UROLOGIX INC
SUPPLY AGREEMENT
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>SUPPLY AGREEMENT
<TEXT>

<PAGE>

                                                                    Exhibit 10.4

                           [Pursuant to Rule 24b-2, certain information has been
                              deleted and filed separately with the Commission.]


                               SUPPLY AGREEMENT

     This Supply Agreement (the "Agreement"), is made as of October 1, 2000,
among Urologix, Inc., a Minnesota corporation ("Urologix"), and EDAP TMS S.A., a
French corporation ("EDAP"), Technomed Medical Systems S.A., a French
corporation ("French Subsidiary") and EDAP Technomed, Inc., a Delaware
corporation ("U.S. Subsidiary").

                                  BACKGROUND
                                  ----------

     Urologix, EDAP, French Subsidiary and U.S. Subsidiary have entered into an
Asset Purchase Agreement dated as of October 1, 2000 (the "Asset Purchase
Agreement"), under which Urologix will purchase the assets owned by the Sellers
which are used or held for use in the research, development, manufacturing,
marketing, assembly, sales, maintenance and service of products for the
minimally invasive treatment of benign prostatic hyperplasia (BPH) or other
urological disorders, including, without limitation, microwave thermotherapy
products (the "Business"), other than the Excluded Assets. The Assets being
transferred include, among other things, all patents, trademarks, trade secrets,
know-how, product designs and designs specifications, drawings, bills of
material and engineering documentation and other intellectual property used to
manufacture the Prostatron Control Module and the Prostaprobe, and all product
approvals, certificates and permits to allow the manufacture, sale and
distribution of the Prostatron products. The Assets will be transferred to
Urologix as of the Closing.

     Urologix and EDAP desire to enter into a Supply Agreement for EDAP to
manufacture and supply the Prostatron Control Module to Urologix until such time
as Urologix either begins manufacturing the product or a next generation product
itself or qualifies another manufacturer to produce the products.

     Also, EDAP has agreed to provide manufacturing information and transition
services and personnel to assist Urologix in understanding the manufacturing of
the products.

     A portion of the consideration paid by Urologix to EDAP under the Asset
Purchase Agreement is in consideration of EDAP's obligations under Section 8 of
this Agreement. All capitalized terms not otherwise defined in this Agreement
have the meanings assigned to them in the Asset Purchase Agreement.

     NOW, THEREFORE, in consideration of the above premises and other good and
valuable consideration, the parties agree as follows:

                                       1
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                              SUPPLY OF PRODUCTS
                              ------------------

1.   Products.  The "Products" subject to this Agreement include, collectively,
     --------
     the Praktis model of EDAP's Prostatron Control Module (including all
     current operating software versions in use as of the date of this Agreement
     (the "Control Module"), and spare parts for the Classic, Maxis and Praktis
     models (the "Replacement Parts"), all as identified on Exhibit A.
                                                            ---------

2.   Supply and Purchase of Products.
     -------------------------------

     2.1  Supply.  EDAP will assemble, manufacture and supply to Urologix the
          ------
          Products which Urologix may order from time to time during the term of
          this Agreement at the prices and on such other terms and conditions as
          are set forth in this Agreement, and in accordance with quantity and
          shipment dates set forth in the firm purchase orders described in
          Section 4.1. Subject to Section 4.1 regarding forecasts, Urologix is
          not committed to purchase any Products except for the quantity
          specified in individual written purchase orders issued by Urologix
          from time-to-time. EDAP shall maintain its supply arrangements with
          vendors throughout the term of this Agreement to ensure that EDAP is
          capable of supplying the Products to Urologix as required by this
          Agreement.

     2.2  Specifications.  The specifications for materials, packaging,
          --------------
          components, labeling, finished product and manufacturing controls and
          other requirements (the "Specifications") for each of the Products
          will be provided by EDAP within fourteen days of the Closing (in the
          English language) and will be attached as Exhibit A to this Agreement.
                                                    ---------
          EDAP shall not make changes in the Specifications, testing methods,
          manufacturing processes, quality assurance procedures or equipment
          used to manufacture the Products, or its vendors, suppliers or
          materials, without Urologix's prior written consent.  EDAP represents
          and warrants that all Control Modules sold to Urologix under this
          Agreement will contain the most recent version of all software
          revisions of the Prostatron operating software.

     2.3  Changes.  At any time during the course of this Agreement, Urologix
          -------
          reserves the right to make changes in the design, manufacture or
          packaging of the Products.  Within sixty (60) days following written
          notice of such proposed changes, EDAP will provide Urologix with
          reasonable resultant price, schedule and/or delivery changes in the
          Products, if any.  Should Urologix require immediate change in the
          design or manufacture of the Products, EDAP will use its reasonable
          efforts to immediately introduce such changes and the parties must
          thereafter negotiate a reasonable modification in price, delivery and
          scheduling terms.  Any price changes will be based solely upon
          increases or decreases in materials, direct labor, and directly
          related overhead, if any.

                                       2
<PAGE>

     2.4  Inspection.  EDAP must, upon reasonable advance notice, provide
          ----------
          Urologix with prompt access to such information, records, production
          facilities, equipment and personnel of EDAP as may be reasonably
          requested by Urologix from time to time for purposes of monitoring
          EDAP's obligations under this Agreement (including, without
          limitation, the adequacy of the sources of EDAP's raw materials for
          producing the Products and EDAP's production and staffing plans).  All
          such inspections are subject to the confidentiality provisions of
          Section 11.

     2.5  Product Quality.  In addition to the other warranties made in this
          ---------------
          Agreement, EDAP represents that the ratio of monthly unscheduled field
          service calls to base of installed units for Products sold under this
          Agreement will be equal to or less than [Confidential Treatment
          Requested]. If the service call rate exceeds the rates set forth in
          this paragraph during any three consecutive months throughout the term
          of this Agreement, EDAP shall provide to Urologix all
          manufacturing/quality engineering, trainer/operator and other
          assistance requested by Urologix to promptly identify and correct the
          issues. Such assistance shall be deemed to be Transition Services
          under Article 8 of this Agreement.

3.   Prices and Payment.
     ------------------

     3.1  Prices.
          ------

(a)                                The prices to be paid by Urologix to EDAP for
               the Products are as set forth on Exhibit B. Prices are in U.S.
                                                ---------
               dollars, Ex Works, Lyon, France (as defined by Incoterms) and
               include all charges, including without limitation, packaging,
               packing and all taxes, except sales, use, VAT and other such
               taxes imposed upon the sale or transfer of the Products. If
               Urologix is liable to pay these taxes, they must be specifically
               listed on EDAP's invoice.

          (b)  If there is a reduction in the materials costs, the cost
               reduction will be passed on to Urologix, as reflected by an
               appropriate reduction to the prices listed on Exhibit B. EDAP
                                                             ---------
               will promptly provide Urologix documentation (such as purchase
               orders) reflecting cost reductions.

          (c)  Subject to Section 3.1(b), the prices on Exhibit B will be firm
                                                        ---------
               for the duration of this Agreement.

                                       3
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     3.2  Payment.  Urologix will pay EDAP for each shipment of Products within
          -------
          30 days of EDAP's shipping date for the Products involved, unless
          there is an unresolved dispute regarding EDAP's entitlement to such
          payment.

     3.3  Prepaid Purchases.  Upon execution of this Agreement, Urologix is
          -----------------
          paying French Subsidiary the sum of US$1,148,000, in cash to be
          applied toward future purchases of Products under this Agreement and
          Prostaprobes pursuant to the Transition and Technology Transfer
          Agreement between Urologix, EDAP, French Subsidiary and U.S.
          Subsidiary dated as of the date hereof.  Accordingly, Urologix and
          French Subsidiary acknowledge that, under Section 6.9 of the Asset
          Purchase Agreement, French Subsidiary will provide, at no additional
          charge to Urologix, US$1,148,000 of Products and Prostaprobe microwave
          delivery systems, in any combination. Such Products and Prostaprobes
          will be provided to Urologix from time to time as ordered by Urologix.
          Individual Prostaprobes and Prostratron Praktis units will be valued
          at [Confidential Treatment Requested] (Praktis Prostaprobe),
          [Confidential Treatment Requested]  (Classic/Maxis Prostaprobe) and
          [Confidential Treatment Requested] (Praktis Control Modules),
          respectively (ExWorks) and with warranty.  French Subsidiary and
          Urologix will develop an appropriate invoice and billing procedure
          with respect to these units.  No payments will be made by Urologix to
          EDAP for Products under this Agreement until the full amount of this
          prepayment has been used.

4.   Forecasts and Inventory.
     -----------------------

     4.1  Forecasts.  Urologix agrees to share with EDAP a nine (9) month
          ---------
          rolling forecast of Urologix's anticipated cumulative requirements for
          the Products during the term of this Agreement. Urologix agrees to
          update the forecast monthly and provide it to EDAP by the fifth
          business day of each month. The forecast will contain three levels of
          order commitment: Firm Releases, Scheduled Releases, and Forecasted
          Releases.

          (a)  Firm Releases.  The first ninety (90) days of the forecast are
               -------------
               fixed with respect to both quantity and delivery date, as
               mutually agreed upon by EDAP and Urologix in the firm release
               purchase order. EDAP is obligated to produce and deliver these
               items and Urologix is committed to purchase them as planned.
               Urologix may delay firm delivery dates if Urologix makes a
               request at least 20 days prior the delivery date in effect
               immediately prior to Urologix change request.

          (b)  Scheduled Releases.  The second ninety (90) days of the forecast
               ------------------
               are for the procurement of materials.  EDAP is authorized to
               purchase materials needed to fill these requirements.  Urologix
               commits to purchase all the non-cancelable or non-returnable
               materials and is responsible for any conversion costs applied to
               this category of requirement.  Urologix will

                                       4
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               produce monthly forecasts that will roll another new month into
               the Scheduled Release window and which will be used to determine
               delivery dates. No material procurement or capacity scheduling
               will take place until Urologix has transmitted an appropriate
               purchase order or scheduled release to EDAP.

          (c)  Forecasted Releases.  Forecasted requirements beyond 180 days
               -------------------
               contain Urologix's current estimate of the demand for the product
               and are offered only for planning purposes. Urologix makes no
               commitment except that this is the best estimate at the time of
               the forecast.

     4.2  Inventory.  At all times during the term of this Agreement, EDAP must
          ---------
          maintain the finished goods inventory of the Products described on
          Exhibit C and a stock of qualified components and materials of
          ---------
          sufficient quantity to cover production of the firm releases and
          scheduled releases described in Section 4.1(a) and 4.1(b).  In
          addition, EDAP must maintain, at all times during the term of this
          Agreement, an adequate inventory of Replacement Parts to promptly
          service the units in the field, as required by this Agreement.

     4.3  Terms.  All sales of Products by EDAP to Urologix are subject to the
          -----
          provisions of this Agreement and are not subject to the terms and
          conditions contained in any purchase order of Urologix or confirmation
          of EDAP, except insofar as a purchase order or confirmation
          establishes the quantity and shipment date for each order of Products
          involved.

5.   Shipment.
     --------

     5.1  Delivery.  EDAP will ship all Products under this Agreement, Ex Works,
          --------
          Lyon, France (as defined by Incoterms) on or before the date indicated
          on the purchase order.  EDAP will package and ship the Products in
          accordance with the requirements set forth in the Specifications
          described on Exhibit A.
                       ---------

     5.2  Incoming Inspection.  As part of its final control procedure in Lyon,
          -------------------
          France, EDAP will conduct functional testing of all Products prior to
          or at delivery to the shipping point. Upon receipt by Urologix or its
          customer, Urologix field service personnel will conduct a short-form
          procedure for inspection. The form of procedure will be mutually
          agreed upon by EDAP and Urologix prior to the first shipment of
          Products under this Agreement. If, upon conclusion of the inspection,
          Urologix determines that any of the Products are defective in material
          or workmanship or otherwise not in conformity with the requirements of
          this Agreement, Urologix, in addition to any other rights as it may
          have by law, may repair the Products or return the Products for
          replacement at EDAP's expense. EDAP will be responsible for all
          shipping charges. Urologix may deduct from the current invoice of EDAP
          the cost of the rejected Product, which may include the

                                       5
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          invoice amount for the Product, handling charges, transportation
          charges, and any other ascertained reasonable costs incurred by
          Urologix.

     5.3  Delays.  If EDAP for any reason anticipates any difficulty in
          ------
          complying with the required shipment date or in meeting any other
          requirements of a purchase order, it must promptly notify Urologix in
          writing. If EDAP does not meet a scheduled shipment date, other than
          in the case of force majeure, Urologix may then, in addition to any
          other remedies and choices it may have by contract or law reduce, by
          5%, the price paid to EDAP for any unit of Product which is delivered
          to the shipping point 15 to 29 days later than the scheduled shipment
          date for that unit and reduce, by 10%, the price of any unit of
          Product which is delivered to the shipping point 30 to 59 days later
          than its scheduled shipment date. If a Product is delivered to the
          shipping point 60 or more days after its scheduled shipment date, EDAP
          shall pay Urologix, as liquidated damages and not as a penalty, the
          sum of $15,000 (USD) for each unit which is late by 60 or more days.

6.   Warranties.
     ----------

     6.1  Limited Warranty.  EDAP warrants to Urologix that all Products and
          ----------------
          materials manufactured or supplied by EDAP will be new and unused and
          will conform and perform in accordance with to the Specifications and
          will be free of defects in materials and workmanship for a period of
          12 months after, the later of the date of shipment to Urologix or the
          date of shipment to Urologix customer. In the event Urologix or a
          customer rejects a Product under Section 5.2, the warranty period for
          such particular Product shall be extended by the period of time the
          particular Product is in transit and held by EDAP or Urologix.

          EDAP further warrants that the Products will not be "adulterated" or
          "misbranded" at the time of manufacture within the meaning of the U.S.
          Food, Drug and Cosmetic Act, as amended, and will be manufactured and
          assembled in compliance with all applicable federal, state, local and
          foreign laws, rules and regulations, including without limitation the
          FDA's Quality System Regulation, ISO9001 and EN46001, as they exist at
          the time of manufacture.

     6.2  Intellectual Property Rights.  EDAP warrants to Urologix that none of
          ----------------------------
          the features, components or configurations of the Products or any of
          the processes which it utilizes in the assembly, manufacturing or
          supply of the Products infringes, violates or breaches any U.S. or
          foreign patent or other intellectual property rights of any third
          party and shall not in the future violate any such rights of any third
          party. EDAP further warrants that it will maintain all applicable
          licenses and comply with applicable license requirements and other
          similar obligations relating to the manufacture and sale of Products
          to Urologix under this Agreement and will pay and be solely
          responsible for the payment of all applicable royalties or other fees
          under those agreements. EDAP will

                                       6
<PAGE>

          immediately notify Urologix if EDAP receives any notice of default or
          cancellation under any intellectual property rights licensed to EDAP
          which are utilized by EDAP in the assembly, manufacturing or supply of
          the Products and will immediately provide Urologix with a copy of any
          such notice.

     6.3  Warranty Procedures.  The warranty service program for the Products
          -------------------
          will be structured as follows:

          .  Urologix will take service calls from customers and attempt to
             provide on-site repairs with EDAP's assistance.
          .  Urologix will determine classification of all failed Products as
             follows: warranty repair, normal repair (outside of warranty),
             misuse or damage repair, or some combination thereof.
          .  If Urologix is unable to repair the Product on-site with the
             assistance of EDAP, then within 3 days of notification from
             Urologix, EDAP will deliver a crate to the customer for the return
             of the failed unit and will deliver a loaner unit to the customer.
             EDAP will, at its own expense, establish and maintain an inventory
             of two functioning Praktis control modules. EDAP will bear the cost
             of freight to the location designated by EDAP for these warranty
             shipments, and will reimburse Urologix for field work labor,
             materials and out-of-pocket expenses incurred in providing warranty
             work. EDAP will pay Urologix for these services within thirty days
             of the day of the invoice issued by Urologix for these services.
          .  Repair instructions from Urologix will accompany the failed
             Product, describing failure mode and any additional refurbishment
             services required (e.g. new case, new paint or labels). EDAP and
             Urologix will jointly develop a minimum set of standards for repair
             of the Products.
          .  All warranty work will be completed within twenty days from receipt
             of Product by EDAP, unless otherwise approved in writing by an
             authorized representative of Urologix.
          .  Within that period, EDAP will return all Products, at EDAP's
             expense, to the customer and retrieve the loaner unit. EDAP will
             provide Urologix and the customer with a description of work
             performed. All repaired Products will carry the remainder of the
             warranty as stated above in Section 6.1.

     EDAP and Urologix will jointly develop this Warranty Service program in
     detail and negotiate a service program for nonwarranty work. These programs
     will be documented and become approved processes/procedures.

                                       7
<PAGE>

7.   Regulatory Compliance.
     ---------------------

     7.1  Registration. EDAP represents and warrants that the Products have been
          ------------
          properly listed with the FDA and other governments requiring a similar
          listing, and that the Products have all necessary and current
          marketing approvals and clearances by all governments requiring such
          approvals in the jurisdictions where the Products are currently being
          marketed. EDAP further represents and warrants that all management,
          facilities, personnel, manufacturing, quality and other systems of
          EDAP, French Subsidiary and U.S. Subsidiary regulated by the FDA and
          other similar regulatory agencies, either state, local, or foreign,
          are in compliance with and regulatory requirements (e.g., the FDA's
          Quality System Regulation, ISO 9001 and EN 46001) related to the
          Products, and all facilities of EDAP, French Subsidiary and U.S.
          Subsidiary have all necessary permits and registrations for operation
          as a medical device facility. EDAP must maintain all such
          registrations and certifications in effect and maintain compliance
          with these regulations at all times during the term of this Agreement.
          Any changes in design, manufacturing or quality assurance procedures
          must be filed with the appropriate agencies in a timely manner.

     7.2  Product Reports.  EDAP must immediately provide Urologix with a copy
          ---------------
          of all medical device reports pertaining to the Products which are
          issued under the Federal Food, Drug and Cosmetic Act, as amended, and
          other applicable regulations of state, local and foreign governmental
          agencies. EDAP agrees that during the term of this Agreement and for a
          minimum of seven (7) years thereafter, EDAP will maintain tracing
          records for all Products and all critical components thereof, that are
          manufactured and sold under this Agreement in order to permit
          compliance with all applicable FDA laws and regulations and other
          applicable material laws and regulations then in effect. EDAP agrees
          to grant Urologix access to such records in the event of a recall or
          proposed recall of any of the Products. EDAP will furnish Urologix
          with copies of all device history records and any FDA Form 483 and
          Establishment Inspection Reports, follow-up warning letters, closeout
          reports or other reports or FDA communications relating specifically
          to the manufacture of the Products or any facility where the Products
          are manufactured, promptly upon receipt by EDAP.

     7.3  Complaints.  If either party receives any complaint regarding the
          ----------
          Products which is reportable to the FDA or similar state, local or
          foreign governmental agency, it must immediately provide the other
          with written notice of that complaint. With regard to any regulatory
          reporting requirements, the parties will cooperate and otherwise
          conduct themselves in manner so as to comply with those regulations.

     7.4  FDA Inspection.  EDAP must advise Urologix immediately if EDAP
          --------------
          receives notification that an authorized agent of the FDA or other
          governmental agency

                                       8
<PAGE>

          intends to visit EDAP's manufacturing facility, if that visit is
          related directly to the Products. EDAP will allow Urologix to assist
          in the preparation for and participating in any FDA audits related
          specifically to Urologix or the Products.

     7.5  Product Recalls.  In the event (i) any government authority issues a
          ---------------
          request, directive or order that any Product be recalled, or (ii) a
          court of competent jurisdiction orders such a recall, or (iii)
          Urologix reasonably determines, after consultation with EDAP, that any
          Product should be recalled because the Product does not conform to
          Specifications or for any reason, the parties will take all
          appropriate corrective actions reasonably directed by Urologix or by
          any government agency. In the event that any such recall results from
          the breach of EDAP's warranties or obligations under this Agreement,
          or EDAP is otherwise responsible for the recall, EDAP will pay that
          portion of the expenses of the recall which is proportionate to the
          extent to which such breach or other action by EDAP are responsible
          for that recall. Urologix will conduct the recall process. Urologix
          and EDAP will fully cooperate with the other party to assist in the
          recall process as reasonably necessary to complete the process.

     7.6  Contacts.  Each party must designate an individual within its
          --------
          organization to be the primary contact regarding regulatory issues and
          notify the other party of the identity of that individual.

       MANUFACTURING INFORMATION AND TRANSITION SERVICES
       -------------------------------------------------

8.   Services to Be Provided.
     -----------------------

     8.1  Documentation.  Within fourteen days after the Closing of the Asset
          -------------
          Purchase Agreement, EDAP will deliver to Urologix copies of all
          Manufacturing Information, written in English, for each of the
          Products, except as provided in Section 8.1(g). "Manufacturing
          Information" includes, but is not limited to:

          (a)  Specifications for each of the Products, including identification
               of parts and components and a full drawing package;

          (b)  Manufacturing assembly instructions, including any revisions or
               updates;

          (c)  Quality system documentation;

          (d)  Design control documentation;

          (e)  Manufacturing equipment and tooling specifications and drawings,
               including a list identifying all manufacturing equipment and
               tooling and the location of such equipment;

                                       9
<PAGE>

          (f)  Engineering change notice history;

          (g)  All Product regulatory filings, device master records, device
               history records, complaint files and any other records which EDAP
               must maintain for FDA or other regulatory purposes.  Any device
               history records, complaint files or other FDA or regulatory files
               that are not currently written in English as of the date of this
               Agreement will be translated into English by EDAP and delivered
               to Urologix within sixty (60) days of the execution of this
               Agreement.

          (h)  Name, address and telephone number of contact person at each of
               EDAP's vendors and suppliers of raw materials, supplies and
               assembly services, and copies of contracts, identification of
               long-term and large quantity purchasing agreements and escalation
               clauses and any unique arrangements with such vendors (such as
               just-in-time delivery methods or production planning and
               coordination), a summary of maximum obligations and the terms
               under each of those arrangements, current price lists and
               historical pricing information, outstanding purchase orders, and
               quality and performance reports (including identification of
               suppliers who fail to meet delivery schedules), and
               identification of any potential availability issues in the
               future.

          (i)  Identification of qualified alternate suppliers and alternative
               materials which could be used for the Products;

          (j)  Bill of Materials for each of the Products.

     EDAP shall promptly update and supplement the Manufacturing Information
     provided to Urologix if and to the extent changes occur during the term of
     this Agreement.

     8.2.  Transition Services.  From time to time during the first nine months
           -------------------
          of the term of this Agreement, Urologix may request EDAP to provide
          manufacturing/quality engineering and trainer/operator personnel and
          resources services to assist Urologix in understanding the
          manufacturing and operation of the Products (the "Transition
          Services"). EDAP agrees to provide the Transition Services to Urologix
          as requested from time to time during the term of this Agreement by
          Urologix. With the assistance of EDAP, Urologix will produce a
          transition plan, which will be attached as Exhibit D, outlining
          milestones and deadlines for the transition. During and after the term
          of this Agreement, EDAP shall disclose to Urologix, in a form
          reasonably satisfactory to Urologix, all of the ideas, innovations,
          inventions, creations, processes, techniques, works of authorship and
          innovations that are (i) developed, created or discovered in providing
          such services to Urologix, or (ii) incorporated, embodied or disclosed
          in work product created or produced by EDAP in providing such services
          (collectively

                                       10
<PAGE>

          "Contracted Developments"). EDAP hereby assigns to Urologix the
          Contracted Developments. If requested by Urologix, EDAP will assist
          Urologix, or its designee, at Urologix's expense, in every proper way
          to secure Urologix's rights in all of those inventions and any
          copyrights, patents or other intellectual property rights relating
          thereto in any and all countries. This assistance includes, without
          limitation, the disclosure to Urologix of all pertinent information
          and data, and the execution by EDAP of all applications,
          specifications, oaths, assignments, and all other instruments which
          Urologix deems necessary in order to apply for and obtain such rights,
          and in order to assign and convey to Urologix, its successors, assigns
          and nominees, the sole and exclusive right, title and interest in and
          to all such inventions and any copyrights, patents, or other
          intellectual property rights relating thereto. EDAP's obligation to
          execute or cause to be executed, when it is EDAP's power to do so, any
          such instrument or papers will continue after the termination of this
          Agreement. In addition, EDAP shall treat all Contracted Developments
          as confidential information of Urologix, without regard to whether
          such Contracted Developments were marked, labeled or identified as
          confidential information at the time of its first disclosure to
          Urologix.

     8.3  Representatives.
          ---------------

          (a)  EDAP has designated the individual(s) set forth on Exhibit E as
                                                                  ---------
               its representative(s) for the Transition Services (the "EDAP
               Representatives") who have the authority to act on EDAP's behalf
               in connection with the performance of such Transition Services
               for which they are the named EDAP Representative, and who shall
               serve as the primary contact for communications between Urologix
               and EDAP concerning the performance of such Transition Services.
               EDAP will ensure the continued, prompt availability of the EDAP
               Representatives throughout the term of this Agreement.

          (b)  Urologix has designated the individual(s) set forth on Exhibit E
                                                                      ---------
               as its representative(s) for the Transition Services who have the
               authority to act on Urologix' behalf in connection with the
               Transition Services, and who shall serve as the primary contact
               for communications between EDAP and Urologix concerning the
               performance of the Transition Services.

     8.4  Efforts.  Unless otherwise agreed in writing by the parties, EDAP
          -------
          shall use commercially reasonable efforts in an efficient and
          cooperative manner to perform all Transition Services to be performed
          under this Agreement. EDAP and Urologix agree to cooperate, to provide
          such information, and to takes such actions as may be reasonably
          required to assist each other in accomplishing the Transition
          Services.

     8.5  Compensation.  EDAP acknowledges that compensation for the Transition
          ------------

                                       11
<PAGE>

          Services is included in the purchase price described in the Asset
          Purchase Agreement and no additional compensation will be due under
          this Agreement, other than for the payment of Products purchased by
          Urologix. For this reason, EDAP's obligations under this Agreement are
          irrevocable and may not be terminated or withheld for any reason
          whatsoever.

                                    GENERAL
                                    -------

9.   Breach of Obligations.
     ---------------------

     9.1  EDAP's obligations under Article 8 of this Agreement are secured by
          the Escrow Agreement by and among Urologix, EDAP, French Subsidiary,
          U.S. Subsidiary, and U.S. Bank Trust, N.A. (the "Escrow Agent") dated
          October 1, 2000. Urologix shall be entitled to payment of claims out
          of the Escrow Funds pursuant to the Escrow Agreement for the failure
          of EDAP to provide the Manufacturing Information and the Transition
          Services described in Article 8 and Exhibit D. The payment of claims
                                              ---------
          to Urologix and the release of the Escrow Funds to EDAP will be
          governed by the terms of the Escrow Agreement and not this summary
          statement.

     9.2  In addition, EDAP and Urologix recognize that, because of regulatory
          requirements and Urologix' unfamiliarity with the manufacture of the
          Products, it is unlikely that Urologix could secure an alternate
          manufacturing source for the Products within a commercially reasonable
          period of time. Urologix will incur significant losses and expenses
          due to Urologix' inability to supply customers who have ordered
          Products or who might otherwise have ordered Products. In addition,
          Urologix will incur significant expenses and losses in seeking to
          preserve its relationship with its customers and potential customers
          and seeking another means for obtaining the Products. If, at any time
          during the term of this Agreement, any portion of three or more of the
          last eight shipments of Products to Urologix or its customers were
          delivered to the shipping point more than 30 days after the scheduled
          shipping date, Urologix may assume that the supply of Products by EDAP
          has become unreliable. Accordingly, if EDAP has failed to supply the
          number of Products described in this paragraph by the date indicated ,
          then, within ten days of written demand for payment by Urologix, EDAP
          shall pay Urologix, as liquidated damages and not as a penalty, the
          sum of $2.0 million.

                                       12
<PAGE>

10.  Indemnification and Related Matters.
     -----------------------------------

     10.1  Urologix.  Urologix will indemnify, defend and hold harmless EDAP
           --------
           against any and all claims, liabilities, judgments, losses, damages,
           costs and expenses (including, without limitation, reasonable
           attorneys' fees and all indirect, collateral, special, incidental or
           consequential losses, damages or expenses) asserted against or
           incurred by EDAP as a result of any injury, illness, death, property
           damage, or other loss or damage (collectively "EDAP Damage")
           resulting directly from the sale or use of Products manufactured by
           EDAP, or services provided by EDAP, for Urologix under this
           Agreement, but only to the proportional extent the EDAP Damage arises
           from any cause other than (A) the negligence, fault, or wrongful
           conduct of EDAP or (B) a breach of any obligation of EDAP under this
           Agreement, including without limitation, EDAP's warranty set forth in
           Section 6 and any failure to deliver Products or services on a timely
           basis.

     10.2  EDAP.  EDAP shall indemnify, defend and hold harmless Urologix, from
           ----
           any and all claims, liabilities, judgments, losses, damages, costs
           and expenses (including, without limitation, reasonable attorneys'
           fees and all indirect, collateral, special, incidental or
           consequential losses, damages or expenses) asserted against or
           incurred by Urologix as a result of any injury, illness, death,
           property damage, or other loss or damage (collectively "Urologix
           Damage") resulting directly from the sale or use of Products
           manufactured by EDAP, or services provided by EDAP, for Urologix
           under this Agreement, but only to the proportional extent the
           Urologix Damage arises from (a) the negligence, fault or wrongful
           conduct of EDAP, or (b) a breach of any obligation of EDAP under this
           Agreement, including without limitation, EDAP's warranty set forth in
           Section 6 and any failure to deliver Products or services on a timely
           basis.

     10.3  Settlement.  Neither the party against whom indemnification is sought
           ----------
           (the "Indemnitor") nor the party who seeks indemnification (the
           "Indemnitee") may settle or compromise any claim, suit, action or
           proceeding without the consent of the opposite party (which consent
           must not be unreasonably withheld) and unless the terms of the
           settlement or compromise release the opposite party from any and all
           liability with respect to that claim and do not impose upon the
           opposite party any obligation involving its business operations or
           assets which is to be satisfied other than by the payment of money.

     10.4  Product Liability Insurance. EDAP must maintain at its own cost the
           ---------------------------
           following insurance, naming Urologix as an Additional Insured on each
           such policy:

           A)  During the entire period that EDAP is a manufacturer/supplier to
               Urologix of the Products described in this Agreement and the
               Products described in

                                       13
<PAGE>

               that certain Transition and Technology Transfer Agreement dated
               the date hereof between EDAP and Urologix (the "Transition
               Agreement"):

1)                                     Primary Product Liability Insurance, with
                 the following features:

b)                                                Limits: $2,000,000 Each
                       Occurrence / $2,000,000 Aggregate

c)                                                Retroactive Date: March 4,
                       1987

d)                                                Deductible Per Claim not to
                       exceed $15,000

e)                                                Endorsement naming Urologix as
                       an Additional Insured for Product Liability. The
                       endorsement will specify that coverage shall be primary
                       with respect to Urologix.

f)                                                Policy Territory will apply to
                       claims brought anywhere in the world and will provide
                       defense of such claims anywhere in the world; and

2)                                     Umbrella Liability Insurance, with the
                 following features:

c)                                                Limits: $8,000,000 Each
                       Occurrence / $8,000,000 Aggregate

d)                                                Retroactive Date: March 4,
                       1987

e)                                                Additional Insured status in
                       favor of Urologix following the form of the primary
                       insurance.

f)                                                Policy Territory will follow
                       the form of the primary policy; and

3)                                     Contractual Liability Insurance that will
                 apply to the indemnity clauses contained in the Asset Purchase
                 Agreement with primary and excess limits totaling $10,000,000.

B)                     For a term of six years following the conclusion of the
               period that EDAP is a manufacturer/supplier to Urologix of the
               Products described in this Agreement and the Products described
               in the Transition Agreement:

1)                                     Discontinued Products Liability
                 Insurance, with the following features:

b)                                                Primary and excess limits in
                       combination totaling $10,000,000 Each Occurrence /

                                       14
<PAGE>

                       $10,000,000 Aggregate

c)                                                Retroactive Date: March 4,
                       1987

d)                                                Deductible Per Claim not to
                       exceed $15,000

e)                                                Endorsement naming Urologix as
                       an Additional Insured for Product Liability. The
                       endorsement will specify that coverage shall be primary
                       with respect to Urologix.


f)                                                Policy Territory will apply to
                       claims brought anywhere in the world and the policy will
                       provide defense of such claims anywhere in the world.

g)                                                Policy shall be for a term of
                       six years with the premium paid in advance; and

2)                                     Contractual Liability that will apply to
                 the indemnity clauses containing in the Asset Purchase
                 Agreement with primary and excess limits totaling $10,000,000.

          All coverages shall be written on policies issued in the United States
          by insurance companies licensed and regulated in the United States.
          The insurance carriers must carry minimum A.M. Best ratings of A (XV).

          On or prior to the date of this Agreement, EDAP will deliver a
          Certificate of Insurance for the policies required under paragraph A
          above. Within sixty days of such date, EDAP will provide Urologix with
          a complete copy of the Product Liability and Umbrella Liability
          policies described herein.

          At least sixty days prior to the termination of this Agreement, EDAP
          will supply to Urologix a Certificate of Insurance confirming the
          policies required under paragraph B above. EDAP will provide a
          complete copy of the policy(-ies) to Urologix prior to the termination
          of this Agreement.

               If, within 10 days of the date of this Agreement, the parties
          determine that the requirements of Section B will result in double
          coverage limitations, the parties and their respective agents will
          cooperate to amend Section B to provide coverage consistent with all
          of the requirements set forth in Section B.

     10.5  Notice of Claims.  The indemnities in this Section 10 are subject to
           ----------------
           the requirement that the Indemnitee promptly provide the Indemnitor
           with written notice of the claim for which indemnification is sought,
           and the Indemnitee must provide its reasonable cooperation,
           information and assistance in connection with that claim.

                                       15
<PAGE>

11.  Confidentiality.  EDAP acknowledges that, as of the Closing date of the
     ---------------
     Asset Purchase Agreement, any and all technical and other information
     concerning the Products will be owned by Urologix. Urologix deems such
     information to be confidential and proprietary. EDAP agrees to keep
     confidential and not disclose to any other person the confidential
     information of Urologix, unless required by law to do so. EDAP will not use
     any such information for any purpose other than performing its obligations
     under this Agreement. EDAP agrees to use not less than the degree of care
     used to prevent disclosure of its own proprietary information to prevent
     disclosure of information received under this Agreement. In no event,
     however, will less than a reasonable standard of care be used. Urologix
     acknowledges that EDAP deems any all information, records, production
     facilities equipment and personnel of EDAP pursuant to Section 2.4 that are
     not Assets acquired by Urologix under the terms of the Asset Purchase
     Agreement, to be confidential and proprietary. Urologix agrees to keep
     confidential and not disclose to any other person such confidential
     information of EDAP, unless required by law to do so. Urologix will not use
     any such information for any purpose other than in accordance with the
     terms of this Agreement. Urologix agrees to use not less than the degree of
     care used to prevent disclosure of its own proprietary information to
     prevent disclosure of information received under this Agreement. In no
     event, however, will less than a reasonable standard of care be used.

12.  Intellectual Property and Tooling.
     ---------------------------------

     12.1  Specifications, Processes, Data and Other Rights Related to the
           ---------------------------------------------------------------
           Products.  As of the Closing, the Specifications, and all
           --------
           processes, data, regulatory approvals and any and all other
           intellectual property rights relating to the Products and their
           manufacture are the exclusive property of Urologix, and Urologix
           retains all right, title and interest, including copyright, relating
           to such material. Urologix hereby grants to EDAP a non-exclusive
           license to use the Urologix intellectual property solely and
           exclusively for the purpose of EDAP performing its obligations under
           this Agreement, and no other license to, or right in, any of the
           Urologix's intellectual property rights is granted to EDAP under this
           Agreement.

     12.2  Manufacturing Equipment, Tooling and Fixtures.  EDAP will use its own
           ---------------------------------------------
           manufacturing equipment, tooling, fixtures and related equipment that
           is required to manufacture the Products.

13.  Term.
     ----

     13.1  Term.  The term of this Agreement commences as of the date of this
           ----
           Agreement and will continue for a period of three years. On that
           date, this Agreement will terminate unless otherwise extended upon
           the written agreement of both parties.

     13.2  Early Termination.  EDAP may terminate this Agreement on or after the
           -----------------
           date which is twenty-four months after the date of this Agreement, if
           EDAP provides

                                       16
<PAGE>

          six months prior written notice to Urologix, and EDAP either:

          (a)  pays to Urologix, no later than the date of termination, as
               liquidated damages and not as a penalty, the sum of $2.0 million
               (USD) to compensate Urologix for the significant expenses and
               losses that Urologix will incur in obtaining another means for
               supplying the Products to its customers; or

          (2)  prior to the date of termination, EDAP qualifies an alternate
               manufacturer and key suppliers in North America, to manufacture
               and supply the Products to Urologix on terms no less favorable to
               Urologix than those provided in this Agreement. EDAP shall
               conduct the transfer and appropriate qualification in strict
               accordance with a transfer plan that is acceptable to Urologix in
               its sole discretion, and EDAP will bear all expenses of such
               transfer and qualification of the alternate manufacturer,
               including time and labor for services provided by Urologix, as
               well as out-of-pocket expenses incurred by Urologix in the
               manufacturing transfer.

               In connection with such a transfer, EDAP, at its own expense,
               shall provide to Urologix the manufacturing/quality engineering
               and trainer/operator personnel and resources requested by
               Urologix to assist in the transfer of manufacturing of the
               Products to the other facility and the appropriate qualification
               of the new facility for the Products (the "Transition Services").
               The Transition Services will include providing manufacturing and
               quality engineering services to Urologix, consulting with and
               training Urologix personnel and representatives about processes,
               providing access to and interpretation of documentation and
               processes, communication and assistance with suppliers and
               regulators, and any other service reasonably requested by
               Urologix which relates to the transfer of manufacturing of the
               Products.

14.  Rights Upon Expiration of Agreement. If, upon expiration of this Agreement,
     -----------------------------------
     there are Products scheduled for delivery under Section 4.1(a), and costs
     incurred by EDAP for non-cancellable and non-returnable materials ordered
     under Section 4.1(b), EDAP shall provide Urologix with copies of EDAP's
     purchase orders or other applicable evidence of EDAP's obligation to
     purchase such materials. Urologix shall make payment to EDAP for these
     items within thirty (30) days after Urologix's receipt of EDAP's invoice;
     provided that, Urologix shall remit payment for Products manufactured and
     scheduled for delivery as provided in Section 4.1(a) at the times, and in
     the manner provided in this Agreement with respect to all deliveries of
     Products. EDAP shall promptly deliver to Urologix all unused material for
     which Urologix is charged, or take such other measures as Urologix shall
     reasonably request to dispose of such material.

15.  Force Majeure.  Notwithstanding anything to the contrary in this Agreement,
     -------------
     neither

                                       17
<PAGE>

     party is liable to the other under this Agreement on account of any loss,
     damage or delay occasioned or caused by delay in performance or
     nonperformance of any obligation under this Agreement due to strikes or
     lockouts, fire, insurrection, war (whether declared or not), acts of God,
     embargoes, act or order of any court, government or governmental authority
     (but excluding any withdrawal or suspension of approval by a governmental
     authority pertaining to the manufacturing of any Product). If either party
     is affected by a force majeure event, that party must, within ten days of
     its occurrence, give notice to the other party stating the nature of the
     event, its anticipated duration and any action being taken to avoid or
     minimize its effect. The suspension of performance shall be of no greater
     scope and no longer duration than is required and the non-performing party
     must use reasonable efforts to remedy its inability to perform.

16.  Miscellaneous.
     -------------

     16.1 Language.  This Agreement may be translated into any language, but it
          --------
          shall be construed and interpreted in English. All reports, notices
          and other documentation required to be submitted by EDAP to Urologix
          under this Agreement shall be in English.

     16.2 Severability.  In the event a court or administrative body of
          ------------
          competent jurisdiction holds any provision of this Agreement to be
          invalid, illegal or unenforceable, in any respect, then unless
          otherwise agreed, this Agreement will continue in full force and
          effect except for that provision which is be deemed to be excised from
          this Agreement.

     16.3 Amendment.  No amendment or modification of this Agreement is binding
          ---------
          unless it is in writing and signed by all of the parties.

     16.4 Governing Law; Disputes.
          -----------------------

          (a)  This Agreement shall be governed by and construed in accordance
               with the laws of the State of New York applicable to contracts
               made and to be performed therein, without regard to the conflicts
               of laws principles of any jurisdiction.

          (b)  Any dispute between Urologix and EDAP arising out of or in
               connection with this Agreement (or any agreements or documents
               delivered by the parties hereto pursuant to the terms of this
               Agreement) or any alleged breach hereof may, at the option of
               either Urologix or EDAP, be submitted for discussion and possible
               resolution by senior officers of Urologix and EDAP, as designated
               by their respective chief executive officers.

          (c)  All disputes arising, relating to or arising in connection with
               this Agreement, including those pertaining to the validity,
               interpretation,

                                       18
<PAGE>

               construction or breach hereof or of any legal obligation owed or
               claimed to be owed by any party hereto to any other party hereto
               or its Affiliates, that is not otherwise amicably settled between
               the parties shall exclusively be resolved by arbitration between
               Urologix and EDAP pursuant to the Commercial Arbitration Rules of
               the American Arbitration Association (the "Rules"), with the
               arbitration to be conducted in the English language and taking
               place in New York, New York.

          (d)  The arbitral tribunal shall be composed of three arbitrators
               appointed in accordance with the Rules. The Chairman of the
               arbitral tribunal shall be nominated by the two arbitrators
               nominated respectively by Urologix and EDAP, and if they fail to
               agree upon such Chairman within 30 days after the second
               arbitrator has been appointed, such Chairman shall be appointed
               by the American Arbitration Association. No arbitrator shall be
               or have been a present or past employee, officer, director, legal
               counsel, consultant or agent of either party or its Affiliates.
               All arbitrators shall be of legal education, unless the parties
               agree otherwise at the time. Unless prohibited or restricted by
               applicable law, each party agrees to provide to the arbitrators
               and the other party, subject to a strict confidentiality
               agreement, such documents, other evidence, witness testimony as
               may reasonably be requested by the other party and as are
               relevant to the issues being arbitrated. The arbitrators may
               restrict or terminate discovery requests which they conclude are
               unreasonable, unduly burdensome or not relevant to the issues
               being arbitrated. Such discovery shall occur during a reasonable
               time period. The arbitrators shall not have the power to act as
               "amiable compositeurs" with respect to any dispute submitted to
               such arbitration, but rather shall make their decision based on
               their understanding and interpretation of the applicable law and
               facts. The fees and disbursements of the arbitrators shall be
               allocated between the disputing party and the other party to the
               dispute in the same proportion that the disputed items so
               submitted to the arbitrators that are unsuccessfully disputed by
               each (as finally determined by the arbitrators) bears to the
               total amount of all disputed items so submitted. Notwithstanding
               any provision of this Agreement to the contrary, (i) any party
               shall be entitled to seek a judicial order for interim relief to
               the extent necessary to safeguard the property that is the
               subject matter of an arbitration proceeding hereunder, and (ii)
               judgment upon the award rendered in any arbitration proceeding
               hereunder may be entered in any court having jurisdiction or
               application may be made to such court in a judicial acceptance of
               the award and an order by enforcement, as the case may be. The
               parties hereto agree that the arbitrators appointed pursuant to
               this Section 15.4 shall have the power to grant equitable relief,
               including temporary and permanent injunctive relief and specific
               performance.

                                       19
<PAGE>

          (e)  Al of the parties to this Agreement acknowledge that the consent
               to jurisdiction contained in Section 9.8(e) of the Asset Purchase
               Agreement will apply to disputes under this Agreement.

     16.6  U.N. Convention Excluded. The U.N. Convention on Contracts for the
           ------------------------
           International Sale of Goods shall not apply to this Agreement.

     16.7  Entire Agreement. This Agreement represents the entire agreement
           ----------------
           between the parties relating to the matters described in this
           Agreement and supersedes all prior discussions, negotiations,
           understandings and agreements relating to these matters; there are no
           oral promises, representations or warranties.

     16.8  Waiver of Breach. The waiver or failure of either party to enforce
           ----------------
           the terms of this Agreement in one instance does not constitute a
           waiver of that party's rights under this Agreement with respect to
           other violations. No waiver of any of the terms of this Agreement
           will be binding unless it is in writing.

     16.9  Survival.  Sections 7, 9, 10, 11, 13 and 14 and all terms and
           --------
           provisions of this Agreement intended to be observed and performed
           after the expiration of this Agreement, will survive such expiration
           and continue, thereafter, in full force and effect, including without
           limitation, the provisions relating to confidentiality, product
           warranties and product liability.

     16.10 Assignment. EDAP may not assign, by operation of law or otherwise,
           ----------
           its obligations under this Agreement without the prior written
           consent of Urologix. This Agreement will inure to the benefit of, be
           binding upon, and be enforceable against the parties and their
           permitted successors and assigns.

     16.11 Independent Contractor.  All Transition Services performed by EDAP
           ----------------------
           under this Agreement shall be performed by EDAP as an independent
           contractor, and employees of EDAP or any other entities providing
           Services shall at all times be under EDAP's sole discretion and
           control. Neither EDAP nor any other person or entity performing any
           Transition Services hereunder for EDAP shall be deemed for any
           purpose to be the agent, servant, employee, or representative of
           Urologix in the performance of this Agreement. Nothing in this
           Agreement shall be construed to mean that either EDAP or Urologix is
           a partner or a joint venturer with the other party. The relationship
           of EDAP and Urologix under this Agreement, and with respect to the
           Transition Services, shall be that of an independent contractor. EDAP
           shall be responsible for and shall withhold or pay, or both, as may
           be required by law, all taxes pertaining to the employment of its
           personnel and/or performance by it of the Transition Services. EDAP
           also assumes full responsibility for the payment of all payroll
           burdens, fringe benefits and payroll taxes, whether federal, state,
           municipal or otherwise, as to its employees, servants or agents
           engaged in the performance of any Services.

                                       20
<PAGE>

     16.12 Notices.  All notices, requests and other communications to any
           -------
           party hereunder shall be in writing, will be effective upon receipt,
           and shall be given or made (and shall be deemed to have been duly
           given or made upon receipt) by delivery in person, by courier
           service, by cable, by facsimile transmission, by telegram or by
           registered or certified mail (postage prepaid, return receipt
           requested) to the respective parties at the following addresses (or
           at such other address for a party as shall be specified in a notice
           given in accordance with this Section 16.12):


           If to EDAP,
           French Subsidiary or
           U.S. Subsidiary, to:  EDAP TMS S.A.
                                 4-6 rue du Dauphine
                                 69120 Vaulx-en-Velin
                                 France
                                 Attention: Chief Executive Officer

           with a copy to:       Cleary, Gottlieb, Steen & Hamilton
                                 City Place House
                                 55 Basinghall Street
                                 London EC2V 5EH, England
                                 Attention: Pierre-Marie Boury

           If to Urologix to:    Urologix, Inc.
                                 14405 21st Avenue North
                                 Minneapolis, MN  55447
                                 Attention: Chief Executive Officer

           with a copy to:       Lindquist & Vennum P.L.L.P.
                                 4200 IDS Center
                                 80 South 8TH Street
                                 Minneapolis, MN 55402
                                 Attention: Ronald G. Vantine

     16.13 Counterparts. This Agreement may be executed in one or more
           ------------
counterparts, all of which taken together will constitute one and the same
instrument.

     16.14 Cooperation. Each party hereto shall cooperate, shall take further
           -----------
action and shall execute and deliver such further documents as may be reasonably
requested by the other party in order to carry out the provisions and purposes
of this Agreement.

     16.15 Joint Obligations. The parties to this Agreement intend that French
           -----------------
Subsidiary will be responsible for the primary obligations of EDAP under this
Agreement, but each of

                                       21
<PAGE>

EDAP, French Subsidiary and U.S. Subsidiary shall be jointly and severally
liable for the obligations of EDAP under this Agreement.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                                    UROLOGIX, INC.

                                    ______
                                    By: Michael M. Selzer, Jr.
                                    Its: Chief Executive Officer

                                    EDAP TMS S.A.

                                    ______
                                    By: Eric Simon
                                    Its: Chief Executive Officer

                                    TECHNOMED MEDICAL SYSTEMS,
S.A.
                                    ______
                                    By: Eric Simon
                                    Its: Chief Executive Officer

                                    EDAP TECHNOMED INC.

                                    ______
                                    By: Antoine Tetard
                                    Its: President

                                       22
</TEXT>
</DOCUMENT>
