Document:

Exhibit
10.2

CERTAIN INFORMATION INDICATED BY [ * * * ] HAS BEEN
DELETED FROM THIS EXHIBIT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2.

TRANSITION SERVICES AND SUPPLY AGREEMENT

          This
Transition Services and Supply Agreement (this “Agreement”) is made and entered
as of September 6, 2011 (the “Effective Date”), by and between, Medtronic,
Inc., a Minnesota corporation (“Licensor”), and Urologix Inc., a Minnesota corporation
(“Licensee”; Licensor and Licensee being sometimes individually referred to as
a “Party” and collectively as the “Parties”).

          WHEREAS,
Licensor and Licensee entered into that certain License Agreement of even date
herewith (the “License Agreement”) pursuant to which Licensor, among other
things, granted to Licensee an exclusive license under Licensor’s intellectual
property relating to Licensor’s minimally-invasive radio-frequency treatment
for symptomatic benign prostatic hyperplasia (“BPH”) (the “Prostiva RF Therapy
System”) in the field of radio frequency treatment of the prostate, including
without limitation, the treatment of BPH; 

          WHEREAS,
prior to the Effective Date, Licensor was in the business of developing,
manufacturing, marketing, selling and distributing components for the Prostiva
RF Therapy System (the “Prostiva Business”), and after the Effective Date,
Licensee wishes to manufacture, market, sell and distribute the Prostiva RF
Therapy System, but in order to do so requires certain transition services from
Licensor; and 

          WHEREAS,
Licensee will act as Licensor’s interim distributor of the products and
components identified on Exhibit E to the License Agreement (the
“Products”) pursuant to the terms and conditions set forth on Schedule B
hereto (the “Interim Distribution Agreement”); and

          WHEREAS,
to allow Licensee an opportunity to reach agreement with Licensor’s suppliers
regarding direct supply of the Products, and to facilitate Licensee’s marketing
and sale of the Products, the Parties deem it necessary and appropriate for
Licensor to consign to Licensee certain finished goods inventory, and, if
necessary, for Licensor to order and purchase certain products from certain
suppliers of Licensor on Licensee’s behalf, all of the foregoing in accordance
with the terms and conditions of this Agreement; and

          WHEREAS,
in order to assist Licensee with the orderly transition of the Prostiva
Business, Licensor agrees to provide certain transition services, and Licensee
agrees to receive such services pursuant to the terms and conditions set forth
in this Agreement.

          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:

1

ARTICLE 1

DEFINITIONS

          1.1          Defined
Terms. Capitalized terms contained herein but not otherwise defined herein
shall have the meanings ascribed them in the License Agreement. Other terms
defined in the text of this Agreement shall have the following meanings or the
meanings ascribed to them in body of this Agreement:

	
  

 	
  

 
	
  

 	
 (a)          “Applicable
 Law” shall mean the applicable laws, rules, regulations, including but
 not limited to any guidelines or other requirements of any Regulatory
 Authority in the relevant country, and industry guidelines or codes of
 conduct, that may apply to the review and analysis of safety reports, the
 communication of safety reports to Regulatory Authorities and the maintenance
 of records relating to safety reports of the Products.

 
	
  

 	
  

 
	
  

 	
 (b)          “Licensee
 Awareness Date” shall mean the date on which Licensee Becomes Aware of a
 reportable event.

 
	
  

 	
  

 
	
  

 	
 (c)          
 “Licensor Awareness Date” shall mean the date on which Licensor
 Becomes Aware of a reportable event.

 
	
  

 	
  

 
	
  

 	
 (d)          “Licensee
 Becomes Aware” shall mean that a Licensee employee has acquired
 information that reasonably suggests that a Product-related event has
 occurred.

 
	
  

 	
  

 
	
  

 	
 (e)          “Licensor
 Becomes Aware” shall mean that a Licensor employee has acquired
 information that reasonably suggests that a Product-related event has
 occurred.

 
	
  

 	
  

 
	
  

 	
 (f)          
 “Regulatory Authority” shall mean any applicable federal, national,
 regional, state, provincial or local regulatory agencies, departments,
 bureaus, commissions, councils or other government entities regulating or
 otherwise exercising authority with respect to the Products in the relevant
 country.

 
	
  

 	
  

 
	
  

 	
 (g)          “Regulatory
 Transfer” shall mean, for the United States, the US Regulatory Transfer;
 for countries of the European Union, the EU Regulatory Transfer; and for the
 rest of the world, the OUS/OEU Regulatory Transfer. Unless otherwise
 specifically noted, references to the “Regulatory Transfer” herein are
 intended to cover any of the foregoing.

 
	
  

 	
  

 
	
  

 	
 (h)          “Product
 Complaint” shall mean any written, electronic, or oral communication that
 alleges deficiencies related to the identity, quality, durability,
 reliability, safety, effectiveness, or performance of a medical device that
 has been placed on the market.

 
	
  

 	
  

 
	
  

 	
 (i)          “Valid
 Report” means a complaint entry form approved by Licensor for purposes of
 expedited reporting to Regulatory Authorities.

 
	
  

 	
  

 
	
  

 	
 1.2          Other
 Definitional Provisions.

 

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 (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)          The
 terms defined in the singular shall have a comparable meaning when used in
 the plural, and vice versa.

 
	
  

 	
  

 
	
  

 	
 (c)          References
 to a “schedule” are, unless otherwise specified, to one of the 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.

 
	
  

 	
  

 
	
  

 	
 (e)          The
 word “including” or any variation thereof means (unless the context of its
 usage otherwise requires) “including, without limitation” and shall not be
 construed to limit any general statement that it follows to the specific or
 similar items or matters immediately following it.

 
	
  

 	
  

 
	
  

 	
 (f)          All
 references to time shall refer to Minneapolis, Minnesota time.

 

ARTICLE 2

TRANSITION SERVICES 

          2.1          Costs
and Responsibilities. Each of Licensor and Licensee shall, from and after
the Effective Date assume those responsibilities and related costs assigned to
it as specifically provided in (a) this Agreement, including without
limitation, as set forth in the Transition Services Plan attached as Schedule
A (the “Transition Plan”), the Interim Distribution Agreement attached as Schedule
B, the Regulatory Transition Plan attached as Schedule C, and the
Quality Agreement attached as Schedule D) (b) the License Agreement, (c)
the Acquisition Option Agreement, and (d) the Asset Purchase Agreement, all in
accordance with the terms and conditions set forth herein and therein, for the
manufacturing, sourcing, operation, regulatory compliance, and quality
requirements of the Prostiva Business. 

          2.2          Transition
Responsibilities. 

	
  

 	
  

 	
  

 
	
  

 	
 (a)          Transition
 Services During Initial Term. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)          Licensor
 shall, with Licensee’s good faith cooperation, provide those transition
 services as specifically set forth in this Agreement and the applicable
 Schedules hereto (“Transition Services”) in accordance with Applicable Laws
 and in the manner and for the periods of time described therein. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)          Licensor
 shall provide such Transition Services until the date that is one (1) month
 following the date that Licensor completes the 510(k) Work, as defined in
 Section 4.1 hereof (the foregoing period shall be hereinafter referred to 

 

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 as the “Initial Term”).
 Notwithstanding the foregoing, if Licensee has not obtained the necessary
 regulatory clearances and permits to sell the Products in the United States
 under Licensee’s own quality system and labeling (“US Regulatory Transfer”)
 by the earlier of (i) April 30, 2012, or (ii) the date that is six (6) months
 following Licensor’s initial submission of the 510(k) Notification referred
 to in Section 4.1(a) hereof, a “Major Challenge” (as defined below) shall be
 deemed to have occurred under Section 4.1(d) below.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii)          The
 Transition Plan may be revised from time to time upon the mutual written
 agreement of Licensor and Licensee. Licensee acknowledges that Licensor’s
 ability to perform the Transition Services depends in part on Licensee’s full
 and timely performance and cooperation, and as such, Licensee agrees to
 fulfill its responsibilities and obligations with respect to the Transition
 Plan, to comply with Applicable Laws, and to cooperate in good faith with
 Licensor in the provision of Transition Services hereunder. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iv)          Licensee
 shall pay Licensor a fee of $30,000 per month (the “Monthly Fee”) beginning
 in the second month following the Effective Date for the performance of
 Transition Services for each month until the earlier of (x) the expiration of
 the Initial Term or (y) one month following the last of the US Regulatory
 Transfer or the EU Regulatory Transfer.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (v)          Further,
 in the event that Licensor is required to pay a Person (other than Licensor,
 its Affiliates, or contracted employees) to perform required Transition
 Services that are not anticipated by the Transition Plan, not related to the
 510(k) Work, or not due to Licensor’s failure to perform under this or any of
 the Transaction Documents (“Third Party Costs”), Licensor shall consult with
 Licensee to explore cost-savings measures with regard to those Third Party
 Costs. Following such consultation and incurring of such Third Party Costs,
 Licensor shall provide Licensee reasonable evidence of the Third Party Costs
 associated therewith. Licensor shall invoice Licensee for the foregoing
 Monthly Fees and Third Party Costs on a monthly basis, and Licensee shall pay
 each such invoice within thirty (30) days following the date thereof.
 Licensee shall reimburse Licensor for Third Party Costs up to an aggregate
 maximum of [ * * * ] during the Initial Term. If and once Third Party Costs
 have exceeded [ * * * ] during the Initial Term, Licensee shall have the
 option to terminate this Agreement pursuant to Section 9.2(c) hereof in lieu
 of incurring further Third Party Costs. In the event of such a termination,
 Licensor shall promptly refund to Licensee an amount equal to $250,000 (the
 “Excessive Third Party Costs Refund”). Such a termination of the Agreement
 will not release Licensor or Licensee from any obligation that accrued prior
 to the effective date of such termination, but such a termination will
 release Licensee of any further payment obligation for any Minimum Royalty
 for a partial Contract Year except as set forth in Section 9.2(d) hereof, any
 License Fee not then due and payable, and any obligation to purchase
 Transferred Prostiva Assets under the Acquisition Option Agreement or to 

 

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 purchase Assets under
 the Asset Purchase Agreement. As further described in Section 9.2(c) hereof,
 the Excessive Third Party Costs Refund and the foregoing termination right
 shall be the sole remedy available to Licensee for excessive Third Party
 Costs described herein, and neither party shall have any liability to other
 party or shall suffer any consequences as a result of Licensee’s termination
 pursuant to this Section, except as explicitly set forth in this Section
 2.2(a)(v) or Section 9.2(c) hereof.

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)          Services
 After Initial Term. Licensee may ask Licensor to provide Licensee
 with additional services following the expiration of the Initial Term, in
 which case Licensor may agree to do so, as determined in Licensor’s
 discretion, at a fee equal to $200 per hour. 

 

          2.3          Taxes.
Prices and charges on the Transition Plan, or as otherwise agreed to pursuant
to Section 2.2 hereof, do not include any applicable sales, use, value added or
similar taxes, customs, duties, or tariffs imposed by any governmental
authority. 

          2.4          Document
Delivery. Subject to the terms and conditions of this Agreement, during the
Initial Term, Licensor shall provide Licensee (i) copies of design
specifications, drawings, bills of material, engineering and documentation used
in connection with the Prostiva Business as contemplated in the Transition
Plan, and (ii) sales and promotional literature, artwork, other sales and
marketing materials, and customer lists used in connection with the Prostiva
Business, as such materials are described in Exhibit C of the License
Agreement. 

          2.5          Employees.
On or promptly after the Effective Date, Licensee shall offer to employ all
eight (8) employees listed on Schedule 2.5 (the “Designated Employees”) with
compensation structures substantially similar to those in existence on the
Effective Date as well as substantially similar job duties and
responsibilities. Licensee shall also give each Designated Employee who accepts
employment with Licensee full credit for all years of service accrued by such
employee as of the Effective Date, subject to the terms of Licensee’s benefit
plans and policies. Licensor shall assist Licensee in its efforts to hire the
Designated Employees, but cannot guarantee their hiring. Further, none of
Licensor, its Affiliates, nor VidaMed may solicit employment with the
Designated Employees for a period of six (6) months from the Effective Date.

ARTICLE 3
 SALE OF PRODUCTS  

          3.1          Exclusive
Distributor of Products in the United States. As of the Effective Date,
Licensor hereby appoints, and Licensee hereby agrees to act as Licensor’s
exclusive United States (excluding Puerto Rico) distributor of the Products in
compliance with the terms and conditions of the Interim Distribution Agreement
set forth in Schedule B. Licensee will operate as Licensor’s exclusive
interim distributor of the Products in the United States (excluding Puerto
Rico), and will be permitted to sell such products under Licensor’s regulatory
approvals and clearances until the date of US Regulatory Transfer. For the
avoidance of doubt, any alleged 

5

	
  

 	
  

 	
  

 
	
 breach by Licensee of
 the terms and conditions of the Interim Distribution Agreement shall be
 subject to the provisions of this Agreement.

 
	
  

 	
  

 	
  

 
	
  

 	
 3.2          Sale
 of Products Outside of the United States. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
  (a) European Union.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
      (i)          After
 the Effective Date, Licensor shall continue to sell Products in the European
 Union (EU) either directly or through its distribution network until the date
 that is three (3) months following the Effective Date hereof (the “Licensor
 EU Transition Period”); provided, however, that in the event
 Licensor is unable able to orderly dissolve or terminate its distribution
 arrangement in a given territory of the EU so as to minimize its financial
 loss related thereto during the Licensor EU Transition Period, Licensor shall
 provide Licensee with notice thereof and of a reasonable extension of the
 Licensor EU Transition Period with respect to any such territory. If, during
 the Licensor EU Transition Period, as extended (if applicable), Licensor
 sells more than 300 handpieces in the European Union, Licensor will provide
 Licensee with a credit toward the second License Fee payment referred to in
 Section 3.1 of the License Agreement equal to fifty percent (50%) of the
 gross profit on those units sold in excess of 300, which gross profit shall
 be calculated by subtracting the transfer price of each such Product as set
 forth in Schedule 5.5 hereof, from the net sales amount of each such Product.
 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
      (ii)        After
 the Licensor EU Transition Period has expired, as determined on a
 territory-by-territory basis, Licensee shall be entitled to distribute the
 Products in each such territory on an exclusive basis pursuant to the terms
 and conditions set forth in the Interim Distribution Agreement set forth in
 Schedule B until the earlier of (1) the time that Licensee obtains the
 necessary regulatory approvals and permits to sell the Products in the
 European Union under Licensee’s own quality system and labeling in accordance
 with the Transition Plan and Regulatory Transition Plan described below (“EU
 Regulatory Transfer”), or (ii) April 30, 2012 (the “Licensee EU Transition
 Period”). After the Licensee EU Transition Period has expired, Licensee shall
 be free to sell Products in the EU, subject to receipt of necessary
 regulatory approvals and permits.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (b) Outside of
 the US and the EU. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
      (i)     After
 the Effective Date, Licensor shall continue to sell Products outside of the
 United States and the EU either directly or through its distribution network
 until the date that is three (3) months following the Effective Date hereof
 (the “Licensor OUS / OEU Transition Period”); provided, however, that in
 the event Licensor is unable to orderly dissolve or terminate its
 distribution arrangement in a given territory so as to minimize its financial
 loss related thereto during the Licensor OUS / OEU Transition Period,
 Licensor shall provide Licensee with notice thereof and of a reasonable
 extension of the Licensor EU 

 

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 Transition Period with
 respect to any such territory. Licensor shall not be obligated to make any
 payments to Licensee as a result of, and Licensee will have no obligation to
 provide any Product or support for, Licensor’s sales during the Licensor OUS
 / OEU Transition Period. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
      (ii)          After
 the Licensor OUS / OEU Transition Period has expired, as determined on a
 country-by-country basis, Licensee shall be entitled to distribute the
 Products in each such country on an exclusive basis pursuant to the terms and
 conditions set forth in that Interim Distribution Agreement set forth in
 Schedule B until the earlier of (1) the time that Licensee obtains the
 necessary regulatory approvals, clearances and permits to sell the Products
 in each such territory under Licensee’s own quality system and labeling in
 accordance with the Transition Plan and Regulatory Transition Plan described
 below (“OUS / OEU Regulatory Transfer”), or (2) the date that is one (1)
 month following the date of EU Regulatory Transfer (the “Licensee OUS/ OEU
 Transition Period”). After the Licensee OUS / OEU Transition Period has
 expired with respect to a territory outside of the EU or the United States,
 Licensee shall be free to sell Products in such territory subject to receipt
 of necessary regulatory approvals, clearances and permits.

 
	
  

 	
  

 	
  

 
	
 3.3          Product
 Warranties. 

 
	
  

 	
  

 	
  

 
	
  

 	
           (a)     Repair and
 Service of Damaged Products. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)          Financial
 Responsibility for Repairs and Services. With respect to Products
 sold by Licensor prior to, on or after the Effective Date in accordance with
 Sections 3.1 or 3.2 above, which are under written warranty, Licensor agrees
 to be financially responsible for the actual costs related to repair and
 service of such Products, and in accordance with, Licensor’s written
 warranties to the extent such costs are not reimbursed by the manufacturers
 of such Products. With respect to Products sold after the Effective Date by
 Licensee, Licensee agrees to be financially responsible for the actual costs
 related to repairs and service of Products under, and in accordance with,
 Licensee’s written warranties to the extent such costs are not reimbursed by
 the manufacturers of such Products. With respect to Products received by
 either party for repair or service which are not under written warranty
 (regardless of who sold such Product), Licensee will be financially
 responsible for the actual costs related to repairs and services of such
 Products. In the event that Licensor receives Products for repair or service
 that are not under written warranty from a customer in a country in which
 Licensee is distributing the Products, and Licensor performs repairs or
 services related thereto in the ordinary course, Licensee will reimburse
 Licensor for its direct costs related thereto. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)        Performance
 of Repairs and Services. With respect to the performance of
 repairs and services for Products after the Effective Date 

 

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 (regardless of whether
 such Products are under any warranty), Licensor shall be responsible to
 perform or have performed such warranty obligations until such time as
 Product repair and service capabilities have been transferred to Licensee
 pursuant to the Transition Plan; provided, however, that in no event
 shall Licensee or Licensor be entitled to augment or expand the terms of
 Product warranties beyond the terms and conditions first offered by Licensor
 for such Products sold by Licensor before such transfer has occurred. Once
 such transfer has occurred, Licensee shall be responsible to perform or have
 performed the repairs and services for the Products. 

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)     Limited
 Returns for Certain Products. For a period of 90 days following
 the Effective Date, Licensor shall only accept the return by customers of
 Products sold by Licensor in the United States prior to the Effective Date up
 to a maximum of one hundred (100) units, provided that such Products must be
 undamaged and have greater than 4 months of shelf-life remaining at the time
 of return. In addition, Licensor shall only accept the foregoing limited
 returns on the condition that (i) Licensee agrees that it will not sell any
 Products to such customers for a period of 90 days after the applicable
 return date, and (ii) any such returned Product will be consigned to Licensee
 under Article 5. 

 
	
  

 	
  

 	
  

 
	
  

 	
           (c)     
 Manufacturers’ Warranties. Licensor and Licensee shall each have
 the rights described in the letter agreement with MediVision, Inc. dated
 August 16, 2011, the letter agreement with The MedTech Group, Inc. dated
 August 29, 2011, and the letter agreement with Bovie Medical Corporation
 dated August 31, 2011, in each case with respect to, among other things, the
 Parties’ rights under manufacturers’ warranties related to the Products. 

 

ARTICLE 4

REGULATORY TRANSITION; QUALITY AGREEMENT

	
  

 	
  

 	
  

 
	
 4.1          Regulatory
 Transition Plan. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (a)
 Generally.
 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)          Subject
 to the Transition Plan, the Regulatory Transition Plan set forth on Schedule
 C (the “Regulatory Transition Plan”) and the Quality Agreement set forth
 in Schedule D (the “Quality Agreement”), Licensee will be responsible
 for achieving US Regulatory Transfer and all other necessary marketing
 approvals at its own expense and as soon as possible after Licensor completes
 the 510(k) Work (as defined below); provided that, Licensor will prepare and
 file at its own expense an appropriate 510(k) Notification, close out open
 FDA comments and letters to the file regarding the Products, and pursue
 achieving 510(k) clearance, including but not limited to responding to FDA
 questions (the “510(k) Work”) during the Initial Term in accordance with the
 Transition Plan and the schedule attached hereto as Schedule 4.1(a) which 

 

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 outlines the scope of
 such work (the “510(k) Work Schedule”), and subject to Section 4.1(d) below.
 Licensor and Licensee will work together to complete the 510(k) Work and the
 US Regulatory Transfer in accordance with the Transition Plan and the 510(k)
 Work Schedule (subject to Section 4.1(d) below). 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)          Nothing
 in this Agreement, the License Agreement, the Acquisition Option Agreement or
 the Asset Purchase Agreement (collectively the “Transaction Documents”),
 shall be interpreted to transfer or grant Licensee any of Licensor’s rights
 to sell, distribute or have distributed Products in any jurisdiction where
 such activities would be prohibited, except in accordance with the Interim
 Distribution Agreement or through appropriate regulatory approvals,
 clearances or permits obtained by Licensee pursuant to the Transition Plan,
 the Regulatory Transition Plan and the Quality Agreement. Licensee and
 Licensor acknowledge and agree that the Transition Plan, the 510(k) Work
 Schedule, the Regulatory Transition Plan and the Quality Agreement are
 working documents that have been prepared by Licensor and Licensee to reflect
 their current intentions regarding the transition of regulatory approvals and
 clearances. Nothing in the Transition Plan, 510(k) Work Schedule, Regulatory
 Transition Plan or Quality Agreement shall be interpreted as expanding or
 diminishing representations, warranties and covenants of the Parties that are
 made pursuant to any of the other Transaction Documents, except only with
 respect to, and only to the extent of, commitments of each party that are
 specifically described in the Transition Plan, 510(k) Work Schedule,
 Regulatory Transition Plan or Quality Agreement. In the event of a conflict
 between the terms of the Transition Plan, the 510(k) Work Schedule, the
 Regulatory Transition Plan or the Quality Agreement, on the one hand, and
 this Agreement or any of the other Transaction Document, on the other hand,
 the terms of this Agreement and the other Transaction Documents shall
 control.

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)
 Recalls
 and Field Actions. After the Effective Date but prior to
 occurrence of Regulatory Transfer in a given country, Licensor shall (i) have
 the authority to make all decisions regarding recalls and field actions and
 responses thereto with respect to the Products in such countries, and (ii) be
 responsible for performing or having performed the necessary corrective
 actions and management activities in response to such recall or field
 corrective action, subject to Section 4.1(d) below. Licensee will provide
 field resources to support Licensor in the performance of the above-described
 activities, as directed by Licensor and all in accordance with the Transition
 Plan. Notwithstanding the foregoing, each party will be financially
 responsible for the direct costs of supporting the recall or corrective
 action with respect to Products such party sold regardless of whether the
 applicable Regulatory Transfer has occurred (but subject to Section 4.1(d)); provided,
 however, that in the event that Licensee assists Licensor with
 Products sold by Licensor by providing field resources in response to a
 recall or field action as directed by Licensor, Licensor will reimburse
 Licensee for Licensee’s reasonable out-of-pocket expenses related thereto,
 subject to the provision of competent documentation thereof. 

 

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           (c)          Product
 Changes. Subject to Section 4.1(d) below with respect to Major
 Challenges, in the event of routine Product changes, Licensor shall
 be responsible for performing the necessary engineering and supply management
 activities until such time as US Regulatory Transfer occurs, and Licensee
 shall provide support related thereto, all in accordance with the Transition
 Plan. Each Party shall bear its own costs in performing such activities.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
           (d)          Major
 Challenges. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
               (i)          Notwithstanding
 anything to the contrary in this Agreement, and in addition to the deemed
 Major Challenge set forth in Section 2.2(a) above, in the event that after
 the Effective Date but prior to US Regulatory Transfer, any of the following
 occur, it shall be considered to be a “Major Challenge” hereunder:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
                  a)          
 Licensor is unable to ship or allow shipment of Product for [ * * * ] days or
 more due to safety concerns; 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
                  b)          a
 new clinical trial involving the Product is required by the FDA; 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
                  c)          Product
 recalls, field actions, Product changes or other similar Product activities
 required by Applicable Law or any Regulatory Authority, including without
 limitation, by the FDA in connection with the 510(k) Work or US Regulatory
 Transfer, are necessary and which (x) cost or are reasonably expected to
 cost, individually or in the aggregate, [ * * * ] or more, the calculation of
 which shall exclude any Monthly Fees and Third Party Costs paid by Licensee
 to Licensor, or (y) individually or in the aggregate, are reasonably expected
 to take longer than six (6) months to address; or

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
                  d)          currently
 unforeseen problems that must be addressed by Licensor under Applicable Law
 to perform the Transition Services in accordance with the provisions of this
 Agreement which (x) cost, or are reasonably expected to cost, individually or
 in the aggregate, [ * * * ] or more, the calculation of which shall exclude
 any Monthly Fees and Third Party Costs paid by Licensee to Licensor, or (y)
 individually or in the aggregate, are reasonably expected to prevent US
 Regulatory Transfer from occurring by the earlier of, April 30, 2012, or the
 date that is six (6) months following Licensor’s submission of the 510(k)
 Notification referred to in Section 4.1(a) hereof. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (ii)             In
 the event of a Major Challenge:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
                  a)          Licensor
 shall have the first option to determine in its reasonable discretion whether
 it elects to do the work and incur the costs 

 

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 necessary to respond to
 the Major Challenge (the “Major Challenge Option”); 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
           b)          In
 the event that Licensor elects not to exercise the Major Challenge Option,
 then Licensee shall have thirty (30) days to notify Licensor in writing
 whether it elects to exercise such Option at its own expense (the “Option
 Notice”), subject to the terms set forth herein. As soon as reasonably
 practicable following the receipt by Licensor of an Option Notice indicating
 the Licensee elects to exercise the Major Challenge Option, (1) Licensor will
 cease the 510(k) Work and will transfer such work to Licensee to the extent
 possible under Applicable Law, (2) Licensor will provide up to eighty (80)
 hours of regulatory or engineering support related to the 510(k) Work at no
 cost to Licensee in the month following such the exercise of such option, (3)
 both Parties will cooperate to complete the Transition Services within one
 month following the date of the Option Notice, and (4) the obligation for
 Licensee to pay Licensor the remaining unpaid License Fee under Section 3.1
 of the License Agreement (excluding the obligation to pay the Purchase Price
 under the Asset Purchase Agreement) on the twelve (12) month anniversary of
 the Effective Date will be automatically waived, subject to the continuing
 obligations of Licensee pursuant to Section 3.3 of the License Agreement (the
 “Major Challenge Transition Period”). For the avoidance of doubt, during the
 Major Challenge Transition Period, each party shall also continue to perform
 its applicable obligations under this Agreement, including without
 limitation, the payment obligations set forth under Article 2 hereof.
 Notwithstanding the foregoing, if the 510(k) Work cannot be transferred to
 Licensee within six (6) months following the date of the Option Notice, the
 parties shall discuss alternatives in good faith, and if the parties cannot
 mutually agree on next steps, the Major Challenge Transition Period shall end
 and either Party may terminate this Agreement and the other Transaction Documents
 in accordance with Section 9.2(b) hereof. In addition, if, after six (6)
 months of the date of the Option Notice, there are countries in which
 Licensee is distributing Product but with respect to which Regulatory
 Transfer has not yet occurred, Licensee will cease distributing Products in
 such country under the applicable Interim Distribution Agreement. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii)          Notwithstanding
 anything contained herein to the contrary, if neither Party elects to
 exercise the Major Challenge Option, either Party may terminate this
 Agreement and the Transaction Documents in accordance Section 9.2(b) hereof.
 In the event of termination under Section 9.2(b), Licensor shall promptly
 refund to Licensee an amount equal to $250,000 (the “Major Challenge Refund”).
 Such a termination of the Agreement will not release Licensor or Licensee
 from any obligation that accrued prior to the effective date of such
 termination, but such a termination will release Licensee of any further
 payment 

 

11

	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 obligation for any
 Minimum Royalty for a partial Contract Year except as set forth in Section
 9.2(d) hereof, any License Fee not then due and payable, and any obligation
 to purchase Transferred Prostiva Assets under the Acquisition Option
 Agreement or to purchase Assets under the Asset Purchase Agreement. As
 further described in Section 9.2(b) hereof, the Major Challenge Refund and
 the foregoing termination right shall be the sole remedy available to
 Licensee in the event neither Party elects to exercise the Major Challenge
 Option, and neither party shall have any liability to other party or shall
 suffer any consequences as a result of Licensee’s termination pursuant to
 this Section, except as explicitly set forth in this Section 4.1(d)(iii) or
 Section 9.2(b) hereof. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
           (e)          Regulatory
 Reporting. After the Effective Date but prior to occurrence of
 Regulatory Transfer in a given country, Licensor shall be responsible for,
 with respect to any such country, all of the regulatory reporting related to
 such Products, and shall incur the costs associated therewith, in accordance
 with the Transition Plan. After Regulatory Transfer occurs in a given
 country, Licensee shall be responsible for all regulatory reporting for the
 Products and for bearing any costs related thereto. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
           (f)          Safety
 Data Reporting and Exchange. In addition to Section 4.1(e) above,
 after the Effective Date but prior to Regulatory Transfer in a given country,
 Licensor shall be responsible for reporting the safety data regarding the
 Products, including reporting Product Complaints, to Regulatory Authorities.
 The Parties agree to amend this Agreement if reasonably necessary to comply
 with Applicable Laws, regulatory reporting requirements and obligations
 imposed by Regulatory Authorities. Licensor will provide Licensee a copy of
 any Product surveillance reports, including but not limited to Product
 Complaint trend reports, that are generated during the normal course of
 business. In addition, Licensor and Licensee agree the following shall apply
 from the Effective Date until Regulatory Transfer occurs in a given country:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)          Contact
 Points. Each Party will designate a contact point(s) for the other
 Party to provide safety data under this Agreement. Each Party will provide
 the safety data pertaining to the Product that is required to be provided
 under this Agreement to the other Party’s designated contact point. A Party
 may change its designated contact point by written notice to the other Party’s
 most recently identified contact point. The Parties’ initial designated
 contact points shall be as set forth in Schedule 4.1(f) (the “Contact
 List”). 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)          Exchange
 of Safety Data. Within 24 hours from the Licensee Awareness Date
 of a Product Complaint, Licensee will send by secure email a Valid Report(s)
 to Licensor for any Product Complaint(s) identified by Licensee as
 Product-related, that reference a Product or that, in Licensee’s reasonable
 judgment, appear to involve a Product (collectively, “Product Complaint”). In
 addition, Licensee will immediately provide to Licensor any Valid Reports
 that were not initially reported as being Product Complaints but that
 Licensee later reasonably determines to be Product related. If Licensee
 believes that there is a 

 

12

	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 safety issue that could
 result in a Serious Adverse Event (“SAE”), it will immediately notify
 Licensor of such issue but in no event shall it notify Licensor later than 24
 hours from the Licensee Awareness Date. Licensee agrees to make best efforts
 to acquire and report as much information as possible in the initial Product
 Complaint, and when submitting the Valid Report to Licensor, Licensee will
 provide all information requested on the Valid Report that is reasonably
 known. Licensor shall be responsible for any follow-up investigation of a
 Product Complaint. Licensee shall not conduct further investigation of a
 Product Complaint previously exchanged, except as reasonably requested by
 Licensor. If Licensor so requests, Licensee agrees to promptly conduct
 follow-up investigation. Licensee will provide to Licensor in writing the
 results of such further investigation within the timeframe specified above
 and shall include the Licensor reference number on the documentation (e.g.,
 PCIR#). In addition, Licensor may request and Licensee agrees to promptly
 provide review and feedback on all or a portion of all Product Complaints
 that Licensor intends to include in (but is not limited to) annual reports,
 final reports and reports to support other regulatory submissions to
 Regulatory Authorities in connection with the Product. After Licensor has
 made the appropriate regulatory filings it will email to Licensee copies of
 those reports for Product Complaints. To facilitate reconciliation of the
 exchanged data, prior to the time that all Regulatory Transfers have
 occurred, Licensee will provide to Licensor within the first thirty (30) days
 of each month contained therein, a monthly listing of all Valid Reports sent
 to Licensor during the previous month. Information exchanged under this
 Subsection will be in English, except that translation of materials not
 originally generated by a Party is not required if translation would be
 substantially burdensome, and the Party providing the material otherwise
 makes reasonable efforts to summarize or describe in English the document and
 its relation to patient safety. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii)          Internal
 Systems. Each Party will keep an individualized written record of
 each of its Product Complaints to the extent required under its standard
 operating procedures (SOPs) and Applicable Law. Each Party will maintain its
 own SOPs for receiving, investigating, tracking, following up, storing and
 reporting Product Complaints. Licensor may audit Licensee for compliance with
 the requirements under this Section 4.1(f) only for cause. Audits will be
 scheduled in advance and will be conducted during normal business hours. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iv)          Regulatory
 Reports and Requests. From the Effective Date until Regulatory
 Transfer occurs in a given country, Licensee will send to Licensor by secure
 email within 24 hours of its receipt, a copy of any correspondence from that
 country’s Regulatory Authority specifically involving the Product, with the
 exception that any information not specifically involving the Product may be
 redacted at Licensee’s discretion. To the extent reasonably possible,
 Licensee will provide Licensor with a copy of any documentation pertaining to
 the request and the response to a Regulatory Authority prior to submission of
 the response for 

 

13

	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 comments. If time
 constraints make it impossible or unreasonable to provide Licensor with a
 copy of the response before submission, Licensee will use diligent efforts to
 notify Licensor of the circumstances and coordinate in good faith with regard
 to any areas for Licensor’s input. Licensee will not unreasonably reject
 suggestions by Licensor for changes in the proposed submission. Licensor will
 use diligent efforts to respond in a reasonable period of time. In addition,
 Licensee will provide to Licensor a copy of its responses to any Regulatory
 Authority’s request. After the Regulatory Transfer in any country, Licensee
 will keep records of all Regulatory Reports and Requests as mandated by
 Applicable Law, and will provide Licensor with a monthly report summarizing
 trend analysis and results but only until the date upon which Licensor’s
 labeled Products are no longer being offered for sale by Licensor or its
 agents or distributors anywhere in the world.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
           (g)
 Complaint
 Handling. After the Effective Date but prior to occurrence of
 Regulatory Transfer in a given country, Licensor shall be responsible for the
 performance of complaint follow-up activities, analysis trending and decision
 making regarding complaints, and shall bear the costs associated therewith,
 and Licensee shall be responsible for performing initial customer interaction
 activities and data collection, and shall bear the costs associated
 therewith, all in accordance with the Transition Plan. From the date of the
 applicable Regulatory Transfer in a given country and thereafter, Licensee
 shall be responsible for performing all complaint handling activities for the
 Products and bearing any costs related thereto. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
           (h)
 Customer
 Service, Sales Support, Field Servicing and Technical Services. From
 and after the Effective Date, subject to the terms and conditions of this
 Agreement, each Party is responsible for performing customer service
 activities, sales support activities, field servicing coordination, and
 technical services activities for the Products described in the Transition
 Plan. Any costs associated with the foregoing shall be borne solely by the
 Party who performs the services in accordance with the Transition Plan.

 
	
  

 	
  

 	
  

 	
  

 
	
           4.2
 Quality Agreement. Licensee and Licensor shall comply in all
 material respects with the terms of the Quality Agreement set forth in Schedule
 D. In the event of a conflict between the terms of the Quality Agreement
 and the balance of this Agreement (other than the Interim Distribution
 Agreement(s)) or any of the other Transaction Documents, the terms of the
 balance of this Agreement (other than the Interim Distribution Agreement(s))
 and the other Transaction Documents shall control. In the event of a conflict
 between the terms of the Quality Agreement and the terms of the Interim
 Distribution Agreement(s), the terms of the Quality Agreement shall control.

 

ARTICLE 5

CONSIGNMENT INVENTORY 

          5.1
Consignment and Use of US Consignment Inventory. As of the
Effective Date, Licensor shall consign, and Licensee shall accept (a) the
finished goods inventory of Product

14

located in Licensor’s
distribution centers or other U.S. field locations which have been manufactured
for, or are held or used primarily for, the conduct of the Prostiva Business
identified in Schedule 5.1 to this Agreement, and which are new,
unexpired and not due to expire within six (6) months of the date of
consignment, and (b) Products returned to Licensor in accordance with Section
3.3(b) above (the “US Consignment Inventory”), except for that inventory that
Licensor anticipates will be necessary to fulfill orders received from its
customers or distributors outside of the United States in accordance with
Section 3.2 hereof (the “OUS Consignment Inventory”) during the three (3) month
period following the Effective Date (the “Consignment Period”) (The US
Consignment Inventory and OUS Consignment Inventory are collectively referred
to as the “Consignment Inventory”). Licensee will use the US Consignment
Inventory as needed to fulfill orders it receives as Licensor’s distributor of
Products pursuant to the terms of the Interim Distribution Agreement. Licensee
shall sell Consignment Inventory prior to selling Products received under new
purchase orders.

          5.2
Consignment and Use of OUS Consignment Inventory. Upon the
expiration of each of the Licensor EU Transition Period and the applicable
Licensor OUS / OEU Transition Periods, as determined on a country-by-country
basis, Licensee shall accept consignment of any remaining OUS Consignment
Inventory that is new, unexpired and not due to expire within six (6) months of
the date of consignment and in salable condition which Licensor purchases back
from any of its distributors outside of the United States. 

          5.3
Shipment of Consignment Inventory. As soon as practicable after
the Effective Date, Licensor will make the US Consignment Inventory available
and Licensee will arrange for shipment, at Licensee’s expense, of the US
Consignment Inventory to Licensee’s facility located at 14405 21st Avenue
North, Minneapolis, MN 55447 (the “Facility”). As soon as practicable after the
expiration of the Licensor EU Transition Period and each Licensor OUS / OEU
Transition Period, as applicable, Licensor will make available and Licensee
will arrange and pay for shipping the specified OUS Consignment Inventory to
the Facility; provided that Licensee may reject, and will not be obligated to
pay for any OUS Consignment Inventory that, upon receipt and inspection
following receipt thereof, is not new, is expired (or due to expire within six
months of the consignment date) or is not in saleable condition. Licensee must
notify Licensor in writing of any rejection of OUS Consignment Inventory within
ten (10) business days following receipt thereof, and if Licensee fails to do
so, such inventory will be deemed accepted by Licensee. In each case, Licensee
shall pay for all shipping costs for Consignment Inventory (other than rejected
Consignment Inventory) and for any insurance necessary to cover such
Consignment Inventory during shipment but shall not pay for handling. 

          5.4
Duration of Consignment Period; Title. For the avoidance of
doubt, both the US Consignment Inventory and the OUS Consignment Inventory will
be consigned by Licensor for a maximum period of nine (9) months following the
Effective Date (the “Consignment Period”). Licensor shall retain title to the
US Consignment Inventory and OUS Consignment Inventory until the earlier to
occur of (i) Licensee’s removal of any Product from the Consignment Inventory,
or (ii) the expiration of the Consignment Period. 

15

          5.5
Price, Reports and Payment. The prices to be paid by Licensee for
the Consignment Inventory shall be as set forth on Schedule 5.5 hereof.
Licensee shall submit a written report to Licensor within ten (10) business
days after the end of each calendar month during the Consignment Period setting
forth the number of Product removed from inventory during the previous calendar
month, and the number of Products remaining in the Consignment Inventory. Based
on such report, Licensor shall issue an invoice for the number of Products
removed by Licensee from the Consignment Inventory and Licensee shall pay such
invoice within nine (9) months of the fifteenth (15th) day of that
month. Within ten (10) business days following the expiration of the
Consignment Period, Licensee shall submit a final report to Licensor setting
forth the number of Products remaining in the Consignment Inventory (if any).
Based on such final report, Licensor shall issue an invoice for the number of
Products remaining in the Consignment Inventory and documentation of the
invoiced cost to Licensor, at which time title shall have passed to Licensee,
and Licensee shall pay such invoice within nine (9) months following the
expiration of the Consignment Period. 

          5.6
Risk of Loss. Licensee will bear the risk of loss for the
Consignment Inventory once it has been shipped to Licensee’s facility as
provided in Section 4.3. Once placed on the carrier for shipment, Licensor
shall not be liable for any damage or unexplained disappearance of the
Consignment Inventory. 

ARTICLE 6

SUPPLY OF PRODUCT COMPONENTS 

          6.1
Bovie Products. Subject to the terms and conditions of this
Agreement and as requested by Licensee, Licensor agrees to place one last time
buy order on Licensee’s behalf under that certain Development and Supply
Agreement by and between Licensor and Bovie Medical Corporation (“Bovie”) dated
September 15, 2003, as amended (“Bovie Agreement”), and Licensee agrees to
purchase such requested products (the “Bovie Products”) from Licensor.
Licensor’s obligation to place orders under the Bovie Agreement is subject to
the terms and conditions thereof, including without limitation, the termination
of such agreement. Licensee understands and acknowledges that the Bovie
Agreement will terminate on December 31, 2011, and nothing contained herein
shall require Licensor to seek modification to the terms and conditions of the
Bovie Agreement, including without limitation, extension thereof, or to enter
into any new supply agreements with any of Licensor’s previous suppliers or
with other third parties in order to fulfill Licensor’s obligations under this
Agreement. 

          6.2
MedTech Products. Subject to the terms and conditions of this
Agreement and as requested by Licensee, Licensor agrees to place orders for
handpieces (the “MedTech Products”) on a monthly basis until US Regulatory
Transfer occurs on Licensee’s behalf under that certain Manufacturing and
Supply Agreement with The MedTech Group, Inc., dated August 6, 2010 (“MedTech
Agreement”). Licensor’s obligation to place orders under the MedTech Agreement
is subject to the terms and conditions thereof, including without limitation,
the termination of such agreement. Nothing contained herein shall require 

16

Licensor to seek
modification to the terms and conditions of the MedTech Agreement, including
without limitation, extension thereof, or to enter into any new supply
agreements with any of Licensor’s previous suppliers or with other third
parties in order to fulfill Licensor’s obligations under this Agreement. 

          6.3
MediVision Products. Licensor shall assign to Licensee the
MediVision, Inc. Sales Orders described in the letter agreement by and among
Licensor, Licensee and MediVision, Inc. dated August 16, 2011 (the “MediVision
Agreement”), in accordance with the MediVision Agreement.

          6.4
Price. Licensor shall sell Licensee each Bovie Product and
MedTech Product ordered by Licensor on Licensee’s behalf pursuant to this
Article 6 at Licensor’s invoiced cost. Notwithstanding the foregoing, Licensor
may adjust the price of any Bovie Product or MedTech Product for an amount
equal to any tax levied on it with respect to the sale, use or delivery of the
Bovie Products or MedTech Products, as applicable (other than taxes based upon
the income of Licensor), including sales tax, use tax, gross receipts tax, and
value added tax, in each case to the extent payable by the Licensor or required
to be collected by Licensor. Licensee will arrange for shipping of the Bovie
Products and MedTech Products to Licensee’s Facility at Licensee’s expense. 

          6.5
Payment. Licensee shall pay all invoices for Bovie Products
ordered by Licensor on Licensee’s behalf pursuant to this Article 6 in full
within 30 days following date of all such invoices. Licensee shall pay Licensor
within 270 days of invoice date for all invoices for MedTech Products received
within four (4) months of the Effective Date; thereafter,. Licensee shall pay
all invoices for MedTech Products ordered by Licensor on Licensee’s behalf
pursuant to this Article 6 in full within 30 days following date of all such
invoices.

          6.6
Generators. Promptly following the Effective Date, Licensor, at
its own expense, shall transfer, convey, assign and deliver to Licensee at the
Facility all right, title and interest to thirty (30) Prostiva generators, which
generators shall be [ * * * ]. 

ARTICLE 7

INTELLECTUAL PROPERTY; CONFIDENTIALITY 

          7.1
Intellectual Property. Nothing in this Agreement shall be
construed as an assignment or grant of any rights with respect to either
party’s intellectual property, or to modify the terms and conditions of any
other Transaction Agreement.

          7.2
Confidentiality. All Confidential Information obtained by the
parties in connection herewith shall be subject to the parties’ confidentiality
obligations under the License Agreement. 

17

ARTICLE 8

PERFORMANCE; REPRESENTATIONS; DISCLAIMER; INDEMNIFICATION 

          8.1
Standard of Performance for Services. Each Party shall perform
all services pursuant to this Agreement in a commercially reasonable manner.
Each Party and its Affiliates, as applicable, will perform services in the
manner and the relative level of quality and service consistent in all material
respects with those performed by such Party and its Affiliates prior to the
date hereof. 

          8.2
Representations and Warranties. Licensor represents and warrants
that:

	
  

 	
  

 
	
  

 	
           (a)
 Licensor has good title to the Consignment Inventory, free and clear of liens
 and encumbrances;

 
	
  

 	
  

 
	
  

 	
           (b)
 Licensor has not extended any written warranty to a customer beyond the
 written warranties referred to in Section 3.3(a)(i) of this Agreement;

 
	
  

 	
  

 
	
  

 	
           (c)
 Licensor has not adulterated or misbranded (within the meanings of the
 Federal Food, Drug and Cosmetic Act, as amended) the Consignment Inventory or
 Prostiva generators to be transferred to Licensee under this Agreement; and

 
	
  

 	
  

 
	
  

 	
           (d)
 All of the Consignment Inventory to be consigned to Licensee hereunder shall
 be in saleable condition in the ordinary course of business on the date of
 consignment. 

 

          8.3
No Other Warranty for Products. EXCEPT AS SET FORTH IN THIS
AGREEMENT OR THE OTHER TRANSACTION AGREEMENTS, LICENSOR MAKES NO OTHER
WARRANTIES WITH RESPECT TO THE PRODUCTS WHICH ARE CONSIGNED, TRANSFERRED OR
SOLD TO LICENSEE HEREUNDER. EXCEPT AS SET FORTH IN THIS AGREEMENT OR THE OTHER
TRANSACTION AGREEMENTS, THE PRODUCTS ARE CONSIGNED, SOLD OR TRANSFERRED
HEREUNDER IN “AS IS/WHERE IS” AND “WITH ALL FAULTS” CONDITION, WITH ALL
WARRANTIES AND REPRESENTATIONS BEING EXPRESSLY DISCLAIMED AND WAIVED. LICENSEE
HEREBY ACKNOWLEDGES AND AGREES THAT LICENSOR MAKES NO OTHER REPRESENTATIONS OR
WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, UNDER THIS AGREEMENT WITH RESPECT TO
ANY MATTER RELATING TO THE PRODUCTS, INCLUDING, WITHOUT LIMITATION, INCOME TO
BE DERIVED OR EXPENSES TO BE INCURRED IN CONNECTION WITH THE PRODUCTS, THE
TRANSFERABILITY OF THE PRODUCTS, THE MERCHANTABILITY OR FITNESS OF THE PRODUCTS
FOR ANY PARTICULAR PURPOSE, ANY IMPLIED WARRANTY OR CONDITION ARISING FROM A
COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, ANY IMPLIED
WARRANTY OR CONDITION OF DURABILITY OR DESCRIPTION, OR ANY OTHER MATTER OR
THING RELATING TO THE PRODUCTS OR ANY PORTION THEREOF. 

          8.4
Indemnification. 

18

	
  

 	
  

 
	
  

 	
           (a)
 Indemnification by Licensee. Pursuant to Section 8.1(a) of the License
 Agreement, and subject to Sections 2.2(a)(v) and 4.1(d)(iii) of this
 Agreement, Licensee shall indemnify Licensor, and any other Medtronic
 Indemnitees, and defend and save each of them harmless, from and against any
 and all Losses in connection with any and all Third Party Claims to the
 extent arising from or occurring as a result of the breach by Licensee of any
 representation or warranty, or the material breach of a covenant, under this
 Agreement. 

 
	
  

 	
  

 
	
  

 	
           (b)
 Indemnification by Licensor. Pursuant to Section 8.2(a) of the License
 Agreement, and subject to Sections 2.2(a)(v) and 4.1(d)(iii) of this
 Agreement, Licensor shall indemnify Licensee, and any other Urologix
 Indemnitees, and defend and save each of them harmless, from and against any
 and all Losses in connection with any and all Third Party Claims to the
 extent arising from or occurring as a result of the breach by Licensor of any
 representation or warranty, or the material breach of a covenant, under this
 Agreement. 

 
	
  

 	
  

 
	
  

 	
           (c)
 Indemnification as Sole Remedy for Third Party Claims. Other than the
 equitable relief described in Section 10.13 hereof, the remedies set forth in
 Sections 2.2(a)(v) and 4.1(d)(iii) hereof, and the termination rights set
 forth in Section 9.2 hereof, indemnification pursuant to this Section 8.4
 shall be a party’s sole remedy for Third Party Claims arising hereunder. 

 
	
  

 	
  

 
	
  

 	
           (d)
 Contribution. With respect to any Third Party Claim for which both
 parties have an obligation to indemnify the other pursuant to this Section
 8.4, the provisions set forth in Section 8.3 of the License Agreement
 (Contribution) shall be incorporated herein by reference and shall apply. 

 
	
  

 	
  

 
	
  

 	
           (e)
 Procedure for Indemnification. The procedures for indemnification set
 forth in Section 8.4 of the License Agreement (Procedure for Indemnification)
 shall be incorporated herein by reference and shall apply to any
 indemnification claims under this Section 8.4. 

 
	
  

 	
  

 
	
  

 	
           (f)
 Exclusions / Limitations. All claims arising under this Agreement,
 including but not limited to, direct claims and in the case of
 indemnification, for Third Party Claims, are subject to the exclusions and
 limitations set forth in Section 8.6 of the License Agreement (including all
 of its subsections) and shall be incorporated herein by reference. 

 

ARTICLE 9

TERM AND TERMINATION 

          9.1
Term. The term of this Agreement shall commence on the date
hereof and shall expire on the twelve (12) month anniversary hereof, except
with respect to services expressly agreed to by Licensor in writing to be
performed after such period pursuant to the terms of this Agreement (the
“Term”), and provided that, if US Regulatory Transfer has not occurred 

19

within such twelve (12)
month period, this Agreement shall be automatically extended for a period of
three (3) months. 

          9.2
Termination.

	
  

 	
  

 
	
  

 	
           (a)
 By
 Licensor. Except as set forth in this Section 9.2, Licensor may
 terminate this Agreement in the event Licensee materially breaches this
 Agreement, including the terms and conditions of the Interim Distribution
 Agreement and the Quality Agreement, and such breach remains uncured for
 sixty (60) days’ following written notice from Licensor specifying in detail
 the claimed breach by Licensee of this Agreement and required corrective
 action. Licensee shall not be deemed in breach of a particular obligation
 under this Agreement to the extent Licensee’s performance is delayed or
 prohibited due to Licensor’s failure to meet Licensor’s obligations under
 this Agreement. 

 
	
  

 	
  

 
	
  

 	
           (b)
 By
 Either Party. Either Party may terminate this Agreement in
 connection with a Major Challenge only in the specific circumstances set
 forth in Section 4.1(d)(ii) and Section 4.1(d)(iii) hereof. Such a
 termination of the Agreement will not release Licensor or Licensee from any
 obligation that accrued prior to the effective date of such termination, but
 such a termination will release Licensee of any further payment obligation
 for any Minimum Royalty for a partial Contract Year, any License Fee not then
 due and payable, and any obligation to purchase Transferred Prostiva Assets
 under the Acquisition Option Agreement or to purchase Assets under the Asset
 Purchase Agreement. Except as set forth in Section 4.1(d)(iii) with respect
 to a termination in connection with Section 4.1(d)(ii) hereof, such a
 termination shall be the sole and exclusive remedy available to the
 applicable terminating Party, and neither party shall have any direct
 liability to the other party or obligation to indemnify the other party,
 including without limitation pursuant to Section 8.4 hereof or Article 8 of
 the License Agreement, or shall suffer any consequences as a result of such
 Party’s decision to terminate pursuant to this Section, except as explicitly
 set forth herein or in the License Agreement. Notwithstanding the foregoing,
 in the event of any such termination, (i) the terminating Party shall give
 the other Party fifteen (15) days’ advance written notice thereof, (ii)
 during or after such period, the Parties shall meet to discuss and document,
 in good faith, a plan to unwind the transition of the Prostiva Business from
 Licensor to Licensee that had occurred prior to the effective date of
 termination, including without limitation, with respect to the treatment of
 Consignment Inventory; and (iii) the provisions set forth in Sections 6.4 and
 6.5.3 of the License Agreement are incorporated herein by reference and shall
 apply as set forth therein. 

 
	
  

 	
  

 
	
  

 	
           (c)
 By Licensee.
 Licensee may terminate this Agreement in connection with excessive Third
 Party Costs as described in Section 2.2(a)(v) hereof. Such a termination of
 the Agreement will not release Licensor or Licensee from any obligation that
 accrued prior to the effective date of such termination, but such a
 termination will release Licensee of any further payment obligation for any
 Minimum Royalty for a partial Contract Year except as set forth in Section
 9.2(d), any License Fee not then due and 

 

20

	
  

 	
  

 
	
  

 	
 payable, and any
 obligation to purchase Transferred Prostiva Assets under the Acquisition
 Option Agreement or to purchase Assets under the Asset Purchase Agreement.
 Except as set forth in Section 2.2(a)(v), such a termination shall be the
 sole and exclusive remedy available to the Licensee, and neither party shall
 have any direct liability to the other party or obligation to indemnify the
 other party, including without limitation pursuant to Section 8.4 hereof or
 Article 8 of the License Agreement, or shall suffer any consequences as a
 result of such Party’s decision to terminate pursuant to this Section, except
 as explicitly set forth herein or in the License Agreement. Notwithstanding
 the foregoing, in the event of any such termination, (i) the Licensee shall
 give Licensor fifteen (15) days’ advance written notice thereof, (ii) during
 or after such period, the Parties shall meet to discuss and document, in good
 faith, a plan to unwind the transition of the Prostiva Business from Licensor
 to Licensee that had occurred prior to the effective date of termination
 including without limitation, with respect to the treatment of Consignment
 Inventory; and (iii) the provisions set forth in Sections 6.4 and 6.5.3 of
 the License Agreement are incorporated herein by reference and shall apply as
 set forth therein.

 
	
  

 	
  

 
	
  

 	
           (d)
 Inventory.
 In the event of termination of this Agreement, Licensee shall (i) return to
 Medtronic all finished goods inventory of Product consigned to it pursuant to
 this Agreement and (ii) provide Licensor the right to purchase, at Licensee’s
 cost, all finished goods inventory of Product owned by Licensee which have
 been manufactured for, or are held or used primarily for, the conduct of the
 Prostiva Business and which are new, unexpired and not due to expire within
 six (6) months of the date of termination. In the event Licensor does not
 exercise its right to purchase the Licensee owned inventory, Licensee shall
 have an additional 90 days after termination of this Agreement to sell the
 inventory under the licenses granted in the License Agreement as set forth in
 Section 6.5.6 of the License Agreement, as if the Interim Distribution
 Agreement had not terminated. 

 
	
  

 	
  

 
	
  

 	
           (e)
 Survival.
 The Parties’ obligations pursuant to Article 7, Article 10 and Sections
 2.2(a)(v), 2.3, 4.1(d)(iii), 8.4, and 9.2 hereof, and any other express terms
 and provisions hereof to be performed by the parties after the termination
 hereof, shall survive the expiration or termination of this Agreement in
 accordance with their respective terms. 

 

ARTICLE 10

MISCELLANEOUS 

	
  

 
	
           10.1          Complete
 Agreement. This Agreement, including all schedules and exhibits annexed
 hereto, contain the entire understanding of the Parties hereto with respect
 to the subject matter contained herein.

 
	
  

 
	
           10.2          Waiver
 and Amendment. This Agreement may be amended, or any provision of this
 Agreement may be waived, provided that any such amendment or waiver will be
 binding on a party hereto only if such amendment or waiver is set forth in a
 writing 

 

21

	
  

 
	
 executed by such party.
 The waiver by any party hereto of a breach of any provision of this Agreement
 shall not operate or be construed as a waiver of any other breach.

 
	
  

 
	
           10.3          Notices.
 All notices and other communications hereunder shall be in writing and shall
 be deemed to have been given only if and when (i) personally delivered, or
 (ii) three (3) business days after mailing, postage prepaid, by certified
 mail, or (iii) when delivered (and receipted for) by an overnight delivery
 service, or (iv) when first sent by facsimile provided such communication is
 promptly confirmed, addressed in each case as follows:

 

	
  

 	
  

 
	
 If to Licensee:

 
	
  

 	
  

 
	
  

 	
 Urologix Inc.

 
	
  

 	
 14405 21st Avenue North

 
	
  

 	
 Minneapolis, MN 55447

 
	
  

 	
 Attn: Greg Fluet

 
	
  

 	
 Fax: 763-475-1443

 
	
  

 	
  

 
	
 With a copy to:

 
	
  

 	
  

 
	
  

 	
 Lindquist & Vennum P.L.L.P.

 
	
  

 	
 80 S. 8th Street, Suite 4200

 
	
  

 	
 Minneapolis, MN 55402

 
	
  

 	
 Attention: Charles P. Moorse and Barbara Rummel

 
	
  

 	
 FAX No: (612) 371-3207

 
	
  

 	
  

 
	
 If to Licensor:

 
	
  

 	
 Medtronic, Inc.

 
	
  

 	
 World Headquarters

 
	
  

 	
 710 Medtronic Parkway 

 
	
  

 	
 Minneapolis, MN 55432-5604

 
	
  

 
	
 With separate copies thereof addressed to:

 
	
  

 	
  

 
	
  

 	
 Attention:          General
 Counsel

 
	
  

 	
 FAX
 No.:          (763)
 572-5459

 
	
  

 	
  

 
	
  

 	
 -and-

 
	
  

 	
  

 
	
  

 	
 Attention:     Vice
 President and Chief Development Officer

 
	
  

 	
 FAX
 No.:          (763)
 505-2542

 
	
  

 	
  

 

22

Either the Licensor or
the Licensee may change the address(es) for the giving of notices and
communications to it, and/or copies thereof, by written notice to the other
Party in conformity with the foregoing.

          10.4          Expenses.
Except as may be expressly provided herein, Licensor and Licensee shall each
pay their own expenses (including, but not limited to, all compensation and
expenses of counsel, financial advisors, consultants, actuaries and independent
accountants) incident to this Agreement and the preparation for, and
consummation of, the transactions provided for herein.

          10.5          Governing
Law. This Agreement shall be governed by, and construed, interpreted and
enforced under, the laws of the State of Minnesota without giving effect to its
conflict of laws principles. 

          10.6          Jurisdiction
and Venue. Each Party hereby irrevocably submits to the exclusive
jurisdiction of the courts located in Hennepin County, Minnesota, in respect of
any claim relating to the interpretation and enforcement of the provisions of
this Agreement and of the documents referred to in this Agreement, or otherwise
in respect of the transactions contemplated hereby and thereby, and hereby
waives, and agrees not to assert, as a defense in any action, suit or
proceeding in which any such claim is made that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in such courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts.

          10.7          Relationship.
This Agreement does not make either party the employee, agent or legal
representative of the other for any purpose whatsoever. Neither party is
granted any right or authority to assume or to create any obligation or
responsibility, express or implied, on behalf of or in the name of the other
party. In fulfilling its obligations pursuant to this Agreement, each party
shall be acting as an independent contractor.

          10.8          Assignment.
Neither Party shall assign this Agreement, or any right or obligation
thereunder, to any third party without the prior written consent of the other
Party. This Agreement shall be binding upon and be for the benefit of the
Parties and their respective successors and permitted assigns. In the event
either Party (the “Assigning Party”) merges or consolidates with another entity
or sells substantially all of its assets to another person or entity, or if
there is a change in control of the Assigning Party or other corporate
reorganization or transaction affecting the Assigning Party (an “Acquisition”),
no consent of the other Party shall be required, but this Agreement shall
remain in full force and effect and the Assigning Party shall assign and
transfer (whether by operation of law or otherwise) this Agreement to the
entity with which it has merged or consolidated, the new owners of the assets,
the new owners of the Assigning Party or the surviving entity in the
reorganization or corporate transaction, as the case may be, and shall cause
that entity or person to assume and agree to perform the entirety of this
Agreement, but shall remain responsible for its obligations hereunder
notwithstanding such assumption. 

23

          10.9          Titles
and Headings; Construction. The titles and headings 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.

          10.10          Third
Parties. Nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any Person, other than the parties to this
Agreement and their respective permitted successors and assigns, any rights or
remedies under or by reason of this Agreement.

          10.11          Illegality.
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or implied thereby.

          10.12          Counterparts.
This Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties hereto and delivered to
the other. In the execution of this Agreement, facsimile, scanned or
electronically delivered signatures shall be fully effective for all purposes.

          10.13          Remedies.
The Parties agree, that in addition to any other relief afforded under the
terms of this Agreement or by law, each Party has the right to seek equitable
remedies, including specific performance and enforcement of this Agreement by
injunction issued against the other Party, it being understood that both
damages and equitable remedies will be proper modes of relief and are not to be
considered as alternative remedies.

[Signatures
follow]

24

          IN
WITNESS WHEREOF, the parties have executed this Transition Services and
Supply Agreement as of the Effective Date.

	
  

 	
  

 	
  

 
	
  

 	
 UROLOGIX INC.

 
	
  

 	
  

 
	
  

 	
 By: /s/ Stryker Warren Jr.

 	
  

 
	
  

 	
  

 
	
  

 	
 Name: Stryker Warren Jr. 

 
	
  

 	
 Title: Chief Executive Officer

 
	
  

 	
  

 
	
  

 	
 MEDTRONIC, INC.

 
	
  

 	
  

 
	
  

 	
 By: /s/ Thomas M. Tefft

 	
  

 
	
  

 	
  

 
	
  

 	
 Name: Thomas M. Tefft

 
	
  

 	
 Title: Senior Vice President & President,
 Neuromodulation

 

[The following exhibits
and schedules are omitted from the copy of this agreement as filed with the
Securities and Exchange Commission, but will be furnished supplementally by Urologix,
Inc. to the Commission upon request:

Schedule A – Transition Plan

Schedule B – Interim Distribution Agreement

Schedule C – Regulatory Transition Plan

Schedule D – Quality Agreement

Schedule 2.5 – Designated Employees

Schedule 4.1(a) – 510(k) Work Plan

Schedule 4.1(f) – Safety Data Contact Lists

Schedule 5.1(a) – US Consignment Inventory

Schedule 5.5(a) – Transfer Prices]Exhibit 10.3

ACQUISITION OPTION AGREEMENT

          THIS
AGREEMENT is entered into as of September 6, 2011 (the “Effective Date”),
among Medtronic VidaMed, Inc., a Delaware corporation (“VidaMed”),
Medtronic, Inc., a Minnesota corporation (“Medtronic”), and Urologix,
Inc., a Minnesota corporation (“Urologix”). VidaMed, Urologix and
Medtronic may each be referred to in this Agreement individually as a “Party”
and collectively as the “Parties.” 

RECITALS:

          A.          The
Parties are entering into a License Agreement of even date herewith (the “License
Agreement”) and certain Sublicense Agreements of even date herewith (the “Sublicense
Agreements”) under which Medtronic, on behalf of itself and its Affiliates,
including VidaMed, is granting to Urologix licenses and sublicenses to certain
intellectual property rights to manufacture, market and distribute the Products
in the Field of Use pursuant to the terms and conditions of the License
Agreement and Sublicense Agreements, as applicable;

          B.          As
one of the conditions to the License Agreement, (i) Medtronic is granting to
Urologix the option to purchase the Transferred Prostiva Assets and to retain
the Field License and the Thermal Scalpel Sublicense, upon the terms and
subject to the conditions set forth in this Agreement; and (ii) Urologix is
granting Medtronic the option to require Urologix to purchase the Transferred
Prostiva Assets, upon the terms and subject to the conditions set forth or
incorporated in this Agreement; and 

          C.          To
facilitate the transition of the Prostiva Business to Urologix, the parties are
simultaneously entering into a Transition Services and Supply Agreement, and an
Asset Purchase Agreement, subject to the terms and conditions set forth therein.

AGREEMENTS:

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

ARTICLE 1

DEFINITIONS

          1.1.     Specific
Definitions. Terms used herein and not otherwise defined have the meaning
given such term in the License Agreement. As used herein, the following
definitions shall have the meanings set forth or as referenced below. 

“Acquisition
Closing” has the meaning given in Section 4.1 hereof.

“Acquisition
Closing Date” has the meaning given in Section 4.1 hereof.

“Asset
Purchase Agreement” means that certain Asset Purchase Agreement between Medtronic,
VidaMed and Urologix dated as of the date hereof. 

“Call
Option” has the meaning given in Section 2.1 hereof.

“Call
Option Term” means the period (A) beginning on the Effective Date, and (B)
ending on the date the License Agreement expires or terminates, or, if earlier,
the date the Medtronic Exercise Notice is received by Urologix, provided
Urologix accepts the Put Price set forth therein and the Acquisition Closing in
respect to the Put Option occurs as provided herein.

“Call Price”
means the sum of (A) Ten Million Dollars ($10,000,000), minus (B) the aggregate of
(i) the portion of the License Fee paid by Urologix under the License Agreement
prior to the Acquisition Closing Date (including any credits against the
License Fee as specifically provided for in Section 3.2(a)(i) of the Transition
Services and Supply Agreement), minus (ii) all Earned Royalties and
Shortfall Payments made by Urologix under the License Agreement prior to the
Acquisition Closing Date, and minus (iii) the Purchase Price paid under
the Asset Purchase Agreement prior to the Acquisition Closing Date. 

“Common
Stock” means shares of the voting common stock, par value $ .01 per share
of VidaMed.

“Convertible
Securities” means any indebtedness or other securities of VidaMed that are
convertible into or exchangeable for, directly or indirectly, Common Stock,
Preferred Stock or other equity of VidaMed.

“Field
License” has the meaning set forth in Section 2.1(b) hereof. 

“License
Agreement” has the meaning given to it in the Recitals of this Agreement.

“Non-Field
Retained License” has the meaning set forth in Section 2.1(a) hereof. 

“Options”
means options, warrants or other rights to acquire, directly or indirectly,
Common Stock, Preferred Stock or Convertible Securities.

“Preferred Stock”
means shares of preferred stock in VidaMed.

“Put Option”
has the meaning given in Section 3.1 hereof.

“Put Option
Term” means the period (A) beginning on the Effective Date, and (B) ending
on the date the License Agreement expires or terminates, or, if earlier, the
date the Urologix Exercise Notice is received by Medtronic, provided the
Acquisition Closing in respect to the Call Option occurs as provided herein.

“Put Price”
means the price set forth in the Medtronic Exercise Notice, provided such price
is accepted by Urologix in its sole discretion as provided in Section 3.2.

 “Thermal Scalpel Sublicense” means
that certain Sublicense Agreement Regarding Thermal Scalpel between Medtronic
(as sublicensor) and Urologix (as sublicensee) as of the date hereof. 

“Transferred
Prostiva Assets” means (i) all of the VidaMed Common Stock outstanding at
the Acquisition Closing; (ii) the Patents, Trademarks, and the Other
Intellectual Property. 

- 2 -

“Transition
Services and Supply Agreement” means that certain Transition Services and
Supply Agreement between Medtronic and Urologix dated as of the date hereof.

“VidaMed
Securities” means Common Stock, Preferred Stock, Convertible Securities
and/or Options.

          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 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.

 
	
  

 	
  

 
	
  

 	
           (e)          The
 word “including” or any variation thereof means (unless the context of its
 usage otherwise requires) “including, without limitation” and shall not be
 construed to limit any general statement that it follows to the specific or
 similar items or matters immediately following it.

 
	
  

 	
  

 
	
  

 	
           (f)          All
 references to time shall refer to Minneapolis, Minnesota time.

 

ARTICLE 2

CALL OPTION

          2.1.     Call
Option. Subject to the terms and conditions of this Agreement, Medtronic
hereby grants to Urologix the irrevocable option (the “Call Option”) to
acquire from Medtronic and VidaMed, during the Call Option Term, in the manner
described herein, the Transferred Prostiva Assets. On the Acquisition Closing:

	
  

 	
  

 
	
  

 	
           (a)          Medtronic
 and VidaMed shall (i) sell, transfer, assign, convey and deliver to Urologix
 all right, title and interest in and to VidaMed Common Stock, and (ii) sell, transfer,
 assign, convey and deliver to Urologix all of Medtronic and VidaMed’s
 respective right, title and interest in and to the other Transferred Prostiva
 Assets. 

 
	
  

 	
  

 
	
  

 	
           (b)          Urologix
 shall grant to Medtronic an exclusive, royalty-free, irrevocable,
 transferable, sublicensable, worldwide license to exploit the Patents
 included in the Transferred Prostiva Assets outside the Field of Use, in the
 form attached hereto as Exhibit A (the “Non-Field Retained License”). 

 

- 3 -

	
  

 	
  

 
	
  

 	
           (c)          The
 license granted by Medtronic to Urologix under Section 2.1.1(b) of the
 License Agreement and the rights granted by Medtronic to Urologix under
 Section 2.1.1 (c) of the License Agreement with respect to Other Medtronic
 Business Intellectual Property will become perpetual and irrevocable (the “Field
 License”). 

 
	
  

 	
  

 
	
  

 	
           (d)          The
 Thermal Scalpel Sublicense will continue subject to the terms and conditions
 thereof. 

 

The
Acquisition Closing shall occur as a single event and shall result in the
purchase by Urologix of the Transferred Prostiva Assets, the grant of the
Non-Field Retained License to Medtronic, and the retention of the Field License
by Urologix. 

          2.2.     Manner
of Exercise. To exercise timely the Call Option, Urologix shall, at or
prior to the expiration of the Call Option Term, give written notice (the “Urologix
Exercise Notice”) to Medtronic indicating Urologix’s election to exercise
the Call Option and the Acquisition Closing shall, subject to the terms and conditions
hereof, take place as provided in Article 4 hereof. 

          2.3.     Payment
of Acquisition Purchase Price. Subject to the terms and conditions hereof,
Urologix shall, if it exercises the Call Option, pay the Call Price, at the
time and in the manner described in Section 4.2. 

ARTICLE 3

MEDTRONIC PUT OPTION

          3.1.     Put
Option. Subject to the terms and conditions of this Agreement, Urologix
hereby grants to Medtronic the irrevocable option (the “Put Option”) to
require Urologix to purchase from Medtronic, during the Put Option Term (as
defined herein), in the manner described herein, the Transferred Prostiva
Assets, subject to the grant of the Non-Field Retained License to Medtronic.
The Acquisition Closing shall occur as a single event and shall result in the
purchase by Urologix of the Transferred Prostiva Assets, the grant of the
Non-Field Retained License to Medtronic from Urologix as described in Section
2.1(a) hereof, the retention by Urologix of the Field License as described in Section
2.1(b) hereof, and the continuation of the Thermal Scalpel Sublicense as
described in Section 2.1(c) hereof. 

          3.2.     Manner
of Exercise. To exercise timely the Put Option, Medtronic shall, at or
prior to the expiration of the Put Option Term, give written notice (the “Medtronic
Exercise Notice”) to Urologix indicating Medtronic’s election to exercise
the Put Option, setting forth Medtronic’s proposed Put Price. Within 20
business days after receipt by Urologix of the Medtronic Exercise Notice,
Urologix shall, by written notice to Medtronic either accept or reject the Put
Price in its sole discretion. If Urologix accepts the Put Price, the
Acquisition Closing shall, subject to the terms and conditions hereof, take
place as provided in Article 4 hereof. If Urologix rejects the Put Price, the
Put Option shall remain exercisable by Medtronic, subject to the terms and
conditions of this Agreement, for the remainder of the Put Option Term.

- 4 -

ARTICLE 4

ACQUISITION CLOSING

          4.1.     Acquisition
Closing. Subject to the terms and conditions hereof, the closing of the
Call Option or the Put Option, as the case may be, and the consummation of the
related transactions hereunder, pursuant to the exercise of the Call Option or
Put Option, respectively (the “Acquisition Closing”), shall be held
during normal business hours, at the offices of Urologix, on the latest to
occur of: (i) the tenth business day after the expiration of the period in
which Urologix had the right to rescind the Urologix Exercise Notice, in
respect to the Call Option; (ii) the tenth business day after receipt by
Medtronic of Urologix’s notice accepting the Put Price, in respect to the Put
Option; and (iii) at such other time, date or place upon which Medtronic and
Urologix shall agree. The time and date of the Acquisition Closing is referred
to as the “Acquisition Closing Date.”

          4.2.     Acquisition
Closing Deliveries. Subject to the terms and conditions hereof, at the
Acquisition Closing, VidaMed and Medtronic will cause to be delivered to
Urologix: (a) certificates representing the VidaMed Securities purchased
by Urologix duly endorsed in negotiable form acceptable to Urologix and its
counsel, and (b) duly executed copies of such assignments in the forms attached
hereto as Exhibit B required to be delivered to Urologix at or prior to
the Acquisition Closing pursuant to Article 7 hereof or as Urologix may
otherwise reasonably request in connection herewith. Subject to the terms and
conditions hereof, at the Acquisition Closing, Urologix shall deliver to
Medtronic: (a) a wire transfer in the amount of the Call Price or Put Price, as
applicable, as directed by Medtronic, (b) a duly executed copy of the Non-Field
Retained License substantially in the form attached hereto as Exhibit A,
and (c) any other documents required to be delivered at or prior to the
Acquisition Closing provided in this Agreement or as Medtronic may reasonably
request, which shall include without limitation, appropriate representations of
an investor purchasing stock under applicable law. 

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF

VIDAMED AND MEDTRONIC

          5.1.     Signing
Representations and Warranties. As an inducement to Urologix to proceed
with the License Agreement, to execute and deliver this Agreement and the
Related Agreements, and to consummate the transactions provided for therein and
herein, VidaMed and Medtronic, jointly and severally, represent and warrant to
Urologix that the following representations and warranties are true and correct
as of the Effective Date (the “Signing Representations and Warranties”):

	
  

 	
  

 
	
  

 	
           (a)          Each
 of Medtronic and VidaMed is a corporation duly organized, validly existing
 and in good standing under the laws of the State of Minnesota and the State
 of Delaware, respectively, and has all requisite corporate power and
 authority to enter into, execute and deliver this Agreement and to perform
 all of its obligations hereunder, including without limitation, the requisite
 corporate power and authority to transfer the Transferred Prostiva Assets at
 the Acquisition Closing without requiring the consent or approval of any
 other person;

 

- 5 -

	
  

 	
  

 
	
  

 	
           (b)          Medtronic
 owns the VidaMed Securities, free and clear of all liens and encumbrances,
 and the VidaMed Common Stock constitutes the only VidaMed Securities issued
 and outstanding as of the Effective Date; and

 
	
  

 	
  

 
	
  

 	
           (c)          Medtronic
 and VidaMed are the owners of the Transferred Prostiva Assets (other than the
 VidaMed Securities) and the Other Medtronic Business Intellectual Property
 listed in Section 4 of Exhibit G of the License Agreement in the Field of
 Use, free and clear of liens and third party rights except as set forth on
 Exhibit A of the License Agreement, and the owners of the Other Medtronic
 Business Intellectual Property listed in Section 5 of Exhibit G in the Field
 of Use, free and clear of liens and third party rights created by Medtronic.

 

          5.2.     Closing
Representations and Warranties. VidaMed and Medtronic, jointly and
severally, represent and warrant to Urologix that the following representations
and warranties shall be true and correct as of the Acquisition Closing (the “Closing
Representations and Warranties”):

	
  

 	
  

 
	
  

 	
           (a)          Each
 of Medtronic and VidaMed is a corporation duly organized, validly existing
 and in good standing under the laws of the State of Minnesota and the State
 of Delaware, respectively, and has all requisite corporate power and
 authority to perform all of its obligations hereunder, including without
 limitation, the requisite corporate power and authority to transfer the
 Transferred Prostiva Assets without requiring the consent or approval of any
 other person;

 
	
  

 	
  

 
	
  

 	
           (b)          Medtronic
 owns the VidaMed Securities, free and clear of all liens and encumbrances
 (other than any liens or encumbrances granted or created by Urologix after
 the Effective Date), and the VidaMed Common Stock constitutes the only
 VidaMed Securities issued and outstanding as of the Acquisition Closing;

 
	
  

 	
  

 
	
  

 	
           (c)          Medtronic
 and VidaMed are the owners of the Transferred Prostiva Assets (other than the
 VidaMed Securities) and the Other Medtronic Business Intellectual Property
 listed in Section 4 of Exhibit G of the License Agreement in the Field of
 Use, free and clear of liens and third party rights except as set forth on
 Exhibit A of the License Agreement, and the owners of the Medtronic Business
 Intellectual Property listed in Section 5 of Exhibit G of the License
 Agreement in the Field of Use, free and clear of liens and third party rights
 granted or created by Medtronic (in each case other than any liens or third
 party rights granted or created by Urologix after the Effective Date); 

 
	
  

 	
  

 
	
  

 	
           (d)          The
 performance of Medtronic’s and VidaMed’s obligations under this Agreement do
 not conflict with, cause a default under, or violate any existing contractual
 obligation that may be owed by Medtronic or VidaMed to any third party named
 in Exhibit A or Exhibit D to the License Agreement, or any other contractual
 obligation to a third party that would materially adversely impact Urologix’s
 operation of the Prostiva Business as it was conducted by Medtronic as of the
 Effective Date (other than a contractual obligation to a third party created
 by Urologix after the Effective Date); 

 

- 6 -

	
  

 	
  

 
	
  

 	
           (e)          VidaMed
 has no liabilities, absolute or contingent, accrued or unaccrued, known or
 unknown, liquidated or unliquidated, whether due or to become due and regardless
 of when asserted, except for (i) those obligations accruing from and after
 the Acquisition Closing Date under the Licensed-In Agreements referenced in
 items 1, 2 and 3 of Exhibit D to the License Agreement, other than
 liabilities for breach by Urologix prior to the Acquisition Closing Date,
 (ii) those obligations accruing from and after the Acquisition Closing Date
 under any agreements identified during the term of the Transition Services
 and Supply Agreement as mutually agreed by the Parties, (iii) any liabilities
 or obligations incurred or created by Urologix after the Effective Date, (iv)
 obligations and liabilities under the Transaction Documents, and (v) any
 rights granted in accordance with the terms of Section 9.1 of this Agreement.

 
	
  

 	
  

 
	
  

 	
           (f)          To
 Medtronic’s or VidaMed’s knowledge, there is no pending, threatened, claim,
 action, suit, or proceeding alleging infringement with respect to the
 Transferred Prostiva Assets in the Field of Use, other than any claims or
 actions commenced by Urologix or by Medtronic pursuant to Section 7.2.2(b) of
 the License Agreement, if any, and other than claims arising after the
 Effective Date based on Urologix use of the Transferred Prostiva Assets; and

 
	
  

 	
  

 
	
  

 	
           (g)          Neither
 Medtronic nor VidaMed is in material breach of any of the terms of the
 Licensed-In Agreements and to the knowledge of Medtronic, such Licensed-In
 Agreements are in full force and effect.

 

          5.3.     DISCLAIMER.
EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS ARTICLE 5 AND ANY EXPRESS
WARRANTIES SET FORTH IN ANY RELATED AGREEMENT AS OF THE EFFECTIVE DATE,
MEDTRONIC AND VIDAMED DO NOT MAKE ANY REPRESENTATION OR GRANT ANY WARRANTY,
EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE,
AND MEDTRONIC AND VIDAMED SPECIFICALLY DISCLAIM ANY OTHER WARRANTIES, WHETHER
WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS
TO THE VALIDITY OF ANY PATENTS, TRADEMARKS, OTHER INTELLECTUAL PROPERTY RIGHTS
OR LICENSED-IN INTELLECTUAL PROPERTY RIGHTS, THE NON-INFRINGEMENT OF ANY
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, THE SCOPE OF THE PATENTS,
TRADEMARKS, OTHER INTELLECTUAL PROPERTY RIGHTS OR LICENSED-IN INTELLECTUAL
PROPERTY RIGHTS, OR THAT THE PATENTS, TRADEMARKS, OTHER INTELLECTUAL PROPERTY
RIGHTS OR LICENSED-IN INTELLECTUAL PROPERTY RIGHTS MAY BE EXPLOITED WITHOUT
INFRINGING THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF UROLOGIX

          As
an inducement to VidaMed and Medtronic to proceed with the License Agreement
and to enter into and perform this Agreement, Urologix hereby makes to
Medtronic and VidaMed the representations and warranties of Urologix set forth
in the License Agreement and

- 7 -

such
representations and warranties are hereby incorporated by reference and are
deemed contained in this Agreement. In addition, Urologix hereby represents and
warrants that (a) no person or entity will be entitled to receive any brokerage
commission, finder’s fee, fee for financial advisory services or similar
compensation in connection with the transactions contemplated by this
Agreement, and (b) it has all requisite corporate power and authority to perform
all of its obligations hereunder, including without limitation, the requisite
corporate power and authority to pay the Put Price or the Call Price, as
applicable, at the Acquisition Closing, without requiring the consent or
approval of any other person. All such representations and warranties shall be
true and correct as of the date hereof and shall be true and correct as of the
Acquisition Closing.

ARTICLE 7

CONDITIONS TO UROLOGIX’S OBLIGATIONS

          Subject
to Urologix’s right to rescind the Urologix Exercise Notice as provided herein
in respect to the Call Option, Urologix’s obligation to consummate the
Acquisition Closing shall, at the option of Urologix, be subject to the
fulfillment of the following conditions, any of which may be expressly waived
in writing by Urologix.

          7.1.     Representations
and Warranties. The Closing Representations and Warranties set forth in
Section 5.2 hereof shall be true and correct on and as of the Acquisition
Closing with the same effect as though such representations and warranties had
been made on and as of such date. An officer of Medtronic shall have certified
to Urologix in writing to such effect. 

          7.2.     Compliance
with Covenants and Agreements. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by Medtronic and
VidaMed on or before the Acquisition Closing shall have been performed or
complied with in all material respects at or prior to the Acquisition Closing.

          7.3.     Litigation
Affecting Closing. At the Acquisition Closing Date, no suit, action or
other proceeding shall be pending or threatened by any person or by or before
any court or governmental agency in which it is sought to restrain or prohibit
or to obtain damages or other relief in connection with the Call Option or the
Put Option, as the case may be, or the consummation of the transactions
contemplated hereby.

          7.4.     Legislation.
At the Acquisition Closing Date, no statute, rule, regulation, order, or
interpretation shall have been enacted, entered or deemed applicable by any
domestic or foreign government or governmental or administrative agency or
court that would make the transactions contemplated by this Agreement illegal.

          7.5.     Resignations.
Resignations, effective as of the Acquisition Closing, of VidaMed’s officers
and directors shall be delivered to Urologix at the Acquisition Closing.

          7.6.     Other
Closing Documents. The documents, instruments, and deliveries by VidaMed
and/or Medtronic referred to in Section 4.2 hereof shall have been delivered to
Urologix.

- 8 -

ARTICLE 8

CONDITIONS TO MEDTRONIC’S OBLIGATIONS

          Medtronic’s
and VidaMed’s obligation to consummate the Acquisition Closing are, at the
option of Medtronic and VidaMed, subject to fulfillment of the following
conditions, any of which may be expressly waived in writing by Medtronic and
VidaMed.

          8.1.     Representations
and Warranties. The representations and warranties contained in Article 6
shall be true and correct on and as of the Acquisition Closing with the same
effect as though such representations and warranties had been made on and as of
such date, and an officer of Urologix shall have certified to Medtronic in
writing to such effect.

          8.2.     Covenants
and Agreements. All covenants, agreements and conditions contained or
incorporated in this Agreement to be performed or complied with by Urologix on
or before the Acquisition Closing shall have been performed or complied with in
all material respects at or prior to the Acquisition Closing.

          8.3.     Litigation
Affecting Closing. At the Acquisition Closing Date, no suit, action or
other proceeding shall be pending or threatened by any person or by or before
any court or governmental agency in which it is sought to restrain or prohibit
or to obtain damages or other relief in connection with the Call Option or the
Put Option, as the case may be, this Agreement or the consummation of the
transactions contemplated hereby.

          8.4.     Legislation.
At the Acquisition Closing Date, no statute, rule, regulation, order, or
interpretation shall have been enacted, entered or deemed applicable by any
domestic or foreign government or governmental or administrative agency or
court that would make the transactions contemplated by this Agreement illegal.

          8.5.     Acquisition
Purchase Price. Urologix shall deliver the Call Price or Put Price, as
applicable, in the manner described in Section 4.2 and satisfy the other
conditions specified in Section 4.2.

          8.6.     Other
Closing Documents. The Non-Field Retained License and the other documents,
instruments, and deliveries by Urologix referred to in Section 4.2 hereof shall
have been executed and delivered to Medtronic.

ARTICLE 9

COVENANTS AND AGREEMENTS

          9.1.     Transfers.
Except as expressly provided in this Agreement, Medtronic agrees that, during
the Call Option Term and Put Option Term, neither it nor VidaMed or any of
their respective Affiliates shall sell, assign, give, pledge, hypothecate, or
otherwise transfer, dispose of, or convey an interest in any Transferred
Prostiva Assets except (a) to Urologix under the License Agreement, the Asset
Purchase Agreement or the Transition Services and Supply Agreement, (b) as
permitted under the License Agreement, (c) pursuant to Urologix’s exercise of
the Call Option or Medtronic’s exercise of the Put Option, or (d) for licenses
or covenants granting rights in the Patents included in the Transferred
Prostiva Assets outside the Field of Use. In addition, during the Put Option
Term and the Call Option Term, VidaMed shall not issue

- 9 -

or record the
transfer of any VidaMed Common Stock or other VidaMed Securities to any person
or entity without the prior written consent of Urologix.

          9.2.     Legend.
Medtronic and VidaMed agree that, during the Call Option Term and the Put
Option Term, each certificate or other instrument representing issued and
outstanding VidaMed Securities shall have imprinted thereto (in addition to any
legend required under applicable securities laws):

	
  

 	
  

 
	
  

 	
 “The
 securities and rights represented hereby are subject to an option as set
 forth in an Acquisition Option Agreement dated ___________, 2011, which
 agreement is on file at the office of the corporation.”

 

Medtronic
consents to VidaMed making a notation on its records and giving stop transfer
or similar instructions to any transfer agent of VidaMed Securities to comply
with this covenant, if applicable.

          9.3.     Confidentiality.
Pursuant to Section 7.3.2 of the License Agreement, Medtronic’s and Urologix’s
respective obligations with respect to Confidential Information shall continue
until the date that is two (2) years after the Acquisition Closing, except with
respect to any items of Confidential Information that no longer retain the
characteristics of Confidential Information during such period. Notwithstanding
the foregoing, Urologix’s obligations with respect to Confidential Information
related to the Prostiva Business shall terminate on the Acquisition Closing
Date. In addition, Medtronic’s obligations under Section 7.6 of the License
Agreement shall survive the Acquisition Closing until the date that is two (2)
years after the Acquisition Closing. 

ARTICLE 10

INDEMNIFICATION

	
  

 	
  

 
	
  

 	
 10.1.     Indemnification
 After the Effective Date.

 
	
  

 	
  

 
	
  

 	
           (a)          By
 Urologix. After the Effective Date, Urologix shall indemnify Medtronic,
 and any other Medtronic Indemnitees, and defend and save each of them
 harmless, from and against any and Losses in connection with any and all
 Third Party Claims to the extent arising from or occurring as a result of the
 breach by Urologix of any representation or warranty made under this
 Agreement made as of the Effective Date, or the material breach of a covenant
 under this Agreement. 

 
	
  

 	
  

 
	
  

 	
           (b)          By
 Medtronic. After the Effective Date, Medtronic shall indemnify Urologix,
 and any other Urologix Indemnitees, and defend and save each of them
 harmless, from and against any and Losses in connection with any and all
 Third Party Claims to the extent arising from or occurring as a result of the
 breach by Medtronic of the Signing Representations and Warranties, or the
 material breach of a covenant under this Agreement. 

 
	
  

 	
  

 
	
  

 	
           (c)          Indemnification
 as Sole Remedy for Third Party Claims. Other than the equitable relief
 described in Section 11.12 hereof, indemnification pursuant to this Section
 10.1 shall be a party’s sole remedy for Third Party Claims arising hereunder.
 

 

- 10 -

	
  

 	
  

 
	
  

 	
           (d)          Contribution.
 With respect to any Third Party Claim for which both parties have an
 obligation to indemnify the other pursuant to this Section 10.1, the
 provisions set forth in Section 8.3 of the License Agreement (Contribution)
 shall be incorporated herein by reference and shall apply. 

 
	
  

 	
  

 
	
  

 	
           (e)          Procedure
 for Indemnification. The procedures for indemnification set forth in
 Section 8.4 of the License Agreement (Procedure of Indemnification) shall be
 incorporated herein by reference and shall apply to any indemnification
 claims under this Article 10.1. 

 
	
  

 	
  

 
	
  

 	
           (f)          Exclusions
 / Liabilities. All claims arising under Section 10.1 of this Agreement,
 including but not limited to, direct claims and indemnification for Third
 Party Claims, are subject to the exclusions and limitations set forth in
 Section 8.6 of the License Agreement (including all subsections thereof) and
 shall be incorporated herein by reference, except as specifically set forth
 as follows: 

 

	
  

 	
  

 	
  

 
	
  

 	
  

 	
              (i)          the
 Signing Representations and Warranties hereunder shall be treated the same as
 Fundamental Representations under the License Agreement for the purpose of
 applying the exclusions and limitations set forth in Section 8.6 of the
 License Agreement; 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
              (ii)          in
 the event the Aggregate Cap set forth in Section 8.6.2 of the License
 Agreement is insufficient to cover Urologix’s claims for indemnification for
 a material breach of Section 9.1 of this Agreement, Urologix may recover
 additional amounts on account of such claims, up to a maximum amount equal to
 100% of the payments actually received by Medtronic under the License
 Agreement and the Related Agreements, including any payments actually
 received by Medtronic from Urologix on the Acquisition Closing Date; and

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
              (iii)          the
 time limit for making any claim for a material breach of Section 9.1, Section
 9.3 or Section 11.1 of this Agreement will commence on the Effective Date and
 will terminate at 11:59 p.m. Minnesota time on the Acquisition Closing Date,
 subject to Section 10.2(f)(v) hereof. 

 

          10.2.     Indemnification
After the Acquisition Closing Date. 

	
  

 	
  

 
	
  

 	
            (a)          By
 Urologix. After the Acquisition Closing Date, Urologix shall indemnify
 Medtronic, and any other Medtronic Indemnitees, and defend and save each of
 them harmless, from and against any and Losses in connection with any and all
 Third Party Claims to the extent arising from or occurring as a result of (i)
 the breach by Urologix of any representation or warranty under this Agreement
 made as of the Acquisition Closing Date, or the material breach of a
 covenant, under this Agreement, (ii) Urologix Sales occurring after the
 Acquisition Closing Date, (iii) any breach of or noncompliance by Urologix,
 its employees, agents or representatives in any respect with applicable laws
 or regulations with regard to Urologix Sales after the Acquisition Closing
 Date; (iv) any field action, recall or mandatory product change associated
 with Urologix Sales after the Acquisition Closing Date; and (v) the ownership
 of the VidaMed 

 

- 11 -

	
  

 	
  

 
	
  

 	
 Securities
 (excluding matters arising from or related to Medtronic’s ownership of the
 VidaMed Securities) and the operation of the Prostiva Business by Urologix
 from and after the Acquisition Closing Date.

 
	
  

 	
  

 
	
  

 	
            (b)          By
 Medtronic. After the Acquisition Closing Date, Medtronic shall indemnify
 Urologix, and any other Urologix Indemnitees, and defend and save each of
 them harmless, from and against any and Losses in connection with any and all
 Third Party Claims to the extent arising from or occurring as a result of (i)
 the breach by Medtronic of any Closing Representations and Warranties made as
 of the Acquisition Closing, or the material breach of a covenant, under this
 Agreement, and (ii) ownership of the VidaMed Securities and the operation of
 the VidaMed entity (excluding the operation of the Prostiva Business by
 Urologix after the Effective Date) prior to the Acquisition Closing Date,
 including, without limitation, liabilities and obligations to Urologix for
 which Medtronic and VidaMed are jointly and severally liable under the
 Transaction Documents, whether such liabilities or obligations arise before,
 on or after the Acquisition Closing Date. 

 
	
  

 	
  

 
	
  

 	
            (c)          Indemnification
 as Sole Remedy for Third Party Claims. Other than the equitable relief
 described in Section 11.12 hereof, indemnification pursuant to this Section
 10.2 shall be a party’s sole remedy for Third Party Claims arising hereunder.
 

 
	
  

 	
  

 
	
  

 	
            (d)          Contribution.
 With respect to any Third Party Claim for which both parties have an
 obligation to indemnify the other pursuant to this Section 10.2, the
 provisions set forth in Section 8.3 of the License Agreement (Contribution)
 shall be incorporated herein by reference and shall apply. 

 
	
  

 	
  

 
	
  

 	
            (e)          Procedure
 for Indemnification. The procedures for indemnification set forth in
 Section 8.4 of the License Agreement (Procedure of Indemnification) shall be
 incorporated herein by reference and shall apply to any indemnification
 claims under this Article 10.2. 

 
	
  

 	
  

 
	
  

 	
            (f)          Exclusions
 / Liabilities. All claims arising under Section 10.2 of this Agreement,
 including but not limited to, direct claims and indemnification for Third
 Party Claims, are subject to the exclusions and limitations set forth in
 Section 8.6 of the License Agreement and shall be incorporated herein by
 reference, except as specifically set forth as follows: 

 

	
  

 	
  

 	
  

 
	
  

 	
  

 	
               (i)          the
 Closing Representations and Warranties set forth in Sections 5.2(a), 5.2(b)
 and 5.2(c) hereof shall be treated the same as Fundamental Representations
 under the License Agreement for the purpose of applying the exclusions and
 limitations set forth in Section 8.6 of the License Agreement; 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
               (ii)          claims
 for a breach of the Closing Representations and Warranties set forth in
 Sections 5.2(d), 5.2(f) and 5.2(g) hereof shall be subject to the Aggregate
 Cap set forth in Section 8.6.2 of the License Agreement, but the time limit
 for making a claim for a breach of such Closing Representations and
 Warranties, will commence on the Effective Date and will terminate at 11:59
 p.m. 

 

- 12 -

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Minnesota time
 on the date that is twelve months following the Acquisition Closing Date; and

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
               (iii)          in
 the event the Aggregate Cap set forth in Section 8.6.2 of the License
 Agreement is insufficient to cover Urologix’s claims for indemnification
 arising under Section 5.2(e) or Section 10.2(b)(ii) hereof (“VidaMed
 Claims”), Urologix may recover additional amounts on account of such
 claims, up to a maximum amount equal to 100% of the payments actually
 received by Medtronic under the License Agreement and the Related Agreements,
 including any payments actually received by Medtronic from Urologix on the
 Acquisition Closing Date; 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
               (iv)          the
 period in which Urologix may pursue VidaMed Claims will commence on the
 Effective Date and will terminate at 11:59 p.m. Minnesota time upon the date
 that is the later of (1) five years following the Effective Date, or (2)
 three years following the Acquisition Closing Date; and

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
               (v)          the
 time limit for making any claim for a material breach of Section 9.3 or
 Section 11.1 of this Agreement will commence on the Acquisition Closing Date
 and will survive for two years after the Acquisition Closing Date.

 

ARTICLE 11

OTHER PROVISIONS

          11.1.     Further
Assurances. On or after the date hereof, including after the Acquisition
Closing, upon request by any other party, Urologix, VidaMed, and Medtronic will
execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances that may be
reasonably required or necessary in order to carry out the intent of this
Agreement, including, without limitation, to permit Urologix or Medtronic to
effect the exercise of the Call Option or the Put Option, respectively,
hereunder and consummation of this Agreement (all on the terms and subject to
the conditions set forth herein), for the transfer to Urologix of the
Transferred Prostiva Assets, for the grant by Urologix of the Non-Field
Retained License, or to otherwise carry out the purposes of this Agreement and
the related transactions contemplated hereby.

          11.2.     Complete
Agreement. The Exhibits to this Agreement shall be construed as an integral
part of this Agreement to the same extent as if they had been set forth
verbatim herein. This Agreement, the Exhibits hereto, constitute the entire
agreement between the parties hereto with respect to the subject matters hereof
and thereof and supersede all prior agreements whether written or oral relating
hereto.

          11.3.     Waiver,
Discharge, Amendment, Etc. The failure of any party hereto to enforce at
any time any of the provisions of this Agreement, despite a failure of any
condition to such party’s closing obligations to occur, shall not, absent an
express written waiver signed by the party making such waiver specifying the
provision being waived, be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part thereof or

- 13 -

the right of
the party thereafter 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. This Agreement may be amended by Medtronic and Urologix. Any
amendment to this Agreement shall be in writing and signed by Medtronic and
Urologix.

          11.4.     Notices.
All notices or other communications to a party required or permitted hereunder
shall be in writing and shall be delivered personally or by fax (receipt
confirmed) or shall be sent by a reputable express delivery service or by
certified mail, postage prepaid with return receipt requested, addressed as
follows:

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 if to
 Medtronic or VidaMed (prior to Acquisition Closing) to:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Medtronic,
 Inc.

 
	
  

 	
  

 	
 World
 Headquarters

 
	
  

 	
  

 	
 710
 Medtronic Parkway

 
	
  

 	
  

 	
 Minneapolis,
 Minnesota 55432-5604

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 with
 separate copies thereof addressed to:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Attention:
 Vice President, Corporate Development

 
	
  

 	
  

 	
 Facsimile:
 (763) 505-2545

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 and to:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Attention:
 Senior Vice President, General Counsel and Secretary

 
	
  

 	
  

 	
 Facsimile:
 (763) 572-5459

 
	
  

 	
  

 	
  

 
	
  

 	
 with
 separate copies thereof addressed to:

 
	
  

 	
  

 	
  

 
	
  

 	
 if to
 Urologix to:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Urologix,
 Inc.

 
	
  

 	
  

 	
 14405 21st
 Avenue North

 
	
  

 	
  

 	
 Minneapolis,
 MN 55447

 
	
  

 	
  

 	
 Attention:
 Greg Fluet

 
	
  

 	
  

 	
 FAX (763)
 475-1443

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 with copy
 to:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Lindquist
 & Vennum P.L.L.P.

 
	
  

 	
  

 	
 4200 IDS
 Center

 
	
  

 	
  

 	
 80 South
 Eighth Street

 
	
  

 	
  

 	
 Minneapolis,
 MN 55402

 
	
  

 	
  

 	
 Attention: 

 	
 Charles P. Moorse, Esq.

 
	
  

 	
  

 	
  

 	
 Barbara
 Rummel, Esq.

 
	
  

 	
  

 	
 FAX (612)
 371-3207

 

- 14 -

Any party may
change the 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 fax) or on the day shown on the return receipt (if delivered
by mail or delivery service).

          11.5.     Public
Announcement. Neither Party will, and the Parties will not permit any of
their respective Affiliates, representatives or advisors to, issue or cause the
publication of any press release, or announcements to customers or vendors of
such Party or other third parties, related to the transactions contemplated by
this Agreement or any of the Related Agreements, without the prior written
consent of the other Party, provided that either Party may issue a press
release or make a filing required under the rules and regulations of the
Securities and Exchange Commission as it deems necessary in its discretion so
long as it provides the other Party an opportunity to review and comment on the
proposed disclosure and seeks confidential treatment to the extent permitted by
the SEC.

          11.6.     Expenses.
Medtronic, VidaMed and Urologix shall each pay their own expenses incident to
this Agreement and the preparation for, and consummation of, the transactions
provided for herein. 

          11.7.     Governing
Law. The formation, legality, validity, enforceability and interpretation
of this Agreement shall be governed by the laws of the State of Minnesota,
without giving effect to the principles of conflict of laws.

          11.8.     Assignment;
Change of Control. For purposes of this Section 11.8 only, Medtronic and
VidaMed shall be collectively referred to as one Party, and Urologix shall be
referred to as a Party. This Agreement will be binding upon and will inure to
the benefit of each Party and each Party’s respective transferees, successors
and assigns. Neither Party shall assign or transfer this Agreement to a third
party without the prior written consent of the other Party as applicable.
Notwithstanding the foregoing, neither Party shall be required to obtain the
prior written consent of the other Party in the event of a Change in Control of
such Party, provided that the acquiror(s) assumes the acquired Party’s
obligations hereunder after such Change of Control. For the purposes of this
paragraph, “Change in Control” means (a) a merger or consolidation of Urologix,
on the one hand, or of Medtronic, Inc. or of Medtronic’s Neuromodulation
Business Unit, on the other hand, (b) a transaction or series of related
transactions in which a third party, together with its Affiliates, becomes the
beneficial owner of fifty percent (50%) or more of the combined voting power of
the outstanding securities of Urologix, on the one hand, or of Medtronic, Inc.
or of Medtronic’s Neuromodulation Business Unit, on the other hand, or (c) the
sale of all or substantially all of the assets of Urologix, on the one hand, or
of Medtronic’s Neuromodulation Business Unit on the other hand. Any attempted
assignment in contravention of this Section 11.8 will be null and void.
Notwithstanding the foregoing, in no event shall Medtronic or VidaMed
collectively assign or transfer this Agreement unless they also assign all
rights and obligations under the Related Agreements and all rights and
obligations associated with the Prostiva Assets, the Field License and the
Thermal Scalpel License to such transferee, successor or assign in a manner
that allows such person to have the full power and ability to consummate the
transactions contemplated by this Agreement.

- 15 -

          11.9.     Titles
and Headings; Construction. The titles and headings to the Articles and
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.

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

          11.11.     Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed as original and all of which together shall constitute one
instrument. 

          11.12.     Equitable
Relief. Notwithstanding anything herein to the contrary, nothing in this
Agreement shall preclude either Party from seeking equitable relief, including
permanent or provisional relief, including a temporary restraining order,
preliminary injunction, permanent injunction, specific performance,
interlocutory decree, preliminary receivership, or other equitable relief
concerning a dispute in any court of competent jurisdiction. This Section 11.12
shall be specifically enforceable.

- 16 -

          IN
WITNESS WHEREOF, each of the parties has caused this Acquisition Option
Agreement to be executed in the manner appropriate for each, and to be dated as
of the Effective Date.

	
  

 	
  

 	
  

 
	
  

 	
 UROLOGIX,
 INC.

 
	
  

 	
  

 	
  

 
	
  

 	
 /s/ Stryker
 Warren Jr.

 	
  

 
	
  

 	
 By: Stryker
 Warren Jr.

 
	
  

 	
 Its: Chief
 Executive Officer

 
	
  

 	
  

 
	
  

 	
 MEDTRONIC,
 INC.

 
	
  

 	
  

 	
  

 
	
  

 	
 /s/ Thomas
 M. Tefft

 	
  

 
	
  

 	
  

 
	
  

 	
 By: Thomas
 M. Tefft

 
	
  

 	
 Its: Senior
 Vice President & President, 

 
	
  

 	
       Neuromodulation

 
	
  

 	
  

 
	
  

 	
 MEDTRONIC
 VIDAMED, INC.

 
	
  

 	
  

 	
  

 
	
  

 	
 /s/ Thomas
 M. Tefft

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	
 By: Thomas M.
 Tefft

 
	
  

 	
 Its:
 President

 

[The following
exhibits and schedules are omitted from the copy of this agreement as filed
with the Securities and Exchange Commission, but will be furnished
supplementally by Urologix, Inc. to the Commission upon request:

	
  

 
	
 Exhibit A –
 Form of Non-Field Retained License

 
	
 Exhibit B –
 Form of Assignment

 
	
 Schedule A –
 Patents

 
	
 Schedule B –
 Trademarks

 
	
 Schedule C –
 Other Intellectual Property]

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