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STOCK OPTION AGREEMENT
UNDER THE
AMS 1998 EQUITY INCENTIVE PLAN
THIS AGREEMENT, made as of April 23, 1999 (the "Effective
Date"), by and between American Medical Systems, Inc., a Delaware corporation
(the "Company"), and Xxxxxxx X. Xxxxx (the "Participant").
W I T N E S S E T H:
WHEREAS, the Company and the Participant have entered into an
employment agreement dated as of April 23, 1999 (the "Employment Agreement"),
pursuant to which the Company is required to afford the Participant the
opportunity to acquire the Company's common stock, par value $.01 per share
("Stock"), so that the Participant may have a direct proprietary interest in the
Company's success.
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. Grant of Option. (a) Subject to the terms and conditions set forth
herein and in the AMS 1998 Equity Incentive Plan (the "Plan"), the Company
hereby grants to the Participant, during the period commencing on the date of
this Agreement and ending on April 23, 2009 (the "Expiration Date"), the right
and option (the right to purchase any one share of Stock hereunder being an
"Option") to purchase from the Company 69,375 shares of Stock. The Options shall
have an exercise price of $5.00 per share, which represents the Fair Market
Value per share of the Stock as of the date hereof. Each of the Options granted
pursuant to this Section 1(a) shall constitute Incentive Stock Options under the
Plan.
(b) Subject to the terms and conditions set forth herein and
in the Plan, the Company hereby also grants to the Participant, during the
period commencing on the date of this Agreement and ending on the Expiration
Date, Options to purchase from the Company 80,625 additional shares of Stock.
The Options shall have an exercise price of $5.00 per share, which represents
the Fair Market Value per share of the Stock as of the date hereof. Each of the
Options granted pursuant to this Section 1(b) shall constitute Nonqualified
Stock Options under the Plan.
2. Limitations on Exercise of Options. (a) The Incentive Stock Options
shall vest and become exercisable, on a cumulative basis, while the Participant
is employed by the Company as set forth in Exhibit A hereto. The Board may
accelerate the vesting and exercisability of any or all of the then-unvested
Incentive Stock Options at any time; provided, however, all Incentive Stock
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Options shall vest and be immediately exercisable in the event of a "Change of
Control" (as defined in the Employment Agreement).
(b) Subject to the terms and conditions set forth herein and
the Plan, the Nonqualified Stock Options shall vest and become exercisable, on a
cumulative basis, while the Participant is employed by the Company as set forth
in Exhibit B hereto. The Board may accelerate the vesting and exercisability of
any or all of the then-unvested Nonqualified Stock Options at any time;
provided, however, all of the Nonqualified Stock Options shall vest and be
immediately exercisable in the event of a Change of Control.
3. Termination of Employment. (a) If prior to the Expiration Date, the
Participant's employment shall be terminated by the Company by reason of a
disability, the Options shall remain exercisable until the earlier of the
Expiration Date or six (6) months after such date of termination (the "Date of
Termination") to the extent the Options were vested and exercisable as of the
Date of Termination.
(b) If the Participant shall cease to be employed by the
Company prior to the Expiration Date by reason of death, or the Participant
shall die while entitled to exercise any of the Options pursuant to paragraph
3(a) or paragraph 3(c), the executor or administrator of the estate of the
Participant or the person or persons to whom the Options shall have been validly
transferred by the executor or administrator pursuant to will or the laws of
descent and distribution shall have the right, until the earlier of the
Expiration Date or twelve (12) months after the date of death, to exercise the
Options to the extent that the Participant was entitled to exercise them on the
date of death.
(c) If, prior to the Expiration Date, the Participant's
employment with the Company is terminated for "Cause" (as defined in the
Employment Agreement), (i) unless otherwise provided by the Board, the Options,
to the extent not exercised as of the Date of Termination, shall lapse and be
canceled, and (ii) all shares of Stock received pursuant to an exercise of the
Options after such termination, in contravention of subsection (i) above, may be
purchased by the Company at its discretion for the exercise price of such shares
paid by the Participant.
(d) If, prior to the Expiration Date, the Company terminates
the Participant's employment without Cause (other than on account of a
disability), the Options, to the extent then vested and exercisable as of the
Date of Termination, shall remain exercisable until the earlier of the
Expiration Date or 90 days after the Date of Termination.
(e) If the Participant voluntarily terminates his employment
with the Company (i) prior to the first anniversary of
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the Effective Date, all Options to the extent not exercised as of the Date of
Termination shall lapse and be canceled, or (ii) on or after the first
anniversary of the Effective Date, the Options shall remain exercisable until
the earlier of the Expiration Date or ninety (90) days after the Date of
Termination to the extent the Options were vested and exercisable as of the Date
of Termination.
(f) After the expiration of any exercise period described in
any of Sections 3(a) - (e) hereof, or otherwise upon the Expiration Date, the
Options shall terminate together with all of the Participant's rights hereunder,
to the extent not previously exercised.
4. Non-Transferable. Except as specifically authorized by the Board,
the Participant may not transfer the Options except by will or the laws of
descent and distribution and the Options shall be exercisable during the
Participant's lifetime only by the Participant or his guardian or legal
representative. Except as so authorized, no purported assignment or transfer of
the Options, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise (except by will or the laws of
descent and distribution), shall vest in the assignee or transferee any interest
or right herein whatsoever.
5. Adjustments and Corporate Reorganizations. In accordance with and
subject to the applicable terms of the Plan, the Options shall be subject to
adjustment or substitution, as determined by the Committee, as to the number,
price or kind of Stock or other consideration subject to such Options or as
otherwise determined by the Committee to be equitable (i) in the event of
changes in the outstanding Stock or in the capital structure of the Company by
reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the date
hereof or (ii) in the event of any change in applicable laws or any change in
circumstances which results in or would result in any substantial dilution or
enlargement of the rights granted to, or available for, the Participant. The
Company shall give the Participant written notice of an adjustment hereunder.
6. Exercise: Payment For and Delivery of Stock. The Options shall be
exercised by delivering written notice to the Committee stating the number of
shares of Stock to be purchased, the person or persons in whose name the shares
of Stock are to be registered and each such person's address and social security
number. Such notice shall not be effective unless accompanied by the full
purchase price for all shares to be purchased, and any applicable withholding
(as described below). The purchase price shall be payable in cash or in shares
of Stock or any combination thereof; provided, however, that the Participant may
use Stock in payment of the exercise price only if the shares so used are
considered "mature" for purposes of generally accepted accounting
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principles (i.e., (i) been held by the Participant free and clear for at least
six (6) months prior to the use thereof to pay part of an Option exercise price,
(ii) been purchased by the Participant in other than a compensatory transaction,
or (iii) meet any other requirements for "mature" shares as may exist on the
date of the use thereof to pay part of an Option exercise price). In the event
that all or part of the purchase price is paid in shares of Stock, the shares
used in payment shall be valued at their Fair Market Value on the date of
exercise of the Options. At the time of exercise, the Participant shall pay to
the Company, in cash, or by having the Company withhold upon exercise of the
Option a sufficient number of shares of Stock otherwise deliverable to the
Participant based on the Fair Market Value of the Stock on the date of exercise,
at the election of the Participant, such minimum amount as the Company deems
necessary to satisfy its obligation to withhold Federal, state or local income
or other taxes incurred by reason of the exercise or the transfer of shares
thereupon. Payment in currency or by certified or cashier's check shall be
considered payment in cash.
7. Rights as Stockholder. (a) The Participant or a transferee of the
Options shall have no rights as a stockholder with respect to any shares covered
by the Options until he shall have become the holder of record of such shares
(and the Company shall use its reasonable best efforts to cause the Participant
promptly to become the holder of record of such shares), and, except as provided
in Section 5 hereof, no adjustment shall be made for dividends or distributions
or other rights in respect of such shares for which the record date is prior to
the date upon which he shall become the holder or record thereof.
(b) The Participant acknowledges and agrees that the Stock
shall be "Shares" as such term is used in the Stockholders Agreement annexed to
the Executive's Employment Agreement as Exhibit B and, as such, will be subject
to certain restrictions, including restrictions on resale and such other
transfers.
8. Company; Participant. (a) The term "Company" as used in this
Agreement with reference to employment shall include the Company and its
affiliates.
(b) Whenever the word "Participant" is used in any provision
of this Agreement under circumstances where the provision should logically be
construed to apply to the executors, the administrators, legal representatives
or the person or persons to whom the Options may be transferred by will or by
the laws of descent and distribution, the word "Participant" shall be deemed to
include such person or persons.
9. Repurchase Rights. (a) Repurchase of Stock. At any time within the
90-day period immediately following the Date of Termination for any reason
(including by reason of death or disability), the Company shall have the right,
and not the obligation, to purchase and acquire from the Participant any or
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all of the shares of Stock (the "Repurchased Shares"). The Company may exercise
the right granted to it under this Section 9(a) by delivering written notice to
the Participant during such 90-day period stating that the Company is exercising
the repurchase right granted to it under this Section 9(a). The delivery of such
notice by the Company to the Participant shall constitute a binding commitment
of the Company to purchase and acquire all of the Repurchased Shares. The total
purchase price for the Repurchased Shares shall be delivered to the Participant
against delivery by the Participant of certificates evidencing the Repurchased
Shares no later than 30 days after the delivery of the election notice by the
Company. The price per share of the Repurchased Shares (the "Share Repurchase
Price") shall be the Fair Market Value of each of the Repurchased Shares on the
date of the Company's delivery of its written notice to the Participant;
provided, however, that if the Participant's employment is terminated for Cause,
then the Share Repurchase Price shall be the lesser of such Fair Market Value or
the exercise price of the Option.
(b) Repurchase of Vested Options. At any time within the
90-day period immediately following the Date of Termination for any reason
(including by reason of death or disability), the Company shall have the right,
and not the obligation, to purchase and acquire from the Participant any or all
of the Participant's vested Options to the extent such vested Options are
exercisable (the "Repurchased Options"). The Company may exercise the right
granted to it under this Section 9(b) by delivering a written notice to the
Participant during such 90-day period stating that the Company is exercising the
repurchase right granted to it under this Section 9(b). The delivery of such
notice by the Company to the Participant shall constitute a binding commitment
of the Company to purchase and acquire all of the Repurchased Options. The total
purchase price for the Repurchased Options shall be delivered to the Participant
against delivery by the Participant of this Agreement no later than 30 days
after the delivery of the election notice by the Company. The Option repurchase
price (the "Option Repurchase Price") shall be an amount equal to the Share
Repurchase Price on the date of the Company's delivery of its written notice to
the Participant under Section 9(a), above, less the exercise price then
applicable to each Repurchased Option (such repurchase shall only be made to the
extent such Option is exercisable as set forth above).
(c) Limitation on Repurchase Rights. Anything in this Section
9 to the contrary, the Company shall not be obligated to purchase any Stock or
Options at any time to the extent that the purchase would result in a violation
of any law, statute, rule, regulation, order, writ, injunction, decree or
judgment promulgated or entered by any Federal, state, local or foreign court or
governmental authority applicable to the Company or any of its property.
Anything in this Section 9 to the contrary, the Company's right to purchase any
Stock or Options hereunder shall expire in the event of an IPO
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10. Requirements of Law. (a) By accepting the Options, the Participant
represents and agrees for himself and his transferees (whether by will or the
laws of descent and distribution) that, unless a registration statement under
the Securities Act of 1933, as amended (the "Act"), is in effect as to shares
purchased upon any exercise of the Options, (i) any and all shares so purchased
shall be acquired for his personal account and not with a view to or for sale in
connection with any distribution, and (ii) each notice of the exercise of any
portion of this Option shall be accompanied by a representation and warranty in
writing, signed by the person entitled to exercise the same, that the shares are
being so acquired in good faith for his personal account and not with a view to
or for sale in connection with any distribution.
(b) No certificate or certificates for shares of Stock may be
purchased, issued or transferred if the exercise hereof or the issuance or
transfer of such shares shall constitute a violation by the Company or the
Participant of any (i) provision of any Federal, state or other securities law,
(ii) requirement of any securities exchange listing agreement to which the
Company may be a party, or (iii) other requirement of law or of any regulatory
body having jurisdiction over the Company. Any reasonable determination in this
connection by the Board, upon notice given to the Participant, shall be final,
binding and conclusive.
(c) The certificates representing shares of Stock acquired
pursuant to the exercise of options shall carry such appropriate legend, and
such written instructions shall be given to the Company's transfer agent, as may
be deemed necessary or advisable by counsel to the Company in order to comply
with the requirements of the Act or any state securities laws.
11. Notices. Any notice to be given to either party shall be in writing
and shall be given by hand delivery to such party or by registered or certified
mail, return receipt requested, postage prepaid, addressed to the Company in
care of its Secretary at its principal office, and to the Participant at the
address given beneath his signature hereto, or at such other address as either
party shall have furnished to the other in writing in accordance herewith.
Notice and communications shall be effective when actually received by the
addressee.
12. Disposition of Stock. The Participant agrees to notify the Company,
in writing, within thirty (30) days of any disposition (whether by sale,
exchange, gift or otherwise) of shares of Stock purchased under this Agreement
with respect to an Incentive Stock Option, within two (2) years from the date of
the granting of such Options or within one (1) year of the transfer of such
shares of Stock to the Participant.
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13. Binding Effect. Subject to Section 4 hereof, this Agreement shall
be binding upon the heirs, executors, administrators, successors and permitted
assigns of the parties hereto.
14. Plan. The terms and provisions of the Plan are incorporated herein
by reference and made a part hereof as though fully set forth herein. In the
event of any conflict or inconsistency between discretionary terms and
provisions of this Agreement, this Agreement shall govern and control. In all
other instances of conflicts or inconsistencies or omissions, the terms and
provisions of the Plan shall govern and control. All capitalized terms not
otherwise expressly defined in this Agreement shall have the meaning ascribed to
them in the Plan.
15. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of New York, without regard to the
principles of conflicts of law thereof.
16. Entire Agreement. This Agreement, together with the Plan, the
Employment Agreement and the Stockholders Agreement, contains the entire
agreement and understanding between the parties with respect to the subject
matter hereof and supersedes all prior agreements, written or oral, with respect
thereto.
IN WITNESS WHEREOF, the Company has granted this Option on the
date of grant specified above.
This instrument may be executed in any number of counterparts,
each of which shall be deemed to be an original, and such counterparts together
shall constitute one and the same instrument.
AMERICAN MEDICAL SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
ACCEPTED:
/s/ Xxxxxxx X. Xxxxx
-------------------------
Xxxxxxx X. Xxxxx
0000 Xxxx Xxxx Xxxxx
Xxxxx, XX 00000
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EXHIBIT A
AMS 1998 EQUITY INCENTIVE PLAN
INCENTIVE STOCK OPTION VESTING SCHEDULE
FOR XXXXXXX X. XXXXX
ANNIVERSARY OF
YEAR EFFECTIVE DATE 3/31 6/30 9/30 12/31 TOTAL
---- -------------- ---- ---- ---- ----- -----
2000 20,000 20,000
2001 5,000 5,000 5,000 5,000 20,000
2002 5,000 5,000 5,000 5,000 20,000
2003 9,375 9,375
69,375
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EXHIBIT B
AMS 1998 EQUITY INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION SCHEDULE
FOR XXXXXXX X. XXXXX
ANNIVERSARY OF
YEAR EFFECTIVE DATE 3/31 6/30 9/30 12/31 TOTAL
---- -------------- ---- ---- ---- ----- -----
2000 17,500 9,375 9,375 9,375 45,625
2001 4,375 4,375 4,375 4,375 17,500
2002 4,375 4,375 4,375 4,375 17,500
2003
80,625
