CHANGE IN CONTROL SEVERANCE AGREEMENT
Exhibit 10.2
This Change in Control Severance Agreement (this “Agreement”), effective as of April
22, 2008, is between American Medical Systems Holdings, Inc., a Delaware corporation (the
“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 Xxxxxxx X. Xxxx, III (the
“Executive”).
A. The Executive has entered into an employment agreement, dated the date hereof, pursuant to
which the Executive will be employed as the Company’s President and Chief Executive Officer,
beginning on April 30, 2008.
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 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 accept employment with 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 two 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) Definitions. 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) Group Health Plans. If the Executive elects COBRA coverage under the
Company’s group health and/or dental plans, then for each month of the Continuation Period,
the Company will pay the Executive an amount equal to the excess of (i) the portion of the
monthly cost for the Executive’s coverage under the Company’s group health and/or dental
plans that was borne by the Company immediately prior to the
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Executive’s Termination of Employment or, if greater, immediately prior to the Change
in Control (subject to the rule for coverage changes discussed below) over (ii) the portion
of the monthly cost for the Executive’s coverage under the Company’s group health and/or
dental plans that is borne by the Company 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 which the Company shall pay will be determined as if the new 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/or 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/or dental plan. Any reimbursement made under this Section 2(c) shall be made on or
before the last day of the calendar year following the calendar year in which any
continuation coverage payment was incurred.
(d) Life Insurance. 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, and in all events reimbursement
shall be made on or before the last day of the calendar year following the calendar year in
which the premium was incurred.
(e) Tax Gross-Up. To the extent the Executive incurs a tax liability
(including foreign, federal, state and local taxes) in connection with a benefit provided
pursuant to Section 2(c) 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
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to such tax liability plus an additional amount sufficient to permit the Executive to
retain a net amount after all taxes equal to the initial tax liability in connection with
the benefit. The payment pursuant to this Section 2(e) will be made within ten (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 Executive’s tax liability, but in no event later
than December 31 of the calendar year next following the calendar year in which the related
taxes are remitted to the appropriate taxing authority.
(f) Six Month Suspension for Specified Key Employees. Notwithstanding the
foregoing, if, at the time of his or her Termination of Employment, the Executive is a
Specified Employee, then any payment under Section 2(a) shall be suspended and not made
until on or after the first day after the end of the six (6) month period following the
Executive’s Termination of Employment, but in no event later than seven (7) months following
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, at an annual rate equal to the applicable Federal
rate (AFR) determined under Code section 1274(d) in effect for each month, 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
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
(such excise tax referred to as the “Excise Tax”), the Company will make an additional cash
payment (a “Gross-Up Payment”) to the Executive equal to an amount such that after payment
by the Executive of all the taxes imposed on the Executive, including any Excise Tax, as a result
of the Gross-Up Payment, the Executive would retain an amount of the Gross-Up Payment equal to the
Excise Tax as a result of the Total Payments. If no determination of the Excise Tax is made by the
Company’s auditors prior to the time the Executive 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
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Tax the Executive reported in such tax return. The payment(s) pursuant to this Section 4 will
be made within ten (10) days after the Executive’s remittal of a written request for payment
accompanied by a statement indicating the basis for and the amount of the Executive’s actual tax
liability. 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 ten (10) days after the Executive notifies
the Company of such determination. Notwithstanding the foregoing, reimbursement of the Gross-Up
Payment will be made not later than the end of the calendar year next following the calendar year
in which the Executive remits the related taxes to the appropriate taxing authority (either
directly or through tax withholdings), provided if an additional Gross-Up Payment is payable
following an audit or litigation and no additional taxes are remitted by the Executive,
reimbursement by the Company shall be made by the end of the calendar year next following the
calendar year in which the audit is completed or there is a final nonappealable settlement or other
resolution of the litigation. Notwithstanding any other provision of this Section 4, the Company
may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other
applicable taxing authority, for the benefit of the Executive, all or any portion of the Gross-Up
Payment and the Executive hereby consents to such withholding.
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.
6. 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.
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(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 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. 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
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by the Executive related to such arbitration unless the 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.
(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 severance pay plan sponsored or maintained by the
Company or agreement to which the Executive is a party. For the avoidance of doubt, the
Executive will not be paid the payments and benefits set forth in Section 6(e) of the
Employment Agreement to the extent that the Executive receives any payment under the terms
of this Agreement.
(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.
(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
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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. Except as provided under Section 2(f), benefits not paid
under this Agreement when due will accrue interest at the rate of 10% per year, or, if
lesser, the maximum rate permitted under applicable law, and shall be paid on the 5th day of
the month next following the month during which such interest accrued.
(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.
(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. Facsimile execution and delivery of this Agreement shall be legal,
valid and binding execution and delivery for all purposes.
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(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:
|
Senior Vice President, | |||||
| Human Resources | ||||||
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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. “Employment Agreement” means the Employment Agreement, dated the date hereof,
between the Company and the Executive.
11. “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.
12. “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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13. “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.
14. “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.
15. “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.
16. “Parent Corporation” means American Medical Systems Holdings, Inc. and any
Successor.
17. “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.
18. “Specified Employee” 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 was employed by the Company or any Affiliate and 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 is not required to be treated as a Specified Employee under Treasury Regulations issued under
Section 409A of the Code.
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19. “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.
20. “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 employment
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 will be treated
as remaining intact while the Executive is on a military leave, a sick leave or other bona fide
leave of absence (pursuant to which there is a reasonable expectation that the Executive will
return to perform services for the Company or an Affiliate) but only if the period of such leave
does not exceed six (6) months, or if longer, so long as the Executive retains a right to
reemployment by the Company or an Affiliate under applicable statute or by contract, provided,
however, a twenty-nine (29) month period of absence may be substituted for such six (6) month
period of absence where the Executive’s leave is due to any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to last for a
continuous period of not less than six (6) months and such impairment causes the Executive to be
unable to perform the duties of his or her position of employment or any substantially similar
position of employment. In all cases, the Executive’s Termination of Employment must constitute a
“separation from service” under Section 409A of the Code and any “separation from service” under
Section 409A of the Code shall be treated as a Termination of Employment.
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