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FORM OF INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of , (the "Effective
Date"), by and between American Medical Systems Holdings, Inc., a Delaware
corporation (the "Company"), and (the "Participant").
W I T N E S S E T H
WHEREAS, The Company has adopted the American Medical Systems Holdings,
Inc. 2000 Equity Incentive Plan (the "Plan") authorizing the Board of Directors
of the Company, or a committee as provided for in the Plan (the Board or such a
committee to be referred to as the "Committee"), to grant incentive stock
options to employees of the Company.
WHEREAS, the Company desires to afford the Participant the opportunity
to acquire an ownership of the Company's common stock, par value $.0l per share
("Stock"), so that he or she may have a direct proprietary interest in the
Company's success.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto hereby agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein and in the Plan, the Company hereby grants to the Participant, during the
period commencing on the date of this Agreement and ending on ,
[Insert date 10 years after Effective Date] (the "Expiration Date"), the
right and option (the right to purchase any one share of Stock hereunder being
an "Option") to purchase from the Company shares of Stock. The
Options shall have an exercise price of $ per share, which represents the
Fair Market Value per share of the Stock as of the date hereof. Each of the
Options granted pursuant to this Agreement shall constitute Incentive Stock
Options under the Plan.
2. Limitations on Exercise of Options.
(a) The Options shall vest and become exercisable, on a
cumulative basis, with respect to [25% of total] shares on December
31, 1999 and with respect to [6.25% of total] on the last day of
each calendar quarter thereafter while the Participant is employed by the
Company. The Board may accelerate the vesting and exercisability of any or all
of the then-unvested Options at any time. If a Change in Control (as defined
below) occurs and (a) the Company terminates the Participant's employment for
any reason other than death, Disability or Cause within nine (9) months after
the Change in Control or (b) the Participant terminates employment with the
Company for Good Reason (as defined below) within nine (9) months after the
Change in Control, then all Options shall vest and be immediately exercisable in
full as of the date of such termination and shall remain exercisable for the
periods set forth in Section 3, subject to the Committee's right to cancel the
Options under Section 13 of the Plan.
(b) For the purposes of this Agreement, "Change of Control"
shall mean:
(i) The acquisition by any individual, entity or group
(within the
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meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more (on
a fully diluted basis) of either (A) the then outstanding shares of Stock,
taking into account as outstanding for this purpose shares of Stock issuable
upon the exercise of options or warrants, the conversion of convertible stock or
debt, and the exercise of any similar right to acquire shares of Stock (the
"Outstanding Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (i), the following acquisitions
shall not constitute a Change of Control: (x) any acquisition by the Company or
any "affiliate" of the Company, within the meaning of 17 C.F.R. ss. 230.405 (an
"Affiliate"), (y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Affiliate of the Company,
(z) any acquisition by any corporation pursuant to a transaction which complies
with clauses (A), (B) and (C) of subsection (ii) of this Section 2(b) (persons
and entities described in clauses (x), (y) and (z) being referred to herein as
"Permitted Holders"); or
(ii) The consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of Stock
and the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, and (B) no Person (excluding any Permitted Holder) beneficially owns,
directly or indirectly, 50% or more (on a fully diluted basis) of, respectively,
the then outstanding shares of common stock of the corporation resulting from
such Business Combination, taking into account as outstanding for this purpose
such common stock issuable upon the exercise of options or warrants, the
conversion of convertible stock or debt, and the exercise of any similar right
to acquire such common stock, or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (C) at least a majority
of the members of the board of directors of the corporation resulting from such
Business Combination were members of the incumbent Board of Directors of the
Company at the time of the execution of the initial agreement providing for such
Business Combination; or
(iii) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company; or
(iv) The sale of at least 80% of the assets of the
Company to an unrelated party, or completion of a transaction having a similar
effect; or
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(v) The individuals who on the date of this Agreement
constitute the Board of Directors thereafter cease to constitute at least a
majority thereof; provided that any person becoming a member of the Board of
Directors subsequent to the date of this Agreement and whose election or
nomination was approved by a vote of at least two-thirds of the directors who
then comprised the Board of Directors immediately prior to such vote shall be
considered a member of the Board of Directors on the date of this Agreement.
(c) For purposes of this Agreement, "Good Reason" shall mean,
without the Participant's prior written consent, (i) a substantial diminution in
the Participant's authority, duties or responsibilities as in effect prior to
the Change in Control, (ii) a reduction by the Company in the Participant's base
salary, or an adverse change in the form or timing of the payment thereof, as in
effect immediately prior to the Change in Control or as thereafter increased, or
(iii) the Company's requiring the Participant to be based at any office or
location that is more than fifty (50) miles further from the office or location
thereof immediately preceding a Change in Control; provided, however, Good
Reason shall not include any of the circumstances or events described herein
unless the Participant has first provided written notice of such circumstance or
event and the Company has not corrected such circumstance or event within thirty
(30) days of receipt by the Company of such written notice from the Participant.
(d) Notwithstanding anything in this Section 2 to the
contrary, if, with respect to the Participant, acceleration of the vesting of
the Options or the payment of cash in exchange for all or part of the Options as
provided above (which acceleration or payment could be deemed a "payment" within
the meaning of Section 280G(b)(2) of the Code), together with any other payments
which the Participant has the right to receive from the Company or any
corporation which is a member of an "affiliated group" (as defined in Section
1504(a) of the Code without regard to Section 1504(b) of the Code) of which the
Company is a member, would constitute a "parachute payment" (as defined in
Section 280G(b)(2) of the Code), the payments to the Participant as set forth
herein will be reduced to the largest amount as will result in no portion of
such payments being subject to the excise tax imposed by Section 4999 of the
Code; provided, that such reduction shall be made only if the aggregate amount
of the payments after such reduction exceeds the difference between (A) the
amount of such payments absent such reduction minus (B) the aggregate amount of
the excise tax imposed under Section 4999 of the Code attributable to any such
excess parachute payments arising in connection with a change in control.
Notwithstanding the foregoing sentence, if the Participant is subject to a
separate agreement with the Company that expressly addresses the potential
application of Sections 280G or 4999 of the Code (including, without limitation,
that "payments" under such agreement or otherwise will be reduced, that the
Participant will have the discretion to determine which "payments" will be
reduced, that such "payments" will not be reduced or that such "payments" will
be "grossed up" for tax purposes), then this Section 2(c) will not apply, and
any "payments" to the Participant pursuant to Section 2(a) of this Agreement
will be treated as "payments" arising under such separate agreement.
3. Termination of Employment.
(a) If prior to the Expiration Date, the Participant's
employment shall be terminated by the Company by reason of a Disability, the
Options shall remain exercisable until the earlier of the Expiration Date or six
(6) months after such date of termination (the "Date of
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Termination") to the extent the Options were vested and exercisable as of the
Date of Termination.
(b) If the Participant shall cease to be employed by the
Company prior to the Expiration Date by reason of death, the executor or
administrator of the estate of the Participant or the person or persons to whom
the Options shall have been validly transferred by the executor or administrator
pursuant to will or the laws of descent and distribution shall have the right,
until the earlier of the Expiration Date or twelve (12) months after the date of
death, to exercise the Options to the extent that the Participant was entitled
to exercise them on the date of death.
(c) If, prior to the Expiration Date, the Participant's
employment with the Company is terminated for Cause, (i) unless otherwise
provided by the Board, the Options, to the extent not exercised as of the Date
of Termination, shall lapse and be canceled, and (ii) all shares of Stock
received pursuant to an exercise of the Options after such termination, in
contravention of subsection (i) above, may be purchased by the Company at its
discretion for the exercise price of such shares paid by the Participant.
(d) If, prior to the Expiration Date, the Company terminates
the Participant's employment without Cause (other than on account of a
Disability), the Options, to the extent then vested and exercisable as of the
Date of Termination, shall remain exercisable until the earlier of the
Expiration Date or 90 days after the Date of Termination.
(e) If the Participant voluntarily terminates his employment
with the Company, the Options shall remain exercisable until the earlier of the
Expiration Date or ninety (90) days after the Date of Termination to the extent
the Options were vested and exercisable as of the Date of Termination.
(f) After the expiration of any exercise period described in
any of Sections 3(a) through (e), or otherwise upon the Expiration Date, the
Options shall terminate together with all of the Participant's rights hereunder,
to the extent not previously exercised.
(g) Notwithstanding anything in this Agreement or the Plan to
the contrary, in the event that the Participant materially breaches the terms of
any confidentiality or non-compete agreement entered into with the Company,
whether such breach occurs before or after termination of the Participant's
employment with the Company, the Committee in its sole discretion may
immediately terminate all rights of the Participant under the Plan and this
Agreement without notice of any kind and may require the Participant to disgorge
any profits (however defined by the Committee) made by the Participant relating
to the Options.
4. Non-Transferable. Except as specifically authorized by the
Committee, the Participant may not transfer the Options except by will or the
laws of descent and distribution and the Options shall be exercisable during the
Participant's lifetime only by the Participant or his guardian or legal
representative. Except as so authorized, no purported assignment or transfer of
the Options, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise (except by will or the laws of
descent and distribution), shall vest in the assignee or transferee any interest
or right herein whatsoever.
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5. Adjustments and Corporate Reorganizations. In accordance with
and subject to the applicable terms of the Plan, the Options shall be subject to
adjustment or substitution, as determined by the Committee, as to the number,
price or kind of Stock or other consideration subject to such Options or as
otherwise determined by the Committee to be equitable (i) in the event of
changes in the outstanding Stock or in the capital structure of the Company by
reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the date
hereof or (ii) in the event of any change in applicable laws or any change in
circumstances which results in or would result in any substantial dilution or
enlargement of the rights granted to, or available for, the Participant. The
Company shall give the Participant written notice of an adjustment hereunder.
6. Exercise: Payment For and Delivery of Stock. The Options
shall be exercised by delivering written notice to the Company's Chief Financial
Officer stating the number of shares of Stock to be purchased, the person or
persons in whose name the shares of Stock are to be registered and each such
person's address and social security number. Such notice shall not be effective
unless accompanied by the full purchase price for all shares to be purchased,
and any applicable withholding (as described below). The purchase price shall be
payable in cash and/or shares of Stock valued at the Fair Market Value at the
time the Option is exercised or, in the discretion of the Committee, either (a)
in other property having a fair market value on the date of exercise equal to
the option price, or (b) by delivering to the Committee a copy of irrevocable
instructions to a stockbroker to deliver promptly to the Company an amount of
sale or loan proceeds sufficient to pay the exercise price. The Participant may
use Stock in payment of the exercise price only if the shares so used are
considered "mature" for purposes of generally accepted accounting principles
(i.e., (i) been held by the Participant free and clear for at least six (6)
months prior to the use thereof to pay part of an Option exercise price, (ii)
been purchased by the Participant in other than a compensatory transaction, or
(iii) meet any other requirements for "mature" shares as may exist on the date
of the use thereof to pay part of an Option exercise price). At the time of
exercise, the Participant shall pay to the Company, in cash, or by having the
Company withhold upon exercise of the option a sufficient number of shares of
Stock otherwise deliverable to the Participant based on the Fair Market Value of
the Stock on the date of exercise, at the election of the Participant, such
minimum amount as the Company deems necessary to satisfy its obligation to
withhold Federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of shares thereupon. Payment in currency or by
certified or cashier's check shall be considered payment in cash.
7. Rights as Stockholder. The Participant or a transferee of
the Options shall have no rights as a stockholder with respect to any shares
covered by the Options until he shall have become the holder of record of such
shares (and the Company shall use its reasonable best efforts to cause the
Participant promptly to become the holder of record of such shares), and, except
as provided in Section 5 hereof, no adjustment shall be made for dividends or
distributions or other rights in respect of such shares for which the record
date is prior to the date upon which he shall become the holder or record
thereof.
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8. Company; Participant.
(a) The term "Company" as used in this Agreement with
reference to employment shall include the Company and its affiliates.
(b) Whenever the word "Participant" is used in any provision
of this Agreement under circumstances where the provision should logically be
construed to apply to the executors, the administrators, legal representatives
or the person or persons to whom the Options may be transferred by will or by
the laws of descent and distribution, the word "Participant" shall be deemed to
include such person or persons.
9. Right of First Refusal.
(a) If the Participant receives an offer to purchase any of
the Participant's Stock and the Participant wishes to accept such offer, the
Participant will offer to sell such shares of Stock to the Company at the same
price and upon the same terms and conditions as are contained in the offer.
Promptly upon receiving such offer, the Participant will provide the Company
with written notice of the offer, which must identify the terms and conditions
of such offer, including a true and complete copy of any writing by which the
offer was made, the identity, business and residence address of the offeror, the
number of shares of Stock the offeror wishes to purchase (the "Offered Shares"),
and the price and terms offered. The Company will have the right, exercisable by
giving written notice to the Participant within forty-five (45) days of receipt
of the written notice of such offer from the Participant, to purchase, to the
extent it is legally able to do so, any or all of the Offered Shares at the same
price and upon the same terms and conditions as are contained in the offer. The
delivery of such notice by the Company to the Participant shall constitute a
binding commitment of the Company to purchase and acquire such number of Offered
Shares as are specified in the Company's notice. The total purchase price for
the Offered Shares shall be delivered to the Participant against delivery by the
Participant of certificates evidencing the Offered Shares no later than 30 days
after the delivery of the election notice by the Company. If the Company fails
to purchase or give notice of its intent to purchase all of the Offered Shares
within such 45-day period, the Participant will have the right to accept the
offer and sell the Offered Shares in strict accordance with all of the
provisions of the offer, provided that the sale is consummated within ninety
(90) days of the date of the first written notice to the Company of such offer.
If the sale is not consummated within such 90-day period or if the terms of the
offer change in any material way, then the provisions of this Section 9(a) will
once again apply to any sale by the Participant of the Offered Shares. Any
purported transfer of Stock in violation of this Section 9(a) shall be null and
void.
(b) Anything in this Section 9 to the contrary, the Company
shall not be obligated to purchase any Stock at any time to the extent that the
purchase would result in a violation of any law, statute, rule, regulation,
order, writ, injunction, decree or judgment promulgated or entered by any
Federal, state, local or foreign court or governmental authority applicable to
the Company or any of its property. Anything in this Section 9 to the contrary,
the Company's right to purchase any Stock hereunder shall expire upon completion
of an IPO.
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10. Requirements of Law.
(a) By accepting the Options, the Participant represents and
agrees for himself and his transferees (whether by will or the laws of descent
and distribution) that, unless a registration statement under the Securities Act
of 1933, as amended (the "Act"), is in effect as to shares purchased upon any
exercise of the Options, (i) any and all shares so purchased shall be acquired
for his personal account and not with a view to or for sale in connection with
any distribution, and (ii) each notice of the exercise of any portion of this
Option shall be accompanied by a representation and warranty in writing, signed
by the person entitled to exercise the same, that the shares are being so
acquired in good faith for his personal account and not with a view to or for
sale in connection with any distribution.
(b) No certificate or certificates for shares of Stock may be
purchased, issued or transferred if the exercise hereof or the issuance or
transfer of such shares shall constitute a violation by the Company or the
Participant of any (i) provision of any Federal, state or other securities law,
(ii) requirement of any securities exchange listing agreement to which the
Company may be a party, or (iii) other requirement of law or of any regulatory
body having jurisdiction over the Company. Any reasonable determination in this
connection by the Board, upon notice given to the Participant, shall be final,
binding and conclusive.
(c) The certificates representing shares of Stock acquired
pursuant to the exercise of options shall carry such appropriate legend, and
such written instructions shall be given to the Company's transfer agent, as may
be deemed necessary or advisable by counsel to the Company in order to comply
with the requirements of the Act or any state securities laws.
11. Notices. Any notice to be given to either party shall be
in writing and shall be given by hand delivery to such party or by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Company in care of its Chief Financial Officer at its principal office, and to
the Participant at the address given beneath his signature hereto, or at such
other address as either party shall have furnished to the other in writing in
accordance herewith. Notice and communications shall be effective when actually
received by the addressee.
12. Disposition of Stock. The Participant agrees to notify the
Company, in writing, within thirty (30) days of any disposition (whether by
sale, exchange, gift or otherwise) of shares of Stock purchased under this
Agreement, within two (2) years from the date of the granting of such Options or
within one (1) year of the exercise of such Options.
13. Binding Effect. Subject to Section 4 hereof, this Agreement
shall be binding upon the heirs, executors, administrators, successors and
permitted assigns of the parties hereto.
14. Plan. The terms and provisions of the Plan are incorporated
herein by reference and made a part hereof as though fully set forth herein. In
the event of any conflict or inconsistency between discretionary terms and
provisions of the Plan and this Agreement, this Agreement shall govern and
control. In all other instances of conflicts or inconsistencies or omissions,
the terms and provisions of the Plan shall govern and control. All capitalized
terms not otherwise expressly defined in this Agreement shall have the meaning
ascribed to them in the Plan.
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15. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of New York, without regard
to the principles of conflicts of law thereof.
16. Entire Agreement. This Agreement, together with the Plan,
contains the entire agreement and understanding between the parties with respect
to the subject matter hereof and supersedes all prior agreements, written or
oral, with respect thereto.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
AMERICAN MEDICAL SYSTEMS
HOLDINGS, INC.
By:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
ACCEPTED:
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[Name of Participant]
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