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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
effective as of March 24, 1999, between American Medical Systems, Inc., a
Delaware corporation (the "Company"), and Xxxx Xxxxxx (the "Executive").
R E C I T A L S:
WHEREAS, the Company recognizes that the future growth, profitability
and success of the Company's business will be substantially and materially
enhanced by the employment of the Executive by the Company;
WHEREAS, the Company desires to employ the Executive and the Executive
has indicated his willingness to provide his services, on the terms and
conditions set forth herein;
NOW, THEREFORE, on the basis of the foregoing premises and in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
Section 1. Employment. The Company hereby agrees to employ the
Executive and the Executive hereby accepts employment with the Company, on the
terms and subject to the conditions hereinafter set forth. The Executive shall
serve as Vice President and Chief Financial Officer of the Company, and, in such
capacity, shall report directly to the Company's President or Chief Executive
Officer and shall have such duties as are typically performed by the chief
financial officer of a corporation, together with such additional duties,
commensurate with the Executive's position as the Chief Financial Officer of the
Company, as may be assigned to the Executive from time to time by the Company's
President or Chief Executive Officer. The principal location of the Executive's
employment shall be at the Company's principal executive office located in
Minnetonka, Minnesota, although the Executive understands and agrees that he may
be required to travel from time to time for Company business reasons.
Section 2. Term. Unless terminated pursuant to Section 6 hereof, the
Executive's employment hereunder shall commence on the date hereof and shall
continue during the period ending on the second anniversary of the date hereof
(the "Initial Term"). Thereafter, the Executive's employment term shall extend
automatically for consecutive periods of one year unless either party shall
provide notice of termination not less than sixty (60) days prior to an
anniversary date of this Agreement. The Initial Term, together with any
extension pursuant to this Section 2, is referred to herein as the "Employment
Term." The Employment Term shall terminate upon any termination of the
Executive's employment pursuant to Section 6.
Section 3. Compensation. During the Employment Term, the Executive
shall be entitled to the following compensation and benefits:
(a) Salary. As compensation for the performance of the Executive's
services hereunder, the Company shall pay to the Executive a salary (the
"Salary") of $155,000 per year with increases, if any, as may be approved in
writing by the Company's, President, Chief Executive Officer or Board of
Directors. The Salary shall be payable in accordance with the payroll practices
of the Company as the same shall exist from time to time. In no event shall the
Salary be decreased during the Employment Term.
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(b) Bonus. During the Employment Term, in addition to Salary, the
Executive shall be eligible to participate in such bonus plans as may be adopted
from time by the Board of Directors for other vice presidents of the Company
(the "Bonus"); provided that, unless the Board of Directors determines
otherwise, the Executive must be employed on the last day of such calendar year
in order to receive the Bonus attributable thereto. The Executive's entitlement
to the Bonus for any particular calendar year shall be based on the attainment
of performance objectives established by the Board of Directors in any such
bonus plan.
(c) Benefits. Except as otherwise provided in this Agreement, in
addition to the Salary and Bonus, if any, the Executive shall be entitled during
the Employment Term to participate in health, insurance, pension, retirement,
disability and other benefit programs provided to other vice presidents of the
Company on terms no less favorable than those available to other vice presidents
of the Company. The Executive shall also be entitled to the same number of
vacation days, holidays, sick days and other benefits as are generally allowed
to other vice presidents of the Company in accordance with the Company's
policies in effect from time to time, except that the Executive shall be
entitled to four weeks of vacation or the amount to which the Executive would
otherwise be entitled under the Company's vacation policy, whichever is greater.
(d) Stock Options. The Executive shall be granted, effective the date
hereof, an incentive stock option (the "Option") to purchase 50,000 shares of
common stock, $.0l par value per share, of the Company (the "Common Stock") at
an exercise price per share equal to $5.00 (which the parties hereto agree is
the fair market value of a share of Common Stock on the date of the grant). The
Option shall have a term of ten years from the date of grant and shall vest, on
a cumulative basis, with respect to 12,500 shares on December 31, 1999 and with
respect to 3,125 on the last day of each calendar quarter thereafter while the
Participant is employed by the Company. All of the terms and conditions relating
to the Option are set forth in the Incentive Stock Option Agreement executed by
the Company and the Executive and attached hereto as Exhibit A.
Section 4. Exclusivity. During the Employment Term, the Executive shall
devote his full time to the business of the Company and its subsidiaries, shall
faithfully serve the Company and its subsidiaries, shall in all respects conform
to and comply with the lawful and reasonable directions and instructions given
to him by the President or Chief Executive Officer in accordance with the terms
of this Agreement, shall use his best efforts to promote and serve the interests
of the Company and its subsidiaries and shall not engage in any other business
activity, whether or not such activity shall be engaged in for pecuniary profit,
except that the Executive may (i) participate in the activities of professional
trade organizations related to the business of the Company and its subsidiaries,
(ii) engage in personal investing activities and (iii) serve on the Board of
Directors of Xxxxx Engineering and non-profit organizations, provided that the
activities set forth in these clauses (i), (ii) and (iii), either singly or in
the aggregate, do not interfere in any material respect with the services to be
provided by the Executive hereunder.
Section 5. Reimbursement for Expenses. During the Employment Term, the
Executive is authorized to incur reasonable expenses in the discharge of the
services to be performed hereunder, including expenses for travel,
entertainment, lodging and similar items in accordance with the Company's
expense reimbursement policy, as the same may be modified by the
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Company from time to time. The Company shall reimburse the Executive for all
such proper expenses upon presentation by the Executive of itemized accounts of
such expenditures in accordance with the financial policy of the Company, as in
effect from time to time.
Section 6. Termination and Default.
(a) Death. The Executive's employment shall automatically terminate
upon his death and upon such event, the Executive's estate shall be entitled to
receive the amounts specified in Section 6(e) below.
(b) Disability. If the Executive is unable to perform the duties
required of him under this Agreement because of illness, incapacity, or physical
or mental disability, the Employment Term shall continue and the Company shall
pay all compensation required to be paid to the Executive hereunder, unless the
Executive is disabled such that the Executive would be entitled to receive
disability benefits under the Company's long-term disability plan, or if no such
plan exists, the Executive is unable to perform the duties required of him under
this Agreement for an aggregate of 180 days (whether or not consecutive) during
any 12-month period during the term of this Agreement, in which event the
Executive's employment shall terminate.
(c) Cause. The Company may terminate the Executive's employment at any
time, with or without Cause. In the event of termination pursuant to this
Section 6(c) for Cause (as defined below), the Company shall deliver to the
Executive written notice setting forth the basis for such termination, which
notice shall specifically set forth the nature of the Cause which is the reason
for such termination. Termination of the Executive's employment hereunder shall
be effective upon delivery of such notice of termination. For purposes of this
Agreement, "Cause" shall mean: (i) the Executive's failure (except where due to
a disability contemplated by subsection (b) hereof), neglect or refusal to
perform his duties hereunder which failure, neglect or refusal shall not have
been corrected by the Executive within 30 days of receipt by the Executive of
written notice from the Company of such failure, neglect or refusal, which
notice shall specifically set forth the nature of said failure, neglect or
refusal, (ii) any willful or intentional act of the Executive that has the
effect of injuring the reputation or business of the Company or its affiliates
in any material respect; (iii) any continued or repeated absence from the
Company, unless such absence is (A) approved or excused by the President or
Chief Executive Officer or (B) is the result of the Executive's illness,
disability or incapacity (in which event the provisions of Section 6(b) hereof
shall control); (iv) use of illegal drugs by the Executive or repeated
drunkenness; (v) conviction of the Executive for the commission of a felony; or
(vi) the commission by the Executive of an act of fraud or embezzlement against
the Company.
(d) Resignation. The Executive shall have the right to terminate his
employment at any time by giving notice of his resignation.
(e) Payments. In the event that the Executive's employment terminates
for any reason, the Company shall pay to the Executive all amounts and benefits
accrued but unpaid hereunder through the date of termination in respect of
Salary or unreimbursed expenses, including accrued and unused vacation. In
addition, in the event the Executive's employment is terminated by the Company
without Cause, whether during or upon expiration of the current term of this
Agreement, in addition to the amounts specified in the foregoing sentence, (i)
the
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Executive shall continue to receive the Salary (less any applicable withholding
or similar taxes) at the rate in effect hereunder on the date of such
termination periodically, in accordance with the Company's prevailing payroll
practices, for a period of twelve months following the date of such termination
(the "Severance Term") and (ii) to the extent permissible under the Company's
health and welfare plans, the Executive shall continue to receive any health and
welfare benefits provided to him as of the date of such termination in
accordance with Section 3(c) hereof during the Severance Term, on the same basis
and at the same cost as during the Employment Term. Following the end of the
Severance Term, the Executive shall be entitled to elect health care
continuation coverage permitted under Section 601 through 608 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), as if his
employment had then terminated. Further, in the event the Executive's employment
is terminated without Cause by reason of the Company having notified the
Executive that this Agreement will not be extended pursuant to Section 2, the
Executive shall be entitled to receive a pro-rated amount of the Bonus in a lump
sum based on the Executive's period of employment during the calendar year in
which such termination occurs (less any applicable withholding or similar
taxes). In the event the Executive accepts other employment prior to the last
date of the Severance Term, the Executive shall forthwith notify the Company and
the Company shall be entitled to set off from amounts and benefits due the
Executive under this Section 6(e) (other than in respect of the Bonus) the
amounts paid to and benefits received by the Executive in respect of such other
employment. Amounts owed by the Company in respect of the Salary, Bonus or
reimbursement for expenses under the provisions of Section 5 hereof shall,
except as otherwise set forth in this Section 6(e), be paid promptly upon any
termination. The payments and benefits to be provided to the Executive as set
forth in this Section 6(e) in the event the Executive's employment is terminated
by the Company without Cause: (i) shall be lieu of any and all benefits
otherwise provided under any severance pay policy, plan or program maintained
from time to time by the Company for its employees, (ii) shall not be paid to
the extent that Executive's employment is terminated following a Change in
Control under circumstances entitling the Executive to the benefits described in
Section 6(f).
(f) Change of Control Benefit. In the event that the Executive's
employment is terminated by the Company without Cause or by the Executive for
Good Reason, as defined below, during the 12-month period immediately following
a Change of Control, as defined below, whether during or upon expiration of the
current term of this Agreement: (i) the Company shall pay to the Executive all
amounts and benefits accrued but unpaid hereunder through the date of
termination in respect of Salary or unreimbursed expenses, including accrued and
unused vacation (less any applicable withholding or similar taxes), (ii) all
unvested shares that are subject to the Option shall become immediately vested
and exercisable as set forth in the Incentive Stock Option Agreement attached as
Exhibit A, (iii) the Company shall pay to Executive a lump sum payment equal to
his Salary at the rate in effect hereunder on the date of such termination, plus
his maximum target Bonus (up to a maximum of 40% of his then current annual
Salary) for the year in which the Change of Control occurs (less any applicable
withholding or similar taxes) and (iv) to the extent permissible under the
Company's health and welfare plans, the Executive shall continue to receive, at
the Company's cost, any health and welfare benefits provided to him as of the
date of such termination for the 12-month period following his termination of
employment. Any payments due under this Section 6(f) shall be made within five
(5) business days of termination of Executive's employment. Following the end of
the 12-month period described in clause (iv) of the preceding sentence, the
Executive
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shall be entitled to elect health care continuation coverage permitted under
Sections 601 through 608 of the Employee Retirement Income Security Act of 1974,
as amended, as if his employment with the Company then terminated.
For the purposes of this Agreement, "Change of Control" shall
mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more (on a fully diluted basis) of either (A) the then outstanding shares of
common stock of the Company, taking into account as outstanding for this purpose
such common stock issuable upon the exercise of options or warrants, the
conversion of convertible stock or debt, and the exercise of any similar right
to acquire such common stock (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a Change of
Control: (x) any acquisition by the Company or any "affiliate" of the Company,
within the meaning of 17 C.F.R. ss. 230.405 (an "Affiliate"), (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliate of the Company, (z) any acquisition
by any corporation pursuant to a transaction which complies with clauses (A),
(B) and (C) of subsection (ii) of this Section 6(f) (persons and entities
described in clauses (x), (y) and (z) being referred to herein as "Permitted
Holders"); or
(ii) The consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, and (B) no Person (excluding any Permitted Holder) beneficially owns,
directly or indirectly, 50% or more (on a fully diluted basis) of, respectively,
the then outstanding shares of common stock of the corporation resulting from
such Business Combination, taking into account as outstanding for this purpose
such common stock issuable upon the exercise of options or warrants, the
conversion of convertible stock or debt, and the exercise of any similar right
to acquire such common stock, or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (C) at least a majority
of the members of the board of directors of the corporation resulting from such
Business Combination were
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members of the incumbent Board of Directors of the Company at the time of the
execution of the initial agreement providing for such Business Combination; or
(iii) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company; or
(iv) The sale of at least 80% of the assets of the Company to
an unrelated party, or completion of a transaction having a similar effect; or
(v) The individuals who on the date of this Agreement
constitute the Board of Directors thereafter cease to constitute at least a
majority thereof; provided that any person becoming a member of the Board of
Directors subsequent to the date of this Agreement and whose election or
nomination was approved by a vote of at least two-thirds of the directors who
then comprised the Board of Directors immediately prior to such vote shall be
considered a member of the Board of Directors on the date of this Agreement.
For purposes of this Agreement, "Good Reason" shall mean,
without the Executive's prior written consent, (i) a substantial diminution in
the Executive's authority, duties or responsibilities as in effect prior to the
Change in Control, (ii) a reduction by the Company in the Executive's base
salary, or an adverse change in the form or timing of the payment thereof, as in
effect immediately prior to the Change in Control or as thereafter increased,
(iii) the failure by the Company to cover the Executive under employee benefit
plans that, in the aggregate, provide substantially similar benefits to the
Executive and/or his or her family and dependents at a substantially similar
total cost to the Executive (e.g., premiums, deductibles, co-pays, out of pocket
maximums, required contributions, taxes and the like) relative to the benefits
and total costs under such benefit plans in which the Executive (and/or his or
her family or dependents) were participating at any time during the 90-day
period immediately preceding the Change in Control, or (iv) the Company's
requiring the Executive to be based at any office or location that is more than
fifty (50) miles further from the office or location thereof immediately
preceding a Change in Control; provided, however, Good Reason shall not include
any of the circumstances or events described herein unless the Executive has
first provided written notice of such circumstance or event and the Company has
not corrected such circumstance or event within thirty (30) days of receipt by
the Company of such written notice from the Participant.
(g) Survival of Operative Sections. Upon any termination of the
Executive's employment, the provisions of Sections 6(e) 6(f) and 7 through 17 of
this Agreement shall survive to the extent necessary to give effect to the
provisions thereof.
Section 7. Secrecy and Non-Competition. The Executive reaffirms his
obligations under the Secrecy and Non-Competition Agreement, dated March 11,
1999, between the Company and the Executive. The Company agrees that the
restrictions contained in Section 1(a) of the Secrecy and Non-Competition
Agreement shall not prohibit the Executive from owning up to one percent (1.0%)
of the outstanding capital stock of a publicly held entity that competes with
the Company.
Section 8. Representations and Warranties of the Executive. The
Executive represents and warrants to the Company as follows:
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(a) This Agreement, upon execution and delivery by the Executive, will
be duly executed and delivered by the Executive and (assuming due execution and
delivery hereof by the Company) will be the valid and binding obligation of the
Executive enforceable against the Executive in accordance with its terms.
(b) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby nor the performance of this
Agreement in accordance with its terms and conditions by the Executive (i)
requires the approval or consent of any governmental body or of any other person
or (ii) conflicts with or results in any breach or violation of, or constitutes
(or with notice or lapse of time or both would constitute) a default under, any
agreement, instrument, judgment, decree, order, statute, rule, permit or
governmental regulation applicable to the Executive. Without limiting the
generality of the foregoing, the Executive is not a party to any
non-competition, non-solicitation, no hire or similar agreement that restricts
in any way the Executive's ability to engage in any business or to solicit or
hire the employees of any person.
The representations and warranties of the Executive contained in this
Section 8 shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
Section 9. Representations and Warranties of the Company. The Company
represents and warrants to the Executive as follows:
(a) This Agreement, upon execution and delivery by the Company, will be
duly executed and delivered by the Company and (assuming due execution and
delivery hereof by the Executive) will be the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms.
(b) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby nor the performance of this
Agreement in accordance with its terms and conditions by the Company (i)
requires the approval or consent of any governmental body or of any other person
or (ii) conflicts with or results in any breach or violation of, or constitutes
(or with notice or lapse of time or both would constitute) a default under, any
agreement, instrument, judgment, decree, order, statute, rule, permit or
governmental regulation applicable to the Company.
The representations and warranties of the Company contained in this
Section 9 shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
Section 10. Successors and Assigns; No Third-Party Beneficiaries. This
Agreement shall inure to the benefit of, and be binding upon, the successors and
assigns of each of the parties, including, but not limited to, the Executive's
heirs and the personal representatives of the Executive's estate; provided,
however, that neither party shall assign or delegate any of the obligations
created under this Agreement without the prior written consent of the other
party. Notwithstanding the foregoing, the Company shall have the unrestricted
right to assign this Agreement and to delegate all or any part of its
obligations hereunder to any of its subsidiaries or
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affiliates, but in such event such assignee shall expressly assume all
obligations of the Company hereunder and the Company shall remain fully liable
for the performance of all of such obligations in the manner prescribed in this
Agreement. Nothing in this Agreement shall confer upon any person or entity not
a party to this Agreement, or the legal representatives of such person or
entity, any rights or remedies of any nature or kind whatsoever under or by
reason of this Agreement.
Section 11. Waiver and Amendments. Any waiver, alteration, amendment or
modification of any of the terms of this Agreement shall be valid only if made
in writing and signed by the parties hereto. No waiver by either of the parties
hereto of their rights hereunder shall be deemed to constitute a waiver with
respect to any subsequent occurrences or transactions hereunder unless such
waiver specifically states that it is to be construed as a continuing waiver.
Section 12. Severability and Governing Law. If any of such covenants or
such other provisions of this Agreement are found to be invalid or unenforceable
by a final determination of a court of competent jurisdiction (a) the remaining
terms and provisions hereof shall be unimpaired and (b) the invalid or
unenforceable term or provision shall be deemed replaced by a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision. This Agreement shall be
governed by and construed in accordance with the laws of the state of Minnesota
applicable to contracts made and to be performed entirely within such state,
provided, however, that the provisions of this Agreement relating to the Option
shall be governed by and construed in accordance with the laws of the State of
New York.
Section 13. Notices.
(a) All communications under this Agreement shall be in writing and
shall be delivered by hand or mailed by overnight courier or by registered or
certified mail, postage prepaid:
(i) If to the Executive, at 0000 Xxxxxxx Xxxxxxx, Xxxxxxxxxxx,
Xxxxxxxxx 00000, or at such other address as the Executive may have furnished
the Company in writing, and
(ii) If to the Company, at 00000 Xxxx Xxxx Xxxx, Xxxxxxxxxx,
Xxxxxxxxx 00000, marked for the attention of the Chief Executive Officer, or at
such other address as it may have furnished in writing to the Executive.
(b) Any notice so addressed shall be deemed to be given: if delivered
by hand, on the date of such delivery; if mailed by courier, on the first
business day following the date of such mailing; and if mailed by registered or
certified mail, on the third business day after the date of such mailing.
Section 14. Section Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof, affect the meaning or interpretation of
this Agreement or any term or provision hereof.
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Section 15. Entire Agreement. This Agreement including the exhibits
hereto, constitutes the entire understanding and agreement of the parties hereto
regarding the employment of the Executive. This Agreement supersedes all prior
negotiations, discussions, correspondence, communications, understandings and
agreements between the parties relating to the subject matter of this Agreement.
Section 16. Severability. In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not effect the
remaining provisions of this Agreement which shall remain in full force and
effect.
Section 17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
AMERICAN MEDICAL SYSTEMS, INC.
By: /s/ Xxx X. Xxxxxxxxx
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Xxx X. Xxxxxxxxx
President and Chief Executive Officer
/s/ Xxxxxxx X. Xxxxxx
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Xxxx Xxxxxx
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