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EXHIBIT 4.1




As Amended through

November 9, 2004




AMENDED AND RESTATED UROLOGIX, INC.

1991 STOCK OPTION PLAN




 









 








	 	 	 	 	 	 	 	 	 
	SECTION	 	CONTENTS	 	PAGE
	 	1.

	 	 	General Purpose of Plan; Definitions
	 	 	1	 
	 	2.

	 	 	Administration
	 	 	3	 
	 	3.

	 	 	Stock Subject to Plan
	 	 	5	 
	 	4.

	 	 	Eligibility
	 	 	5	 
	 	5.

	 	 	Stock Options
	 	 	6	 
	 	6.

	 	 	Stock Appreciation Rights
	 	 	11	 
	 	7.

	 	 	Restricted Stock
	 	 	12	 
	 	8.

	 	 	Deferred Stock Awards
	 	 	14	 
	 	9.

	 	 	Transfer, Leave of Absence, etc.
	 	 	16	 
	 	10.

	 	 	Amendments and Termination
	 	 	16	 
	 	11.

	 	 	Unfunded Status of Plan
	 	 	17	 
	 	12.

	 	 	General Provisions
	 	 	16	 






 









 






AMENDED AND RESTATED UROLOGIX, INC.

1991 STOCK OPTION PLAN




     SECTION 1. General Purpose of Plan; Definitions.



     The name of this plan is the Amended and Restated Urologix, Inc. 1991 Stock Option Plan (the
“Plan”). The purpose of the Plan is to enable Urologix, Inc. (the “Company”) to retain and attract
executives and other key employees, directors and consultants who contribute to the Company’s
success by their ability, ingenuity and industry, and to enable such individuals to participate in
the long-term success and growth of the Company by giving them a proprietary interest in the
Company.



     For purposes of the Plan, the following terms shall be defined as set forth below:




	 	a.  	“Board” means the Board of Directors of the Company as it may be comprised from
time to time.
	 
	 	b.  	“Cause” means a felony conviction of a participant or the failure of a
participant to contest prosecution for a felony, willful misconduct, dishonesty or
intentional violation of a statute, rule or regulation, any of which, in the judgment of
the Company, is harmful to the business or reputation of the Company.
	 
	 	c.  	“Code” means the Internal Revenue Code of 1986, as amended from time to time,
or any successor statute.
	 
	 	d.  	“Committee” means the Committee referred to in Section 2 of the Plan.
	 
	 	e.  	“Consultant” means any person, including an advisor, engaged by the Company or
a Parent Corporation or Subsidiary of the Company to render services and who is compensated
for such services and who is not an employee of the Company or any Parent Corporation or
Subsidiary of the Company. A Non-Employee Director may serve as a Consultant.
	 
	 	f.  	“Company” means Urologix, Inc., a corporation organized under the laws of the
State of Minnesota (or any successor corporation).
	 
	 	g.  	“Deferred Stock” means an award made pursuant to Section 8 below of the right
to receive stock at the end of a specified deferral period.
	 
	 	h.  	“Disability” means permanent and total disability as determined by the
Committee.
	 
	 	i.  	“Early Retirement” means retirement, with consent of the Committee at the time
of retirement, from active employment with the Company and any Subsidiary or Parent
Corporation of the Company.




 









 






	 	j.  	“Fair Market Value” of Stock on any given date shall be determined by the
Committee as follows: (a) if the Stock is listed for trading on one of more national
securities exchanges, or is traded on the Nasdaq Stock Market, the last reported sales
price on the principal such exchange or the Nasdaq Stock Market on the date in question, or
if such Stock shall not have been traded on such principal exchange on such date, the last
reported sales price on such principal exchange or the Nasdaq Stock Market on the first day
prior thereto on which such Stock was so traded; or (b) if the Stock is not listed for
trading on a national securities exchange or the Nasdaq Stock Market, but is traded in the
over-the-counter market, including the Nasdaq Small Cap Market, the closing bid price for
such Stock on the date in question, or if there is no such bid price for such Stock on such
date, the closing bid price on the first day prior thereto on which such price existed; or
(c) if neither (a) or (b) is applicable, by any means fair and reasonable by the Committee,
which determination shall be final and binding on all parties.
	 
	 	k.  	“Incentive Stock Option” means any Stock Option intended to be and designated
as an “Incentive Stock Option” within the meaning of Section 422 of the Code.
	 
	 	l.  	“Non-Employee Director” means a “Non-Employee Director” within the meaning of
Rule 16b-3(b)(3) under the Securities Exchange Act of 1934.
	 
	 	m.  	“Non-Qualified Stock Option” means any Stock Option that is not an Incentive
Stock Option, and is intended to be and is designated as a “Non-Qualified Stock Option.”
	 
	 	n.  	“Normal Retirement” means retirement from active employment with the Company
and any Subsidiary or Parent Corporation of the Company on or after age 65.
	 
	 	o.	“Outside Director” means a member of the Board of Directors who: (a) is not a
current employee of the Company or any member of an affiliated group which includes the
Company; (b) is not a former employee of the Company who receives compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the taxable
year; (c) has not been an officer of the Company; and (d) does not receive remuneration
from the Company, either directly or indirectly, in any capacity other than as a director,
except as otherwise permitted under Code Section 162(m) and regulations thereunder. For
this purpose, remuneration includes any payment in exchange for goods or services. This
definition shall be further governed by the provisions of Code Section 162(m) and
regulations promulgated thereunder.
	 
	 	p.  	“Parent Corporation” means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of the corporations (other
than the Company) owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain.
	 
	 	q.  	“Restricted Stock” means an award of shares of Stock that are subject to
restrictions under Section 7 below.




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	 	r.  	“Retirement” means Normal Retirement or Early Retirement.
	 
	 	s.  	“Stock” means the Common Stock of the Company.
	 
	 	t.  	“Stock Appreciation Right” means the right pursuant to an award granted under
Section 6 below to surrender to the Company all or a portion of a Stock Option in exchange
for an amount equal to the difference between (i) Fair Market Value, as of the date such
Stock Option or such portion thereof is surrendered, of the shares of Stock covered by such
Stock Option or such portion thereof, and (ii) the aggregate exercise price of such Stock
Option or such portion thereof.
	 
	 	u.  	“Stock Option” means any option to purchase shares of Stock granted pursuant to
Section 5 below.
	 
	 	v.  	“Subsidiary” means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of the corporations (other than
the last corporation in the unbroken chain) owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations in the
chain.





     SECTION 2. Administration.



     The Plan shall be administered by the Board of Directors or by a committee, consisting of not
less than two members of the Board of Directors, all of whom shall be Outside Directors and
Non-Employee Directors and who shall serve at the pleasure of the Board (the “Committee”). Any or
all of the functions of the Committee specified in the Plan may be exercised by the Board, unless
the Plan specifically states otherwise.



     The Committee shall have the power and authority to grant to eligible employees, members of
the Board of Directors or Consultants, pursuant to the terms of the Plan: (i) Stock Options, (ii)
Stock Appreciation Rights, (iii) Restricted Stock, or (iv) Deferred Stock awards.



     In particular, the Committee shall have the authority:




	 	(i)  	to select the officers and other key employees of the Company and its Subsidiaries and
other eligible persons to whom Stock Options, Stock Appreciation Rights, Restricted Stock
and Deferred Stock awards may from time to time be granted hereunder;
	 
	 	(ii)  	to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Restricted Stock and Deferred Stock awards, or a
combination of the foregoing, are to be granted hereunder;
	 
	 	(iii)  	to determine the number of shares to be covered by each such award granted hereunder;




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	 	(iv)  	to determine the terms and conditions, not inconsistent with the terms of the Plan, of

any award granted hereunder (including, but not limited to, any restriction on any Stock
Option or other award and/or the shares of Stock relating thereto); provided,
however, that in the event of a merger or asset sale or other form of change of control,
the applicable provisions of Sections 5(c) and 7(c) of the Plan shall govern the
acceleration of the vesting of any Stock option or awards;
	 
	 	(v)  	to determine whether, to what extent and under what circumstances Stock and other
amounts payable with respect to an award under this Plan shall be deferred either
automatically or at the election of the participant.





     The Committee shall have the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to
interpret the terms and provisions of the Plan and any award issued under the Plan (and any
agreements relating thereto); and to otherwise supervise the administration of the Plan. The
Committee may delegate to executive officers of the Company the authority to exercise the powers
specified in (i), (ii), (iii), (iv) and (v) above with respect to persons who are not executive
officers of the Company.



     All decisions made by the Committee pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Company and Plan participants.



     SECTION 3. Stock Subject to Plan.



     The total number of shares of Stock reserved and available for distribution under the Plan
shall be 4,450,9101. Such shares may consist, in whole or in part, of authorized and
unissued shares.









	1	History: This Plan originally reserved 970,912 shares
for issuance. The Board of Directors approved an increase from 970,912 shares
to 1,250,912 on January 19, 1994, and an increase from 1,250,912 shares to
1,601,820 shares on August 19, 1994. The shareholders approved the increase to
1,601,820 shares at a special meeting on December 21, 1994. The Board of
Directors approved an increase from 1,601,820 shares to 2,101,820 shares on
July 26, 1995, which was approved by the Shareholders at a special meeting on
November 27, 1995. The number of shares reserved under the Plan was again
increased from 2,101,820 to 3,101,820 by the Board of Directors on April 3,
1996 and such increase was approved by the Shareholders at a special meeting on
April 30, 1996. Simultaneously on April 30, 1996, the Company effected a
1-for-2 Reverse Stock Split, thereby converting the number of shares reserved
to 1,550,910 as of April 30, 1996. Following the Reverse Stock Split, the
Board of Directors increased the number of shares reserved to 1,950,910 on
September 17, 1997 and the increase was approved by the shareholders on
November 19, 1997. On November 17, 1998, the Board of Directors authorized an
increase in the number of shares reserved to 2,450,910, which increase was
approved by the shareholders on January 14, 1999. On September 12, 2000 the
Board of Directors authorized an increase in the number of shares reserved to
2, 950,910, which increase was approved by the shareholders on November 14,
2000. On September 11, 2001 the Board of Directors authorized an increase in
the number of shares reserved to 3,450,910, which increase was approved by the
shareholders on November 6, 2001. On July 19, 2004 the Board of Directors
authorized an increase in the number of shares reserved to 4,450,910, which
increase was approved by the shareholders on November 9, 2004.




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     Subject to paragraph (b)(iv) of Section 6 below, if any shares that have been optioned cease
to be subject to Stock Options, or if any shares subject to any Restricted Stock or Deferred Stock
award granted hereunder are forfeited or such award otherwise terminates without a payment being
made to the participant, such shares shall again be available for distribution in connection with
future awards under the Plan.



     In the event of any merger, reorganization, consolidation, recapitalization, stock dividend,
other change in corporate structure affecting the Stock, or spin-off or other distribution of
assets to shareholders, such substitution or adjustment shall be made in the aggregate number of
shares reserved for issuance under the Plan, in the number and option price of shares subject to
outstanding options granted under the Plan, and in the number of shares subject to Restricted Stock
or Deferred Stock awards granted under the Plan as may be determined to be appropriate by the
Committee, in its sole discretion, provided that the number of shares subject to any award shall
always be a whole number. Such adjusted option price shall also be used to determine the amount
payable by the Company upon the exercise of any Stock Appreciation Right associated with any
Option.



     SECTION 4. Eligibility.



     Officers, other key employees of the Company and Subsidiaries, members of the Board of
Directors, and Consultants who are responsible for or contribute to the management, growth and
profitability of the business of the Company and its Subsidiaries are eligible to be granted Stock
Options, Stock Appreciation Rights, Restricted Stock or Deferred Stock awards under the Plan. The
optionees and participants under the Plan shall be selected from time to time by the Committee, in
its sole discretion, from among those eligible, and the Committee shall determine, in its sole
discretion, the number of shares covered by each award.



     Notwithstanding the foregoing, no person may, during any fiscal year of the Company, receive
grants of Stock Options and Stock Appreciation Rights under this Plan which, in the aggregate,
exceed 500,000 shares.



     SECTION 5. Stock Options.



     Any Stock Option granted under the Plan shall be in such form as the Committee may from time
to time approve.



     The Stock Options granted under the Plan may be of two types: (i) Incentive Stock Options and
(ii) Non-Qualified Stock Options. No Incentive Stock Options shall be granted under the Plan after
August 1, 2011.



     The Committee shall have the authority to grant any optionee Incentive Stock Options,
Non-Qualified Stock Options, or both types of options (in each case with or without Stock
Appreciation Rights). To the extent that any option does not qualify as an Incentive Stock Option,
it shall constitute a separate Non-Qualified Stock Option.



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     Anything in the Plan to the contrary notwithstanding, no term of this Plan relating to
Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify either the Plan or any
Incentive Stock Option under Section 422 of the Code. The preceding sentence shall not preclude
any modification or amendment to an outstanding Incentive Stock Option, whether or not such
modification or amendment results in disqualification of such Option as an Incentive Stock Option,
provided the optionee consents in writing to the modification or amendment.



     No changes that result from the restatement of this Plan shall effect any change in any
outstanding incentive stock option that would cause such option to be modified, extended or renewed
to the extent that such change will constitute the grant of a new option as specified in Section
424(h) of the Code.



     Options granted under the Plan shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable.



     (a) Option Price. The option price per share of Stock purchasable under a Stock
Option shall be determined by the Committee at the time of grant. In no event shall the option
price per share of Stock purchasable under an Incentive Stock Option be less than 100% of such Fair
Market Value. If an employee owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Parent Corporation or Subsidiary and an Incentive Stock
Option is granted to such employee, the option price shall be no less than 110% of the Fair Market
Value of the Stock on the date the option is granted.



     (b) Option Term. The term of each Stock Option shall be fixed by the Committee, but
no Incentive Stock Option shall be exercisable more than ten years after the date the option is
granted. If an employee owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation or Subsidiary and an Incentive Stock Option is granted to such
employee, the term of such option shall be no more than five years from the date of grant.



     (c) Exercisability. Stock Options shall be exercisable at such time or times as
determined by the Committee at or after grant. If the Committee provides, in its discretion, that
any option is exercisable only in installments, the Committee may waive such installment exercise
provisions at any time. Notwithstanding anything contained in the Plan to the contrary, the
Committee may, in its discretion, extend or vary the term of any Stock Option or any installment
thereof, whether or not the optionee is then employed by the Company, if such action is deemed to
be in the best interests of the Company; provided, however, that in the event of a merger or sale
of assets, or of a Change of Control, the provisions of this section 5(c) shall govern vesting
acceleration.




	 	(i)  	In the event of a merger of the Company with or into another corporation, or the sale
of substantially all of the assets of the Company, each outstanding Option shall be assumed
or an equivalent option or right shall be substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that




6









 












	 	   	the successor corporation does not agree to assume the Option or to substitute an
equivalent option or right, the Committee shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option as to
all of the Optioned Stock, including shares as to which it would not otherwise be
exercisable. If the Committee makes an Option fully exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Committee shall notify
the Optionee that the Option shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Option will terminate upon the expiration of
such period. For the purposes of this paragraph, the Option shall be considered assumed
if, following the merger or sale of assets, the option or right confers the right to
purchase, for each Share of Optioned Stock subject to the Option immediately prior to
the merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of Common
Stock for each Share held on the effective date of the transaction (and if holders were
offered a choice of consideration, the type of consideration chose by the holders of a
majority of the outstanding Shares); provided, however, that if such consideration
received in the merger or sale of assets was not solely common stock of the successor
corporation or its Parent, the Committee may, with consent of the successor corporation
and the participant, provide for the consideration to be received upon the exercise of
the Option, for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in Fair Market Value to the per
share consideration received by holders of Common Stock in the merger or sale of assets.
	 
	 	(ii)  	Upon a Change of Control, each outstanding Stock Option shall become exercisable in
full as to all of the shares covered thereby without regard to any installment exercise or
vesting provisions. In the event that at any time prior to August 13, 1999, a Change of
Control or other business combination of the Company occurs as to which the Company desires
that pooling accounting treatment be utilized, the Board may, in its sole discretion,
declare that the provisions of this Section 5(c)(ii), and the related provisions of all
then outstanding Stock Options shall be of no force and effect whatsoever and the treatment
of any Stock Options outstanding at that time shall then instead be governed solely by the
provisions of Section 5(c)(i). After August 13, 1999, the provisions of Section 5(c)(i)
shall be of no further force or effect. This Section 5(c)(ii) will apply to all Stock
Options which are outstanding on August 13, 1997, as well as all Stock Options which are
granted on or after that date. For purposes of this Section 5(c), the term “Change of
Control” means any of the following:






	 	(A)  	any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes a “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company’s then outstanding
securities and is required to file a Schedule 13D under the Exchange Act; or




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	 	(B)  	the Incumbent Directors cease for any reason to constitute at least a
majority of the Board of Directors. The term, “Incumbent Directors,” shall mean
those individuals who are members of the Board of Directors on August 13, 1997 and
any individual who subsequently becomes a member of the Board of Directors whose
election or nomination for election by the Company’s shareholders was approved by a
vote of at least a majority of the then Incumbent Directors; or
	 
	 	(C)  	all or substantially all of the assets of the Company are sold,
leased, exchanged or otherwise transferred and immediately thereafter, there is
no substantial continuity of ownership with respect to the Company and the
entity to which such assets have been transferred.






	 	(iii)  	The grant of an option pursuant to the Plan shall not limit in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge, exchange or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.





     (d) Method of Exercise. Stock Options may be exercised in whole or in part at any
time during the option period by giving written notice of exercise to the Company specifying the
number of shares to be purchased. Such notice shall be accompanied by payment in full of the
purchase price, either by check, or by any other form of legal consideration deemed sufficient by
the Committee and consistent with the Plan’s purpose and applicable law, including promissory notes
or a properly executed exercise notice together with irrevocable instructions to a broker
acceptable to the Company to promptly deliver to the Company the amount of sale or loan proceeds to
pay the exercise price. As determined by the Committee at the time of grant or exercise, in its
sole discretion, payment in full or in part may also be made in the form of Stock already owned by
the optionee (which in the case of Stock acquired upon exercise of an option have been owned for
more than six months on the date of surrender) or, in the case of the exercise of a Non-Qualified
Stock Option, by delivery of Restricted Stock or Deferred Stock subject to an award hereunder
(based, in each case, on the Fair Market Value of the Stock on the date the option is exercised, as
determined by the Committee), provided, however, that, in the case of an Incentive Stock Option,
the right to make a payment in the form of already owned shares may be authorized only at the time
the option is granted, and provided further that in the event payment is made in the form of shares
of Restricted Stock or a Deferred Stock award, the optionee will receive a portion of the option
shares in the form of, and in an amount equal to, the Restricted Stock or Deferred Stock award
tendered as payment by the optionee. If the terms of an option so permit, an optionee may elect to
pay all or part of the option exercise price by having the Company withhold from the shares of
Stock that would otherwise be issued upon exercise that number of shares of Stock having a Fair
Market Value equal to the aggregate option exercise price for the shares with respect to which such
election is made. No shares of Stock shall be issued until full payment therefor has been made.
An optionee shall generally have the rights to dividends and other rights of a shareholder with
respect to shares subject to the option when the optionee has given written notice of exercise, has
paid in full for such shares, and, if requested, has given the representation described in
paragraph (a) of Section 12.



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     (e) Non-transferability of Options. No Stock Option shall be transferable by the
optionee otherwise than by will or by the laws of descent and distribution, and all Stock Options
shall be exercisable, during the optionee’s lifetime, only by the optionee.



     (f) Termination by Death. If an optionee’s employment by the Company and any
Subsidiary or Parent Corporation terminates by reason of death, the Stock Option may thereafter be
immediately exercised, to the extent then exercisable, by the legal representative of the estate or
by the legatee of the optionee under the will of the optionee, for a period of twelve months from
the date of such death or until the expiration of the stated term of the option, whichever period
is shorter.



     (g) Termination by Reason of Disability. If an optionee’s employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of Disability, any Stock Option held
by such optionee may thereafter be exercised, to the extent it was exercisable at the time of
termination due to Disability, but may not be exercised after twelve months from the date of such
termination of employment or the expiration of the stated term of the
option, whichever period is the shorter. In the event of termination of employment by reason of Disability, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that apply for purposes of
Section 422 of the Code, the option will thereafter be treated as a Non-Qualified Stock Option.



     (h) Termination by Reason of Retirement. If an optionee’s employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of Retirement and the terms of the
Stock Option so provide, any Stock Option held by such optionee may thereafter be exercised to the
extent it was exercisable at the time of such Retirement, but may not be exercised after twelve
months from the date of such termination of employment or the expiration of the stated term of the
option, whichever period is the shorter. In the event of termination of employment by reason of
Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option.



     (i) Other Termination. In the event an Optionee’s continuous status as an Employee or
Consultant terminates (other than upon the Optionee’s death or Disability), the Optionee may
exercise his or her Option, but only within such period of time as is determined by the Committee,
and only to the extent that the Optionee was entitled to exercise it at the date of termination
(but in no event later than the expiration of the term of such Option as set forth in the Notice of
Grant). In the case of an Incentive Stock Option, the Committee shall determine such period of
time (in no event to exceed ninety (90) days from the date of termination) when the Option is
granted.



     (j) Annual Limit on Incentive Stock Options. The aggregate Fair Market Value
(determined as of the time the Stock Option is granted) of the Common Stock with respect to which
an Incentive Stock Option under this Plan or any other plan of the Company and any Subsidiary or
Parent Corporation is exercisable for the first time by an optionee during any calendar year shall
not exceed $100,000.



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     (k) Directors Who Are Not Employees. Each year on the date of the annual meeting of
shareholders, each person who is not an employee of the Company, any Parent Corporation or
Subsidiary and is serving as a member of the Board of Directors of the Company immediately
following such annual meeting, will automatically, without any Committee action, be granted a
Non-Qualified Stock Option to purchase 10,000 shares of the Company’s Common Stock at an option
price per share equal to 100% of the Fair Market Value of a share of Stock on such date. All such
Options shall be designated as Non-Qualified Stock Options and shall be subject to the same terms
and provisions as are then in effect with respect to the grant of Non-Qualified Stock Options to
employees of the Company, except that (i) the term of each such Option shall be equal to ten years;
and (ii) the Option shall immediately become exercisable in full at the time of grant. Upon
termination of a person’s service as a Director of the Company, such Director will be allowed to
exercise such Option for a period of one year after the date on which such person ceased to be a
Director, after which date the Option, if not exercised, shall terminate. The Committee may elect
to grant a similar Non-Qualified Stock Option, consisting of such number of shares as the Committee
deems appropriate under the circumstances, to any person who is elected to the Board of Directors
between annual meetings of shareholders. Subject to the foregoing, all provisions of this Plan not
inconsistent with the foregoing shall apply to Options granted pursuant to this Section 5(k).



     SECTION 6. Stock Appreciation Rights.



     (a) Grant and Exercise. Stock Appreciation Rights may be granted in conjunction with
all or part of any Stock Option granted under the Plan. In the case of a Non-Qualified Stock
Option, such rights may be granted either at or after the time of the grant of such Option. In the
case of an Incentive Stock Option, such rights may be granted only at the time of the grant of the
option.



     A Stock Appreciation Right or applicable portion thereof granted with respect to a given Stock
Option shall terminate and no longer be exercisable upon the termination or exercise of the related
Stock Option, except that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by a related stock Option shall not be reduced until the exercise or
termination of the related Stock Option exceeds the number of shares not covered by the Stock
Appreciation Right.



     A Stock Appreciation Right may be exercised by an optionee, in accordance with paragraph (b)
of this Section 6, by surrendering the applicable portion of the related Stock Option. Upon such
exercise and surrender, the optionee shall be entitled to receive an amount determined in the
manner prescribed in paragraph (b) of this Section 6. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent the related Stock
Appreciation Rights have been exercised.



     (b) Terms and Conditions. Stock Appreciation Rights shall be subject to such terms
and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time
to time by the Committee, including the following:



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     (i) Stock Appreciation Rights shall be exercisable only at such time or times and to the
extent that the Stock Options to which they relate shall be exercisable in accordance with the
provisions of Section 5 and this Section 6 of the Plan.




     (ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be entitled to
receive up to, but not more than, an amount in cash or shares of Stock equal in value to the
excess of the Fair Market Value of one share of Stock over the option price per share specified
in the related option multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the right to determine
the form of payment.




     (iii) Stock Appreciation Rights shall be transferable only when and to the extent that the underlying Stock Option would be transferable under Section 5 of the Plan.




     (iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or part thereof to
which such Stock Appreciation Right is related shall be deemed to have been exercised for the
purpose of the limitation set forth in Section 3 of the Plan on the number of shares of Stock to
be issued under the Plan, but only to the extent of the number of shares issued or issuable
under the Stock Appreciation Right at the time of exercise based on the value of the Stock
Appreciation Right at such time.




     (v) A Stock Appreciation Right granted in connection with an Incentive Stock Option may be
exercised only if and when the market price of the Stock subject to the Incentive Stock Option
exceeds the exercise price of such Option.



     SECTION 7. Restricted Stock.



     (a) Administration. Shares of Restricted Stock may be issued either alone or in
addition to other awards granted under the Plan. The Committee shall determine the officers, key
employees and Consultants of the Company and Subsidiaries to whom, and the time or times at which,
grants of Restricted Stock will be made, the number of shares to be awarded, the time or times
within which such awards may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment of specified
performance goals. The provisions of Restricted Stock awards need not be the same with respect to
each recipient.



     (b) Awards and Certificates. The prospective recipient of an award of shares of
Restricted Stock shall not have any rights with respect to such award, unless and until such
recipient has executed an agreement evidencing the award and has delivered a fully executed copy
thereof to the Company, and has otherwise complied with the then applicable terms and conditions.




     (i) Each participant shall be issued a stock certificate in respect of shares of Restricted
Stock awarded under the Plan. Such certificate shall be registered in the name of the
participant, and shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award, substantially in the following form:



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“The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture) of the
Amended and Restated Urologix, Inc. 1991 Stock Plan and an Agreement entered
into between the registered owner and Urologix, Inc. Copies of such Plan
and Agreement are on file in the offices of Urologix, Inc., 14405 21st
Avenue North, Minneapolis, MN 55447.”




     (ii) The Committee shall require that the stock certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock award, the participant shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such award.



     (c) Restrictions and Conditions. The shares of Restricted Stock awarded pursuant to
the Plan shall be subject to the following restrictions and conditions:




     (i) Subject to the provisions of this Plan and the award agreement, during a period set by
the Committee commencing with the date of such award (the “Restriction Period”), the participant
shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock awarded
under the Plan. In no event shall the Restriction Period be less than one (1) year. Within
these limits, the Committee may provide for the lapse of such restrictions in installments where
deemed appropriate.




     (ii) Except as provided in paragraph (c)(i) of this Section 7, the participant shall have,
with respect to the shares of Restricted Stock, all of the rights of a shareholder of the
Company, including the right to vote the shares and the right to receive any cash dividends.
The Committee, in its sole discretion, may permit or require the payment of cash dividends to be
deferred and, if the Committee so determines, reinvested in additional shares of Restricted
Stock (to the extent shares are available under Section 3 and subject to paragraph (f) of
Section 12). Certificates for shares of unrestricted Stock shall be delivered to the grantee
promptly after, and only after, the period of forfeiture shall have expired without forfeiture
in respect of such shares of Restricted Stock.




     (iii) Subject to the provisions of the award agreement and paragraph (c)(iv) of this
Section 7, upon termination of employment for any reason during the Restriction Period, all
shares still subject to restriction shall be forfeited by the participant.




     (iv) In the event of special hardship circumstances of a participant whose employment is
terminated (other than for Cause), including death, Disability or Retirement, or in the event of
an unforeseeable emergency of a participant still in service, the Committee may, in its sole
discretion, when it finds that a waiver would be in the best interest of the Company, waive in
whole or in part any or all remaining restrictions with respect to such participant’s shares of
Restricted Stock.



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     (v) Notwithstanding the foregoing, in the event of the sale by the Company of substantially
all of its assets and the consequent discontinuance of its business, or in the event
of a merger, exchange, consolidation or liquidation of the Company, the Board shall, in its
sole discretion, in connection with the Board’s adoption of the plan for sale, merger, exchange,
consolidation or liquidation, provide for one or more of the following with respect to
Restricted Stock Awards that are, on such date, still subject to a Restriction Period: (i) the
removal of the restrictions on any or all outstanding Restricted Stock Awards; (ii) the complete
termination of this Plan and forfeiture of outstanding Restricted Stock Awards prior to a date
specified by the Board; and (iii) the continuance of the Plan with respect to the Restricted
Stock Award which were outstanding as of the date of adoption by the Board of such plan for
sale, merger, exchange, consolidation or liquidation and provide to participants holding
Restricted Stock Awards the right to an equivalent number of restricted shares of stock of the
corporation succeeding the Company by reason of such sale, merger, exchange, consolidation or
liquidation. The grant of a Restricted Stock Award pursuant to the Plan shall not limit in any
way the right or power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, exchange or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or assets.



     SECTION 8. Deferred Stock Awards.



     (a) Administration. Deferred Stock may be awarded either alone or in addition to
other awards granted under the Plan. The Committee shall determine the officers, key employees,
members of the Board of Directors and Consultants of the Company and Subsidiaries to whom and the
time or times at which Deferred Stock shall be awarded, the number of Shares of Deferred Stock to
be awarded to any participant or group of participants, the duration of the period (the “Deferral
Period”) during which, and the conditions under which, receipt of the Stock will be deferred, and
the terms and conditions of the award in addition to those contained in paragraph (b) of this
Section 8. The Committee may also condition the grant of Deferred Stock upon the attainment of
specified performance goals. The provisions of Deferred Stock awards need not be the same with
respect to each recipient.



     (b) Terms and Conditions.




     (i) Subject to the provisions of this Plan and the award agreement, Deferred Stock awards
may not be sold, assigned, transferred, pledged or otherwise encumbered during the Deferral
Period. In no event shall the Deferral Period be less than one (1) year. At the expiration of
the Deferral Period (or Elective Deferral Period, where applicable), share certificates shall be
delivered to the participant, or his legal representative, in a number equal to the shares
covered by the Deferred Stock award.




     (ii) Amounts equal to any dividends declared during the Deferral Period with respect to the
number of shares covered by a Deferred Stock award will be paid to the participant currently or
deferred and deemed to be reinvested in additional Deferred Stock or otherwise reinvested, all
as determined at the time of the award by the Committee, in its sole discretion.



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     (iii) Subject to the provisions of the award agreement and paragraph (b)(iv) of this
Section 8, upon termination of employment for any reason during the Deferral Period for a given
award, the Deferred Stock in question shall be forfeited by the participant.




     (iv) In the event of special hardship circumstances of a participant whose employment is
terminated (other than for Cause) including death, Disability or Retirement, or in the event of
an unforeseeable emergency of a participant still in service, the Committee may, in its sole
discretion, when it finds that a waiver would be in the best interest of the Company, waive in
whole or in part any or all of the remaining deferral limitations imposed hereunder with respect
to any or all of the participant’s Deferred Stock.




     (v) A participant may elect to further defer receipt of the award for a specified period or
until a specified event (the “Elective Deferral Period”), subject in each case to the
Committee’s approval and to such terms as are determined by the Committee, all in its sole
discretion. Subject to any exceptions adopted by the Committee, such election must generally be
made prior to completion of one half of the Deferral Period for a Deferred Stock award (or for
an installment of such an award).




     (vi) Each award shall be confirmed by, and subject to the terms of, a Deferred Stock
agreement executed by the Company and the participant.



     SECTION 9. Transfer, Leave of Absence, etc.



     For purposes of the Plan, the following events shall not be deemed a termination of
employment:



     (a) a transfer of an employee from the Company to a Parent Corporation or Subsidiary, or from
a Parent Corporation or Subsidiary to the Company, or from one Subsidiary to another;



     (b) a leave of absence, approved in writing by the Committee, for military service or
sickness, or for any other purpose approved by the Company if the period of such leave does not
exceed ninety (90) days (or such longer period as the Committee may approve, in its sole
discretion); and



     (c) a leave of absence in excess of ninety (90) days, approved in writing by the Committee,
but only if the employee’s right to reemployment is guaranteed either by a statute or by contract,
and provided that, in the case of any leave of absence, the employee returns to work within 30 days
after the end of such leave.



     SECTION 10. Amendments and Termination.



     The Board may amend, alter, or discontinue the Plan, but no amendment, alteration, or
discontinuation shall be made (i) which would impair the rights of an optionee or participant under
a Stock Option, Restricted Stock or other Stock-based award theretofore granted, without the
optionee’s or participant’s consent, or (ii) which without the approval of the stockholders of
the Company would cause the Plan to no longer comply with Rule 16b-3 under the Securities
Exchange Act of 1934, Section 422 of the Code or any other regulatory requirements.



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     The Committee may amend the terms of any award or option theretofore granted, prospectively or
retroactively to the extent such amendment is consistent with the terms of this Plan, but no such
amendment shall impair the rights of any holder without his or her consent except to the extent
authorized under the Plan. The Committee may also substitute new Stock Options for previously
granted options, including previously granted options having higher option prices.



     SECTION 11. Unfunded Status of Plan.



     The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation.
With respect to any payments not yet made to a participant or optionee by the Company, nothing
contained herein shall give any such participant or optionee any rights that are greater than those
of a general creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect to awards hereunder, provided,
however, that the existence of such trusts or other arrangements is consistent with the unfunded
status of the Plan.



     SECTION 12. General Provisions.



     (a) The Committee may require each person purchasing shares pursuant to a Stock Option under
the Plan to represent to and agree with the Company in writing that the optionee is acquiring the
shares without a view to distribution thereof. The certificates for such shares may include any
legend which the Committee deems appropriate to reflect any restrictions on transfer.



     All certificates for shares of Stock delivered under the Plan pursuant to any Restricted
Stock, Deferred Stock or other Stock-based awards shall be subject to such stock-transfer orders
and other restrictions as the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate reference to such
restrictions.



     (b) Subject to paragraph (d) below, recipients of Restricted Stock, Deferred Stock and other
Stock-based awards under the Plan (other than Stock Options) are not required to make any payment
or provide consideration other than the rendering of services.



     (c) Nothing contained in this Plan shall prevent the Board of Directors from adopting other or
additional compensation arrangements, subject to stockholder approval if such approval is required;
and such arrangements may be either generally applicable or applicable only in specific cases. The
adoption of the Plan shall not confer upon any employee of the Company or any Subsidiary any right
to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a Subsidiary to
terminate the employment of any of its employees at any time.



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     (d) Each participant shall, no later than the date as of which any part of the value of an
award first becomes includible as compensation in the gross income of the participant for Federal
income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee
regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld
with respect to the award. The obligations of the Company under the Plan shall be conditional on
such payment or arrangements and the Company and Subsidiaries shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind otherwise due to the
participant. With respect to any award under the Plan, if the terms of such award so permit, a
participant may elect by written notice to the Company to satisfy part or all of the withholding
tax requirements associated with the award by (i) authorizing the Company to retain from the number
of shares of Stock that would otherwise be deliverable to the participant, or (ii) delivering to
the Company from shares of Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the participant under this
Section 12(d). Any such election shall be in accordance with, and subject to, applicable tax and
securities laws, regulations and rulings.



     (e) At the time of grant, the Committee may provide in connection with any grant made under
this Plan that the shares of Stock received as a result of such grant shall be subject to a
repurchase right in favor of the Company, pursuant to which the participant shall be required to
offer to the Company upon termination of employment for any reason any shares that the participant
acquired under the Plan, with the price being the then Fair Market Value of the Stock or, in the
case of a termination for Cause, an amount equal to the cash consideration paid for the Stock,
subject to such other terms and conditions as the Committee may specify at the time of grant. The
Committee may, at the time of the grant of an award under the Plan, provide the Company with the
right to repurchase, or require the forfeiture of, shares of Stock acquired pursuant to the Plan by
any participant who, at any time within two years after termination of employment with the Company,
directly or indirectly competes with, or is employed by a competitor of, the Company.



     (f) The reinvestment of dividends in additional Restricted Stock (or in Deferred Stock or
other types of Plan awards) at the time of any dividend payment shall only be permissible if the
Committee (or the Company’s chief financial officer) certifies in writing that under Section 3
sufficient shares are available for such reinvestment (taking into account then outstanding Stock
Options and other Plan awards).




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