Document:

Exhibit
10.3

 

DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

 

THIS DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (the “Agreement”) is
made and entered into the 25th day of July, 2008 to be effective as of the
effective date (the “Effective Date”), between Artann Laboratories, Inc.,
(“Artann”) a Delaware corporation, and ProUroCare Medical Inc., (“ProUroCare”)
a Nevada corporation.

 

WITNESSETH:

 

WHEREAS, ProUroCare has expertise and intellectual property in the
field of urologic products and applications; and

 

WHEREAS, Artann has developed expertise and intellectual property in
the area of a prostate mechanical imaging system; and

 

WHEREAS,  ProUroCare and Artann
desire to enter into (i) this Agreement and (ii) a License Agreement
of even date herewith (the “License Agreement”) whereby Artann grants certain
patent, trade secret and technology license rights to ProUroCare with respect
to various prostate mechanical imaging systems (the “PMI System”); and

 

WHEREAS, Artann and ProUroCare desire to work together pursuant to the
terms of this Agreement to develop and commercialize PMI Systems.

 

AGREEMENTS:

 

NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and for other valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties mutually agree as follows:

 

ARTICLE 1

DEFINITIONS

 

1.1           Specific
Definitions.  As used in this
Agreement, the following terms shall have the meanings set forth or as
referenced below:

 

“2008
ProUroCare Offering” means one or more public or private equity offerings
that raises at least Four Million Dollars ($4,000,000.00) by ProUroCare after
the date of signing of this Agreement.

 

“2008 Offering
Price” means the weighted average price that ProUroCare shares have traded
over the forty five (45) day period prior to the date of the closing of the
2008 ProUroCare Offering.

 

“510K” means an application filed with FDA pursuant to § 510(k) of
the Medical Device Amendments of 1976 to the Federal Food, Drug and Cosmetic
Act to initiate marketing and sales in the U.S.

 

1

 

“Agreement” means this Agreement and all Exhibits hereto.

 

“Artann” means Artann Laboratories, Inc.

 

“Artann Trade Secrets” means the Confidential Information of
Artann (e.g., software source code) that are used or useful in the use,
manufacture or sale of a PMI System and which provide a sustainable competitive
technology and which qualify fully as trade secret information within the
normal and common meaning of that term under the laws of the State of New
Jersey.

 

“Confidential Information” means know-how, trade secrets, and
unpublished information disclosed (whether before or during the term of this
Agreement) by one of the parties (the “disclosing party”) to the other party
(the “receiving party”) or generated under this Agreement, excluding
information which:

 

(a)           was already in the
possession of receiving party prior to its receipt from the disclosing party
(provided that the receiving party is able to provide the disclosing party with
reasonable documentary proof thereof);

 

(b)           is or becomes part
of the public domain by reason of acts not attributable to the receiving party;

 

(c)           is or becomes
available to receiving party from a source other than the disclosing party
which source, to the best of receiving party’s knowledge, has rightfully
obtained such information and has no obligation of non-disclosure or
confidentiality to the disclosing party with respect thereto;

 

(d)           is made available by
the disclosing party to a third party unaffiliated with the disclosing party on
an unrestricted basis;

 

(e)           has been
independently developed by the receiving party without breach of this Agreement
or use of any Confidential Information of the other party; or

 

(f)            has been or must be
publicly disclosed by reason of legal, accounting or regulatory requirements
beyond the reasonable control, and despite the reasonable efforts of the
receiving party.

 

All Confidential Information disclosed by one party to the other under
this Agreement with the exception of PMI Documentation and Artann Trade Secrets
shall be in writing and bear a legend “Company Proprietary” or words of similar
import or, if disclosed in any manner other than writing, shall be preceded or
followed by an oral statement indicating that the information is Company
proprietary or confidential, with an identification of the particular
information that is Company proprietary or confidential.  PMI Documentation and Artann Trade Secrets
will be considered Confidential Information by default.

 

“Effective Date” means ten (10) days after close of the
2008 ProUroCare Offering or November 30, 2008, whichever is first to
occur.

 

2

 

“FDA” means the United States Food and Drug Administration or
any successor entity thereto.

 

“FDA Approval” means approval by the FDA of a 510K or PMA to
commercially sell a Product.

 

“Field of Use” means diagnosis or treatment of urologic
disorders of the prostate, kidney or liver.

 

“Generation V PMI System” means the most current PMI System
existing as of the Effective Date of the Agreement.

 

“Intellectual Property” means U.S. and foreign patents and
patent applications, know-how, trade secrets, Inventions, discoveries and
technical information including but not limited to information embodied in
drawings, designs, mask works, mask work applications, copyrights, copyright
applications, trademarks and trademark applications, material specifications,
processing instructions, formulas, equipment specifications, product
specifications, confidential data, computer software, electronic files,
research notebooks, invention disclosures, research and development reports and
the like related thereto and all amendments, modifications and improvements to
any of the foregoing.

 

“Invention” means any invention, whether or not patented or
patentable, and whether or not memorialized in writing.

 

“PMA” means a pre-market approval application filed with the FDA
as more fully defined under 21 U.S.C. Section 360(e), to obtain permission
to initiate marketing and sales in the U.S.

 

“PMI System” means the Artann’s prostate mechanical imaging
system consisting of a 1) transrectal probe with pressure sensor arrays, 2)
positioning system, 3) data processing unit, 4) real time imaging display, and
5) operating system, as generally outlined in the journal article entitled “Prostate
Mechanical Imaging:  A New Method for
Quantitative Prostate Assessment” by Weiss, et al.

 

“PMI Documentation” means software and software source code (if,
and to the extent such code is not maintained as an Artann Trade Secret); any
and all drawings, schematics, assembly information, methods, specifications,
know how, procedures, processes, designs, technical data and engineering
reports necessary and/or useful in the development, use and manufacture of a
PMI System.

 

“Product” means a PMI System including all improvements and
modifications applicable thereto, except for improvements and modifications
that are developed for a different medical device which have only tangential
application to a PMI System and which were developed independently of any
activities conducted under this Agreement and/or the Development and
Commercialization Agreement.

 

“ProUroCare” means ProUroCare Medical, Inc.

 

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“Territory” means anywhere and everywhere in the world.

 

1.2           Definitional
Provisions.

 

(a)           The words “hereof,” “herein,”
and “hereunder” and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provisions of this
Agreement.

 

(b)           Terms defined in the
singular shall have a comparable meaning when used in the plural, and
vice-versa.

 

(c)           References to an “Exhibit”
or to a “Schedule” are, unless otherwise specified, to one of the Exhibits or
Schedules attached to or referenced in this Agreement, and references to an “Article”
or a “Section” are, unless otherwise specified, to one of the Articles or
Sections of this Agreement.

 

(d)           The term “person”
includes any individual, partnership, joint venture, corporation, trust,
unincorporated organization or government or any department or agency thereof.

 

ARTICLE 2

DEVELOPMENT ACTIVITIES

 

2.1           Purpose.   Artann and ProUroCare intend to collaborate
together to develop, commercialize and market PMI Systems.  Toward that end, clinical testing regulatory
approval and product refinement of the PMI System is indicated.  Each party shall perform its respective
obligations pursuant to the process set forth in this Agreement.

 

2.2           Clinical Testing and IDE
Submission.

 

(a)           Unless otherwise specified, Artann
shall conduct and complete all pre-clinical activities and testing on the
Generation V PMI System.

 

(b)           Unless otherwise specified, Artann
shall be responsible for obtaining all necessary FDA regulatory approval for
tests of the Generation V PMI System pursuant to an IDE including specification
of the scope of IDE clinical study, selection of investigational sites,
preparation of investigator brochures, instruction and training of clinical
investigators, data collection and analysis reporting of adverse IDE events and
overall preparation and prosecution of FDA approved IDE clinical studies.  It is understood that all chosen
investigational sites shall be acceptable to Artann, shall not conflict with
the NIH grant objectives and shall be subject to the inventory and
accountability requirements as specified by the Department of Health and Human
Services.

 

(c)           Artann may solicit, accept and
utilize NIH grant monies for the conduct of such pre-clinical and clinical
studies, as, if, and to the extent permitted in any such grants.

 

(d)           Artann shall share information with
ProUroCare necessary to facilitate a mutual understanding of the status of the
clinical studies and the decision-making in connection 

 

4

 

therewith.  Without limiting the foregoing, Artann shall
provide ProUroCare with a summary of the clinical activities and developments
as reasonably requested by ProUroCare. 
Such report shall encompass data, records and reports generated by or
for hospitals, clinics and health care groups and all reports and information
on the IDE clinical study provided to the FDA and all information and reports
received from the FDA.  ProUroCare shall
be provided a copy of the NIH grant.

 

(e)           ProUroCare shall provide clinical
study advice and assistance, at no charge to Artann, including but not limited
to suggestions on the selection of investigators, the scope and content of
clinical study protocol and IDE submissions, the preparation of investigator
brochures, the claims to be addressed and supported in the study, and the
overall conduct of the clinical studies. 
Although not bound to follow such ProUroCare advice and suggestions,
Artann shall give it due consideration and preference whenever feasible.

 

2.3           510K/PMA Regulatory Submission.

 

(a)           Unless otherwise specified, Artann
shall be responsible for preparing all necessary regulatory approvals for the
Generation V PMI System via a 510K or PMA application to FDA in accordance with
the NIH grant funding even though the 510K or PMA application may be drafted or
prepared in significant part by Hogan & Hartson and/or other
regulatory and consulting groups.

 

(b)           Artann may solicit, accept and
utilize NIH grant monies for such 510K or PMA submission, as, if and to the
extent permitted in any such grants.

 

( c)          Artann shall share information with
ProUroCare on the proposed 510K or PMA application strategy, including but not
limited to details on the proposed claims, warnings, contradictions and use
instructions for which approval is to be sought.  Without limiting the foregoing, Artann shall
allow ProUroCare to review and comment upon any and all draft 510(K) or
PMA submissions and shall modify any such 510(K) or PMA submission as
requested by ProUroCare, unless such ProUroCare requested modification would
delay the date that the 510(K) or PMA is filed with and/or approved by
FDA.

 

(d)           The 510(K) or PMA application
shall be submitted in the name of Artann, but application shall be made to FDA
to have the name on the application changed from Artann to ProUroCare upon the
first commercial sale of the Generation V PMI System.

 

2.4           Product Refinement.

 

(a)           Artann shall provide Product hardware
and software development, refinement and debugging services to ready the
Generation V PMI System for commercial sale. 
Such development, refinement and debugging services shall, among other
things, address issues, concerns and deficiencies identified in IDE clinical
testing and satisfy FDA concerns.

 

(b)           Artann may solicit, accept and
utilize NIH grant monies for such Product refinement, as, if, and to the extent
permitted in any such grants.

 

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ARTICLE 3

PAYMENT FOR DEVELOPMENT
ACTIVITIES

 

3.1           In consideration for the development
activities undertaken by Artann hereunder, ProUroCare shall provide Artann; 1)
the equity set forth in Section 3.2; 2) the milestone payments set forth
in Section 3.3, and 3) the retainer fee set forth in Section 3.4.

 

3.2           Equity.

 

ProUroCare shall
provide equity (i.e., shares of stock) in ProUroCare having a value of
approximately One Million Dollars ($1,000,000.00) upon completion of the FDA
approved IDE clinical studies more fully described in Section 2.2 and
submission of a 510(K) or PMA as outlined in Section 2.3 on the
Generation V PMI System.  The exact
number of shares of stock in ProUroCare shall equal $1,000,000.00 divided by
the fair market value price per share of ProUroCare stock, with that price
being the weighted average price that ProUroCare shares have traded over the
forty five (45) day period prior to the date of the 510(K) or PMA
submission.  In no event shall the fair
market price per share used for this computation be less than eighty percent
(80%) of the 2008 Offering Price.

 

3.3           Milestone Payments.

 

ProUroCare shall
make the following milestone payments to Artann:

 

(a)           Two Hundred Fifty Thousand Dollars
($250,000.00) upon initiation of an FDA approved IDE clinical study (i.e., upon
first actual use of a Generation V PMI System on a patient enrolled in the IDE
clinical study) on the Generation V PMI System as more fully described in Section 2.2;

 

(b)           Two Hundred Fifty Thousand Dollars
($250,000.00) upon completion of that FDA approved IDE clinical study and
submission of a 510(K) or PMA on the Generation V PMI System; as more
fully described in Section 2.3; and

 

(c)           Seven Hundred Fifty Thousand Dollars
($750,000.00) upon FDA approval of a 510(K) or PMA to allow the Generation
V PMI System to be commercially sold.

 

3.4           ProUroCare shall pay Artann a monthly
retainer fee for technical advice and training of ProUroCare representatives by
qualified Artann personnel, as may be most appropriate, to facilitate a
thorough understanding of the Generation V PMI System and the PMI
Documentation.  Although the exact number
of days that it will take Artann personnel to conduct such advice and training
is not now known, it is anticipated that it may take up to twenty-five (25)
days per month for the first six (6) months and twelve (12) days per month
for the following twelve (12) months. 
The monthly fee retainer shall be paid within ten (10) days from
the end of the month starting from the Effective Date of the Agreement and
shall be Thirty Thousand Dollars ($30,000.00) per month for each of the first
six (6) months from the Effective Date of the Agreement and Fifteen
Thousand Dollars ($15,000.00) per month for the next twelve (12) 

 

6

 

months.  It is understood and agreed that any
intellectual property (e.g., any patentable invention) provided through or as a
part of this technical advice and training shall not be deemed to be work made
for hire and ProUroCare shall not obtain any property rights thereto.

 

3.5           Product Development Success Bonus.

 

ProUroCare shall
provide equity (i.e., shares of stock) in ProUroCare having a value of
approximately One Million Dollars ($1,000,000.00) as a bonus if FDA approval
for commercial sale of the Generation V PMI System is obtained within fifteen
(15) months of the Effective Date of the Agreement.  The exact number of shares of stock in
ProUroCare shall equal $1,000,000.00 divided by the fair market value price per
share of ProUroCare stock, with that price being the weighted average price
that ProUroCare shares have traded over the forty five (45) day period prior to
the date of the 510(K) or PMA approval for commercial sale.  Such equity shall be reduced by ten (10) percent
per month for each full month that such FDA approval is delayed beyond such
fifteen (15) month period.

 

ARTICLE 4

SCALE UP COMMERCIAL ACTIVITIES

 

4.1           Pre-Commercial Product.

 

Artann shall
supply to ProUroCare such quantities of Generation V PMI Systems as is
reasonably required by ProUroCare for pre-commercial test, evaluation,
marketing and clinical study and to facilitate having a third party
manufacturer produce the Generation V PMI Systems for commercial sale.  The number of such pre-commercial Generation
V PMI Systems to be supplied by Artann is anticipated to number approximately
twenty (20).

 

4.2           Commercial Product.

 

Artann may be
requested to provide Generation V PMI Systems for ProUroCare’s initial
commercial marketing.  Artann agrees to
use best reasonable efforts to provide such needed commercial Product to
ProUroCare and ProUroCare shall use best reasonable efforts to limit the number
of such Product to a number less than one hundred (100).

 

4.3           Pre-Commercial and Commercial
Product.

 

ProUroCare shall
pay Artann TBD Dollars for each requested pre-commercial Generation V PMI
System and TBD Dollars for each commercial system.  Payment for each such system shall be made as
follows:  fifty percent (50%) at the date
ProUroCare orders the Generation V PMI System and the remaining fifty percent
(50%) upon delivery to ProUroCare.

 

4.4           Scale-Up Service.

 

Artann shall
provide all reasonably requested Generation V PMI System manufacture and
scale-up services to ProUroCare or a third party manufacturer designated by
ProUroCare to facilitate the commercial manufacture of such Product.  Such services shall be provided by qualified
Artann personnel and ProUroCare shall pay Artann Twelve Hundred Dollars 

 

7

 

($1,200.00) per
day per individual (based upon an eight (8) hour work day with partial
days being payable on a pro-rata basis) for such services.

 

ARTICLE 5

FUTURE
GENERATION PMI SYSTEMS

 

5.1           Future Agreements.

 

The parties
contemplate the development and marketing of further and additional versions
and generations of PMI Systems. 
ProUroCare shall solicit ideas and recommendations from Artann, but
ProUroCare shall be solely responsible for setting specifications and
outsourcing the manufacture of such further and additional versions and
generations of PMI Systems.  The specific
terms for development and marketing of such further and additional versions and
generations of PMI Systems shall be as specified in a separate agreement
entered into between the parties hereto.

 

5.2           Future NIH Grants.

 

ProUroCare shall
have a “right of first negotiation” with Artann regarding any future NIH grants
that Artann receives for the development of Products in the Field of Use.  The “right of first negotiation” means the
right of ProUroCare to negotiate exclusivity with Artann for a period of ninety
(90) days (the “period of exclusivity”) from the date of such NIH grant to
enter into a development and commercialization arrangement for such
Products.  If an agreement is not reached
during this “period of exclusivity”, Artann may enter into a development and
commercialization agreement with a third party, but only upon terms which are
no less favorable than those offered by ProUroCare during the “period of
exclusivity”.

 

ARTICLE 6

CERTAIN
REPRESENTATIONS, WARRANTIES AND INDEMNITIES

 

6.1           Representations and Warranties.

 

(a)           Artann represents
and warrants to ProUroCare that the execution and delivery by Artann of this
Agreement and the performance by Artann of its obligations hereunder have been
duly authorized by all requisite corporate action and will not violate any
provision of law, any order of any court or other agency of government, the
Articles of Incorporation or Bylaws of Artann, as amended, or any provision of
any indenture, agreement or other instrument to which Artann or any of its
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of Artann and that this
Agreement has been duly executed and delivered by Artann and constitutes the
legal, valid and binding obligation of Artann, enforceable in accordance with
its terms, subject, as to the enforcement of remedies, to the discretion of the
courts in awarding 

 

8

 

equitable
relief and to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally.

 

(b)           ProUroCare
represents and warrants to Artann that the execution and delivery by ProUroCare
of this Agreement and the performance by ProUroCare of its obligations
hereunder have been duly authorized by all requisite corporate action and will
not violate any provision of law, any order of any court or other agency of
government, the Articles of Incorporation or Bylaws of ProUroCare, as amended,
or any provision of any indenture, agreement or other instrument to which
ProUroCare or any of its properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both)
a default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of
ProUroCare and that this Agreement has been duly executed and delivered by
ProUroCare and constitutes the legal, valid and binding obligation of
ProUroCare, enforceable in accordance with its terms, subject, as to the
enforcement of remedies, to the discretion of the courts in awarding equitable
relief and to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally.

 

Limitation of
Liability.  ARTANN
WILL NOT BE LIABLE FOR ANY INDIRECT, SPECIAL INCIDENTAL, CONSEQUENTIAL,
EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING BUT NOT LIMITED TO LOST PROFITS,
BUSINESS INTERRUPTION, LOSS OF GOODWILL, OR COSTS OF PROCUREMENT OF SUBSTITUTE
PRODUCT OR SERVICES, OR OTHERWISE, HOWEVER CAUSED AND UNDER ANY THEORY OF
LIABILITY AND WHETHER OR NOT A PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.

 

6.2           Indemnity.

 

(a)           Purposely left blank.

 

(b)           Subject to the terms and conditions of this Agreement,
ProUroCare shall indemnify and hold Artann, and each of its officers,
directors, employees, agents or consultants harmless from and against any
third-party liability, losses, damages, claims, costs and expenses (including
reasonable fees of attorneys and other professionals and court costs)
(collectively “Liabilities”) arising out of or connected with (a) any
breach of this Agreement by ProUroCare or 
(b) the use by or administration of the ProUroCare Product to any
person that arises out of the use, manufacture, sale, import or other
exploitation of a ProUroCare Product by ProUroCare or a ProUroCare sublicensee
(except to the extent such liability resulted from any gross negligence or
willful misconduct of Artann in the design, specification or manufacture of the
Product).  Additionally, ProUroCare shall
maintain commercially reasonable product liability insurance with such insurance
being effective as of a date no later than the date of first clinical use
independently directed by ProUroCare or commercial sale of Product and shall
have Artann listed as an additional insured party on such insurance.

 

9

 

ARTICLE 7

INTELLECTUAL PROPERTY

 

7.1           Ownership of Intellectual Property.  All Intellectual Property of ProUroCare
existing on the Effective Date, and any Intellectual Property developed solely
by employees of, or consultants working for, ProUroCare in the course of the
Agreement, shall be and remain the property of ProUroCare.  All Intellectual Property of Artann existing
on the Effective Date, and any Intellectual Property, developed solely by
employees of, or consultants working for Artann in the course of the Agreement,
shall be the property of Artann and ProUroCare shall not acquire any rights
therein except pursuant to the License Agreement.  Any Intellectual Property developed jointly
by employees or consultants of Artann and ProUroCare in the course of work
performed under this Agreement shall be jointly owned by ProUroCare and Artann,
with each party having an undivided interest therein, subject to the License
Agreement.

 

7.2           Protection of Intellectual
Property.  If either Artann or
ProUroCare proposes to file for any U.S. or foreign patent, copyright and mask
work registration, or any continuation or modification thereof, with respect to
any Joint Invention, or proposes to prosecute any alleged infringement of any
Joint Invention, then such party proposing to file such registration or
prosecute such alleged infringement (“the first party”) shall notify the other
party (“the second party”) in writing and the second party shall have option of
joining in such action.  If the second
party elects to join in such action, the second party shall (i) pay
one-half of the total expenses incurred by ProUroCare and Artann therein, (ii) be
entitled to participate in all material steps in such action, and (iii) in
the event of prosecution of alleged infringement, be entitled to share in one-half
of all recoveries.  If the second party
elects not to join in such action, the first party shall be entitled to control
such action and retain all recoveries from the prosecution of alleged
infringement, but such failure to participate shall not affect the second party’s
ownership interest in the Joint Inventions or in any Intellectual Property
rights therein.  Whether or not the
second party elects to join in such action, the second party shall, upon the
request of the first party, cooperate with and assist the first party in such
action to the extent required by statute, regulation, or government agency,
including without limitation, executing and delivering all documents in
connection therewith and using its reasonable efforts to obtain such executions
from all appropriate employees and agents of the second party; provided that if
the second party has elected not to participate in such action, the first party
shall reimburse the second party for costs and expenses incurred by the second
party in connection with such cooperation, including any filing and attorneys
fees, but not including internal administrative or personnel expenses of the
second party.  Each party will treat
Joint Inventions as Confidential Information so long as they remain trade secrets
under applicable state statutes or common law except to the extent that such
Joint Invention are protected by federal copyright, patent or mask work
statutes.  Except as set forth in this Section 7.2
and the License Agreement, each party may freely license or assign Joint
Inventions (provided that any assignee agrees in writing to be bound by the
obligations of the licensing or assigning party hereto and obligations of
confidentiality as they apply to Confidential Information hereunder) and
neither party will have any obligation to account to the other with respect to
Joint Inventions.  The obligations of
this Section 7.2 shall survive any termination or expiration of this
Agreement.

 

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ARTICLE 8

TERM AND TERMINATION

 

8.1           Term.  Subject to earlier termination as provided in
Section 8.2 of this Agreement, this Agreement shall commence upon the
Effective Date and is for an initial term of three (3) years and may
thereafter be renewed for additional one (1) year terms upon mutual
agreement of the parties.

 

8.2           Termination.  Notwithstanding the provisions of Section 8.1
above, this Agreement may be terminated in accordance with the following
provisions:

 

(a)           A party may
terminate this Agreement by giving notice in writing to the other party if the
other party is in breach of any material obligation (e.g., obligation of
ProUroCare to make a payment as specified under Sections 3.1, 3.2 and 3.3
hereof and Sections 3.1 and 3.3 of the License Agreement), representation,
warranty or covenant of this Agreement and shall have failed to cure such
breach within sixty (60) days of receipt of written notice thereof from the
first party;

 

(b)           A party may terminate this agreement
at any time by giving notice in writing to the other party, which notice shall
be effective upon dispatch, should the other party become insolvent, make an
assignment for the benefit of creditors, go into liquidation or receivership or
otherwise lose legal control of its business.

 

8.3           Effect of Termination.

 

(a)           Upon termination of this Agreement for any reason, nothing
herein shall be construed to release either party from any obligation that
matured prior to the effective date of such termination.

 

(b)           The provisions of Article 6 (Certain Representations,
Warranties, and Indemnities); Article 5 (Intellectual Property); Section 9.1
(Non-Disclosure) and Section 9.12 (Arbitration) shall survive a
termination under Section 8.2.

 

ARTICLE 9

MISCELLANEOUS

 

9.1           Non-Disclosure.  Each party agrees not to disclose or use
(except as permitted or required for performance by the party receiving such
Confidential Information of its rights or duties hereunder or under the License
Agreement) any Confidential Information of the other party obtained during the
term of this Agreement until (i) the expiration of four (4) years
after the termination or expiration of this Agreement or (ii) the end of
2015, whichever is last to occur.  Each
party further agrees to take appropriate measures to prevent any such
prohibited disclosure by its present and future employees, officers, agents,
subsidiaries, or consultants during the term of this Agreement and for a period
of (i) four (4) years thereafter or (ii) the end of 2015,
whichever is last to occur.  Artann Trade
Secrets shall be kept confidential perpetually.

 

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9.2           Assignment.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and the successors or assigns of the
parties hereto; provided, that (i) the rights and obligations of Artann
herein may not be assigned except to any person who succeeds to substantially
all of Artann’s business, and (ii) the rights and obligations of
ProUroCare herein may not be assigned except to any person who succeeds to all
or a substantial portion of ProUroCare’s business to which this Agreement
relates.  Any attempted assignment of
this Agreement in violation of this Section 9.2 shall be null and void.

 

9.3           Entire Agreement.  This Agreement and the Development and Commercialization
Agreement, and the agreements contemplated herein and therein constitute the
entire agreements of the parties with respect to the subject matter of such
agreements and supersede all previous proposals or agreements, oral or written,
and all negotiations, conversations or discussions heretofore had between the
parties related to the subject matter of such agreements.

 

9.4           Governing Law.  This Agreement shall be governed by, and
interpreted and construed in accordance with, the laws of the State of New
Jersey, without giving effect to principles of conflicts of laws.  The parties hereby agree to submit all
disputes arising hereunder to the jurisdiction of the Federal District Court
for New Jersey where Artann is resident.

 

9.5           Amendment, Waiver, Discharge, etc.  This Agreement may not be amended, released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing signed on behalf of each of the parties to this Agreement
by their duly authorized representatives. 
The failure of either party to enforce at any time any of the provisions
of this Agreement shall in no way be construed to be a waiver of any such
provision, nor in any way to affect the validity of this Agreement or any part
of it or the right of either party after any such failure to enforce each and
every such provision.  No waiver of any
breach of this Agreement shall be held to be a waiver of any other or
subsequent breach.

 

9.6           Execution in Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other party.

 

9.7           Titles and headings; Construction.  The titles and headings to Sections herein
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.  This Agreement shall be construed without
regard to any presumption or other rule requiring construction hereof
against the party causing this Agreement to be drafted.

 

9.8           Benefit.  Nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties to this
Agreement or their respective successors or permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.

 

9.9           Notices.  All notices or other communications to a
party required or permitted hereunder shall be in writing and shall be delivered
personally or by facsimile (receipt 

 

12

 

confirmed) to such
party (or, in the case of an entity, to an executive officer of such party) or
shall be given by certified mail, postage prepaid with return receipt
requested, addressed as follows:

 

if to ProUroCare to:

 

ProUroCare Medical, Inc.

5500 Wayzata Boulevard, #310

Golden Valley, MN  55416

Attention: 
CEO

Phone: 
952-476-9093

Fax: 
763-591-5039

 

if
to Artann to:

 

Artann Laboratories, Inc.

1459 Lower Ferry Road

West Trenton, NJ 
08618-1414

Fax:  (609)
333-0710

Phone:  (609) 333-0712

 

Artann or ProUroCare may
change their respective above-specified recipient and/or mailing address by
notice to the other party given in the manner herein prescribed.  All notices shall be deemed given on the day
when actually delivered as provided above (if delivered personally or by
facsimile) or on the day shown on the return receipt (if delivered by mail).

 

9.10         Severability.  If any provision of this Agreement is held invalid
by a court of competent jurisdiction, such provision shall be enforced to the
maximum extent permissible and the remaining provisions shall nonetheless be
enforceable according to their terms.

 

9.11         Execution of Further Documents.  Each party agrees to execute and deliver
without further consideration any further applications, licenses, assignments
or other documents, and to perform such other lawful acts as the other party
may reasonably request to fully secure and/or evidence the rights or interests
herein.

 

9.12         Purposely Left Blank.

 

9.13.        Compliance with Laws.  The parties will, and ProUroCare shall cause
any permitted sublicensees of ProUroCare to, comply with all applicable
international, national, state, regional and local laws and regulations,
including all applicable import and export control laws, in exercising rights
or performing their duties under this Agreement.

 

9.14.        Force
Majeure.  Neither party shall be in
default because of any failure to perform this Agreement if such failure arises
from causes beyond the control of such party (“the first party”) and without
the fault or negligence of such first party, including without limitation, Acts
of God or of the public enemy, acts of the Government in either its sovereign
or contractual capacity, fires, floods, earthquakes, epidemics, quarantine
restrictions, strikes, freight embargoes 

 

13

 

or unusually
severe weather.  In each instance, the
failure to perform must be beyond the reasonable control and without the fault
or negligence of the first party.

 

9.15.        Non-Solicitation.  ProUroCare agrees not to solicit any Artann
employee or agent for employment by ProUroCare, irrespective of whether the
proposed employment by ProUroCare shall be in a different capacity than the
capacity in which such person provided services to or for Artann.

 

IN WITNESS WHEREOF, each of the parties has caused this License
Agreement to be executed in the manner appropriate to each.

 

	
   

  	
  ARTANN LABORATORIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Noune Sarvazyan

  
	
   

  	
   

  	
   

  
	
   

  	
  Its: 

  	
  CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROUROCARE MEDICAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Richard C. Carlson

  
	
   

  	
   

  	
   

  
	
   

  	
  Its: 

  	
  CEO

  

 

14Exhibit
10.4

 

PROUROCARE INC.

AMENDED AND RETSTATED 2004 STOCK OPTION PLAN

 

 

FORM OF
NOTICE OF STOCK OPTION GRANT

 

<Employee Name and Address>

 

1.             Basic Terms.  You have
been granted an option (“Option”) to purchase Common Stock, par value $0.00001
per share (“Common Stock”) of ProUroCare Medical Inc. (“Company’) as follows:

 

	
  Date of
  Grant

  	
   

  	
  July 11,
  2008 (“Grant Date”)

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares Granted:

  	
   

  	
              (“Shares”)

  
	
   

  	
   

  	
   

  
	
  Exercise
  Price Per Share:

  	
   

  	
  $1.00
  (“Exercise Price”)

  
	
   

  	
   

  	
   

  
	
  Type of
  Option:

  	
   

  	
  x   Incentive
  Stock Option (“ISO”)

  
	
   

  	
   

  	
  o   
  Non-Qualified Stock Option (“NQSO”)

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date:

  	
   

  	
  July 11,
  2015 (“Expiration Date”)

  

 

2.             Vesting.  This Option
will vest with respect to the granted Shares in accordance with the following
vesting schedule (“Vesting Schedule”):

 

	
  Shares

  	
   

  	
  Vesting Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  July 11, 2008

  
	
   

  	
   

  	
  July 1, 2009

  
	
   

  	
   

  	
  July 1, 2010

  
	
   

  	
   

  	
  July 1, 2011

  

 

3.             Exercise.

 

(a)           During
Employment/Consultancy.  This
Option may be exercised in whole or in part with respect to vested Shares at
any time during your employment or consultancy, but in no event later than the
Expiration Date.

 

(b)           Following
Termination of Employment/Consultancy.  This Option may be exercised in whole or in
part with respect to Shares which are vested on the termination date of your
employment or consultancy (your “Termination Date”) for a period of 3 months
after your Termination Date (the “Post-Termination Exercise Period”), but in no
event later than the Expiration Date.  In
the event of your termination is due to your disability or death, the
Post-Termination Exercise Period will be increased to 12 months after your
Termination Date, but in no event later than the Expiration Date.

 

By execution
of this Notice of Grant, you and the Company agree that this Option is granted
under and governed by the terms and conditions of the Company’s Amended and
Restated 2004 Stock Option Plan and the Stock Option Agreement, both of which
are attached hereto and made a part hereof.

 

	
  OPTIONEE:

  	
   

  	
  PROUROCARE MEDICAL INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name

  	
   

  	
  Print Name and Title

  

 

 

PROUROCARE MEDICAL INC.

AMENDED AND RESTATED 2004 STOCK OPTION PLAN

 

 

FORM OF
STOCK OPTION AGREEMENT

 

1.             Grant of Option.

 

(a)           Grant.  ProUroCare
Medical Inc. (the “Company”) hereby grants from the Plan to the Optionee (the “Optionee”)
named in the attached Notice of Grant (the “Notice of Grant”) an option (the “Option”)
to purchase the total number of shares of Common Stock, par value $0.00001 per
share (the “Shares”), set forth in the Notice of Grant, at the exercise price
(the “Exercise Price”) set forth in the Notice of Grant, subject to the terms,
definitions, and provisions of the Amended and Restated 2004 Stock Option Plan
(the “Plan”) adopted by the Company, which Plan is incorporated herein by
references.  Unless otherwise defined
herein, terms used herein with initial capital letters shall have the meanings
ascribed to such terms in the Plan.  In
the event of a conflict between the provisions of this Agreement and the Plan,
the provisions of the Plan shall control.

 

(b)           Designation as ISO.  If designated
in the Notice of Grant as an Incentive Stock Option (an “ISO”), this Option is
intended to qualify as an Incentive Stock Option as defined in Section 422
of the Internal Revenue Code of 1986, as amended (the “Code).  However, if this Option is intended to be an
ISO, to the extent that it exceeds the “$100,000 rule” of Code Section 422(d) it
shall be treated as a Non-Qualified Stock Option (“NQSO”).

 

2.             Term of Option. 
The term of this Option shall begin on the Grant Date set forth in the
Notice of Grant and shall continue through, and include, the Expiration Date
set forth in the Notice of Grant (the “Term”). 
Notwithstanding the preceding sentence or anything in the Notice of
Grant to the contrary, if this Option is designated as an ISO, the Expiration
Date and the Term shall limited by the provisions of Section 6.5(d) of
the Plan.

 

3.             Exercise of Option.

 

(a)           Right to Exercise.  This Option
shall be exercisable during the Term only in accordance with the terms of the
Plan, this Agreement, and the Notice of Grant (including, without limitation,
the Vesting Schedule and exercise terms set forth therein); provided, however,
that this Option may not be exercised for a fraction of a Share.  In the event of Optionee’s death, disability
or other termination of employment or consultancy, the exercisability of this
Option shall be further governed by the provisions of Section 9 of this
Agreement.  In no event may this Option
be exercised after the Expiration Date set forth in the Notice of Grant.

 

(b)           Method of Exercise.

 

(1)           This
Option shall be exercisable by written notice (in the form attached as Exhibit A)
which shall state Optionee’s election to exercise the Option, the number of
Shares in respect of which the Option is being exercised, and such other
representations and agreements as to Optionee’s investment intent with respect
to such Shares may be required by the

 

 

Company pursuant to the
provisions of the Plan.  Such written
notice shall be signed by Optionee and shall be delivered in person, by
certified mail, or by overnight delivery service to the Secretary of the
Company.  The written notice shall be
accompanied by payment in full of the Exercise Price.  This Option shall be deemed to be exercised
upon receipt by the Company of such written notice accompanied by the Exercise
Price.

 

(2)           No
Shares shall be issued pursuant to the exercise of an Option unless such
issuance and such exercise comply with all relevant provisions of law and the
requirements of any stock exchange or national market system upon which the
Common Stock of the Company is then listed. 
Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.

 

(c)           Method of Payment.  Payment of
the Exercise Price shall be by any of the following, or a combination thereof,
at the election of Optionee:

 

(1)           Cash
or check;

 

(2)           Surrender
of other shares of Common Stock of the Company which (i) in the case of
shares acquired pursuant to the exercise of a Company option, have been owned
by Optionee for more than six (6) months on the date of surrender,
and (ii) have a Fair Market Value on the date of surrender equal to the aggregate
Exercise Price of the Shares for which the Option is being exercised; or

 

(3)           Instructions
to the Company to withhold from the Shares issuable upon the exercise of the
Option that number of Shares the Fair Market Value of which is equal to the aggregate
Exercise Price of the Shares for which the Option is being exercised (inclusive
of the Shares being withheld, which are treated for this purpose as being
exercised).

 

4.             Investment Representation. 
In the event the Shares purchasable pursuant to the exercise of this
Option have not been registered under the Securities Act of 1933, as amended
(the “Securities Act”), at the time this Option is exercised, Optionee shall,
if required by the Company, concurrently with the exercise of all or any
portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B.

 

5.             Restrictions on Exercise. 
This Option may not be exercised if the issuance of such Shares upon
such exercise or the method of payment of consideration for such Shares would
constitute a violation of any applicable federal or state securities or other
law or regulation.  As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.

 

6.             Market Standoff Agreement. 
Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters (the “Managing Underwriter”) in connection
with any registration of the offering of any securities of the Company under
the Securities Act, Optionee shall not sell or otherwise transfer any
Shares or other securities of the Company during the 180-day period (or such
longer period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the “Market Standoff Period”) following
the effective date of a registration statement of the Company filed under the
Securities Act; provided,

 

2

 

however, that such
restriction shall apply only to the first registration statement of the Company
to become effective under the Securities Act that includes securities to be
sold on behalf of the Company to the public in an underwritten public offering
under the Securities Act.  The Company
may impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.

 

7.             Rights of Optionee. 
Optionee shall not have any of the rights of a shareholder with respect
to the Shares covered by the Option except to the extent that one or more
certificates for such Shares shall have been delivered to Optionee upon the
valid exercise of all or any part of the Option.

 

8.             Non-Transferability of
Option.

 

a.     ISO. Options designated as an ISO may only be
transferred by will or by the laws of descent or distribution and may be
exercised during the lifetime of Optionee only by Optionee.  Incentive Stock Options transferred (except
as permitted in the preceding sentence) will continue to be outstanding for
purposes of the Plan but will thereafter be deemed to be a non-qualified stock
option.

 

b.     Non-qualified stock options. 
Options designated as a non-qualified stock option, may be transferred
by the holder thereof only to such holder’s spouse, children, grandchildren or
parents (collectively, the “Family Members”), to trusts for the benefit of
Family Members, to partnerships or limited liability companies in which Family
Members are the only partners or shareholders, or to entities exempt from
federal income taxation pursuant to Section 501(c)(3) of the
Code.  During a participant’s lifetime, a
stock option may be exercised only by him or her, by his or her guardian or
legal representative or by the transferees permitted.

 

c.               Successors. 
The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

 

9.             Termination of Relationship.

 

(a)           In General.  In the event
that Optionee’s employment or consultancy with the Company terminates, Optionee
(or, if Optionee is deceased, his or her estate or heirs) may exercise this
Option during the Post-Termination Exercise Period set forth in the Notice of
Grant, but only to the extent that this Option was vested and otherwise
exercisable by the Optionee on the date of such termination (the “Termination
Date”), and in no event after the Expiration Date of this Option.  To the extent that this Option was not vested
or otherwise exercisable on Optionee’s Termination Date, or if Optionee does
not exercise all or any portion this Option within the Post-Termination
Exercise Period, this Option shall terminate.

 

(b)           ISO Termination Provisions.  Notwithstanding anything in Section 9(a) or
the Notice of Grant to the contrary, if this Option is designated as an ISO,
then the Post-Termination Exercise Period shall be equal to a period of 3
months after Optionee’s Termination Date, but in no event later than the
Expiration Date; provided, however, that in the event Optionee’s termination of
employment is due to Optionee’s disability or death, the Post-Termination
Exercise Period will be increased to 12 months after Optionee’s Termination
Date, but in no event later than the Expiration Date.

 

3

 

10.          No Right to Continued Relationship. 
Optionee acknowledges and agrees that nothing in this Agreement or in
the Plan shall confer upon Optionee any right with respect to continued
employment or consultancy with the Company, nor shall it interfere in any way
with Optionee’s right, or the Company’s right, to terminate Optionee’s
employment or consultancy at any time, with or without cause.

 

11.          Tax Withholding or Collection.

 

(a)           NQSO.  If this Option
is treated as a NQSO, Optionee understands that he or she will be treated as
having received compensation income (taxable at ordinary income tax rates) on
the date of exercise equal to the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price.  If Optionee is an employee of the Company,
the Company will be required to withhold from Optionee’s compensation or
collect from Optionee an amount equal to the applicable federal and state
payroll, income withholding, or other taxes required to be withheld and paid
over to such taxing authorities (collectively, “Withholding Taxes”).  Optionee hereby consents to such withholding
or collection as a condition to the valid exercise of this Option.  If requested by the Company, Optionee agrees
to promptly pay over to the Company all Withholding Taxes prior to and as a
condition of the issuance to Optionee of a certificate represented the Shares
for which this Option was exercised.

 

(b)           ISO.  If this Option
is treated as an ISO, Optionee understands that he or she will not recognize regular compensation
income on the date of exercise.  However,
the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price will be treated as an adjustment to alternative
minimum taxable income for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.  The Company will not withhold any
amounts from Optionee’s compensation or collect any amounts from Optionee upon
the exercise of an ISO.

 

12.          Notice of Disqualifying Disposition of ISO Shares;
Follow-Up Tax Withholding or Collection.  If the Option
granted to Optionee is an ISO, and if Optionee sells or otherwise disposes of
any of the Shares acquired pursuant to the ISO on or before the later of (i) the
date that is two years after the Date of Grant, or (ii) the date that is
one year after the date of exercise, Optionee agrees to immediately notify the
Company in writing of such disposition. 
Optionee further understands and agrees that he or she may be subject to
income taxation at the time of such disposition, and that the Company may be
required to withhold from Optionee’s compensation or collect from Optionee an
amount equal to the applicable Withholding Taxes.  Optionee hereby consents to such withholding
or collection.  If requested by the
Company, Optionee agrees to promptly pay over to the Company all Withholding
Taxes.

 

13.          Optionee Acknowledgements, Representations, and
Agreements.  Optionee acknowledges receipt of a copy of
the Plan and represents that he is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof.  Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel (including, without limitation, tax counsel) prior
to executing this Option and fully understands all provisions of this
Option.  Optionee hereby agrees to accept
as binding, conclusive 

 

4

 

and final all decisions
or interpretations of the Committee upon any questions arising under the Plan
or this Option.  Optionee further agrees
to notify the Company upon any change in the residence address indicated below.

 

14.          Miscellaneous.

 

(a)           Parties and Assignment.  This Agreement shall be binding upon the Optionee and
the Company and shall inure to their benefit and to the benefit of their heirs,
successors and assigns.  This Agreement
may not be assigned by Optionee.  This
Agreement may be assigned by the Company to an affiliate or
successor-in-interest.

 

(b)           Waiver.  The Company’s
delay, waiver or failure to enforce any of the terms of this Agreement or any
similar agreement in one instance shall not constitute a waiver of its rights
hereunder with respect to other violations of this or any other agreement.

 

(c)           Severability.  If any
provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, invalid or unenforceable and such illegality,
invalidity or unenforceability shall have no effect upon and shall not impair
the enforceability of any other provision of this Agreement.

 

(d)           Third Party Beneficiary. 
Nothing herein expressed or implied is intended to or shall be construed
as conferring upon or giving to any person, firm or corporation other than the
parties hereto any rights or benefits under or by reason of this Agreement.

 

(e)           Entire Agreement; Amendment. 
This Agreement sets forth the parties’ final and entire agreement with respect
to its subject matter and supersedes any and all prior understandings and
agreements.  This Agreement shall not be
modified or amended in any fashion except by an instrument in writing signed by
the parties hereto.

 

(f)            Further Assurances.  Each party
hereto agrees to execute such further papers, agreements, assignments or
documents of title as may necessary or desirable to effect the purposes of this
Agreement and carry out its provisions.

 

(g)           Counterparts.  This Agreement
may be executed in any number of counterparts, each of which shall be deemed an
original, but all of which shall be constitute but one in the same agreement.

 

(h)           Governing Law.   This
Agreement, in its interpretation and effect, shall be governed by the laws of
the State of Minnesota applicable to contracts executed and to be performed
therein.  The venue for any action
hereunder shall be in the State of Minnesota, whether or not such venue is or
subsequently becomes inconvenient, and the parties consent to the jurisdiction
of the courts of the State of Minnesota, and the U.S. District Court for the
District of Minnesota.

 

IN
WITNESS WHEREOF,
the parties have executed this Agreement effective as of the 11th day of July,
2008.

 

5

 

	
   

  	
  PROUROCARE
  MEDICAL INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

6

 

PROUROCARE MEDICAL INC.

AMENDED AND RESTATED 2004 STOCK OPTION PLAN

 

 

STOCK
OPTION AGREEMENT

 

OPTIONEE SIGNATURE PAGE

 

 

	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print
  Name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Residence
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Social Security No.:

  	
   

  
				

 

7

 

Exhibit A

 

PROUROCARE
MEDICAL INC.

AMENDED AND RESTATED 2004 STOCK OPTION PLAN

 

EXERCISE
NOTICE

 

ProUroCare Medical Inc.

5500 Wayzata Boulevard, Suite 310

Golden Valley, MN 55416

Attention:  Chief Financial Officer

 

1.             Exercise of Option. 
Effective as of today,
                        
[enter today’s date], the
undersigned (“Optionee”) hereby elects to exercise Optionee’s option to purchase
                  
shares of the Common Stock (the “Shares”) of ProUroCare Medical Inc. (the “Company”)
under and pursuant to the Company’s Amended and Restated 2004 Stock Option
Plan, as amended (the “Plan”) and the Stock Option Agreement dated as of
                                    
(the “Stock Option Agreement”).

 

2.             Representations of Optionee. 
Optionee acknowledges that Optionee has received, read and understood
the Plan and the Stock Option Agreement and agrees to abide by and be bound by
their terms and conditions.

 

3.             Rights as Shareholder. 
Until the stock certificate evidencing such Shares is issued (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option.  The Company shall issue (or cause to be
issued) such stock certificate promptly after the Option is exercised, subject
to Optionee’s compliance with all provisions of the Plan and Stock Option
Agreement.  No adjustment will be made
for a dividend or other right for which the record date is prior to the date
the stock certificate is issued.

 

4.             Tax Consultation. 
Optionee understands that Optionee may suffer adverse tax consequences
as a result of Optionee’s purchase or disposition of the Shares.  Optionee represents that Optionee has
consulted with any tax consultants Optionee deems advisable in connection with
the purchase or disposition of the Shares and that Optionee is not relying on
the Company for any tax advice.

 

5.             Restrictive Legend and Stop-Transfer
Orders.

 

(a)           Legend.  Optionee
understands and agrees that the Company shall cause the legend set forth below
or a legend substantially equivalent thereto, to be placed upon any certificate(s) evidencing
ownership of the Shares together with any other legends that may be required by
state or federal securities laws at the time of the issuance of the Shares:

 

8

 

THE SHARES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR THE ISSUER
OF THE SHARES (THE “ISSUER”) HAS RECEIVED AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE
OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT.

 

(b)           Stop-Transfer Notices.  Optionee
agrees that, in order to ensure compliance with the restrictions referred to
herein, the Company may issue appropriate “stop transfer” instructions to its
transfer agent, if any, and that, if the Company  transfers its own securities, it may make
appropriate notations to the same effect in its own records.

 

(c)           Refusal to Transfer.  The Company
shall not be required (i) to transfer on its books any Shares that have
been sold or otherwise transferred in violation of any of the provisions of this
Agreement or (ii) to treat as owner of such Shares or to accord the right
to vote or pay dividends to any purchaser or other transferee to whom such
Shares shall have been so transferred.

 

6.             Successors and Assigns. 
The Company may assign any of its rights under this Agreement to single
or multiple assignees, and this Agreement shall inure to the benefit of, and be
binding upon, the successors and assigns of the Company.  This Agreement shall also be binding upon,
and inure to the benefit of, Optionee and his or her heirs, executors,
successors and assigns.

 

7.             Interpretation. 
Any dispute regarding the interpretation of this Agreement shall be
submitted by Optionee or by the Company forthwith to the Committee, which shall
review such dispute at its next regular meeting.  The resolution of such a dispute by the
Committee shall be final and binding on the Company and on Optionee.

 

8.             Governing Law; Severability. 
This Agreement shall be governed by and construed in accordance with the
laws of the State of Minnesota.  Should
any provision of this Agreement be determined by a court of law to be illegal
or unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.

 

9.             Notices. 
Any notice required or permitted hereunder shall be in writing and shall
be deemed to have been duly given if (i) delivered by hand, (ii) sent
by telecopy, (iii) delivered to an overnight courier with guaranteed next
day delivery, or (iv) mailed by certified mail, postage prepaid, return
receipt requested, and addressed (or sent, in the case of a telecopy) as
follows:

 

	
  To the Company:

  	
   

  	
  at the address shown on
  the first page hereof

  
	
   

  	
   

  	
   

  
	
  To the Optionee:

  	
   

  	
  at the address shown
  beneath the Optionee’s signature on the last page hereof

  

 

9

 

or to such other person
and/or place as the parties hereto shall furnish in writing to each other.  Notices shall be deemed effectively given (i) on
the day delivered, if delivered by hand, (ii) on the day sent, if sent by
telecopy, (iii) on the day deposited with an overnight courier with
guaranteed overnight delivery, or (iv) on the day deposited in the U.S.
mail, if sent by certified mail.

 

10.          Further Instruments.  The parties
agree to execute such further instruments and to take such further action as
may be reasonably necessary to carry out the purposes and intent of this
Agreement.

 

11.          Delivery of Payment.  Optionee
herewith delivers to the Company the full Exercise Price for the Shares,
together with all federal and state payroll, income withholding, and other
taxes required by the Company to be collected from Optionee.

 

12.          Entire Agreement.  The Plan, the
Notice of Grant, and the Stock Option Agreement are incorporated herein by
reference.  This Agreement, the Plan, the
Notice of Grant, the Stock Option Agreement and the Investment Representation
Statement (if applicable) constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof.

 

	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [signature]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Print
  Name]

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

 

ACCEPTED:

 

	
  PROUROCARE
  MEDICAL INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name and Title

  	
   

  

 

10

 

Exhibit B

 

INVESTMENT
REPRESENTATION STATEMENT

 

	
  Optionee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Company:

  	
  ProUroCare Medical Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
  Type
  of Security:

  	
  Common Stock

  	
   

  
	
   

  	
   

  	
   

  
	
  Number
  of Shares:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  

 

In connection with the purchase of the above-listed
Securities, the undersigned Optionee represents to the Company the following:

 

(a)           Optionee is aware of the Company’s
business affairs and financial condition and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision
to acquire the Securities.  Optionee is
acquiring these Securities for investment for Optionee’s own account only and
not with a view to, or for resale in connection with, any “distribution”
thereof within the meaning of the Securities Act of 1933, as amended (the “Securities
Act”).

 

(b)           Optionee acknowledges and understands
that the Securities constitute “restricted securities” under the Securities Act
and have not been registered under the Securities Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of Optionee’s investment intent as expressed herein.  In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory
basis for such exemption may be unavailable if Optionee’s representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future.  Optionee further understands that the
Securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is
available.  Optionee further acknowledges
and understands that the Company is under no obligation to register the
Securities.  Optionee understands that
the certificate evidencing the Securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are registered or such
registration is not required in the opinion of counsel satisfactory to the
Company and any other legend required under then applicable state or federal
securities laws.

 

(c)           Optionee is familiar with the
provisions of Rule 701 and Rule 144, each promulgated under the
Securities Act, which, in substance, permit limited public resale of “restricted
securities” acquired, directly or indirectly from the issuer thereof, in a
non-public offering subject to the satisfaction of certain conditions.  Rule 701 provides that if the issuer

 

 

qualifies under Rule 701
at the time of the grant of the Option to the Optionee, the exercise will be
exempt from registration under the Securities Act.  In the event the Company becomes subject to
the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) ninety (90) days
thereafter (or such longer period as any market stand-off agreement may require)
the Securities exempt under Rule 701 may be resold, subject to the
satisfaction of certain of the conditions specified by Rule 144,
including:  (i) the resale being
made through a broker in an unsolicited “broker’s transaction” or in
transactions directly with a market maker (as said term is defined under
the Exchange Act); and, in the case of an affiliate, (ii) the availability
of certain public information about the Company, (iii) the amount of
Securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), and (iv) the timely filing of a
Form 144, if applicable.

 

(d)           In the event that the Company does
not qualify under Rule 701 at the time of grant of the Option, then the
Securities may be resold in certain limited circumstances subject to the
provisions of Rule 144, which requires the resale to occur not less
than two years after the later of the date the Securities were sold by the
Company or the date the Securities were sold by an affiliate of the Company,
within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than three years, the satisfaction of the conditions set forth
in clauses (1), (2), (3) and (4) of Paragraph (c), above.

 

(e)           Optionee further understands that in
the event all of the applicable requirements of Rule 701 or 144 are not
satisfied, registration under the Securities Act, compliance with Regulation A
under the Securities Act, or some other registration exemption will be
required; and that, notwithstanding the fact that Rules 144 and 701 are
not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement securities
other than in a registered offering and otherwise than pursuant to Rules 144
or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk.  Optionee
understands that no assurances can be given that any such other registration
exemption will be available in such event.

 

	
   

  	
  Signature of Optionee:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  

 

12

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