CHANGE IN CONTROL SEVERANCE AGREEMENT
Exhibit 10.3
This Change in Control Severance Agreement (this “Agreement”), effective as of
, , is between American Medical Systems Holdings, Inc., a Delaware corporation
(“Parent Corporation”), on its behalf and on behalf of all of its Affiliates (collectively, and if
the context requires, each individually, referred to herein as the “Company”), located at
00000 Xxxx Xxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxx 00000 and , an individual residing at
(the “Executive”).
A. The Executive is currently employed by the Company in an executive or senior management
position.
B. The Board considers the operation of the Company to be of critical importance to the Parent
Corporation and therefore the establishment and maintenance of a sound and vital management team of
the Company is essential to protecting and enhancing the best interests of the Parent Corporation
and its stockholders.
C. In this connection, the Board recognizes that the possibility of a Change in Control may
arise and that such possibility and the uncertainty and questions which such transaction may raise
among key management personnel of the Company and its subsidiaries could result in the departure or
distraction of such management personnel to the detriment of the Parent Corporation and its
stockholders.
D. The Board has determined that appropriate steps should be taken to minimize the risk that
Company executive management will depart prior to a Change in Control, thereby leaving the Company
without adequate executive management personnel during such a critical period, and to reinforce and
encourage the continued attention and dedication of members of the Company’s executive management
to their assigned duties without distraction in circumstances arising from the possibility of a
Change in Control.
E. The Board recognizes that continuance of the Executive’s position with the Company involves
a substantial commitment to the Company in terms of the Executive’s personal life and professional
career and the possibility of foregoing present and future career opportunities, for which the
Company receives substantial benefits.
F. To induce the Executive to remain in the employ of the Company, this Agreement, which has
been approved by the Board, sets forth the benefits that the Company agrees will be provided to the
Executive in the event of a Change in Control under the circumstances described below.
G. The Company and the Executive intend that the benefits provided under this Agreement will
comply, in form and operation, with the requirements of Section 409A of the Code and this Agreement
will be construed and administered in a manner that is consistent with and gives effect to such
intention.
H. Certain capitalized terms that are used in this Agreement are defined in Exhibit A, which
is an integral part of this Agreement.
Accordingly, the Company and the Executive each intending to be legally bound, agree as
follows:
1. Term of Agreement. This Agreement is effective immediately and will continue in
effect only so long as the Executive remains employed by the Company. This Agreement will
automatically terminate upon the Executive’s Termination of Employment with the Company, except for
a Termination of Employment contemplated by Section 2, in which case this Agreement will remain in
effect until the date on which the Company’s obligations to the Executive arising under or in
connection with this Agreement have been satisfied in full. Notwithstanding the foregoing, this
Agreement shall terminate immediately (and no benefit will be payable under this Agreement) in the
event, prior to a Change in Control, and in a transaction that is not a Change in Control, either
the Company ceases to be an Affiliate of the Parent Corporation or sells all or substantially all
of its assets, in one or a series of related transactions, to any Person.
2. Benefits upon a Change in Control Termination. The Executive will become entitled
to the benefits described in this Section 2 on account of a Termination of Employment if and only
if (i) the Company terminates the Executive’s employment for any reason other than for Cause, or
the Executive terminates the Executive’s employment with the Company for Good Reason, and (ii) the
Termination of Employment occurs either within the period beginning on the date of a Change in
Control and ending on the last day of the first full calendar month following the first anniversary
date of the Change in Control or prior to a Change in Control if the Executive’s Termination of
Employment was either a condition of the Change in Control or was at the request or insistence of a
Person related to the Change in Control.
(a) Cash Payment. Subject to Section 2(d), not more than 10 days following the
Date of Termination, or, if later, not more than 10 days following the date of the Change in
Control, the Company will make a lump-sum cash payment to the Executive in an amount equal
to [CEO: two times; COO and CFO: one and one-half times; other executives: one times] the
sum of (i) the Executive’s Base Pay, plus (ii) 100% of the Executive’s target bonus
established for the year during which the Change in Control occurs.
(b) Group Health Plans; Life Insurance. If the Executive elects COBRA coverage
under the Company’s group health and dental plans, then during each month of the
Continuation Period (as defined below), the Company will pay the Executive an amount equal
to the excess of (a) the portion of the monthly cost for the Executive’s coverage under the
Company’s group health and dental plans that was borne by the Company immediately prior to
the Executive’s Termination of Employment or, if greater, immediately prior to the Change in
Control over (b) the portion of the monthly cost for the Executive’s coverage under the
Company’s group health and dental plans that is borne by the Company during the Continuation
Period, which excess is $0.00 if the Executive fails to elect or maintain COBRA coverage
during the Continuation Period. The Executive’s coverage will be deemed to include any
Company contribution to a Health Savings Account (or similar arrangement) for the Executive.
If the level of the Executive’s coverage changes during the Continuation Period, as, for
example, from single to family coverage or to no coverage, the amount will be determined as
if the new
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coverage level had been the level of coverage in effect immediately prior to the
Termination of Employment or Change in Control, as the case may be. The Executive shall be
entitled to elect health care continuation coverage under the Company’s group health and
dental plans for up to 12 months beyond the end of the 18-month COBRA period if he or she
has not become eligible to participate as an employee in a plan of another employer
providing group health and dental benefits to the Executive and the Executive’s eligible
family members and dependents, which plan does not contain any exclusion or limitation with
respect to any pre-existing condition of the Executive or any eligible family member or
dependent who would otherwise be covered under the Company’s plan but for this clause. If
COBRA continuation coverage is not available to the Executive during any portion of the
Continuation Period (other than by reason of his or her failure to elect COBRA continuation
coverage or to pay the required premiums for such coverage), the Company will provide
comparable medical benefits pursuant to an alternative arrangement, such as an individual
medical insurance contract, and such alternative benefits will be treated as part of the
Company’s health and dental plan. In addition, during each month of the Continuation
Period, the Executive shall be entitled to receive life insurance coverage substantially
equivalent to the coverage Executive had on the day immediately prior to his or her
Termination of Employment, including coverage then in effect for Executive’s spouse and
dependents. Executive shall be required to pay no more for such life insurance than
Executive paid as an active employee immediately before his or her Termination of
Employment. In order to continue life insurance coverage, Executive must timely elect
continuation or the portability option available under the Company’s group life insurance
policy or policies and pay the full premium for such coverage following Termination of
Employment. The Company will reimburse Executive at least quarterly for the amount by which
such life insurance premium exceeds the amount Executive paid for such coverage as an active
employee immediately prior to his or her Termination of Employment.
For purposes of this section, the “Continuation Period” is the period beginning
on the Executive’s Date of Termination and ending on (x) the last day of the 12th month
that begins after the Executive’s Date of Termination or, if earlier, (y) the date
after the Executive’s Date of Termination on which the Executive first becomes eligible to
participate as an employee in a plan of another employer providing group health and dental
benefits to the Executive and the Executive’s eligible family members and dependents, which
plan does not contain any exclusion or limitation with respect to any pre-existing condition
of the Executive or any eligible family member or dependent who would otherwise be covered
under the Company’s plan but for this clause (y).
(c) To the extent the Executive incurs a tax liability (including federal, state and
local taxes and any interest and penalties with respect thereto) in connection with a
benefit provided pursuant to Section 2(b) which the Executive would not have incurred had
the Executive been an active employee of the Company participating in the Company’s group
health and dental plans, the Company will make a payment to the Executive in an amount equal
to such tax liability plus an additional amount sufficient to permit the Executive to retain
a net amount after all taxes (including penalties and interest) equal to the initial tax
liability in connection with the benefit. For purposes of applying the foregoing, the
Executive’s tax rate will be deemed to be the highest statutory
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marginal state and federal tax rate (on a combined basis) then in effect. The payment
pursuant to this Section 2(b) will be made within 10 days after the Executive’s remittal of
a written request for payment accompanied by a statement indicating the basis for and amount
of the liability, but in no event later than December 31 of the calendar year to which the
tax liability relates.
(d) Notwithstanding the foregoing, if, and to the extent, the payments under Paragraph
(a), (b) and/or (c) are considered deferred compensation that is subject to the requirements
of Section 409A of the Code and, at the time of his or her Termination of Employment the
Executive is a Specified Employee, then any payment of such benefit(s) shall be suspended
and not made until the first day after the end of the six (6) month period following the
Executive’s Termination of Employment, or, if earlier, upon the Executive’s death. If any
such suspended payment is not made within 10 days of the end of such six month period, the
Company will pay the Executive interest, as determined under Section 7(l), from the date of
Termination of Employment through the date of payment.
3. Stock Option Acceleration. If a Change in Control occurs, regardless of whether
the acquiring entity or Successor assumes or replaces the stock options or stock awards granted
under any Benefit Plan and then held by the Executive and regardless of whether the Executive
continues to be employed by the Company after the Change in Control, then all such stock options or
stock awards which are unvested or restricted shall vest and be immediately exercisable in full, or
become unrestricted, as the case may be, as of the date of the Change in Control and,
notwithstanding the provisions of any Benefit Plan, shall, in the case of options, remain
exercisable until two years after the date of the Change in Control or the date of the Executive’s
Termination of Employment with the Company, whichever is later, but in no event after the
expiration date of any stock option.
4. Gross-Up Payments. If the Executive becomes entitled to payments and benefits in
following a Change in Control under Section 2 or the vesting of any stock options accelerate
following a Change in Control under Section 3, any stock option agreement or certificate or
otherwise, the Company will cause its independent auditors promptly to review, at the Company’s
sole expense, the applicability of Code Section 4999 to any payment or distribution of any type by
the Company to or for the Executive’s benefit, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement, any stock option agreement or certificate or
otherwise (the “Total Payments”). If the auditor determines that the Total Payments result
in an excise tax imposed on the Executive by Code Section 4999 or any comparable state or local
law, or any interest or penalties with respect to such excise tax (such excise tax, together with
any such interest and penalties, are collectively referred to as the “Excise Tax”), the
Company will make an additional cash payment (a “Gross-Up Payment”) to the Executive within
10 days after such determination equal to an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes), including any
Excise Tax, imposed upon the Gross-Up Payment, the Executive would retain an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments. For purposes of the foregoing
determination, the Executive’s tax rate will be deemed to be the highest statutory marginal state
and federal tax rate (on a combined basis) then in effect. If no determination by the Company’s
auditors is made prior to the time the Executive
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is required to file a tax return reflecting the Total Payments, the Executive will be entitled
to receive from the Company a Gross-Up Payment calculated on the basis of the Excise Tax the
Executive reported in such tax return, within 10 days after the later of the date on which the
Executive files such tax return or the date on which the Executive provides a copy thereof to the
Company. In all events, if any tax authority determines that a greater Excise Tax should be
imposed upon the Total Payments than is determined by the Company’s independent auditors or
reflected in the Executive’s tax return pursuant to this Section 4, the Executive will be entitled
to receive from the Company the full Gross-Up Payment calculated on the basis of the amount of
Excise Tax determined to be payable by such tax authority within 10 days after the Executive
notifies the Company of such determination. Notwithstanding the foregoing, in the event the
Company reasonably determines that the Gross-Up Payment is subject to the requirements of Section
409A of the Code, such payment will be made in the same calendar year in which the Total Payments
are made, provided, however, if the Executive is a Specified Employee, then any such Gross-up
Payment shall be suspended and not made until the first day after the end of the six (6) month
period following the Executive’s Termination of Employment, or, if earlier, upon the Executive’s
death. The suspended payment will include interest under Section 7(l) if and only to the extent
such interest is not treated as part of the “Total Payments.”
5. Indemnification. Following a Change in Control, the Company will indemnify and
advance expenses to the Executive for damages, costs and expenses (including, without limitation,
judgments, fines, penalties, settlements and reasonable fees and expenses of the Executive’s
counsel) (the “Expenses”) incurred in connection with all matters, events and transactions relating
to the Executive’s service to or status with the Company or any other corporation, employee benefit
plan or other Person for which the Executive served at the request of the Company to the extent
that the Company would have been required to do so under applicable law, corporate articles, bylaws
or agreements or instruments of any nature with or covering the Executive, including any
indemnification agreement between Parent Corporation and the Executive, as in effect immediately
prior to the Change in Control and to any further extent as may be determined or agreed upon
following the Change in Control. Any payment required under this Section 5 will be made no later
than March 15 of the calendar year following the calendar year during which the liability to
indemnify the Expense arises.
6. Restrictions on Competitive Activities. The Executive acknowledges that the
agreements and covenants contained in this Section 6 are essential to protect the value of the
Company’s business and assets and by his or her current employment with the Company, the Executive
has obtained and will obtain such knowledge, contacts, know-how, training and experience and there
is a substantial probability that such knowledge, know-how, contacts, training and experience could
be used to the substantial advantage of a competitor of the Company and to the Company’s
substantial detriment. In consideration of the foregoing and the other covenants and agreements of
the Company set forth herein, the Executive agrees to the restrictions contained in this Section 6.
(a) Non-Solicitation. The Executive agrees that the Executive will not, during
the Executive’s employment with the Company and for a period of two years following the date
of the Executive’s voluntary or the Company’s involuntary termination of the Executive’s
employment with the Company (the “Restrictive Period”), directly or indirectly
solicit, or assist anyone else in the solicitation of, any of the Company’s
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employees, or former employees who worked for the Company for the purpose of hiring
them, engaging them as consultants, or inducing them to leave their employment with the
Company. If the Executive is approached by one of the Company’s employees or former
employees regarding potential employment, consultation or contract, as described above
during the Restrictive Period of non-solicitation, the Executive must immediately (i) fully
inform the employee or former employee of the Executive’s non-solicitation obligation
described above; and (ii) refrain from engaging in any communication with the employee or
former employee regarding potential employment, consultation or contract.
(b) “Company Product” means any product, product line or service that has been
designed, developed, manufactured, marketed, sold or is under research, development, or is
being pursued through acquisition or licensure, or has been the subject of disclosure to the
Company in response to a due diligence process by the Company, at any time during the
Executive’s employment with the Company; provided, however, that if the Executive becomes
entitled to the benefits described in Section 2 of this Agreement, then the definition of
“Company Product” shall mean Company Product as of immediately prior to the Change of
Control.
(c) “Competitive Product” means goods, products, product lines or services
developed, designed, manufactured, marketed, promoted, sold, serviced, or that are in
development or the subject of research by any Person that are the same or similar, perform
any of the same or similar functions, may be substituted for, or are intended or used for
any of the same purposes as a Company Product.
(d) “Conflicting Organization” means any Person (including the Executive), and
any parent, subsidiary, partner or affiliate of any Person, that engages in, or is about to
become engaged in, the development, design, production, manufacture, promotion, marketing,
sale, support or service of a Competitive Product.
(e) Non-Competition. The Executive agrees that the Executive will not, during
the Restrictive Period, alone or in any capacity with another Person (e.g., as an advisor,
consultant, principal, agent, partner, officer, director, shareholder, employee or
otherwise), within any geographic area where the Company does business:
(i) directly or indirectly disclose to a Conflicting Organization the names or
any other information regarding the Company’s customers, or, on behalf of a
Conflicting Organization, call on, solicit, take away, or attempt to call on,
solicit, or take away any of the customers of the Company on whom the Executive
called, or otherwise had contact on behalf of the Company, or developed knowledge
regarding the customer’s need for or use of Competitive Product(s); or
(ii) seek or obtain employment with, work for, consult with, or lend assistance
to any Conflicting Organization in a capacity which is the same as or similar to the
employment capacity the Executive performed on behalf of the Company; or
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(iii) directly or indirectly participate in or support in any capacity the
manufacture, invention, development, testing or research of any Competitive Product;
or
(iv) disrupt, damage, impair, or interfere with the business of the Company
whether by way of interfering with or disrupting the Company’s relationship with
employees, customers, agents, representatives or vendors.
(f) Exception. During the Restrictive Period, the restrictions contained in
this Section 6 will not prevent the Executive from accepting employment with, or providing
consulting services to, a large diversified organization with separate and distinct
divisions that do not compete, directly or indirectly, with the Company, if prior to
accepting such employment or providing such consulting services, the Company receives
separate written assurances from the prospective employer and from the Executive,
satisfactory to the Company, confirming that the Executive will not render any services,
directly or indirectly, to any division or business unit that competes, directly or
indirectly, with the Company. During the Restrictive Period set forth in this Section 6,
the Executive will inform any new employer, prior to accepting employment or providing
consulting services, of the existence of this Agreement and provide such employer with a
copy of this Agreement
(g) Effect on Prior Agreements. This Section 6 supersedes and replaces the
provisions of any prior agreement between the Company and the Executive with respect to
restrictions on solicitation of current or former employees of the Company and
non-competition. Any provisions in such prior agreement unrelated to restrictions on
solicitation of current or former employees of the Company and non-competition shall remain
in full force and effect.
7. Miscellaneous.
(a) Successors. The Parent Corporation must seek to have any Successor, by
agreement in form and substance satisfactory to the Executive, assent to the fulfillment by
such Successor of the Company’s obligations under this Agreement. Failure of the Company to
obtain such assent at least three business days prior to the time a Person becomes a
Successor (or where the Parent Corporation does not have at least three business days’
advance notice that a Person may become a Successor, within one business day after having
notice that such Person may become or has become a Successor) will constitute Good Reason
for termination by the Executive of the Executive’s employment. The date on which any such
succession becomes effective will be deemed the Date of Termination, and Notice of
Termination will be deemed to have been given on that date. A Successor has no rights,
authority or power with respect to this Agreement prior to a Change in Control.
(b) Binding Agreement. This Agreement inures to the benefit of, and is
enforceable by, the Executive, the Executive’s personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and legatees. If the
Executive dies while employed by the Company or while any amount would still be
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payable to the Executive under this Agreement if the Executive had continued to live,
all such amounts, unless otherwise provided in this Agreement, will be paid in accordance
with the terms of this Agreement to the Executive’s devisee, legatee or other designee or,
if there be no such designee, to the Executive’s estate.
(c) No Mitigation. The Executive will not be required to mitigate the amount
of any benefits the Company becomes obligated to provide to the Executive in connection with
this Agreement by seeking other employment or otherwise. The benefits to be provided to the
Executive in connection with this Agreement may not be reduced, offset or subject to
recovery by the Company by any benefits the Executive may receive from other employment or
otherwise.
(d) No Setoff. The Company has no right to setoff benefits owed to the
Executive under this Agreement against amounts owed or claimed to be owed by the Executive
to the Company under this Agreement or otherwise.
(e) Taxes. All benefits to be provided to the Executive in connection with
this Agreement will be subject to required withholding of federal, state and local income,
excise and employment-related taxes. The Company’s good faith determination with respect to
its obligation to withhold such taxes relieves it of any obligation that such amounts should
have been paid to the Executive.
(f) Notices. For the purposes of this Agreement, notices and all other
communications provided for in, or required under, this Agreement must be in writing and
will be deemed to have been duly given when personally delivered or when mailed by United
States registered or certified mail, return receipt requested, postage prepaid and addressed
to each party’s respective address set forth on the first page of this Agreement (provided
that all notices to the Company must be directed to the attention of the President), or to
such other address as either party may have furnished to the other in writing in accordance
with these provisions, except that notice of change of address will be effective only upon
receipt.
(g) Disputes.
(i) If the Executive so elects, any dispute, controversy or claim arising under
or in connection with Sections 2, 3, 4 or 5 after a Change in Control will be
settled exclusively by binding arbitration administered by the American Arbitration
Association in Minneapolis, Minnesota in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect; provided that the
Executive may seek specific performance of the Executive’s right to receive benefits
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction. If any dispute, controversy or
claim for damages arising under or in connection with Sections 2, 3, 4 or 5 is
settled by arbitration, the Company will pay, or if elected by the Executive,
reimburse, all fees, costs and expenses incurred by the Executive related to such
arbitration unless the
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arbitrators decide that the Executive’s claim was frivolous or advanced by the
Executive in bad faith. If the Executive does not elect arbitration, the Executive
may pursue all available legal remedies. The Company will pay, or if elected by the
Executive, reimburse the Executive for, all fees, costs and expenses incurred by the
Executive in connection with any actual, threatened or contemplated litigation
relating to Sections 2, 3, 4 or 5 to which the Executive is or reasonably expects to
become a party, whether or not initiated by the Executive, if the Executive is
successful in recovering any benefit under Sections 2, 3, 4 or 5 as a result of such
action. The Company will not assert in any dispute or controversy with the
Executive arising under or in connection with this Agreement the Executive’s failure
to exhaust administrative remedies.
(ii) The parties agree that any disputes arising out of Section 6 will not be
subject to arbitration pursuant to Section 7(g)(i). The Executive understands that
if the Executive fails to fulfill Executive’s obligations under Section 6, the
damages to the Company would be very difficult to determine. Therefore, in addition
to any rights or remedies available to the Company at law, in equity, or by statute,
the Executive hereby consents to the Company seeking specific enforcement of Section
6 through an injunction or restraining order issued by an appropriate court.
(h) Effect of Benefits on Other Severance Plans. In the event the Executive
receives any payment under the terms of this Agreement, the Executive will not be eligible
to receive benefits under any other change in control severance pay plan sponsored or
maintained by the Company or agreement to which the Executive is a party.
(i) Related Agreements and Other Arrangements. This Agreement, including
Exhibit A attached hereto and incorporated as an integral part of this Agreement,
constitutes the entire agreement of the parties with respect to the subject matter hereof,
and no agreements or representations, oral or otherwise, express or implied, with respect to
the subject matter to this Agreement have been made by any party which are not expressly set
forth in this Agreement. To the extent that any provision of any Other Arrangement limits,
qualifies or is inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while such Other Arrangement remains in force, the provision of this Agreement
will control and such provision of such Other Arrangement will be deemed to have been
superseded, and to be of no force or effect, as if such Other Arrangement had been formally
amended to the extent necessary to accomplish such purpose. Nothing in this Agreement
prevents or limits the Executive’s continuing or future participation in any Other
Arrangement for which the Executive may qualify, and nothing in this Agreement limits or
otherwise affects the rights the Executive may have under any Other Arrangement. Amounts
that are vested benefits or which the Executive is otherwise entitled to receive under any
Other Arrangement at or subsequent to the Date of Termination will be payable in accordance
with such Other Arrangement.
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(j) No Employment or Service Contract. Nothing in this Agreement is intended
to provide the Executive with any right to continue in the employ of the Company for any
period of specific duration or interfere with or otherwise restrict in any way the
Executive’s rights or the rights of the Company.
(k) Payment; Assignment. Benefits payable under this Agreement will be paid
only from the general assets of the Company. No Person has any right to or interest in any
specific assets of the Company by reason of this Agreement. To the extent benefits under
this Agreement are not paid when due to any individual, he or she is a general unsecured
creditor of the Company with respect to any amounts due. Benefits payable pursuant to this
Agreement and the right to receive future benefits may not be anticipated, alienated, sold,
transferred, assigned, pledged, encumbered or subject to any charge.
(l) Late Payments. Benefits not paid under this Agreement when due will accrue
interest at the rate of 10% per year or the maximum rate permitted under applicable law.
(m) Survival. The respective obligations of, and benefits afforded to, the
Company and the Executive which by their express terms or clear intent survive termination
of the Executive’s employment with the Company or termination of this Agreement, as the case
may be, will survive termination of the Executive’s employment with the Company or
termination of this Agreement, as the case may be, and will remain in full force and effect
according to their terms.
(n) Amendments; Waivers. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to in a writing
signed by the Executive, a duly authorized officer of the Company. No waiver by any party
to this Agreement at any time of any breach by another party to this Agreement of, or of
compliance with any condition or provision of this Agreement to be performed by such party
will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.
(o) Governing Law. This Agreement and the legal relations among the parties as
to all matters, including, without limitation, matters of validity, interpretation,
construction, performance and remedies, will be governed by and construed exclusively in
accordance with the internal laws of the State of Minnesota (without regard to the conflict
of laws principles of any jurisdiction).
(p) Further Assurances. The parties to this Agreement agree to perform, or
cause to be performed, such further acts and deeds and to execute and deliver or cause to be
executed and delivered, such additional or supplemental documents or instruments as may be
reasonably required by the other party to carry into effect the intent and purpose of this
Agreement.
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(q) Interpretation. The invalidity or unenforceability of all or any part of
any provision of this Agreement will not affect the validity or enforceability of the
remainder of such provision or of any other provision of this Agreement, which will remain
in full force and effect.
(r) Counterparts. This Agreement may be executed in several counterparts, each
of which will be deemed to be an original, but all of which together will constitute one and
the same instrument.
(s) Severability and Judicial Modification. If any portion of this Agreement
is adjudicated to be invalid or unenforceable, then a court of competent jurisdiction shall
amend, modify or delete that portion thus adjudicated invalid or unenforceable. If any
portion is deemed unenforceable by virtue of its scope or limitation, the Company and the
Executive agree that a court of competent jurisdiction shall modify such provision to make
it enforceable to the fullest extent permitted by Minnesota law.
IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement effective as of
the date first above written.
| AMERICAN MEDICAL SYSTEMS HOLDINGS, INC. | EXECUTIVE: | |||||||
By: |
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Name:
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Title:
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Exhibit A
DEFINITIONS
For purposes of the Agreement, the following terms will have the meaning set forth below in
this Exhibit A unless the context clearly requires otherwise. Terms defined elsewhere in the
Agreement will have the same meaning throughout the Agreement.
1. “Affiliate” means any person with whom the Company would be considered a single
employer under Sections 414(b) and 414(c) of the Code, namely (i) any corporation at least eighty
percent (80%) of whose outstanding securities ordinarily having the right to vote at elections of
directors is owned directly or indirectly by the Parent Corporation or (ii) any other form of
business entity in which the Parent Corporation, directly or indirectly, owns eighty percent (80%)
or more of the controlling interests in such entity.
2. “Base Pay” means the Executive’s annual base salary from the Company at the rate in
effect immediately prior to a Change in Control or at the time Notice of Termination is given,
whichever is greater. Base Pay includes only regular cash salary and is determined before any
reduction for deferrals pursuant to any nonqualified deferred compensation plan or arrangement,
qualified cash or deferred arrangement or cafeteria plan.
3. “Benefit Plan” means any
(a) employee benefit plan as defined in Section 3(3) of ERISA;
(b) cafeteria plan described in Code Section 125;
(c) plan, policy or practice providing for paid vacation, other paid time off or
short-or long-term profit sharing, bonus or incentive payments or perquisites; or
(d) stock option, stock purchase, restricted stock, phantom stock, stock appreciation
right or other equity-based compensation plan with respect to the securities of any
Affiliate
that is sponsored, maintained or contributed to by the Parent Corporation or the Company for the
benefit of employees (and/or their families and dependents) generally or the Executive in
particular (and/or the Executive’s family and dependents).
4. “Board” means the board of directors of the Parent Corporation duly qualified and
acting at the time in question. On and after the date of a Change in Control, any duty of the
Board in connection with this Agreement is nondelegable and any attempt by the Board to delegate
any such duty is ineffective.
5. “Cause” means:
(a) the Executive’s gross misconduct that is materially and demonstrably injurious to
the Company;
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(b) the Executive’s willful and continued failure to perform substantially the
Executive’s duties with the Company (other than any such failure (i) resulting from the
Executive’s death or incapacity due to bodily injury or physical or mental illness or (ii)
relating to changes in the Executive’s duties after a Change in Control that constitute Good
Reason) after a written demand for substantial performance is delivered to the Executive by
the chair of the Board which specifically identifies the manner in which the Executive has
not substantially performed the Executive’s duties and provides for a reasonable period of
time within which the Executive may take corrective actions; or
(c) the Executive’s conviction (including a plea of nolo contendere) of willfully
engaging in illegal conduct constituting a felony or gross misdemeanor under federal or
state law which is materially and demonstrably injurious to the Company or which impairs the
Executive’s ability to perform substantially the Executive’s duties for the Company.
An act or failure to act will be considered “gross or willful” for this purpose only if done,
or omitted to be done, by the Executive in bad faith and without reasonable belief that it was in,
or not opposed to, the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board (or a committee thereof) or
based upon the advice of counsel for the Company will be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best interests of the Company. It is
also expressly understood that the Executive’s attention to matters not directly related to the
business of the Company will not provide a basis for termination for Cause so long as the Board did
not expressly disapprove in writing of the Executive’s engagement in such activities either before
or within a reasonable period of time after the Board knew or could reasonably have known that the
Executive engaged in those activities. Notwithstanding the foregoing, the Executive may not be
terminated for Cause unless and until there has been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of the entire
membership of the Board at a meeting of the Board called and held for the purpose (after reasonable
notice to the Executive and an opportunity for the Executive, together with the Executive’s
counsel, to be heard before the Board), finding that in the good faith opinion of the Board the
Executive was guilty of the conduct set forth above in clauses (a), (b) or (c) of this definition
and specifying the particulars thereof in detail.
6. “Change in Control” shall mean a Change in Control of the Parent Corporation, as
defined in the Parent Corporation’s 2005 Stock Incentive Plan, after the date of this Agreement.
7. “Code” means the Internal Revenue Code of 1986, as amended (including, when the
context requires, all regulations, rulings and authoritative interpretations issued thereunder).
Any reference to a specific provision of the Code includes a reference to such provision as it may
be amended from time to time and to any successor provision.
8. “Company” means the Parent Corporation and any Affiliate.
9. “Date of Termination” following a Change in Control (or prior to a Change in
Control if the Executive’s termination was either a condition of the Change in Control or was at
the request or insistence of any Person related to the Change in Control) means:
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(a) if the Executive’s employment is to be terminated by the Executive, the date
specified in the Notice of Termination which in no event may be a date more than 15 days
after the date on which Notice of Termination is given unless the Company agree in writing
to a later date;
(b) if the Executive’s employment is to be terminated by the Company for Cause, the
date specified in the Notice of Termination; or
(c) if the Executive’s employment is terminated by reason of the Executive’s death, the
date of the Executive’s death; or
(d) if the Executive’s employment is to be terminated by the Company for any reason
other than Cause or the Executive’s death, the date specified in the Notice of Termination,
which in no event may be a date earlier than 15 days after the date on which a Notice of
Termination is given, unless the Executive expressly agrees in writing to an earlier date.
In the case of termination by the Company of the Executive’s employment for Cause, if the
Executive has not previously expressly agreed in writing to the termination, then within the 30-day
period after the Executive’s receipt of the Notice of Termination, the Executive may notify the
Company that a dispute exists concerning the termination, in which event the Date of Termination
will be the date set either by mutual written agreement of the parties or by the judge or
arbitrators in a proceeding as provided in Section 7(g) of the Agreement. During the pendency of
any such dispute, the Executive will continue to make the Executive available to provide services
to the Company and the Company will continue to pay the Executive the Executive’s full compensation
and benefits in effect immediately prior to the date on which the Notice of Termination is given
(without regard to any changes to such compensation or benefits that constitute Good Reason) and
until the dispute is resolved in accordance with Section 7(g) of the Agreement. The Executive will
be entitled to retain the full amount of any such compensation and benefits without regard to the
resolution of the dispute unless the judge or arbitrators decide(s) that the Executive’s claim of a
dispute was frivolous or advanced by the Executive in bad faith.
In all cases, the Executive’s Date of Termination must be consistent with the Executive’s
Termination of Employment.
10. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
Any reference to a specific provision of ERISA includes a reference to such provision as it may be
amended from time to time and to any successor provision.
11. “Exchange Act” means the Securities Exchange Act of 1934, as amended. Any
reference to a specific provision of the Exchange Act or to any rule or regulation thereunder
includes a reference to such provision as it may be amended from time to time and to any successor
provision.
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12. “Good Reason” means:
(a) a change in the Executive’s title(s), status, position(s), authority, duties or
responsibilities as an executive of the Company as in effect immediately prior to the Change
in Control which, in the Executive’s reasonable judgment, is material and adverse (other
than, if applicable, any such change directly attributable to the fact that the Parent
Corporation is no longer publicly owned);
(b) a reduction by the Company in the Executive’s Base Pay, or a material 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;
(c) the failure by the Company to cover the Executive under Benefit Plans that, in the
aggregate, provide substantially similar benefits to the Executive and/or the Executive’s
family and dependents at a substantially similar total cost to the Executive (e.g.,
premiums, deductibles, co-pays, out of pocket maximums, required contributions and the like)
relative to the benefits and total costs under the Benefit Plans in which the Executive
(and/or the Executive’s family or dependents) were participating at any time during the
90-day period immediately preceding the Change in Control;
(d) the Company 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, except for required travel on the Company’s business, and then only to
the extent substantially consistent with the business travel obligations which the Executive
undertook on behalf of the Company during the 90-day period immediately preceding the Change
in Control (without regard to travel related to or in anticipation of the Change in
Control);
(e) any refusal by the Company to continue to allow the Executive to attend to matters
or engage in activities not directly related to the business of the Company which, at any
time prior to the Change in Control, the Executive was not expressly prohibited in writing
by the Board from attending to or engaging in;
(f) the failure by the Parent Corporation to obtain from any Successor the assent to
this Agreement contemplated by Section 7(a) of the Agreement;
(g) any purported termination by the Company of the Executive’s employment that is not
properly effected pursuant to a Notice of Termination and pursuant to any other requirements
of this Agreement, and, for purposes of this Agreement, no such purported termination will
be effective; or
(h) any termination by the Executive of the Executive’s employment for any reason
during the first full calendar month following the first anniversary date of the Change in
Control.
The Executive shall give written notice to the Company of an event or change constituting Good
Reason and his or her intent to terminate employment with the Company for Good Reason; provided,
however, that the Executive may not give such notice earlier than the
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ninetieth (90th) day following the date of the Change in Control. If the Company remedies any
event or change described in subsections (a) through (e) within 30 days of such notice from the
Executive, such event or change shall not constitute Good Reason. The Executive’s continued
employment does not constitute consent to, or waiver of any rights arising in connection with, any
circumstances constituting Good Reason. The Executive’s termination of employment for Good Reason
as defined above will constitute Good Reason for all purposes of the Agreement notwithstanding that
the Executive may also thereby be deemed to have retired under any applicable benefit plan, policy
or practice of the Company.
13. “Notice of Termination” means a written notice given on or after the date of a
Change in Control (unless the Executive’s termination before the date of the Change in Control was
either a condition of the Change in Control or was at the request or insistence of any Person
related to the Change in Control in which case the written notice may be given before the date of
the Change in Control) which indicates the specific termination provision in the Agreement pursuant
to which the notice is given. Any purported termination by the Company or by the Executive on or
after the date of a Change in Control (or before the date of a Change in Control if the Executive’s
termination was either a condition of the Change in Control or was at the request or insistence of
any Person related to the Change in Control) must be communicated by written Notice of Termination
to be effective; provided, however, that the Executive’s failure to provide Notice of Termination
will not limit any of the Executive’s rights under the Agreement except to the extent the Company
demonstrates that it suffered material actual damages by reason of such failure.
14. “Other Arrangement” is any Benefit Plan or other plan, policy or practice of the
Company or any other agreement between the Executive and the Company, other than this Agreement.
15. “Parent Corporation” means American Medical Systems Holdings, Inc. and any
Successor.
16. “Person” means any individual, corporation, partnership, group, association or
other person, as such term is used in Section 13(d) or Section 14(d) of the Exchange Act, other
than the Parent Corporation, any Affiliate or any Benefit Plan(s) sponsored by the Parent
Corporation or an Affiliate.
17. “The Executive is a “Specified Employee” if on the date of his or her Termination
of Employment he or she is a “key employee” (defined below), and the Company or any Affiliate has
stock that is publicly traded on an established securities market within the meaning of such term
under Section 409A(a)(2)(B) of the Code. For this purpose, Executive is a “key employee” during
the 12-month period beginning on the April 1 immediately following a calendar year, if he or she
satisfied, at any time during such preceding calendar year, the requirements of Section
416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the regulations issued
thereunder and disregarding Section 416(i)(5) of the Code). The Executive will not be treated as a
Specified Employee if he or she would not be treated as a Specified Employee under Treasury
Regulations issued under Section 409A of the Code.
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18. “Successor” means any Person that succeeds to, or has the practical ability to
control (either immediately or solely with the passage of time), the Parent Corporation’s business
directly, by merger, consolidation or other form of business combination, or indirectly, by
purchase of the Parent Corporation’s outstanding securities ordinarily having the right to vote at
the election of directors or all or substantially all of its assets or otherwise.
19. “Termination of Employment” means a termination of Executive’s employment
relationship with the Company and all Affiliates or such other change in the Executive’s
relationship with the Company and all Affiliates that would be considered a “separation from
service” under Section 409A of the Code. The Executive’s employment relationship is deemed to have
terminated on the date immediately following a military leave, sick leave or other bona fide leave
of absence of six months if the Executive’s right to reemployment is not provided either by statute
or by contract. In all cases, the Executive’s Termination of Employment must constitute a
“separation from service” under Section 409A of the Code and any “separation under service” under
Section 409A of the Code shall be treated as a Termination of Employment.
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