Exhibit 10.1
CONFIDENTIAL SEPARATION AGREEMENT
     This Separation Agreement (“Agreement”) and the Release, which is attached
and incorporated by reference as Exhibit A (the “Release”), are made by and
between Stephen J. McGill (“Employee”), and American Medical Systems, Inc. and
its respective parent and/or subsidiary corporations, affiliates, successors,
predecessors, shareholders, present and/or former officers, directors, agents,
employees, and attorneys, whether in their individual or official capacities,
benefit plans and plan administrators, and insurers (collectively referred to as
“Employer”).
     The Employer and Employee wish to end their employment relationship in an
honorable, dignified and orderly fashion. Toward that end, the parties have
agreed to separate according to the following terms.
     The Employer does not believe that it has any claims against the Employee,
nor do the parties believe that the Employee has any claims against the
Employer. Nevertheless, the parties have agreed upon the following separation
terms, and to resolve any actual and potential claims arising out of the
Employee’s employment with and separation from Employer.
     IN CONSIDERATION OF THIS ENTIRE SEPARATION AGREEMENT AND RELEASE, THE
PARTIES AGREE AS FOLLOWS:

1.   Termination. The Employee’s employment will terminate effective April 30,
2008 (the “Termination Date”).

2.   Consideration. After the Employee has executed the Separation Agreement and
Release, and after the expiration of all applicable rescission periods without
actual or attempted rescission of this Agreement and/or Release, the Employer
will provide the Employee with the following Consideration:

  (a)   Severance Pay. The Employer will pay the Employee the gross amount of
$131,500 USD (the “Initial Severance Pay”), subject to applicable taxes and
withholding, which represents six (6) months of the Employee’s base salary. If
the Employee has not commenced new employment by November 3, 2008, the Employer
will pay the Employee additional severance in the form of salary continuation,
in the monthly gross amount of $21,917 USD (the “Additional Severance Pay”),
subject to applicable taxes and withholding, for each month during the period
beginning November 3, 2008 and ending on April 30, 2009, during which the
Employee has not commenced new employment; provided the Additional Severance Pay
shall be reduced for each month by the amount fees, if any, the Employee will be
paid for consulting services provided in such month.

                       
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      In order to be eligible to receive Additional Severance Pay for any such
month, the Employee must submit written or e-mail confirmation within 10 days of
the end of each month, satisfactory to the Employer, stating that the Employee
did not commence employment and the amount of fees, if any, that the Employee
will be paid for consulting services provided in the prior month. The amount of
such Additional Severance Pay shall be pro rated for the month during with
Employee commences new employment.     (b)   2008 EVIP. The Employee will
participate in the Company’s 2008 Executive Variable Incentive Plan (“2008
EVIP”) for the first fiscal quarter of 2008. The Employee’s target bonus under
the 2008 EVIP will be 45% of his base salary in the first fiscal quarter of 2008
and will be based only on the net sales and net income objectives in the 2008
EVIP. The Employee will not be eligible for a bonus under the 2008 EVIP for any
subsequent periods in 2008 or for the annual cash flow objective. Accordingly,
the Employee’s target bonus under the 2008 EVIP for the first fiscal quarter of
2008 is $20,711.     (c)   Miscellaneous Payment. The Employer shall provide the
Employee with a payment of $9,000 USD, which the Employee may use, after payment
of taxes, to cover his medical and dental insurance costs for a 6-month period
or as Employee so chooses. This payment will be paid in one lump sum within two
weeks after the Employee’s termination date, or after the rescission period set
forth in Paragraph 5 of the Release has passed, whichever is later.     (d)  
Relocation Expenses.         The Employer will reimburse the Employee for
reasonable and customary expenses incurred by the Employee prior to April 30,
2009 that are related to the sale of the Employee’s home in Minnesota, including
sales commission of up to 6.0%, and moving the Employee and his family and
household goods to Scotland. These expenses also include some minimal fees each
under $500 such as closing/administrative fee, abstract fee, special assessment
search fee, recording fees, etc.and the deed tax.         The Employee shall
submit to the Employer, documentation evidencing such expenses, acceptable to
the Employer, within thirty (30) days of incurring such expenses. The Employer
will reimburse the Employee for such expenses, subject to applicable taxes and
withholding within thirty (30) days of receiving such documentation. To the
extent the Employee incurs a U.S. tax liability in connection with the
reimbursement of expenses under this Section 2(d), the Employer will make a
payment to the Employee in an amount equal to such tax liability plus an
additional amount sufficient to permit the Employee to retain a

                       
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      net amount after all U.S. taxes substantially equal to the initial U.S.
tax liability in connection with the reimbursement of expenses.

  (e)   Vacation/Floating Holidays/United Way Days. The Employer will pay the
Employee for the Employee’s accrued and unused vacation/floating holidays/United
Way days, as of the Termination Date. As of March 24, 2008, this amount is
estimated to be $29,636.81 but is subject to adjustment as of the Termination
Date.     (f)   U.K. Pension. The Employer will make standard contributions to
the Employee’s U.K. pension plan through the Termination Date, but will not make
any such contributions after the Termination Date.     (g)   Tax Preparation.
The Employer will pay, or reimburse the Employee, for services provided by
PriceWaterhouseCoopers for preparing and filing the Employee’s U.S. and
Minnesota income tax returns for 2007 and 2008.     (h)   Stock Options. The
Employer and the Employee acknowledge and agree that, as of the Termination
Date, Employee holds options to purchase 185,936 shares of Common Stock of
American Medical Systems Holdings, Inc. that are vested and unexercised and
shall remain exercisable until and expire at the close of business on
January 30, 2009. Options to purchase 71,564 shares are not vested and are
forfeited. The Employee acknowledges that none of the foregoing options will
qualify as “incentive stock options” under Section 422 of the Internal Revenue
Code.

3.   Compliance with Prior Agreements. The Employee acknowledges the legitimate
Employer interests which the Restrictions set forth in Section 6 of the Change
in Control Severance Agreement, dated April 2, 2007, between American Medical
Systems Holdings, Inc. and the Employee (the “CIC Agreement”) are designed to
protect. The Employee further agrees that the Restrictions set forth in
Section 6 of the CIC Agreement are reasonable in their scope and duration, and
are supported by adequate consideration, including but not limited to the
benefits contained in the CIC Agreement and this Agreement. The Employee agrees
that he will fully comply with those Restrictions in accordance with their
terms. The Employee further agrees that he will fully comply with his continuing
obligations in the At-Will Employment Agreement.

4.   Confidentiality. It is the intent of the parties that this Agreement and
Release be and is confidential, except to the extent that disclosure is required
by applicable law or regulation. The Employee warrants that he has not and will
not disclose the terms of this Agreement and Release to any person other than
his spouse, attorney, tax advisor, or representatives of the E.E.O.C. or the
Minnesota Department of Human Rights, who shall

                       
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    be bound by the same prohibitions against disclosure as bind the Employee,
and the Employee shall be responsible for advising these individuals of this
confidentiality provision and obtaining their commitment to maintain such
confidentiality.

5.   Release. In consideration of the compensation paid by and other
undertakings of Employer stated in this Agreement, the Employee will voluntarily
sign the Release at the same time he signs this Agreement. The parties agree
that the consideration set forth in Section 2 is greater than anything owed to
Employee by law, contract (including the Employment Agreement) or under the
policies of Employer and is provided to Employee in exchange for, and
specifically contingent upon, his signing this Agreement and the attached
Release.

6.   Stipulation of No Charges. The Employee affirmatively represents that he
has not filed nor caused to be filed any charges, claims, complaints, or actions
against the Employer before any federal, state, or local administrative agency,
court, or other forum. Employee understands that this Agreement and Release
permit but do not require him to voluntarily refrain from filing, seek dismissal
or seek withdrawal of any charges, grievances, petitions, or complaints that he
may have against Employer before the EEOC or other governmental enforcement
agency.

7.   Non-Disparagement. The parties to this Agreement agree that they will make
no disparaging or defamatory comments regarding the other party in any respect
or make any comments concerning any aspect of their relationship or the
Employer’s conduct, products, services personnel, or events, including but not
limited to those which precipitated the Employee’s separation. Furthermore, the
Employee agrees not to encourage in any way any individual or group of
individuals to bring or pursue a lawsuit, charge, complaint, or grievance, or
make any other demands against , or in any way disparage Employer.

8.   Damages for Violation of Duty of Confidentiality and/or Non-Disparagement.
Any violation by the Employee of the confidentiality and/or non-disparagement
provisions of this Agreement shall entitle Employer to withhold the Supplemental
Consideration to bring a legal action for appropriate equitable relief as well
as damages, including reasonable attorneys’ fees. If Employee violates his duty
of confidentiality and/or non-disparagement as provided in this Agreement,
Employee shall be obligated to return to the Employer the Consideration he has
received under this Agreement.

9.   Non-Admissions. The parties expressly deny any and all liability or
wrongdoing and agree that nothing in this Agreement and Release shall be deemed
to represent any concession or admission of such liability or wrongdoing or any
waiver of any defense.

                       
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10.   Invalidity. In case any one or more of the provisions of this Agreement
and Release shall be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained in
this Agreement and Release will not in any way be affected or impaired thereby.

11.   Return and Release of All Property: The Employee agrees to immediately
return any and all of the Employer’s property to the Employer.

12.   Choice of Law/Venue. This Agreement shall be construed and interpreted in
accordance with applicable federal laws and the laws of the State of Minnesota.
If either party brings a legal action pursuant to this Agreement and Release
including, but not limited to, an action to enforce its terms, or to challenge
its validity, such legal action shall be properly filed in a court of competent
jurisdiction located in Hennepin County, Minnesota.

                  EMPLOYEE:    
 
            Dated:                        /s/ Stephen J. McGill                
  STEPHEN J. MCGILL    
 
            Dated:                        AMERICAN MEDICAL SYSTEMS, INC.    
 
           
 
  By:        
 
             
 
  Its:        
 
           

                       
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EXHIBIT A
RELEASE

1.   Definitions. I intend all words used in this Release to have their plain
meanings in ordinary English. Technical legal words are not needed to describe
what I mean. Specific terms I use in this Release have the following meanings:

  (a)   “I,” “me,” and “my” include both me, Stephen J. McGill, and anyone who
has or obtains any legal rights or claims through me.     (b)   “Company,” as
used in this Release, shall at all times mean American Medical Systems, Inc.,
and its respective parent and/or subsidiary corporations, affiliates,
successors, predecessors, shareholders, present and/or former officers,
directors, agents, employees, and attorneys, whether in their individual or
official capacities, benefit plans and plan administrators, and insurers.    
(c)   “My Claims” mean any and all of the actual or potential claims of any kind
whatsoever I have now against Company, regardless of whether I now know about
those claims, that are in any way related to my employment with or separation
(termination of employment) from the Company, including, but not limited to,
claims for invasion of privacy; breach of written or oral, express or implied,
contract; fraud or misrepresentation; the Age Discrimination in Employment Act
of 1967, as amended, (“ADEA”), the Older Workers Benefit Protection Act of 1990
(“OWBPA”), Title VII of the Civil Rights Act of 1964 (“Title VII”), the
Americans with Disabilities Act (“ADA”), the Family Medical Leave Act (“FMLA”),
the Employee Retirement Income Security Act of 1978 (“ERISA”), as amended, Equal
Pay Act (“EPA”), the Worker Adjustment and Retraining Notification Act (“WARN”),
the Minnesota Human Rights Act, Minnesota Statutes § 363.01, et seq., the
Minnesota Dismissal for Age statute, Minn. Stat. § 181.08 et seq., the Minnesota
Whistleblower statute, Minn. Stat. § 181.932, and/or Employee’s conduct as a
“whistleblower,” Minn. Stat. § 176.82, and any other federal, state, or local
statute, law, rule, regulation, ordinance or order. This includes, but is not
limited to, claims for violation of any civil rights laws based on protected
class status; claims for discrimination, harassment, assault, battery,
defamation, intentional or negligent infliction of emotional distress, breach of
the covenant of good faith and fair dealing, promissory estoppel, negligence,
violation of public policy, and all other claims for unlawful employment
practices, and all other common law or statutory claims.

2.   Agreement to Release My Claims. Except as stated in Paragraph 4, I agree to
give up all My Claims, waive any rights thereunder, and withdraw any and all of
my charges and lawsuits against Company. In exchange for my agreement to release
My Claims, I am receiving satisfactory consideration (compensation) from Company
to which I am not otherwise entitled by law, contract, or under any Company
policy. The consideration I

                       
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    am receiving is a full and fair payment for the release of all My Claims.
Company does not owe me anything in addition to what I will be receiving.

3.   Older Workers Benefit Protection Act. I understand and have been advised
that the above release of My Claims is subject to the terms of the Older Workers
Benefit Protection Act (“OWBPA”). The OWBPA provides that an individual cannot
waive a right or claim under the Age Discrimination in Employment Act (“ADEA”)
unless the waiver is knowing and voluntary. I have been advised of this law, and
I agree that I am signing this Release voluntarily, and with full knowledge of
its consequences. I understand that the Company is giving me at least twenty-one
(21) days from the date I received a copy of this Release to decide whether I
want to sign it. I acknowledge that I have been advised to use this time to
consult with an attorney about the effect of this Release. If I sign this
Release before the end of the twenty-one (21) day period it will be my personal,
voluntary decision to do so, and will be done with full knowledge of my legal
rights. I agree that material and/or immaterial changes to this Release will not
restart the running of this consideration period.   4.   Exclusions from
Release. My Claims do not include my rights, if any, to claim the following:
Re-employment Insurance benefits; claims for my vested post-termination benefits
under any 401K or similar retirement benefit plan; my COBRA rights; my rights to
enforce the terms of this Release; or my rights to assert claims that are based
on events occurring after this Release becomes effective.

  (a)   Nothing in this Release interferes with my right to file a charge with
the Equal Employment Opportunity Commission (“EEOC”), or participate in any
manner in an EEOC investigation or proceeding under Title VII, the ADA, the
ADEA, or the EPA. I, however, understand that I am waiving my right to recover
individual relief including, but not limited to, back pay, front pay,
reinstatement, attorneys’ fees, and/or punitive damages, in any administrative
or legal action whether brought by the EEOC, Employee, or any other party.    
(b)   Nothing in this Release interferes with my right to challenge the knowing
and voluntary nature of this Release under the ADEA and/or OWBPA.     (c)  
Nothing in this Release limits any rights that I would otherwise have to be
indemnified by the Company, in my capacity as a former officer or employee of
the Company, under the Employer’s Certificate of Incorporation, Bylaws,
directors’ and officers’ insurance policy or Section 145 of the Delaware General
Corporation Law.     (d)   I agree that Company reserves any and all defenses,
which it has or might have against any claims brought by me. This includes, but
is not limited to, Company’s right to seek available costs and attorneys’ fees,
and to have any

                       
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      monetary award granted to me, if any, reduced by the value of the
additional and valuable consideration that I received in consideration for this
Release.

5.   Right to Rescind and/or Revoke. I understand that insofar as this Release
relates to my rights under the Age Discrimination in Employment Act (“ADEA”), it
shall not become effective or enforceable until seven (7) days after I sign it.
I have the right to rescind this Release only insofar as it extends to potential
claims under the ADEA by written notice to Company within seven (7) calendar
days following my signing this Release, and within fifteen (15) calendar days as
to waiver of claims under the Minnesota Human Rights Act. Any such rescission
must be in writing and hand-delivered to Company or, if sent by mail, postmarked
within the applicable time period, sent by certified mail, return receipt
requested, and addressed as follows:

  (a)   post-marked within the seven (7) or fifteen (15) day period;     (b)  
properly addressed to Janet L. Dick, Senior Vice President of Human Resources,
American Medical Systems, Inc., 10700 Bren Road West, Minnetonka, MN 55343-9679,
and     (c)   sent by certified mail, return receipt requested.

    I understand that the payment I am receiving for settling and releasing My
Claims is contingent upon my agreement to be bound by the terms of this Release.
Accordingly, if I decide to revoke this Release, I understand that I am not
entitled to the payments offered in the attached Separation Agreement.   6.   I
Understand the Terms of this Release. I have had the opportunity to read this
Release carefully and understand all its terms. I have reviewed this Release
with my own attorney. In agreeing to sign this Release, I have not relied on any
statements or explanations made by Company or their attorneys. I understand and
agree that this Release, the attached Separation Agreement and the At-Will
Employment Agreement and CIC Agreement referred to in the Separation Agreement
contain all the agreements between Company and me. We have no other written or
oral agreements.

              Dated:                        /s/ Stephen J. McGill              
    Stephen J. McGill    

                       
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