<PAGE>

                            PRODUCT ROYALTY AGREEMENT
                            -------------------------


THIS PRODUCT ROYALTY AGREEMENT is made and entered into as of DECEMBER 28, 1993
(the "Effective Date") by and between BEI MEDICAL SYSTEMS INC., a Delaware
corporation ("Company") and MILTON H. GOLDRATH, M.D. ("Goldrath").


                                    RECITALS
                                    --------

     WHEREAS Company and Goldrath are parties to that Option Agreement dated
12/28/93 (the "Option Agreement"); and

     WHEREAS pursuant to Section 1.3 of the Option Agreement, the Company has
acquired the "Proprietary Rights" (below defined) and, as the consideration
therefore, has agreed to enter into this agreement with respect to the making of
certain payments to Goldrath as a result; and

     WHEREAS in connection with said acquisition, Company and Goldrath have
entered into a "Consulting Agreement" of even date herewith, providing for the
provision by Goldrath of certain consulting services to the Company regarding
governmental approval for and the development and use of the Covered Products
(the "Consulting Agreement").

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:

   1.     DEFINITIONS.  As used in this Agreement, the following terms shall
have the meanings respectively set forth below:

   A.     "AFFILIATE" means a company controlling, controlled by or under common
control with the Company, where "control" means majority-ownership.

   B.     "COVERED PRODUCTS" means the products listed on Schedule 1, and any
and all modifications, enhancements and improvements thereto.

   C.     "FDA APPROVAL" means written authorization from the US Food and Drug
Administration for the Company to commence commercial sale of a Covered Product
in the United States.

   D.     [*]




[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

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   E.    [*]

   F.    "PATENT" means the patents and patent applications listed on Schedule
2, and any patents, which may issue on the Proprietary Rights and foreign
counterparts thereof.

   G.    "PROPRIETARY RIGHTS" means all ideas, information, designs, inventions,
patents, patent applications, copyrights, rights in mask works, trademarks,
technology, products and product rights, product improvements or modifications,
designs or processes or other proprietary rights of every kind and type created
or discovered by Goldrath heretofore or during the term of this Agreement and
relating to the design, manufacture, use and/or improvement of the Covered
Products, including but not limited to those items identified on Schedule 2; all
right, title and interest in and to the Proprietary Rights has been acquired by
the Company, pursuant to its exercise of the right and option granted by the
Option Agreement.

   H.    "ROYALTY-BEARING PRODUCT" means the Covered Products more particularly
identified and Schedule 1 as such, and any and all modifications, enhancements
and improvements thereto, but in each instance only if and for so long as such
item is covered by a valid claim of a Patent or is intended for use in a
Procedure covered by a valid claim of a Patent.

   I.    "ROYALTY TERM" means the period commencing on the Effective Date and
continuing until the expiration of the last to expire of the Patents covering
the products sold by Company or the method practiced using such products or, if
lesser, for so long as the Company is selling the particular Royalty-Bearing
Product.

   2.  ROYALTIES.   Subject to Section 3, Company agrees as follows:

   A.       The Company will pay to Goldrath a [*] royalty on the [*] of all
items of Royalty Bearing Product.

     Goldrath acknowledges and agrees that, subject to Section 2.C, he is not
entitled to receive any royalties on any product (including any other portion of
the Covered Products) other than the Royalty-Bearing Products, and only a single
royalty shall be paid on any Royalty-Bearing Product.


[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

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   B.    The Company's payment of earned royalties hereunder is subject to the
following [*], during [*] only (no such [*] is due for any subsequent period):

                 [*]                                             [*]

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

Within sixty (60) days the end of each such [*], the Company shall pay to
Goldrath the positive result, if any, of (1) the applicable [*] amount from the
table above MINUS (2) the sum of (i) the [*] paid under Section 2.A for all
periods ending on that date plus (ii) all [*] previously paid Goldrath pursuant
to this Section 2.B.

   C.    If Royalty-Bearing Products are sold together with other items as part
of a Bundled Product, unless otherwise agreed, the Net Sales Revenues resulting
from such sale will be based on the allocable portion (determined on a pro rata
basis, based on the Company's stand alone published list prices for the items
being sold together) of the total net sales revenues (determined in the same
manner as Net Sales Revenues) from the sale of said Bundled Product. For this
purpose, a "Bundled Product" is a combination of Royalty-Bearing Products and
other items that is marketed collectively as a single product and/or for a
single price (e.g, as a so-called "kit").

   D.    Within sixty (60) days after the end of each of its fiscal quarters,
the Company shall provide a written royalty report to Goldrath setting forth the
amount of royalties due hereunder with respect to the fiscal quarter just ended
and a general description of how that amount was calculated. Payments under
Section 2.A (and Section 2.B if applicable) are due concurrently with the
delivery of said report.

   E.    Goldrath shall have the right to cause a third party auditor, hired by
him on a non-contingency fee basis and reasonably acceptable to Company, to
enter Company's premises where the Company's books and records relating to the
Royalty-Bearing Products are normally kept, after reasonable prior written
notice and during normal business hours, for purposes of auditing or inspecting
all such books of account for the period(s) requested in such notice. The cost
of any such audit or inspection shall be borne by Goldrath; provided, however,
the Company shall bear the reasonable costs thereof if it is finally determined
that the amount of royalties paid by for the period(s) audited or inspected is,
in the aggregate, less that ninety percent (90%) of the aggregate amount of
royalties actually due hereunder for said period(s). If any such audit or
inspection reveals that an overpayment or underpayment of royalties may have
occurred, then the necessary correcting payment shall be made within thirty (30)
days after the amount of the discrepancy is finally determined.

   F.    If the Company determines that the royalties provided for herein are
excessive (e.g., if an expected patent does not issue or an applicable patent
lapses, is held invalid or



[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

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otherwise is not enforceable) and/or render the affected Royalty-Bearing
Products commercially noncompetitive as to price (based on the Company's average
net selling price (as reasonably set by the Company with due consideration for
competition and other market factors and any applicable cost-reimbursement
guidelines) and cost of goods, and assuming a minimum gross margin before
royalties of not less than [*] (or higher, if typical in the Company's industry
for such products) is a commercially reasonable requirement), then upon
Company's request, the Company and Goldrath shall negotiate, reasonably and in
good faith, a reduction in such royalties; provided, however, in no event shall
said royalties be reduced except by mutual agreement in writing (agreement not
to be unreasonably withheld).

   3.    LIMITATIONS.   The Company's obligations hereunder are subject to the
following:

   A.    Goldrath acknowledges and agrees that the Company does not have any
express or implied duties of diligence with respect to the commercialization of
any Covered Product or Royalty-Bearing Product except as specifically provided
in Section 4 and does not in any way guarantee or promise any particular outcome
or level of sales with respect thereto or royalties hereunder except as provided
in Section 2.B. Subject to Section 4, the Company reserves the right to (and
may) market and promote the Covered Products and the Royalty-Bearing Products as
and to the extent it determines is commercially reasonable; make changes (s) and
improvement(s) to any Covered Product(s) and or Royalty-Bearing Product(s) at
any time (even if the direct or cumulative effect or result of such change(s)
and/or improvement(s) is that the resulting product ceases to be a "Covered
Product" or a "Royalty-Bearing Product", as the case may be, hereunder), so long
as such change or improvement is not made in bad faith for the sole purpose of
royalty avoidance; and/or discontinue the marketing, promotion and sale of any
Covered Product(s) or Royalty-Bearing Product(s) at any time.

   B.    The Company's obligation to pay royalties and [*] pursuant to Section 2
is at all times subject to the condition precedent that, since the date of the
last royalty payment to him hereunder (or the Effective Date, in the case of the
first such payment), Goldrath has complied with Section 6.

   4.    REPURCHASE OPTION. As soon as practicable following receipt of the FDA
Approval, the Company shall initiate and maintain direct and/or indirect
marketing and/or distribution arrangements, on a commercially reasonable basis
to make Covered Product(s) available for purchase by end users throughout the
United States. The Company may elect to cease to maintain such US marketing
and/or distribution arrangements ("US Commercial Arrangements") at any time upon
written notice to Goldrath. However, if the Company ceases US Commercial
Arrangements for reasons other than governmental regulatory rulings or orders
(or the effect thereof), than as Goldrath's sole and exclusive right and remedy
in such event, Goldrath shall have the right and option to reacquire the
Proprietary Rights (the "Repurchase Option") as follows:

   A.    Goldrath may exercise the Repurchase Option only by written notice to
the Company specifying a closing date at least ninety (90) days after the date
the Company receives said notice. If, however, during said ninety (90) day
period the Company resumes the US Commercial Arrangements and advises Goldrath
in writing of such resumption, then Goldrath's


[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

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exercise of the Repurchase Option shall be void and have no effect and said
closing shall not occur.

   B.    Subject to the preceding sentence, the closing of the Repurchase Option
shall occur on the date specified in Goldrath's notice; at said closing the
Company shall assign over and sell to Goldrath (1) all of the Company's right,
title and interest in and to the Proprietary rights and the FDA Approval in
consideration of Goldrath's execution of a written agreement implementing
Section 4.C, the mutual termination of the Agreement, and Goldrath's release of
the Company of any and all liabilities and obligations hereunder (other than
payment of earned royalties under Section 2.A then accrued and unpaid), all
effective as of the closing. Goldrath shall have an option, exercisable at the
closing, to acquire all of the Company's then finished goods and
work-in-progress inventory of Covered Products, exclusive of any such inventory
retained by the Company for the purpose of satisfying its then existing
contractual obligations, in consideration of Goldrath's payment of the Company's
documented cost thereof.

   C.

  (1)    If Goldrath reacquires the Proprietary Rights pursuant to an exercise
of the Repurchase Option, then Goldrath will pay to the Company [*] of the
royalties and other revenues received by Goldrath from the licensing or other
commercial exploitation of the Proprietary Rights and/or the sale of Covered
Products and Royalty-Bearing Products until such time as the Company has been
reimbursed for the out-of-pocket costs and expenses incurred by it in connection
with the development of the Covered Products and the Royalty-Bearing Products,
the prosecution and maintenance of any Patents, and the obtaining and
maintaining of the FDA Approval (and any other governmental or regulatory
approval applicable to the Covered Products and the Royalty-Bearing Products).
Such reimbursement shall be limited to the direct costs incurred by the Company
and shall not include reimbursement of any payments to Goldrath for services
performed under the Consulting Agreement.

  (2)   If Goldrath does not purchase Company's inventory after exercise of the
Repurchase Option, then Company shall have a license under the Proprietary
Rights to sell its inventory of finished goods and products completed based on
work-in-process inventory existing as of the date of the Company's election to
cease to maintain U.S. marketing and/or distribution arrangements, subject to
the obligations of the Company pursuant to Paragraph 2 of this Agreement.

   5.   SEEKING FDA APPROVAL. The Company covenants that it will diligently
prosecute its application (s) for the FDA Approval and will use reasonable
efforts to obtain the FDA Approval in a timely manner. Goldrath will assist the
Company in connection with the obtaining of the FDA Approval by performing
services under the Consulting Agreement. In that regard, however, Company and
Goldrath agree that:

   A.   The timing of any submission to the FDA regarding or relating to any
Covered Product or Royalty-Bearing Product and/or their use (or any portion or
aspect thereof) will be as jointly agreed by the Company and Goldrath, and


                                      -5-
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   B.    Goldrath will have the right of veto over site selection for clinical
trials for the Covered Products; it is agreed that Columbia University is a test
site approved by Goldrath.

   C.    Goldrath acknowledges that regulatory review and/or approval(s) in
addition to the FDA Approval may be required in connection with the manufacture,
marketing and/or sale of the Covered Products and/or Royalty-Bearing Products
and that the obtaining or (and the length of time necessary to obtain) the FDA
Approval and any other such review and/or approval(s), once applied for, are
outside of the reasonable control of the Company.

   6.    NONCOMPETITION. Goldrath agrees that he will not, for himself or for or
with third parties, directly of indirectly develop, market or promote, or
support the development, marketing or promotion of, any product of that competes
with any Covered Product or Royalty-Bearing Product under development,
manufactured, marketed or sold by the Company or its affiliates during the
Royalty Term. Goldrath nevertheless may do research; may publish papers,
articles and the like; may teach classes or conduct training courses; and/or may
participate in seminars, conferences, and/or symposia, even though the same
includes products competitive with the Covered Products, in each case provided
that there is no resulting violation of Section 8 and Goldrath's primary purpose
is not development, promotion and/or marketing of such competitive products.

   7.    TERM. The term of the parties' respective rights and obligations under
Section, 2, 3, 4 and 5 of this Agreement shall commence on the Effective Date
and terminate on the last day of the Royalty Term; provided that the provisions
of Section 4.C shall survive until fully performed. The remaining provisions of
this Agreement shall survive such, or any other, termination of this Agreement.

   8.    CONFIDENTIAL INFORMATION.

   A.    Goldrath agrees that all records and information regarding the Company
and/or its affiliates or customers which may be obtained by Goldrath pursuant to
or under this Agreement including, without limitation, all confidential; trade
secret and proprietary information regarding product development, product
development concepts and related technological know-how (collectively, "Company
Information") shall be kept confidential and shall be and remain the property of
the Company and its affiliates. Goldrath (i) shall not use any Company
information except for the benefit of the Company and shall not disclose any
Company Information to any third party without the express written consent of
Company and (ii) upon request shall promptly deliver to Company all notes,
summaries, diagrams, memoranda, computer memory media and all other material
containing any portion of the Company Information then in said Goldrath's
possession or control.

   B.    For purposes of this Section 8, all information, trade secrets, etc.
which are acquired by Company by reason of its acquisition of the Proprietary
Rights pursuant to the Option Agreement shall be treated and considered as
"Company Information" from and after the Effective Date hereof.


                                      -6-
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   C.    Each party acknowledges and agrees as follows: (i) the restrictions
contained in this Section 8 are reasonable and necessary to protect the other
party's legitimate interest; (ii) in the event of a violation of these
restrictions, remedies at law will be inadequate and such violation will cause
irreparable damages to such other party within a short period of time; (iii)
such other party will be entitled to injunctive relief for each and every
violation; and (iv) to provide reasonable assistance to the Company in remedying
any such unauthorized disclosure or use of any Company Information.

   D.    The parties' respective rights and obligations under this Section 8
shall survive the termination of this Agreement for any reason whatsoever.
However, this Section 8 shall not be applicable and shall impose no obligation
on either party with respect to any Company Information which; (i) was at the
time received or thereafter becomes, through no act or failure on the part of
the recipient, part of the public domain or generally known or available to the
public; (ii) is furnished to a third party by the owner thereof without a
similar confidentiality obligation; or (iii) is required to be disclosed by law
or by or pursuant to an order of a court or administrative or regulatory agency
or authority.

   9.    TAXES.

   A.    In order for the Company to submit accurate Form 1099 information to
the Internal Revenue Service, and to do other necessary federal, state and local
tax reporting, Goldrath is required to promptly and timely provide appropriate
tax identification numbers and other necessary information to the Company
concerning Goldrath and the form of Goldrath's business.

   B.    As an independent contractor, Goldrath will be responsible for filing
all tax returns and paying all taxes in a timely manner. No amount will be
deducted or withheld for state, local or federal taxes from amounts otherwise
due Goldrath. No FICA, FUTA or state unemployment taxes will be payable by the
Company on behalf of Goldrath.

   C.    The foregoing provisions of this Section 9 notwithstanding, if at any
time the Company reasonably determines, after consultation with its professional
tax advisors, that tax withholding is required under any applicable law with
respect to the amounts payable to Goldrath hereunder, then (i) Goldrath shall
promptly reimburse the Company, upon the Company's written request, for any
withholding the Company so determines is due taxing authorities on any amounts
already received by Goldrath hereunder and (ii) the Company may make
withholdings from any amounts thereafter payable hereunder.

  10.    PUBLICITY.   The Company shall not use, publish or disclose the name or
the graphic image or photograph of Goldrath in any press releases (trade or
media) and/or promotional or marketing materials without the prior written
consent of Goldrath.

  11.    ASSIGNMENT. Goldrath may not assign or delegate his obligations under
this Agreement without the Company's prior written consent, and any such
assignment shall not act to release Goldrath from his obligations hereunder. The
Company may, in its sole discretion,


                                      -7-
<PAGE>

assign this Agreement in whole or part to any Affiliate of the Company or, with
the written consent of Goldrath (not unreasonably withheld) to any other third
party.

  12.    GENERAL PROVISIONS.

   A.    Neither party will disclose the business terms of this Agreement,
except as mutually agreed or except as required by law. A party may disclose the
terms of this Agreement to accountants and attorneys and with the prior written
consent of the other party (which will not be unreasonably withheld) to
prospective purchasers of all or a material portion of the disclosing party's
(or, if applicable, its subsidiary's) stock, assets, product lines or
businesses; to financiers and lenders; and/or to other professional advisors.

   B.    This Agreement shall be subject to the laws of the State of California
(notwithstanding the application of its choice of law principles).

   C.    Notices under this Agreement shall be in writing, and shall be
addressed to the recipient at the address below (or such other address as is
specified by written notice given pursuant to this Section 12.C. Notices shall
be effective upon receipt. The parties respective addresses for notices are:

     If to Goldrath:
                                    Milton H. Goldrath
                                    31074 Oakleaf
                                    Franklin, Michigan 48025
                  With copy to:
                                    Krass & Young, P.C.
                                    3001 West Big Beaver Road
                                    Suite 624
                                    Troy, Michigan  48084-3109
                                    Attn:  Allen M. Krass, Esq.
     If to the Company:
                                    BEI Medical Systems Company, Inc.
                                    83 Hobart Street
                                    Hackensack, New Jersey  07601
                                    Attn:  Richard W.Turner
                  With copy to:
                                    Pillsbury Madison & Sutro
                                    Ten Almaden Boulevard
                                    San Jose, California  95113
                                    Attn:  F. Kinsey Haffner, Esq.

   D.    This Agreement constitutes the complete agreement and understanding
between Goldrath and the Company regarding the payment of royalties with respect
to the Proprietary Rights, the Covered Products, and the Royalty-Bearing
Products. This Agreement supersedes any and all other agreements either oral or
written, between Goldrath and the Company


                                      -8-
<PAGE>

regarding said subject matter. Any modification of this Agreement will be
effective only if it is in writing, signed by both of the parties.

   E.    In the event that individual provisions of this Agreement should be or
become invalid, this shall not affect the validity of the remaining provisions.
In such an instance, the parties will replace any invalid provision by such
valid provision, which comes as close as possible to the economic purpose of the
invalid provision. This Agreement may be executed in counterparts, each of which
shall be an original, but all of which shall constitute one and the same
Agreement.

   IN WITNESS WHEREOF, the parties have executed this Agreement intending to be
bound hereby as of the Effective Date.

    Company:                                  Goldrath:

    BEI Medical Systems Company, Inc.         /s/ Milton H. Goldrath, M.D.
                                              ----------------------------------
                                              Milton. H. Goldrath, M.D.
    By:     /s/ Thomas W. Fry
            -------------------------------
            Thomas W. Fry
    Title:  V.P. Finance & Administration


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                                   SCHEDULE 1

                                COVERED PRODUCTS
                                ----------------

         A system for perfusion of the uterus to accomplish endometrial
ablation.

                            ROYALTY BEARING PRODUCTS
                            ------------------------

         The components of a system for perfusion of the uterus to accomplish
endometrial ablation which form the sterile perfusion fluid pathway, namely;

     A.  [*]

     B.  [*]

     C.  [*]


[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

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                                   SCHEDULE 2

                         PATENT AND PATENT APPLICATIONS
                         ------------------------------

     1)    [*]

     2)    [*]

     3)    [*]








[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

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