon receipt by CardioGenesis or found defective by the
end-user during the relevant warranty period.

        9.     TERM AND TERMINATION.

               (a) Term. The initial term of this Agreement will be for the
period commencing on the date hereof, and, unless sooner terminated as provided
in this Agreement, continuing through and including December 31, 2000, and the
term hereof will be automatically renewed thereafter for successive one year
terms commencing on January 1, 2001, and on January 1 of each successive
calendar year unless either CardioGenesis or Baasel gives the other written
notice of termination at least one hundred and eighty (180) days before the end
of the then-current one year term (i.e., no later than July 1 in the year of the
then-current term), or unless otherwise sooner terminated as provided in this
Agreement.

               (b) [ ** ]

                      (i) [ ** ]

                      (ii) [ ** ]

                      (iii) [ ** ]


                                      -24-
<PAGE>   25



[ ** ]

                      (iv) [ ** ]

                      (v) [ ** ].

               (c) Other Rights to Terminate; Timing of Termination. Either
party hereto may terminate this Agreement by written notice to the other as
provided in (i) Section 1(b)(i) hereof if CardioGenesis elects not to continue
its Development Program, or (ii) Section 1(b)(ii) hereof for failure to agree on
adjustments to OEM Product research and development payments, or (iii) Section
1(b)(iv) for failure for the parties to agree upon increased payment for the
Development Efforts under certain circumstances or (iv) Section 10(a)(v) hereof
due to failure to enter into the Escrow Agreement, or (v) if the other party
materially breaches this Agreement (other than a Baasel breach which is a
Triggering Event and other than breaches for which other time periods for cure
are specifically provided herein) and such breach remains uncured for ninety
(90) days following written notice of such breach, setting forth in reasonable
detail the nature of the breach, given to the breaching party by the
nonbreaching party. Baasel may terminate this Agreement by written notice to
CardioGenesis if proceedings are commenced by or against CardioGenesis for
bankruptcy, insolvency or debtor's relief or if CardioGenesis is liquidated or
dissolved, or pursuant to the terms of Section 10(a)(vii) of this Agreement. Any
termination hereunder for which a specific notice or other period is not
required under this Agreement may be made immediately, upon the delivery of the
notice to the receiving party, or at such other future time after the date of
notice of termination as the party giving such notice specifies therein.

               (d) Fulfillment of Orders Upon Termination or Expiration. Any
termination of this Agreement for any reason including CardioGenesis' breach, or
expiration of the term hereof, will not prevent Baasel from fulfilling, if it so
elects, all orders from CardioGenesis accepted by Baasel prior to the date of
termination and purchase orders placed by CardioGenesis with Baasel within six
(6) months after the date of such termination, in each case at the delivery
times provided in such accepted orders or as otherwise agreed in writing by
CardioGenesis and Baasel; provided, however, that if termination is as a result
of breach by CardioGenesis of its obligation to pay undisputed amounts due
hereunder to Baasel, Baasel may demand from CardioGenesis commercially
reasonable assurance of payment, such as prepayment or letters of


                                      -25-
<PAGE>   26



credit, prior to shipment of OEM Products and/or Parts by Baasel, to ensure
payment for such post-termination fulfillment of orders.

               (e) Transition Assistance. In the event of any termination of
this Agreement for any reason, including any breach by Baasel or by
CardioGenesis other than an uncured accidental or willful breach by
CardioGenesis, and if CardioGenesis is not, by virtue of the application of the
terms of this Agreement, able to use the Manufacturing License from and after
such termination, then Baasel will render such commercially reasonable
assistance, at CardioGenesis' sole expense, as CardioGenesis may in good faith
request of Baasel, with commercially reasonable advance notice in writing to
Baasel, in order to assist CardioGenesis in identifying a qualified manufacturer
of a laser for CardioGenesis Products as a substitution for the OEM Product, and
in transitioning to manufacture of such substitute laser product as soon as
possible. Baasel may require that CardioGenesis and/or third parties execute and
deliver such customary nondisclosure agreements as Baasel may believe in good
faith are appropriate or necessary for the protection of Baasel Confidential
Information or Baasel Proprietary Information in the providing of such
assistance by Baasel.

        10.    MANUFACTURING ESCROW: MANUFACTURING LICENSE.

               (a)    Manufacturing Escrow.

                      (i) Escrow Agent; Escrow Agreement; Escrowed Materials. No
later than June 30, 1997, CardioGenesis and Baasel will identify and enter into
a written agreement (the "Escrow Agreement") with an independent escrow agent
chosen by mutual agreement of Baasel and CardioGenesis (the "Escrow Agent") to
establish a Manufacturing Escrow (the "Manufacturing Escrow"), to be located at
a location in Germany to be set forth in such Escrow Agreement, of the Escrowed
Materials, as hereinafter defined. For purposes of this Agreement, the "Escrowed
Materials" means at least one full and accurate copy, in English if such copy
already exists, of all information commercially reasonably necessary in order
for CardioGenesis to manufacture, or to have manufactured for CardioGenesis by
third party manufacturer subcontractors, the OEM Products and Parts, in the
event the Manufacturing License described in Section 10(b) hereof becomes
effective as provided herein, and includes, without limitation, all drawings,
schematics, manuals, software (including Baasel Software and Updates) in source
code (as to third-party software licensed to Baasel, only to the extent such
license allows such deposit of source code) and object code format, and all
standard operating policies and procedures ("SOP's") of Baasel, including,
without limitation, component, material and device specifications, manufacturing
processes, test methods and procedures, validation systems, methods and tests
material, and all SOP's of vendors to Baasel of materials or components for the
OEM Products or Parts, and a copy of Baasel's device manufacturing license from
the relevant licensing authority or authorities, a copy of Baasel's registration
with the FDA (if and when obtained) and with other relevant regulatory bodies or
agencies, and of other related registration files of Baasel, including all
inspection reports and warning letters, and a copy of all other correspondence
to or from Baasel with all other regulatory bodies relevant to the OEM Products
and/or any Part, and including in each case such documents as they relate to the
Development Efforts.

                                      -26-
<PAGE>   27

                      (ii) Delivery of Escrowed Materials By Baasel;
Notification to CardioGenesis; Inspection By CardioGenesis. The Escrow Agreement
will provide that within forty-five (45) days after the date of shipment by
Baasel to CardioGenesis of the last pilot unit as provided in Section 1(h)(iii)
hereof, Baasel will provide to the Escrow Agent, and the Escrow Agent will hold
in the Manufacturing Escrow in confidence, as hereinafter provided, the Escrowed
Materials as they exist through the date of shipment of such last pilot unit.
After Baasel's original deposit of Escrowed Materials, Baasel will be obligated
to deliver new and/or updated Escrowed Materials to the Escrow Agent promptly
after the content of the Escrowed Materials may have changed (including new
items or changes to already deposited items) or new Escrowed Materials have come
into existence from the most recent deposit of Escrowed Materials; provided,
however, that Baasel will not be obligated to deposit into the Manufacturing
Escrow any materials specifically relating to the Cost-Reduced Product, other
than such materials as were deposited in Baasel's original deposit into the
Manufacturing Escrow, until forty-five (45) days after the date of shipment by
Baasel of the first unit of Cost-Reduced Product to CardioGenesis under a
Rolling Purchase Order. Within ten (10) days after Baasel's initial deposit of
Escrowed Materials into the Manufacturing Escrow, and within ten (10) days after
any subsequent deposit by Baasel of Escrowed Materials into the Manufacturing
Escrow as required by this Agreement, Baasel will give CardioGenesis written
notification, in reasonable detail, of the nature of the Escrowed Materials so
deposited by Baasel. Upon reasonable advance written notice by CardioGenesis to
the Escrow Agent with a copy to Baasel, or upon such specific advance written
notice as the Escrow Agent may require, CardioGenesis will have access to the
Escrowed Materials, at the location specified by the Escrow Agent, solely for
purposes of determining the nature and content of such Escrowed Materials and
determining that, in CardioGenesis' reasonable and good faith judgment, they are
sufficient to allow CardioGenesis to fully use the Manufacturing License should
it become necessary to do so. Except as may be otherwise agreed in writing by
CardioGenesis and Baasel in advance of any such inspection, CardioGenesis will
make no copies of, and will not take away any notes as to, the contents of such
inspected Escrowed Materials, and all of such Escrowed Materials will continue
to be subject to provisions of Section 11 hereof with respect to
confidentiality.

                      (iii) Nature of Manufacturing Escrow. The Escrow Agent
will hold all of the Escrowed Materials in the Manufacturing Escrow separate
from the books, records or materials of CardioGenesis or of any other third
party who may have deposited items with such Escrow Agent. The terms of the
Escrow Agreement will impose upon the Escrow Agent a requirement of
confidentiality with respect to the Escrowed Materials at least as protective of
the Escrowed Materials as those afforded by Section 11 of this Agreement to the
Confidential Information of the parties hereto and to Baasel Proprietary
Information and CardioGenesis Proprietary Information.

                      (iv) Release of Escrowed Materials To CardioGenesis or To
Baasel. The Escrow Agreement will provide that (i) upon delivery by
CardioGenesis of a Manufacturing License Election Notice, as provided below, and
provided injunctive relief has not been granted in favor of Baasel barring such
access to CardioGenesis, then CardioGenesis will be given full access to all
Escrowed Materials by the Escrow Agent solely for purpose of the Manufacturing
License, and (ii) Baasel's signature or acceptance as to any such release of
Escrowed Materials is not required, and (iii) all Escrowed Materials will be
released to Baasel upon Baasel's written

                                      -27-

<PAGE>   28

request to the Escrow Agent at the expiration or termination of the Escrow
Agreement unless CardioGenesis then is using the Manufacturing License pursuant
to the terms of this Agreement.

                      (v) Reimbursement of Certain Costs of Baasel by
CardioGenesis; Payment of Escrow Agent's Fees and Costs. CardioGenesis will
reimburse Baasel for Baasel's documented expenses and direct labor costs for
providing such Escrowed Materials into the Manufacturing Escrow, and will pay
the fees and costs of such Escrow Agent.

                      (vi) Right of CardioGenesis or Baasel to Terminate This
Agreement For Failure To Enter Into Escrow Agreement; Right of CardioGenesis to
Terminate If Baasel Does Not Make Deposits of Escrowed Materials. If the parties
have not entered into a mutually satisfactory Escrow Agreement by June 30, 1997,
or by such later time as they may agree in writing, then either party may at any
time thereafter terminate this Agreement by written notice to the other. If,
upon CardioGenesis' inspection of the Escrowed Materials from time to time as
permitted under Section 10(a)(ii) hereof, CardioGenesis determines in good
faith, after reasonable consultation with Baasel, that the Escrowed Materials
are not complete or sufficient for purposes of the operation of the
Manufacturing License, CardioGenesis will deliver a written notice to Baasel
specifying in reasonable detail the nature and general content of such materials
as CardioGenesis believes in good faith should also be deposited into the
Manufacturing Escrow as part of the Escrowed Materials. If Baasel fails to
deposit such requested materials into the Manufacturing Escrow within forty-five
(45) business days (as defined in Section 5(b) hereof) after the date it
receives such notice, or within such longer time period, without requiring
CardioGenesis' consent, as Baasel reasonably and in good faith request by
notifying CardioGenesis of such longer period, but in no event to exceed ninety
(90) days, then CardioGenesis may terminate this Agreement by written notice to
Baasel.

                      (vii) Right of Baasel To Terminate This Agreement For
Certain Acts of CardioGenesis.

                             (A) Unlawful Obtaining Of Escrow Materials;
Unlawful Use of Manufacturing License. If CardioGenesis obtains the Escrowed
Materials, or any portion of them, unlawfully (as defined in Section 10(a)(vii)
hereof), or commences use of the Manufacturing License unlawfully (as so
defined), then Baasel may upon written notice to CardioGenesis immediately
terminate this Agreement, and upon such termination the Manufacturing License
will become null and void and CardioGenesis will have no right thereafter to the
Escrowed Materials or to use the Manufacturing License.

                             (B) Definition of "Unlawful". For purposes of this
Section 10(a)(vii), the term "unlawful" means (1) as to obtaining all or any
portion of the Escrowed Materials, that CardioGenesis or any of its agents under
its control or at its direction obtain the Escrowed Materials or any portion
thereof, in whole or in part by fraud of CardioGenesis or of any such agent, in
any written statement or notice, or in any oral statement, to Baasel, the Escrow
Agent, or any third party, or otherwise in violation of this Agreement and/or of
the Escrow Agreement, except as provided in the last sentence of this Section
10(a)(vii)(B) as to inadvertent receipt, and (2) as to use of the Manufacturing
License, that CardioGenesis or any of its agents under its control or at its
direction commence using the Manufacturing Agreement by fraud of

                                      -28-
<PAGE>   29

CardioGenesis or of any such agent, in any written statement or notice, or in
any oral statement, to Baasel, the Escrow Agent, or any third party, or
otherwise in violation of the terms of this Agreement. If CardioGenesis obtains
all or any part of the Escrowed Materials from the Escrow Agent by reason of the
mistake or willful act of the Escrow Agent and/or of the agents of the Escrow
Agent, and not at CardioGenesis' request, CardioGenesis will not be deemed to
have received such Escrowed Materials unlawfully, for purposes of this Section
10(a)(vii), and thus will not have breached its obligations under this
Agreement, if CardioGenesis (1) returns all of such Escrowed Materials to the
Escrow Agent as promptly as commercially reasonable after CardioGenesis
determines that it is not then supposed to have such Escrowed Materials under
the terms of this Agreement and/or of the Escrow Agreement, and (2) retains no
copies of such Escrowed Materials, and (3) promptly notifies the Escrow Agent
and Baasel in writing of such matters.

               (b)    Manufacturing License.

                      (i) General Grant of License Rights. Baasel hereby grants
to CardioGenesis an irrevocable, exclusive, royalty-bearing, worldwide license
in perpetuity (the "Manufacturing License"), under the terms and conditions set
forth herein, which CardioGenesis may use only upon the occurrence of a
Noncurable Triggering Event, and only if CardioGenesis has timely delivered a
Manufacturing License Election Notice to Baasel as provided in Section 10(c)
hereof and such use of the Manufacturing License has not been enjoined by
judicial action, to use the Escrowed Materials and the other materials described
below in this Section 10(b)(i), solely in order for CardioGenesis, itself and/or
through its subcontractors, to manufacture, and solely for CardioGenesis and its
distributors, agents and representatives to sell and distribute, on a worldwide
exclusive basis, OEM Products and Parts as incorporated in (or, as to Parts, to
be incorporated in) CardioGenesis Products.. The rights of CardioGenesis under
the Manufacturing License will survive any expiration or termination of this
Agreement. Upon and after activation of the Manufacturing License under the
terms hereof (A) CardioGenesis will have the right to use all Escrowed Materials
deposited into the Manufacturing Escrow, as well as all other materials that
would constitute Escrowed Materials hereunder but which have not been deposited
by Baasel into the Manufacturing Escrow at the time of activation of the
Manufacturing License, and (B) Baasel will supply to CardioGenesis directly,
upon CardioGenesis' written request specifying in such reasonable detail as to
such non-deposited materials as is known to CardioGenesis at the time, at no
cost to CardioGenesis one complete and accurate copy of such other non-deposited
materials so requested. The provisions of Section 11 hereof will apply to all
such non-deposited materials as may be delivered by Baasel to CardioGenesis. The
Manufacturing License includes the right of CardioGenesis to sublicense to
CardioGenesis' designated subcontractor manufacturers. The provisions of Section
3(b) hereof with respect to Baasel's Software and Updates are incorporated into
the Manufacturing License by reference.

                      (ii) Sublicenses to Subcontract Manufacturers. The terms
of any sublicense by CardioGenesis to any subcontract manufacturer will contain
confidentiality provisions consistent with the provisions of Section 11 hereof
with respect to the protection of Baasel Proprietary Information and Baasel
Confidential Information, and will not afford such subcontract manufacturer any
rights to further sublicense such rights, nor any rights to sell or otherwise
distribute OEM Products or Parts other than to CardioGenesis.

                                      -29-
<PAGE>   30

                      (iii) Certain Limitations of CardioGenesis' Rights.
CardioGenesis may not use the Manufacturing License after expiration hereof, or
after termination hereof if such termination is by Baasel by reason of
CardioGenesis' uncured breach of this Agreement, or if such termination is
pursuant to the provisions of (A) Section 1(b)(i) hereof due to CardioGenesis'
termination of the Development Efforts, and (B) Section 1(b)(ii) hereof because
the parties cannot agree on appropriate adjustments to the payments for the
Development Efforts, or (C) Section 6(b) hereof because the parties cannot agree
on pricing, or (D) Section 10(a)(v) hereof because the parties have not timely
entered into the Escrow Agreement; provided that in each case, the provisions of
Section 9(a) hereof, with respect to post-termination fulfillment of
CardioGenesis' orders, and Section 9(b) hereof, with respect to certain
cooperation by Baasel as to manufacturing transition, nevertheless will apply.

               (c) Noncurable Triggering Event Notice; Noncurable Triggering
Event Notice; Manufacturing License Election Notice. Within ten (10) days after
CardioGenesis believes a Noncurable Triggering Event has occurred, CardioGenesis
will give written notice thereof ( a "Noncurable Triggering Event Notice") to
Baasel and to the Escrow Agent, specifying in reasonable detail the nature of
such Noncurable Triggering Event (including the expiration of the relevant cure
period for any Curable Triggering Event). Baasel will have the right to seek
judicial injunctive relief, as provided in Section 15 hereof, if it believes
that the relevant Noncurable Triggering Event has not occurred. The
Manufacturing License may be used by CardioGenesis only if, within thirty (30)
days after the occurrence of such Noncurable Triggering Event, CardioGenesis
also gives written notice (a "Manufacturing License Election Notice") to the
Escrow Agent and to Baasel stating CardioGenesis' election to use the
Manufacturing License (which Manufacturing License Election Notice may be
included in the original Noncurable Triggering Event Notice), and provided that
the use by CardioGenesis of the Manufacturing License has not been enjoined by
judicial action. If CardioGenesis gives Baasel a Manufacturing License Election
Notice, the Manufacturing License may not be activated and used by CardioGenesis
prior to the expiration of such thirty day (30) period after occurrence of such
Noncurable Triggering Event. If CardioGenesis does not elect in writing to
Baasel within thirty (30) days after the occurrence of a Noncurable Triggering
Event to terminate this Agreement, or if CardioGenesis' use of the Manufacturing
License then is enjoined by judicial action, this Agreement will continue until
otherwise terminated or expired, and the Manufacturing License will not be
activated, provided that such failure to elect to so terminate, or the granting
of such injunctive relief to Baasel, will not preclude CardioGenesis from
electing to terminate, and to activate the Manufacturing License (subject to
Baasel's rights again to seek injunctive relief), with respect to the occurrence
of any future Noncurable Trigger Event.

               (d) Manufacturing Royalty. If CardioGenesis elects as provided
herein to use the Manufacturing License, CardioGenesis will pay to Baasel,
within [ ** ] after the close of each calendar quarter during which the
Manufacturing License is used, a manufacturing royalty (the "Manufacturing
Royalty") in an amount, in cash, equal to [ ** ]. CardioGenesis will submit to

                                      -30-

<PAGE>   31



Baasel, with each such payment of accrued royalties, a written statement, signed
by CardioGenesis' Chief Financial Officer, in reasonable detail showing the
basis for the calculation of the royalty amount remitted. Baasel may at Baasel's
expense, and subject to such reasonable written mutual confidentiality
agreements as CardioGenesis may request, review those portions of the books and
records of CardioGenesis relating to such calculation. In the event such review
determines any underpayment of such royalties, CardioGenesis will promptly pay
such underpayment amount to Baasel. During its use of the Manufacturing License,
CardioGenesis will not be liable for payment to Baasel for any amount other than
the Manufacturing Royalty with respect to the manufacture by CardioGenesis and
its designated third party subcontract manufacturers, and the sale by
CardioGenesis and its distributors, sales agents, and representatives, of OEM
Products and/or Parts.

        11.    CONFIDENTIAL INFORMATION.

               (a) Definition. The term "Confidential Information" as used
herein includes, as to CardioGenesis, the CardioGenesis Proprietary Information
and as to Baasel, the Baasel Proprietary Information, and as to each party, such
party's other proprietary and confidential information of whatever sort.
Confidential Information of either party will not include information which:

                      (i) is now, or hereafter becomes, through no act or
failure to act on the part of the receiving party, generally known or available
to the public;

                      (ii) was acquired by the receiving party before receiving
such information from the disclosing party and without restriction as to use or
disclosure;

                      (iii) is hereafter rightfully furnished to the receiving
party by a third party, without restriction as to use or disclosure;

                      (iv) is information which the receiving party can document
was independently developed by the receiving party;

                      (v) is required to be disclosed pursuant to law, provided
the receiving party uses reasonable efforts to give the disclosing party
reasonably detailed notice of such required disclosure; or

                      (vi) is disclosed with the prior written consent of the
disclosing party.

               (b) Obligations. Except as may be specifically authorized
otherwise in this Agreement, or as may be otherwise specifically agreed by the
parties in writing, each party will:

                      (i) hold the other party's Confidential Information in
strict confidence,

                      (ii) not disclose such Confidential Information to any
third parties and will take all reasonable steps to prevent such disclosure,
which steps will include at least those taken by such party to protect its own
confidential information of like kind, and

                                      -31-
<PAGE>   32

                      (iii) not use any Confidential Information of the other
party for any purpose except as provided in this Agreement.

                      Each party may disclose the other party's Confidential
Information to the recipient party's responsible employees and consultants who
have a bona fide need to know, but only to the extent necessary to carry out the
purposes of this Agreement. Each party will instruct all such employees and
consultants not to disclose such Confidential Information to third parties,
including other consultants, without the prior written permission of the
disclosing party hereto.

               (c) Return of Items. Subject to the rights of the parties under
other provisions of this Agreement, including without limitation the rights of
CardioGenesis under Section 10 of this Agreement, upon the disclosing party's
written request, the receiving party will promptly return to the disclosing
party all tangible items containing or consisting of the disclosing party's
Confidential Information and all copies thereof.

        12.    INDEMNITY; LIABILITY; INSURANCE.

               (a) Indemnity by Baasel. Subject to the other provisions of this
Section 12, Baasel will, at its expense, defend and indemnify CardioGenesis and
CardioGenesis' directors, officers, employees, consultants, agents, shareholders
and customers, in any suit, claim or proceeding brought against CardioGenesis or
any of such other indemnified parties:

                      (i) Alleged Infringement. Alleging that any OEM Products
or Parts sold pursuant to this Agreement, as such, as apart from their use in
the CardioGenesis Use, infringe a United States patent, United States copyright,
United States trademark or trade secret obligation of any third party; provided
that Baasel will have no liability to the extent of any infringement alleged by
third parties rights arising from the CardioGenesis Use or with respect to
alleged infringement of general laser industry patents, not keyed to Baasel's
specific laser before its modification into the OEM Product, for which
infringement allegations CardioGenesis will be responsible; or

                      (ii) Defect In Manufacture or Design. Due directly to any
defect in manufacture or design of the OEM Product as developed by Baasel.

               CardioGenesis will promptly notify Baasel of any such claim.
Baasel will be given reasonable assistance from CardioGenesis and will be
permitted the exclusive control of the defense. Further, to the extent Baasel is
required hereunder to indemnify such parties, Baasel will pay any damages and
costs finally awarded against CardioGenesis and any such other indemnified
parties in any such suit by reason of any such liability, but Baasel will have
no liability for settlements or costs incurred without its written consent.

               If CardioGenesis' or its customers' use of any such OEM Products
and Parts is enjoined, or Baasel desires to minimize its liability hereunder as
to any alleged infringement, Baasel may, at its option and sole expense, either:

                      (i) Substitution. Substitute to CardioGenesis or
CardioGenesis 'customer, equivalent noninfringing OEM Products and/or Parts for
the allegedly infringing item,

                                      -32-

<PAGE>   33

subject to CardioGenesis' absolute right of approval as to whether such
substituted OEM Products and/or Parts meet all specifications required therefor,
including U.S. and international regulatory requirements, as determined by
CardioGenesis in good faith, or

                      (ii) Modification. Modify the substituted infringing item
so that it no longer infringes but remains equivalent in the reasonable and good
faith judgment of CardioGenesis, subject to CardioGenesis' absolute right of
approval as to whether such modified OEM Products and/or Parts meet all
specifications thereof, including U.S. and international regulation
requirements, as determined by CardioGenesis in good faith or

                      (iii) Obtain Rights. Obtain for CardioGenesis and
CardioGenesis' customer, the right to continue using such item.

                      If none of the foregoing is feasible in Baasel's good
faith judgment, Baasel will accept a return of the OEM Products and/or Parts
from CardioGenesis or CardioGenesis' customer, which are subject to the
allegation or to such injunction, and Baasel then will refund, to CardioGenesis
or CardioGenesis' customer, the purchase price therefor plus costs to Baasel of
shipping paid by CardioGenesis or CardioGenesis' customer, less reasonable
depreciation.

               (b) Indemnity by CardioGenesis. Subject to the other provisions
of this Section 12, CardioGenesis will, at its expense, defend and indemnify
Baasel and its directors, officers, employees, consultants, agents, shareholders
and customers, in any suit, claim or proceeding brought against Baasel or any of
such other indemnified parties, alleging that:

                      (i) Alleged Infringement. Any CardioGenesis Proprietary
Information contained in any OEM Products or Parts sold pursuant to this
Agreement, as such, infringes a United States patent, United States copyright,
United States trademark or trade secret obligation of any third party, or

                      (ii) Defect in Manufacture or Design. Due directly to any
defect in manufacture or design of the OEM Product other than for which Baasel
is liable under Section 12(a) hereof.

                      Baasel will promptly notify CardioGenesis of any such
claim. CardioGenesis will be given reasonable assistance from Baasel and will be
permitted the exclusive control of the defense. Further, to the extent
CardioGenesis is required hereunder to indemnify such parties, CardioGenesis
will pay any damage and costs finally awarded against Baasel and any such other
indemnified parties in any such suit by reason of any such liability, but
CardioGenesis will have no liability for settlements or costs incurred without
its written consent.

                      If Baasel's use of any such CardioGenesis Proprietary
Information in the production by Baasel of OEM Products and Parts hereunder is
enjoined, or CardioGenesis desires to minimize its liability hereunder as to
such alleged infringement, CardioGenesis may, at its option and sole expense,
either:

                                      -33-
<PAGE>   34

                      (i) Substitution. Substitute to Baasel equivalent
noninfringing CardioGenesis Proprietary Information for the allegedly infringing
item,

                      (ii) Modification. modify the allegedly infringing item so
that it no longer infringes but remains equivalent in the reasonable and good
faith judgment of CardioGenesis and Baasel, or

                      (iii) Obtain Rights. Obtain for Baasel the right to
continue using such item.

                      If none of the foregoing is feasible in the good faith
judgment of either Baasel or CardioGenesis, either party may give the other
notice that, unless the parties negotiate and reflect in writing within thirty
(30) days a commercially reasonable solution, which the parties will in good
faith attempt to do, then either party may terminate this Agreement by written
notice to the other party at any time after the such thirty (30) days; provided,
however, that in the event of any such termination by either party, Section
10(b) hereof will not apply and CardioGenesis will have no rights thereafter
under the Manufacturing License.

               (c) CardioGenesis Liability. Subject to Baasel's indemnities and
warranties contained herein and in Baasel's relevant warranty as supplied with
the OEM Products and Parts, CardioGenesis and CardioGenesis' customers assume
all risk and liability arising from or connected with the operation and use of
the OEM Product and Parts. Baasel's maximum liability for all damages,
regardless of the legal basis therefor but excluding willful acts against
CardioGenesis, will be limited to the sum of all payments made by CardioGenesis
to Baasel with respect to the goods at issue in the dispute. Baasel's liability
under the German Product Liability Code is reserved.

               (d) Limitations.

                      (i) Baasel Limitations. Baasel will have no liability for
any claim of patent or copyright infringement or other infringement of
proprietary rights, or any liability for design or manufacture, to the extent
resulting from:

                             (A) CardioGenesis' or CardioGenesis' customers',
use or combination of the OEM Products, or Parts, or of Baasel's Software or
Updates, with products or data, other than the CardioGenesis Products, not
supplied by Baasel as part of the OEM Products, or Parts, or as part of Baasel's
Software or Updates, or

                             (B) any modification or attempted modification of
the OEM Products or Parts or Baasel's Software or Updates by anyone other than
Baasel, or other than by third parties agreed in writing by Baasel, or

                             (C) use of other than the latest release of
Baasel's Software or Updates received by CardioGenesis or CardioGenesis'
customers from Baasel.

                      (ii) CardioGenesis Limitations. CardioGenesis will have no
liability for any claim of patent or copyright infringement or other
infringement of proprietary rights, or any liability for design or manufacture,
to the extent resulting from:

                             (A) Baasel's use or combination, in producing the
OEM Products or Parts, or producing Baasel's Software or Updates, with products
or data, other than

                                      -34-
<PAGE>   35

the CardioGenesis Proprietary Rights or CardioGenesis Products, not supplied by
CardioGenesis to Baasel in order for Baasel to produce the OEM Products, or
Parts, or Baasel's Software or Updates, or

                             (B) any modification or attempted modification of
the CardioGenesis Proprietary Rights or CardioGenesis Products by anyone other
than CardioGenesis, or other than by Baasel with CardioGenesis' written
permission in the course of the Development Efforts.

                      (iii) General Mutual Limitation. IN NO EVENT WILL EITHER
PARTY BE LIABLE TO THE OTHER IN CONNECTION WITH THIS AGREEMENT FOR SPECIAL,
INCIDENTAL, INDIRECT OR CONSEQUENTIAL OR PUNITIVE DAMAGES REGARDLESS OF WHETHER
EITHER OR BOTH PARTIES OR BAASEL KNEW OF THE POSSIBILITY OF SUCH DAMAGES.

               (e) Insurance. Subject to the provisions of Section 6(d)(iii)(C)
hereof relating to possible price adjustments deriving from the cost of products
liability insurance of Baasel as to OEM Products and Parts to be sold in the
United States, Baasel and CardioGenesis each will at all times during the term
hereof obtain and maintain, at the obtaining party's expense, fire and casualty,
general liability, business interruption, and product liability insurance
relating to the business of such party, taking into account such party's
respective obligations under this Agreement, and taking into account the nature
of the OEM Products and Parts, in amounts (including tail coverage) customary
for its industry and size, with reputable insurers, with respect to such product
liability insurance. In particular, CardioGenesis will obtain and maintain
product liability coverage with respect to the OEM Products in an amount, and
with such coverage, and for such periods of time, as are customary, within the
industry within which the OEM Products would be considered to be included by
national-level United States medical products insurers, according to the type of
product so considered and according to the particular use (i.e., clinical or
commercial) to which the OEM Products will be used in the jurisdiction to which
such insurance relates. The parties will agree in writing, as an amendment to
this Section 12(e), as to the United States dollar amount of such coverage for
the relevant jurisdictions, no later than June 30, 1997, after consultation by
CardioGenesis with its insurance brokers and with Baasel.

        13.    REPRESENTATIONS AND WARRANTIES OF BAASEL.

               Baasel hereby represents and warrants to CardioGenesis as follows
(where a representation is made "to the best knowledge" of Baasel, such
representation will be based upon reasonable inquiry into the records and of the
employees of Baasel and reasonable inquiry of the advisors and/or other agents
of Baasel):

               (a) Organization and Good Standing. Baasel is a corporation duly
organized and validly existing under the laws of Germany, has the corporate
power and authority to own, operate and lease its properties and to carry on its
business as now conducted.

               (b) Power, Authorization and Validity.

                      (i) Authorization. No filing, authorization or approval
with or from governmental authorities by Baasel is necessary to enable Baasel to
enter into, and to perform, its obligations under this Agreement.

                                      -35-
<PAGE>   36

                      (ii) Valid and Binding Obligation. This Agreement is the
valid and binding obligation of Baasel, enforceable in accordance with its terms
except as to the effect, if any, of (A) applicable bankruptcy and other similar
laws affecting the rights of creditors generally, (B) rules of law governing
specific performance, injunctive relief and other equitable remedies, and (C)
the exercise of judicial discretion in accordance with general principles of
equity.

               (c) No Violation of Existing Agreements. Neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with, or (with or without notice or lapse of
time, or both) result in a termination, breach, impairment or violation of: (i)
any provision of the Certificate of Incorporation or Bylaws of Baasel, as
currently in effect, (ii) any instrument or contract to which Baasel is a party
or by which Baasel is bound, or (iii) to the best knowledge of Baasel, any
German, European Union or foreign judgment, writ, decree, order, statute, rule
or regulation applicable to Baasel or its assets or properties in any material
respect.

               (d) Litigation. Baasel has not received notice of any action,
proceeding, claim or investigation pending against Baasel before any court or
administrative agency that if determined adversely to Baasel may be expected to
have a material adverse effect on the present or future operations or financial
condition of Baasel. To the best knowledge of Baasel, after due inquiry, no such
action, proceeding, claim or investigation has been threatened.

               (e) Intellectual Property. Baasel owns or has sufficient rights
to use all patents, "Moral Rights" (as defined below), copyrights, trade
secrets, know-how, technology and other intellectual property and proprietary
rights reasonably necessary to the conduct of the business as presently
conducted by Baasel and as will be required for the performance by Baasel of its
obligations hereunder ("Baasel Intellectual Property"). "Moral Rights" means any
rights of paternity or integrity, any right to claim authorship, formula,
invention, improvement, original work of authorship, process, computer program,
database or trade secret ("Invention"), and any right to object to any
distortion, mutilation or other modification of, or other derogatory action in
relation to, any Invention, whether or not such would be prejudicial to any
developer's honor or reputation. No third party has any right of reversion or
tenancy in the Baasel Intellectual Property that would impair in any way the
ability of Baasel to fully perform its obligations under this Agreement or that
would impair in any way the rights and benefits of CardioGenesis under this
Agreement. Baasel is not aware of any infringement of Baasel Intellectual
Property by any third party. To the best of Baasel's knowledge, the business of
Baasel as presently conducted by Baasel and as will be required for the
performance by Baasel of its obligations hereunder does not cause Baasel, and
will not cause CardioGenesis, by use of Baasel as an OEM Product and Parts
manufacturer and supplier to CardioGenesis as provided herein, to infringe or
violate any of the patents, trademarks, service marks, trade names, copyrights,
trade secrets, proprietary rights or other intellectual property of any other
person, and Baasel has not received any claim or notice of infringement or
potential infringement of the intellectual property of any other person. To the
best knowledge of Baasel, Baasel is not using any confidential information or
trade secrets of any former employer of any past or present Baasel employees or
consultants.

        14. REPRESENTATIONS AND WARRANTIES OF CARDIOGENESIS.

                                      -36-
<PAGE>   37

               CardioGenesis hereby represents and warrants to Baasel as follows
(where a representation is made "to the best knowledge" of CardioGenesis, such
representation will be based upon reasonable inquiry into the records and of the
employees of CardioGenesis and reasonable inquiry of the advisors and/or other
agents of CardioGenesis):

               (a) Organization and Good Standing. CardioGenesis is a
corporation duly organized and validly existing under the laws of the State of
Delaware, has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted.

               (b) Power, Authorization and Validity.

                      (i) Right, Power and Authority. CardioGenesis has the
right, power, legal capacity and authority to enter into and perform its
respective obligations under this Agreement, and the execution, delivery and
performance of this Agreement have been duly and validly approved and authorized
by CardioGenesis and no other corporate approvals are required therefor under
the laws of the State of Delaware or California.

                      (ii) Authorization. No U.S. federal or state filing,
authorization or approval with or from governmental authorities by CardioGenesis
is necessary to enable CardioGenesis to enter into, and to perform, its
obligations under this Agreement.

                      (iii) Valid and Binding Obligation. This Agreement is the
valid and binding obligation of CardioGenesis, enforceable in accordance with
its terms except as to the effect, if any, of (A) applicable bankruptcy and
other similar laws affecting the rights of creditors generally, (B) rules of law
governing specific performance, injunctive relief and other equitable remedies,
and (C) the exercise of judicial discretion in accordance with general
principles of equity.

               (c) No Violation of Existing Agreements. Neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with, or (with or without notice or lapse of
time, or both) result in a termination, breach, impairment or violation of: (i)
any provision of the Certificate of Incorporation or Bylaws of CardioGenesis, as
currently in effect, (ii) any instrument or contract to which CardioGenesis is a
party or by which CardioGenesis is bound, or (iii) to the best knowledge of
CardioGenesis, any federal, state, local or foreign judgment, writ, decree,
order, statute, rule or regulation applicable to CardioGenesis or its assets or
properties in any material respect.

               (d) Intellectual Property. CardioGenesis owns or has sufficient
rights to use all patents, "Moral Rights" (as defined below), copyrights, trade
secrets, know-how, technology and other intellectual property and proprietary
rights reasonably necessary to the licenses by CardioGenesis hereunder to Baasel
and as will be required for the performance by CardioGenesis of its obligations
hereunder ("CardioGenesis Intellectual Property"). "Moral Rights" means any
rights of paternity or integrity, any right to claim authorship, formula,
invention, improvement, original work of authorship, process, computer program,
database or trade secret ("Invention"),


                                      -37-

<PAGE>   38

and any right to object to any distortion, mutilation or other modification of,
or other derogatory action in relation to, any Invention, whether or not such
would be prejudicial to any developer's honor or reputation. CardioGenesis is
not aware of any infringement of CardioGenesis Intellectual Property by any
third party. To the best of CardioGenesis' knowledge, the use by Baasel of
CardioGenesis Intellectual Property as permitted and required by this Agreement
will not cause Baasel, as an OEM Product and Parts manufacturer and supplier to
CardioGenesis as provided herein, to infringe or violate any of the patents,
trademarks, service marks, trade names, copyrights, trade secrets, proprietary
rights or other intellectual property of any other person, and CardioGenesis has
not received any claim or notice of infringement or potential infringement of
the intellectual property of any other person.

               (e) No Violation of Existing Agreements. Neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with, or (with or without notice or lapse of
time, or both) result in a termination, breach, impairment or violation of: (i)
any provision of the Articles of Incorporation or Bylaws of CardioGenesis, (ii)
any instrument or contract to which CardioGenesis is a party or by which
CardioGenesis is bound or (iii) to the best knowledge of CardioGenesis, any
federal, other national, state, local or foreign judgment, writ, decree, order,
statute, rule or regulation applicable to CardioGenesis or its assets or
properties in any material respect.

        15.    GOVERNING LAW; DISPUTE RESOLUTION.

               (a) Governing Law. This Agreement will be governed by and
construed under the laws of the State of California excluding the Convention on
Contracts for the International Sale of Goods and excluding that body of law
known as conflict of laws. The procedural laws of the court in which a
good-faith injunctive relief action is brought by either party pursuant to its
rights under Section 15(a)(vii) hereof will control as to the procedure of such
action.

               (b) Dispute Resolution. Any dispute arising out of or related to
this Agreement, including any dispute which relates to the Confidential
Information of either party, or to Baasel Proprietary Information or to
CardioGenesis Proprietary Information, will be subject to the following
provisions:

                      (i) Rules and Location. Such dispute will be determined by
arbitration under the Rules of the International Chamber of Commerce (the
"ICC"), in Munich, Germany if brought by CardioGenesis, or in San Francisco,
California if brought by Baasel, before a panel of three (3) arbitrators to be
appointed in accordance with such Rules.

                      (ii) Language. The language of the arbitration will be
English.

                      (iii) Arbitrator Qualifications. Each arbitrator must be
reasonably fluent in English, and must have reasonable experience with high
technology commercial companies or with arbitration of matters involving high
technology commercial companies.


                                      -38-

<PAGE>   39

                      (iv) Fees and Costs. The arbitrators will rule on the fees
and costs of the arbitration.

                      (v) Governing Law of Arbitration. The laws of the State of
California excluding the Convention on Contracts for the International Sale of
Goods, and excluding that body of law known as conflict of laws, will be the
applicable substantive law, provided that ICC procedural laws will govern the
arbitration procedure.

                      (vi) Award. The award of the arbitrators will be final and
binding upon the parties, and judgment upon the award may be entered in any
court having jurisdiction, and an application may be made to any such court for
judicial acceptance of the award and an order of enforcement.

                      (vii) Right to Seek Injunctive Relief. Each party retains
the right to seek immediate injunctive judicial relief, in whichever court is
appropriate, whether in Germany, California (federal and State courts) or
elsewhere in the world, each party hereby consenting to in personam
 .jurisdiction of and venue in such court(s), as to alleged breaches of this
Agreement which, in the good faith judgment of the initiating party, would cause
irreparable harm to such party for which damages would not be a sufficient or
appropriate remedy and the amount of which damages would be difficult to
ascertain.

               (b) Legal Expenses. The prevailing party in any injunctive action
brought by one party against the other and arising out of this Agreement will be
entitled, in addition to any other rights and remedies it may have, to
reimbursement for its expenses, including court costs and reasonable attorneys'
fees and costs, provided, however, that reimbursement of such attorney's fees
and costs will not exceed ten percent (10 %) of the total amount (exclusive of
such fees and costs) in dispute.

        16.    GENERAL PROVISIONS.

               (a) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein
and merges and supersedes all prior agreements between them with respect to such
specific subject matter. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing signed by both parties.

               (b) Independent Contractors. The relationship of Baasel and
CardioGenesis under this Agreement is that of independent contractors, and
nothing contained in this Agreement will be construed to give either party the
power to direct and control the day-to-day activities of the other, or to create
or assume any obligation on behalf of the other for any purpose whatsoever. All
financial obligations associated with each party's business are the sole
responsibility of such party.

               (c) Notices. Any notice required or permitted by this Agreement
will be in writing and will be sent by hand (including commercially-recognized
international courier), or by prepaid registered or certified airmail, return
receipt requested where possible, or by facsimile, in

                                      -39-

<PAGE>   40

each case addressed to the other party at the address below such party's
signature hereon, or at such other address for which such party gives notice
hereunder. Such notice will be deemed to have been given when delivered if by
hand, or five (5) days after deposit in the mail (sent airmail, postage
pre-paid), or upon receipt if sent by facsimile.

               (d) Force Majeure. Nonperformance of either party will be excused
to the extent and for the period that performance by such party is rendered
impossible by strike, fire, flood, governmental acts or orders or restrictions
(other than such orders or restrictions arising as a result of the action or
failure to act by such nonperforming party), failure of suppliers, or any other
reason where failure to perform is beyond the reasonable control of and is not
caused by the negligence of the nonperforming party.

               (e) Nonassignability and Binding Effect. Neither CardioGenesis'
nor Baasel's rights and obligations under this Agreement may be transferred or
assigned without the prior written consent of the other party, which will not be
unreasonably withheld. Subject to the foregoing sentence, this Agreement will be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto.

               (f) Severability. If any provision of this Agreement is held
invalid by any law, rule, order or regulation of any government, or by the final
determination of any state or federal court, such invalidity will not affect the
enforceability of any other provisions not held to be invalid, and such
provision will be enforced to the maximum extent legally possible.

               (g) Import/Export Regulations. CardioGenesis and Baasel will
comply with all regulations, both U.S. and international, with respect to the
importation and exportation of OEM Products and Parts, and as to CardioGenesis
Products, by CardioGenesis, and as to products of Baasel manufactured and/or
supplied by Baasel pursuant to its rights under Section 3(d) hereof.

               (h) Publicity Regarding Agreement. Neither party will disclose
the terms of this Agreement to any third parties except as may be mutually
agreed in writing or as may be required by, and then only to the extent required
by, statute, regulation or the order of a court of competent jurisdiction.

               (i) Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of which together
will constitute one instrument.

               (j) Construction. This Agreement has been negotiated by each of
the parties with advice of counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either party.

               (k) Counting of Time. Whenever time is to be counted hereunder,
the first day will be ignored and counting will commence with and include the
next day and continue through and including the final day of the relevant period
provided for in this Agreement.
                                      -40-
<PAGE>   41

               (l) Survival. The provisions of Sections 1(c), 1(d), 1(e), 1(j),
2, 3(b) (as to OEM Products shipped by Baasel prior to such termination and
those that may be shipped after termination pursuant to the provisions of
Section 9(d) hereof), 3(d), 3(e), 4(b), 6(e), 6(f), 7, 8, 9(d), 9(e), 9(f), 10,
11, 12, 13, 14, 15 and 16 will survive the termination or expiration of this
Agreement.


                                      -41-
<PAGE>   42



        IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date by their duly authorized representatives.

CARDIOGENESIS CORPORATION                      CARL BAASEL LASERTECHNIK GMBH
-------------------------                      -----------------------------


By: /s/ Allen W. Hill                          By: /s/ Joseph Settele
   ------------------------------                  -----------------------------

Name:      ALLEN W. HILL                       Name:       JOSEPH SETTELE

Title:     PRESIDENT                           Title:      MANAGING DIRECTOR

Date signed:  March 11, 1997                   Dated signed:  March 13, 1997

Address: 540 Oakmead Parkway                   Address: Petersbrunner Strasse 1b
         Sunnyvale, California 94086                    82319 Starnberg, Germany
         Attention:  President                          Attention:  President
Facsimile: 408-328-3816                       Facsimile: 011-49-81-51-776-232


                                      -42-
<PAGE>   43



                                    EXHIBIT A

                             OEM PRODUCT DESCRIPTION









CARDIOGENESIS CORPORATION                       CARL BAASEL LASERTECHNIK
                                                GMBH

By:                                             By:
  ------------------------------                   -----------------------------
Name:                                           Name:
    ----------------------------                     ---------------------------
Title:                                          Title:
     ---------------------------                     ---------------------------
Date signed:                                    Date signed:
           ---------------------                            --------------------

<PAGE>   44




** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE FOLLOWING 23
   PAGES OF THIS DOCUMENT. CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THE
   PUBLIC FILING AND HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
   COMMISSION.


<PAGE>   45


                                    EXHIBIT B

                       OEM PRODUCT DEVELOPMENT PROGRAM AND
            SPECIFICATIONS FOR FUNCTIONAL, PROTOTYPE AND PILOT UNITS



1.    OEM PRODUCT DEVELOPMENT PROGRAM.

                    [ATTACHED AND INCORPORATED BY REFERENCE]





2. SPECIFICATIONS FOR FUNCTIONAL, PROTOTYPE AND PILOT UNITS.

                    [ATTACHED AND INCORPORATED BY REFERENCE]


















CARDIOGENESIS CORPORATION                          CARL BAASEL LASERTECHNIK
                                                   GMBH

By:                                             By:
  ------------------------------                   -----------------------------
Name:                                           Name:
    ----------------------------                     ---------------------------
Title:                                          Title:
     ---------------------------                     ---------------------------
Date signed:                                    Date signed:
           ---------------------                            --------------------

<PAGE>   46



** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE FOLLOWING 2
   PAGES OF THIS DOCUMENT. CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THE
   PUBLIC FILING AND HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
   COMMISSION.





<PAGE>   47




                                    EXHIBIT B

                         OEM PRODUCT DEVELOPMENT PROGRAM

                    [ATTACHED AND INCORPORATED BY REFERENCE]



[ ** ]





CARDIOGENESIS CORPORATION GMBHCARL BAASEL LASERTECHNIK



By:                                             By:
  ------------------------------                   -----------------------------
Name:                                           Name:
    ----------------------------                     ---------------------------
Title:                                          Title:
     ---------------------------                     ---------------------------
Date signed:                                    Date signed:
           ---------------------                            --------------------



<PAGE>   48





** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE FOLLOWING 2
   PAGES OF THIS DOCUMENT. CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THE
   PUBLIC FILING AND HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
   COMMISSION.


<PAGE>   49



                                    EXHIBIT C

                       OEM PRODUCT PRICES TO CARDIOGENESIS

** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THIS PAGE.
   CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THE PUBLIC FILING AND HAVE BEEN
   FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.






CARDIOGENESIS CORPORATION                          CARL BAASEL LASERTECHNIK
                                                   GMBH

By:                                             By:
  ------------------------------                   -----------------------------
Name:                                           Name:
    ----------------------------                     ---------------------------
Title:                                          Title:
     ---------------------------                     ---------------------------
Date signed:                                    Date signed:
           ---------------------                            --------------------



<PAGE>   50



                                    EXHIBIT D

                      OTHER BAASEL PROPRIETARY INFORMATION;
                   OTHER CARDIOGENESIS PROPRIETARY INFORMATION



      1.   OTHER BAASEL PROPRIETARY INFORMATION.

           Intellectual Property Rights of Baasel

** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THIS PAGE.
   CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THE PUBLIC FILING AND HAVE BEEN
   FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


      2.   OTHER CARDIOGENESIS PROPRIETARY INFORMATION.

                    [ATTACHED AND INCORPORATED BY REFERENCE]





CARDIOGENESIS CORPORATION                          CARL BAASEL LASERTECHNIK
                                                   GMBH

By:                                             By:
  ------------------------------                   -----------------------------
Name:                                           Name:
    ----------------------------                     ---------------------------
Title:                                          Title:
     ---------------------------                     ---------------------------
Date signed:                                    Date signed:
           ---------------------                            --------------------

<PAGE>   51



** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THIS PAGE.
   CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THE PUBLIC FILING AND HAVE BEEN
   FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.



<PAGE>   52



                                    EXHIBIT E

                            CARDIOGENESIS TRADEMARKS





                                  CardioGenesis
                                      ITMR
                                      TTMR
                                       PMR
                                   ITMR System
                                   TTMR System
                                   PMR System









CARDIOGENESIS CORPORATION                       CARL BAASEL LASERTECHNIK
                                                GMBH

By:                                             By:
  ------------------------------                   -----------------------------
Name:                                           Name:
    ----------------------------                     ---------------------------
Title:                                          Title:
     ---------------------------                     ---------------------------
Date signed:                                    Date signed:
           ---------------------                            --------------------


<PAGE>   53



                                    EXHIBIT F

                             PARTS AND PARTS PRICES


                    [ATTACHED AND INCORPORATED BY REFERENCE]










CARDIOGENESIS CORPORATION                       CARL BAASEL LASERTECHNIK
                                                GMBH

By:                                             By:
  ------------------------------                   -----------------------------
Name:                                           Name:
    ----------------------------                     ---------------------------
Title:                                          Title:
     ---------------------------                     ---------------------------
Date signed:                                    Date signed:
           ---------------------                            --------------------


<PAGE>   54

                                    EXHIBIT G

                               ACCEPTANCE CRITERIA








CARDIOGENESIS CORPORATION                       CARL BAASEL LASERTECHNIK
                                                GMBH

By:                                             By:
  ------------------------------                   -----------------------------
Name:                                           Name:
    ----------------------------                     ---------------------------
Title:                                          Title:
     ---------------------------                     ---------------------------
Date signed:                                    Date signed:
           ---------------------                            --------------------


<PAGE>   55



                                    EXHIBIT H
                    BAASEL WARRANTY ON OEM PRODUCTS AND PARTS



CardioGenesis or its end-user customer shall, throughout the whole period of
operation of the OEM Product, provide and maintain all operation conditions
reflected in the Baasel operating manuals and other end-user documentation of
Baasel for such OEM Product (the "OEM Product Documentation"), a complete copy
of which OEM Product Documentation shall be supplied with each unit of OEM
Product sold to CardioGenesis or provided by CardioGenesis to its customer.

Baasel warrants that the goods to which this warranty applies shall be free from
defects in material and workmanship for the period of one (1) year for labor and
parts. The warranty period for parts exchanged by Baasel back to the customer
during the parts exchange period will be six (6) months. Damage to parts,
including but not limited to lenses, optical components, flash lamps and the
like, from wear and tear and caused by improper use or handling by CardioGenesis
or the end-user, is not covered by this warranty.

This warranty is contingent upon CardioGenesis or its customer promptly
notifying Baasel in writing of any defect, to operating the relevant product
within the limits of related and normal usage in accordance with the OEM Product
Documentation, and, upon the written request of Baasel, returning to Baasel any
defective goods or parts thereof. If CardioGenesis or its customer, after
acceptance of such goods from Baasel, modifies, alters, substitutes or changes
any of such goods acquired from Baasel, then Baasel's warranty with respect
thereto shall be null and void.

CardioGenesis', and its customers', sole and exclusive remedy with respect to
any claim relating to the goods shall be limited to the repair/replacement of
nonconforming or defective goods.

THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED,
INCLUDING ANY WARRANTY OF FITNESS OF THE GOODS FOR A PARTICULAR PURPOSE.


CARDIOGENESIS CORPORATION                       CARL BAASEL LASERTECHNIK
                                                GMBH

By:                                             By:
  ------------------------------                   -----------------------------
Name:                                           Name:
    ----------------------------                     ---------------------------
Title:                                          Title:
     ---------------------------                     ---------------------------
Date signed:                                    Date signed:
           ---------------------                            --------------------