Document:

<PAGE>

                                 Exhibit 10.21

                                 VidaMed, Inc.
                             46107 Landing parkway
                           Fremont, California 94538
                           -------------------------

                                August 31, 1999

Mr. David Illingworth
Executive Chairman and
Chairman of the Board
VidaMed, Inc,
46107 Landing Parkway
Fremont, California 94538

     Re: Resignation of Employment as Executive Chairman and Consulting
         Agreement
         --------------------------------------------------------------

Dear Mr. Illingworth:

     With reference to your agreement with VidaMed, Inc. dated June 26, 1999
     ("Employment Agreement") regarding your service to the Company as Executive
     Chairman, this letter will confirm the terms of your resignation from that
     office and the compensation to be paid to you by the Company.

1.   Resignation and Acknowledgments.  Effective August 31, 1999 (the
     --------------------------------
     "Resignation Date") Mr. Illingworth herewith resigns his employment with
     VidaMed, Inc. as its Executive Chairman. The Company acknowledges the fine
     service of Mr. Illingworth and confirms that his resignation was
     necessitated by the Company's need for additional outside (non-employee)
     directors. Mr. Illingworth shall remain as Chairman of the Company's Board
     of Directors. Mr. Illingworth's authority and responsibility as a Member
     and Chairman of the VidaMed Board of Directors is herewith recognized as
     distinct from his role as Executive Chairman and is in no way modified by
     this writing.

2.   Consulting and Severance Benefits.  As a severance for early termination of
     ---------------------------------
     your Employment Agreement and as consideration for the releases granted
     herein by Mr. Illingworth to the Company, the Company has agreed:

     (a)  To retain Mr. Illingworth as a consultant on the Resignation Date
          through February 15, 2000 ("Termination Date"). Mr. Illingworth's
          compensation through the consultancy period shall be $56,250.00
                                                               ----------
          payable in two lump sums of $28,125.00 each; the first payment shall
          be made November 1, 1999 and the second February 15, 2000.

     (b)  As further consideration to Mr. Illingworth, the Company shall
          purchase for Mr. Illingworth and his dependants, through the
          Termination Date, a policy of health insurance equivalent to that the
          Company provides its officers and employees, and

     (c)  To pay Mr. Illingworth on or before February 1, 2000 his share of the
          VidaMed Performance Improvement Plan ("PIP") under such terms accorded
          the President and Chief Executive Officer of the Company, prorated
          from January 1, 1999 through August 1, 1999. For purposes of
          calculating benefits under the PIP, the Operating Plan shall be

                                       52
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          the "Steady Growth Plan" stated in the Minutes of the Board of
          Directors dated June 22, 1999; and

     (d)  On the Termination Date the remaining balance of $62,500.00 loan
                                                            ----------
          made to Mr. Illingworth by the Company shall be deemed earned and the
          note forgiven.

     (e)  Mr. Illingworth's stock options for an aggregate of 250,000 shares
                                                              -------
          which was granted to him on October 9, 1998 (the "10/98 Option") shall
          continue to vest on terms set forth in such option until Termination
          Date. Thereafter Mr. Illingworth will have thirty (30) days from said
          Termination Date to exercise the shares vested under the 10/98 Option.
          The unvested portion of all Mr. Illingworth's other unexercised
          VidaMed options will be cancelled and returned to the VidaMed stock
          option plan.

     (f)  Reimburse Mr. Illingworth for reasonable and necessary expenses
          incurred on behalf of the Company during the consultancy period, said
          reimbursement ending on the Termination Date.

     (g)  With regard to other agreement between the Company and
          Mr. Illingworth:

          (i)    Mr. Illingworth's Change of Control Agreement with
                 VidaMed will remain in effect through the Termination Date.

          (ii)   Mr. Illingworth Indemnification Agreement with VidaMed will
                 remain in effect for so long as he continues to serve as a
                 member of VidaMed's Board of Directors.

          (iii)  Mr. Illingworth's Employee Confidentiality Agreement with
                 VidaMed will remain in effect in accordance with its terms.

4.   Release of Claims.   Mr. Illingworth agrees that the consideration
     -----------------
     described in this Agreement represents settlement in full of all
     outstanding obligations owed to Mr. Illingworth by the Company under any
     employment agreement, or other like agreements with the Company. Mr.
     Illingworth on behalf of himself, and his respective heirs, family members
     (including domestic partners), executors, heirs and assigns hereby fully
     and forever releases VidaMed, Inc., including its officers, directors,
     employees, investors, shareholders, administrators, affiliates, divisions,
     subsidiaries, predecessor and successor corporations, and assigns, from,
     and agrees not to sue concerning, any claim, duty, obligation or cause of
     action relating to any matters of any kind, whether presently known or
     unknown, suspected or unsuspected, that any of them may possess arising
     from any omissions, acts or facts that have occurred up until and including
     the Effective Date of this Agreement. Said release includes, but is not
     limited to:

     (a)  Any and all claims relating to or arising from Mr. Illingworth's
          employment relationship with the Company and the termination of that
          relationship;

     (b)  Any and all claims relating to, or arising from, Mr. Illingworth's
          right to purchase, or actual purchase of shares of stock of the
          Company, including, without limitation. any claims for fraud,
          misrepresentation, breach of fiduciary duty, breach of duty under
          applicable state corporate law, and securities fraud under any state
          or federal law;

     (c)  Any and all claims for wrongful discharge of employment; termination
          in violation of public policy; discrimination; breach of contract,
          both express and implied; breach of a covenant of good faith and fair
          dealing, both express and implied; promissory estoppel; negligent or
          intentional

                                       53
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          infliction of emotional distress; negligent or intentional
          misrepresentation; negligent or intentional interference with contract
          or prospective economic advantage; unfair business practices;
          defamation; libel; slander; negligence; personal injury; assault;
          battery; invasion of privacy; false imprisonment; and conversion;

     (d)  Any and all claims for violation of any federal, state or municipal
          statute, including, but not limited to, Title VII of the Civil Rights
          Act of 1964, the Civil Rights Act of 199 1, the Age Discrimination in
          Employment Act of 1967, the Americans with Disabilities Act of 1990,
          the Fair Labor Standards Act, the Employee Retirement Income Security
          Act of 1974, The Worker Adjustment and Retraining Notification Act,
          Older Workers Benefit Protection Act; the California Fair Employment
          and Housing Act, and Labor Code section 20 1, et seq. and section 970,
          et seq.;

     (e)  Any and all claims for violation of the federal, or any state,
          constitution;

     (f)  Any and all claims arising out of any other laws and regulations
          relating to employment or employment discrimination; and

     (g)  Any and all claims for attorneys' fees and costs.

For its part, VidaMed, Inc agrees not to sue and fully and forever releases, Mr.
Illingworth, his heirs and assigns from any claim, duty, obligation or cause of
action relating to any matters of any kind, whether presently known or unknown,
suspected or unsuspected, that the Company may possess arising from any
omissions, acts or facts that have occurred up until and including the
Termination Date.

The Company and Mr. Illingworth agree that the releases set forth in this
section shall be and remain in effect in all respects as a complete general
release as to the matters released. This release does not extend to any
obligations incurred under this Agreement or arising after the effective date of
this Agreement.

5.   Acknowledgment of Waiver of Claims Under ADEA.   Mr. Illingworth
     ---------------------------------------------
     acknowledges that he is waiving and releasing any rights he may have under
     the Age Discrimination in Employment Act of 1967 ("ADEA") and that this
     waiver and release is knowing and voluntary. Mr. Illingworth and the
     Company agree that this waiver and release does not apply to any rights or
     claims that may arise under ADEA after the Resignation Date. Mr.
     Illingworth acknowledges that the consideration given to him for his waiver
     and release is in addition to anything of value to which Mr. Illingworth
     was already entitled. Mr. Illingworth further acknowledges that he has been
     advised by this writing that:

     (a)  He should consult with an attorney prior to executing this Agreement;

     (b)  He has twenty-one (21) days within which to consider this Agreement;

     (c)  He least seven (7) days following the execution of this Agreement by
          the parties to revoke the Agreement; and

     (d)  This Agreement shall not be effective until the revocation period has
          expired.

6.   Civil Code Section 1542. The Parties represent that they are not aware of
     -----------------------
     any claim by either of them other than the claims that are released by this
     Agreement. Mr. Illingworth and the Company acknowledge that legal counsel
     has advised them and are familiar with the provisions of California Civil
     Code Section 1542, which provides as follows:

                                       54
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     A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
     KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
     WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
     DEBTOR.

Mr. Illingworth and the Company, being aware of said code section, agree to
expressly waive any rights they may have thereunder, as well as under any other
statute or common law principles of similar effect.

7.   No Pending or Future Lawsuits.   Mr. Illingworth represents that he has no
     -----------------------------
     lawsuits, claims, or actions pending in his name, or on behalf of any other
     person or entity, against the Company its officers, directors, employees,
     investors, shareholders, administrators, affiliates, divisions,
     subsidiaries, predecessor and successor corporations, and assigns or any
     other person or entity referred to herein. Mr. Illingworth also represents
     that he does not intend and henceforth forswears any right to bring any
     claims on his own behalf or on behalf of any other person or entity against
     the Company or its officers, directors, employees, investors, shareholders,
     administrators, affiliates, divisions, subsidiaries, predecessor and
     successor corporations, and assigns or any other person or entity referred
     to herein.

8.   No Cooperation.   Mr. Illingworth agrees he will not act in any manner that
     --------------
     might damage the business or reputation of the Company. Mr. Illingworth
     agrees that he will not counsel or assist any attorneys or their clients in
     the presentation or prosecution of any disputes, differences, grievances,
     claims, charges, or complaints by any third Party against the Company
     and/or any officer, director, employee, agent, representative, shareholder
     or attorney of the Company, unless under a subpoena or other court order to
     do so.

9.   Non-Disparagement.   Each Party agrees to refrain from any defamation,
     -----------------
     libel or slander of the other, or tortious interference with the contracts
     and relationships of the other.

11.  Consulting Agreement  Mr. Illingworth shall be assigned consulting tasks by
     --------------------
     the President and Chief Executive Officer of the Company related to (i)
     participating in development of financing strategies (ii) participating in
     business development activities as directed by the President and CEO, and
     (iii) such other duties of a similar nature as may be assigned by the
     President and Chief Executive Officer of the Company. The term of your
     consulting service will continue through the Termination Date, unless
     modified by mutual agreement in writing.

12.  General Provisions.
     -------------------

     (a)  This letter will be governed by the laws of the State of California,
          applicable to agreements made and to be performed entirely within such
          state.

     (b)  This letter agreement sets the entire agreement and understanding
          between VidaMed and you relating to your service as Executive Chairman
          and supersedes all prior verbal discussions between us.

     (c)  This agreement will be binding upon your heirs, executors,
          administrators and other legal representatives and will be for the
          benefit of VidaMed and its respective successors and assigns.

     Please acknowledge and confirm your acceptance of this letter by signing
and returning the enclosed copy of this letter as soon as possible.

                                       55
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VIDAMED, INC.

                                    By   /s/
                                        ----------------------------------
                                        Randy Lindholm
                                        President and Chief Executive Officer
                                        Member of Board of Directors

Agreed to and accepted this 31st day of August 1999.
                            -----------------------

By  /s/
   -----------------------------
      David J. Illingworth
      Executive Chairman

                                       56<PAGE>

                                 Exhibit 10.22

                    Transition Agreement and Mutual Release

     This Transition Agreement and Mutual Release ("Agreement") is made by and
between VidaMed, Inc., a Delaware corporation with offices at 46107 Landing
Parkway, Fremont California 94538 (the "Company") and Richard D. Brounstein
("Mr. Brounstein "), an individual, and is effective seven (7) days after the
date last signed below ("Effective Date").

     WHEREAS, Mr. Brounstein was employed by the Company;

     WHEREAS, the Company and Mr. Brounstein have entered into an employment
letter agreement dated May 6, 1997 ("Employment Letter Agreement"); and

     WHEREAS, the Company and Mr. Brounstein have entered into a Proprietary
Information Agreement, attached hereto and incorporated herein as Exhibit A
containing covenants and acknowledgments of "At Will" employment, confidential
information, invention assignment, and arbitration ("Proprietary Information
Agreement"); and

     WHEREAS, the Company and Mr. Brounstein have entered into Stock Option
Agreements on such dates with respect to options to purchase such number of
shares of the Company's Common Stock as stated in Exhibit B, attached hereto and
incorporated herein by reference.

     NOW THEREFORE, in consideration of the mutual promises made herein and with
the intent to release each other from any claims arising from or related to the
employment relationship, the Company and Mr. Brounstein (collectively referred
to as "the Parties") hereby agree as follows:

1.   Resignation.   The Company accepts Mr. Brounstein's resignation from
     -----------
     his position as Vice President and Chief Financial Officer as of August 21,
     1999 (the "Resignation Date"). Mr. Brounstein's shall continue as an
     employee of the Company through January 3, 2000 (the "Termination Date") as
     Vice President of Administration, reporting to the Vice President and Chief
     Financial Officer. The duties of this office shall be determined by the
     Vice President and Chief Financial Officer or his designee.

2.   Consideration for Release. Mr. Brounstein has resigned his position
     -------------------------
     with the Company, and the parties acknowledge that the Company has no
     obligation to provide any payment in severance to Mr. Brounstein. However,
     in consideration of the releases given by Mr. Brounstein, the Company has
     agreed:

     a)   To continue Mr. Brounstein as an officer of the Company in the
          capacity of Vice President of Administration at the same salary and
          benefit level Mr. Brounstein received in his previous position through
          the Termination Date; and

     b)   To issue to Mr. Brounstein under the terms and conditions stated
          herein and in the VidaMed "1999 Nonstatutory Stock Option Plan" (the
          "Plan"), the value Sixty Thousand Dollars ($60,000) (hereinafter
          called "Plan Value") in registered, fully tradeable common stock of
          the Company based upon the closing bid price for VidaMed, Inc common
          stock on the Termination Date, to the nearest whole share. The Company
          reserves the right to provide, in its sole and absolute discretion, to
          pay Mr. Brounstein some or all of the Plan Value offered in cash. The
          issuance of the aforementioned stock and / or payment of cash shall
          satisfy any obligation the Company has regarding Mr. Brounstein's
          participation in the VidaMed "Performance Improvement Plan" through
          the Termination Date.

          It is anticipated that Employee shall sell his shares during the week
          of January 17, 2000 (hereinafter called "Sales Date"). In the event
          the actual selling price of the Company common stock on the Sales Date
          returns Employee a value lower than the stated Plan Value, the Company
          will pay Employee the difference between the Plan Value and the actual
          sales price of the common stock in cash. In the event the actual sales
          price of the common stock on the sales date is higher

                                       57
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          than the Plan Value, Employee shall keep any profit gained. Employee
          is solely responsible for all taxes and reporting liability for profit
          realized from the sale of the common stock. The Company advises
          Employee that there are significant risks and tax consequences
          associated with holding its common stock obtained under the Plan.
          Employee should read the Prospectus and all documents referenced in
          the Prospectus and consult his tax adviser before electing to hold any
          portion of the issued common stock. THE COMPANY DOES NOT GUARANTEE THE
          PRICE OF VIDAMED, INC. COMMON STOCK THAT YOU ELECT TO HOLD FOR
          INVESTMENT OR OTHER PURPOSES; and

     c)   The Company shall make available to Mr. Brounstein Executive-level
          Career Transition Services through Interim Career Consulting at
          Company expense not to exceed $10,000 ("Not-to-exceed Amount"). Should
          Mr. Brounstein wish to continued use of career consulting services
          after the Not-to-exceed Amount has been spent, or desire additional
          Executive-level Career Transition Services which would cause, in the
          aggregate, the total cost to the Company to exceed the above-mentioned
          Not-to-exceed Amount, such additional cost shall be at Mr.
          Brounstein's expense.

     At the Termination Date Mr. Brounstein shall receive his final paycheck and
the value of any accrued and unused "Paid Time Off" earned up to the Termination
date.  All required state and federal withholding shall be deducted from the
above-mentioned consideration as well as from salary and Paid Time Off
compensation.

3.   Vesting of Stock. The Parties agree that for purposes of determining
     ----------------
     the number of shares of the Company's common stock that Mr. Brounstein is
     entitled to purchase from the Company, Mr. Brounstein will be entitled to
     continue vesting of stock until the Termination Date. The exercise of any
     stock options shall continue to be subject to the terms and conditions of
     the Company's Stock Option Plan and any applicable Stock Option
     Agreement(s) between Mr. Brounstein and the Company. A true copy of said
     Agreement(s) is attached hereto and incorporated herein by reference.

4.   No Benefits After Termination Date. Mr. Brounstein acknowledges and
     ----------------------------------
     agrees and it is the intent of the parties hereto that after the
     Termination Date, Mr. Brounstein receive no Company-sponsored benefits from
     the Company, either as a consultant or employee. Such benefits include, but
     are not limited to, company paid health plans, life insurance and similar
     plans, paid vacation, sick leave and 401(k) participation. Mr. Brounstein
     may elect to continue coverage by such plans as available from the plan
     providers at Mr. Brounstein's expense, pursuant to applicable law,
     including COBRA.

5.   Confidential Information; Return of Company Property.   Mr. Brounstein
     ----------------------------------------------------
     shall continue to maintain the confidentiality of all confidential and
     proprietary information of the Company and shall continue to comply with
     the terms and conditions of the Proprietary Information Agreement between
     Mr. Brounstein and the Company. Mr. Brounstein agrees to return to the
     VidaMed Chief Financial Officer or his designee, by no later than the
     Termination Date, all Company property and all Company documents,
     including, but not limited to Company confidential and proprietary
     information, credit cards, telephone credit cards, unused flight travel and
     upgrade coupons, computers, disks or other computer related storage media,
     cellular telephones, beepers, customer lists, and the like company
     property. Further, Mr. Brounstein agrees not to maintain copies or use any
     Company information in any form or for any purpose whatsoever.

6.   Payment of Salary.   Mr. Brounstein acknowledges and represents that
     -----------------
     the Company has paid all salary, wages, bonuses, and commissions due Mr.
     Brounstein as of the Resignation Date of this Agreement, except as provided
     in this Agreement.

7.   Release of Claims.   Mr. Brounstein agrees that the consideration
     ------------------
     described in this Agreement represents settlement in full of all
     outstanding obligations owed to Mr. Brounstein by the Company. Mr.
     Brounstein on behalf of himself, and his respective heirs, family members
     (including domestic partners), executors, heirs and assigns hereby fully
     and forever releases VidaMed, Inc., including its officers, directors,
     employees, investors, shareholders, administrators, affiliates, divisions,
     subsidiaries, predecessor and successor corporations, and assigns, from,
     and agrees not to sue concerning, any claim, duty, obligation or cause of
     action relating to any matters of any kind, whether presently known or
     unknown, suspected or

                                       58
<PAGE>

     unsuspected, that any of them may possess arising from any omissions, acts
     or facts that have occurred up until and including the Effective Date of
     this Agreement. Said release includes, but is not limited to:

     (a)  Any and all claims relating to or arising from Mr. Brounstein's
          employment relationship with the Company and the termination of that
          relationship;

     (b)  Any and all claims relating to, or arising from, Mr. Brounstein's
          right to purchase, or actual purchase of shares of stock of the
          Company, including, without limitation. any claims for fraud,
          misrepresentation, breach of fiduciary duty, breach of duty under
          applicable state corporate law, and securities fraud under any state
          or federal law;

     (c)  Any and all claims for wrongful discharge of employment; termination
          in violation of public policy; discrimination; breach of contract,
          both express and implied; breach of a covenant of good faith and fair
          dealing, both express and implied; promissory estoppel; negligent or
          intentional infliction of emotional distress; negligent or intentional
          misrepresentation; negligent or intentional interference with contract
          or prospective economic advantage; unfair business practices;
          defamation; libel; slander; negligence; personal injury; assault;
          battery; invasion of privacy; false imprisonment; and conversion;

     (d)  Any and all claims for violation of any federal, state or municipal
          statute, including, but not limited to, Title VII of the Civil Rights
          Act of 1964, the Civil Rights Act of 199 1, the Age Discrimination in
          Employment Act of 1967, the Americans with Disabilities Act of 1990,
          the Fair Labor Standards Act, the Employee Retirement Income Security
          Act of 1974, The Worker Adjustment and Retraining Notification Act,
          Older Workers Benefit Protection Act; the California Fair Employment
          and Housing Act, and Labor Code section 20 1, et seq. and section 970,
          et seq.;

     (e)  Any and all claims for violation of the federal, or any state,
          constitution;

     (f)  Any and all claims arising out of any other laws and regulations
          relating to employment or employment discrimination; and

     (g)  Any and all claims for attorneys' fees and costs.

     VidaMed, Inc., on behalf of itself, its officers, directors, employees,
investors, shareholders, administrators, affiliates, divisions, subsidiaries,
predecessor and successor corporations, and assigns, hereby agrees not to sue
and fully and forever releases and discharges Mr. Brounstein, his heirs,
assigns, agents and attorneys from any and all claims, demands, actions, causes
of action, obligations, costs, expenses, damages, acts or omissions, losses or
liabilities, of whatever kind or nature whatsoever, in law, equity or otherwise,
whether known or unknown, which it may now have or has ever had against Mr.
Brounstein, up to and including the Effective Date of this Agreement.

     The Company and Mr. Brounstein agree that the release set forth in this
section shall be and remains in effect in all respects as a complete general
release as to the matters released. This release does not extend to any
obligations incurred under this Agreement or arising after the effective date of
this Agreement.

8.   Acknowledgment of Waiver of Claims under ADEA.   Mr. Brounstein
     ---------------------------------------------
acknowledges that he is waiving and releasing any rights he may have under the
Age Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and
release is knowing and voluntary. Mr. Brounstein and the Company agree that this
waiver and release does not apply to any rights or claims that may arise under
ADEA after the Effective Date of this Agreement. Mr. Brounstein acknowledges
that the consideration given for this waiver and release is in addition to
anything of value to which Mr. Brounstein was already entitled. Mr. Brounstein
further acknowledges that he has been advised by this

                                       59
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writing that:

     (a)  He should consult with an attorney prior to executing this Agreement;

     (b)  He has twenty-one (21) days within which to consider this Agreement;

     (c)  He least seven (7) days following the execution of this Agreement by
          the parties to revoke the Agreement; and

     (d)  This Agreement shall not be effective until the revocation period has
          expired.

13.  Civil Code Section 1542. The Parties represent that they are not aware of
     ------------------------
     any claim by either of them other than the claims that are released by this
     Agreement. Mr. Brounstein and the Company acknowledge that legal counsel
     has advised them and are familiar with the provisions of California Civil
     Code Section 1542, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Mr. Brounstein and the Company, being aware of said code section, agree to
expressly waive any rights they may have thereunder, as well as under any other
statute or common law principles of similar effect.

14.  No Pending or Future Lawsuits.   Mr. Brounstein represents that he has no
     ------------------------------
     lawsuits, claims, or actions pending in his name, or on behalf of any other
     person or entity, against the Company its officers, directors, employees,
     investors, shareholders, administrators, affiliates, divisions,
     subsidiaries, predecessor and successor corporations, and assigns or any
     other person or entity referred to herein. Mr. Brounstein also represents
     that he does not intend and henceforth forswears any right to bring any
     claims on his own behalf or on behalf of any other person or entity against
     the Company or its officers, directors, employees, investors, shareholders,
     administrators, affiliates, divisions, subsidiaries, predecessor and
     successor corporations, and assigns or any other person or entity referred
     to herein.

15.  Confidentiality. The Parties hereto each agree to use their best efforts to
     ----------------
     maintain in confidence the existence of this Agreement, the contents and
     terms of this Agreement, and the consideration for this Agreement
     (hereinafter collectively referred to as "Settlement Information"). Each
     Party hereto agrees to take every reasonable precaution to prevent
     disclosure of any Settlement Information to third parties, and each agrees
     that there will be no publicity, directly or indirectly, concerning any
     Settlement Information. The Parties hereto agree to take every precaution
     to disclose Settlement Information only to those employees, officers,
     directors, attorneys, accountants, governmental entities, and family
     members who have a reasonable need to know of such Settlement Information.

16.  No Cooperation.   Mr. Brounstein agrees he will not act in any manner that
     ---------------
     might damage the business or reputation of the Company. Mr. Brounstein
     agrees that he will not counsel or assist any attorneys or their clients in
     the presentation or prosecution of any disputes, differences, grievances,
     claims, charges, or complaints by any third Party against the Company
     and/or any officer, director, employee, agent, representative, shareholder
     or attorney of the Company, unless under a subpoena or other court order to
     do so.

17.  Non-Disparagement.   Each Party agrees to refrain from any defamation,
     ------------------
     libel or slander of the other, or tortious interference with the contracts
     and relationships of the other.

18.  Indemnification.   The Company will provide Mr. Brounstein indemnification
     ----------------
     pursuant to California Law with regard to indemnification of employees
     acting within the course and scope of their employment and any applicable
     policies of Directors and Officer liability insurance.

                                       60
<PAGE>

19.  Tax Consequences.  The Company makes no representations or warranties with
     -----------------
     respect to the tax consequences of the payment of any compensation to Mr.
     Brounstein under the terms of this Agreement. Mr. Brounstein agrees and
     understands that he is responsible for payment, if any, of any local, state
     and/or federal taxes on the compensation paid hereunder by the Company and
     any penalties or assessments thereon. Mr. Brounstein further agrees to
     indemnify and hold the Company harmless from any claims, demands,
     deficiencies, penalties, assessments, executions, judgments, or recoveries
     by any government agency against the Company for any amounts claimed due on
     account of Mr. Brounstein's failure to pay federal or state taxes or
     damages sustained by the Company by reason of any such claims, including
     reasonable attorneys' fees. Mr. Brounstein agrees and understands that,
     with respect to the compensation to be paid to Mr. Brounstein under this
     Agreement, the Company will make applicable withholding only with respect
     to the compensation described in Paragraphs1 and 2 hereof.

20.  No Admission of Liability. The Parties understand and acknowledge that this
     -------------------------
     Agreement constitutes a compromise and settlement of disputed claims. No
     action taken by the Parties hereto, or either of them, either previously or
     in connection with this Agreement shall be deemed or construed to be:

     (a)  An admission of the truth or falsity of any claims heretofore made, or

     (b)  An acknowledgment or admission by either Party of any fault or
          liability whatsoever to the other Party or to any third Party.

21.  Arbitration.   The Parties agree that any and all disputes arising out of
     ------------
     the terms of this Agreement, their interpretation, and any of the matters
     herein released, shall be subject to binding arbitration in Alameda County,
     California before the American Arbitration Association under its California
     Employment Dispute Resolution Rules before a judge to be mutually agreed
     upon. The Parties agree that the prevailing party in any arbitration shall
     be entitled to injunctive relief in any court of competent jurisdiction to
     enforce the arbitration award. The prevailing Party shall also be entitled
     to reimbursement of their costs and reasonable attorneys' fees.

22.  Authority.   The Company represents and warrants that the undersigned has
     ----------
     the authority to act on behalf of the Company and to bind the Company and
     all who may claim through it to the terms and conditions of this Agreement.
     Mr. Brounstein represents and warrants that he has the capacity to act on
     his own behalf and on behalf of all who might claim through him to bind
     them to the terms and conditions of this Agreement. Each Party warrants and
     represents that there are no liens or claims of lien or assignments in law
     or equity or otherwise of or against any of the claims or causes of action
     released herein.

23.  No Representations.   Each Party represents that it has had the opportunity
     -------------------
     to consult with an attorney, and has carefully read and understands the
     scope and effect of the provisions of this Agreement. Neither Party has
     relied upon any representations or statements made by the other Party
     hereto which are not specifically set forth in this Agreement.

24.  Assignment.   Mr. Brounstein's rights and obligations under this Agreement
     -----------
     shall not be assignable. The Company's rights and obligations under this
     Agreement shall be assignable by the Company.

25.  Successors. This Agreement shall be binding upon and inure to the benefit
     -----------
     of, and shall be enforceable by Mr. Brounstein and the Company, their
     respective heirs, executors, administrators and assigns. In the event the
     Company is merged, consolidated, liquidated by a parent corporation. or
     otherwise combined into one or more corporations, the provisions of this
     Agreement shall be binding upon and inure to the benefit of the parent
     corporation or the corporation resulting from such merger or to which the
     assets shall be sold or transferred, which corporation from and after the
     date of such merger, consolidation, sale or transfer shall be deemed to be
     the Company for purposes of this Agreement.

26.  Headings.   The headings of sections herein arc included solely for
     ---------
     convenience of reference and shall not control the meaning or
     interpretation of any of the provisions of this Agreement.

                                       61
<PAGE>

27.  Severability.  In the event that any provision hereof becomes or is
     -------------
     declared by a court of competent jurisdiction to be illegal, unenforceable
     or void, this Agreement shall continue in full force and effect without
     said provision.

28.  Entire Agreement.   This Agreement represents the entire agreement and
     -----------------
     understanding between the Company and Mr. Brounstein concerning his
     separation from the Company, and supersedes and replaces any and all prior
     agreements, including the Employment Letter Agreement, and understandings
     concerning Mr. Brounstein's relationship with the Company and his
     compensation by the Company.

29.  No Oral Modification.   This Agreement may only be amended in writing
     --------------------
     signed by Mr. Brounstein and the President of the Company.

30.  Governing Law.   The laws of the State of California shall govern this
     --------------
     Agreement.

31.  Effective Date. This Agreement is effective seven days after both Parties
     ---------------
     have signed it.

32.  Counterparts.   This Agreement may be executed in counterparts, and each
     --------------
     counterpart shall have the same force and effect as an original and shall
     constitute an effective, binding agreement on the part of each of the
     undersigned.

33.  Voluntary Execution of Agreement. This Agreement is executed voluntarily
     ---------------------------------
     and without any duress or undue influence on the part or behalf of the
     Parties hereto, with the full intent of releasing all claims. The Parties
     acknowledge that:

     (1)  They have read this Agreement;
     (b)  They have been represented in the preparation, negotiation, and
          execution of this Agreement by legal counsel of their own choice or
          that they have voluntarily declined to seek such counsel;
     (c)  They understand the terms and consequences of this Agreement and of
          the releases it contains;
     (d)  They are fully aware of the legal and binding effect of this
          Agreement.

     IN WITNESS WHEREOF, the Parties have executed this Agreement on the
respective dates set for the below.

                                 VIDAMED, INC.

Dated:    9/10/99                 By:  /s/
          -------                    -------------------------------------------
                                     RANDY LINDHOLM
                                     President and Chief Executive Officer

Dated:    9/9/99                  By:  /s/
          -------                    -------------------------------------------
                                     RICHARD D. BROUNSTEIN

                                       62

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