exv10w14



 





Exhibit 10.14




AMERICAN MEDICAL SYSTEMS, INC.

EXECUTIVE VARIABLE INCENTIVE PLAN

For 2005




I. PURPOSE




American Medical Systems, Inc. (AMS) is dedicated to excellence in performance and in creating a
strong link between performance and compensation. This plan is designed to reward senior
management team members of AMS with performance-based compensation for achieving and surpassing
specified company financial goals of long-term company growth and business improvement. The Plan
aligns with shareholder value drivers of sales growth and operating profit and supports wise use of
and decisions regarding capital investments.




II. PERFORMANCE MEASURES — 100% OF THE VARIABLE INCENTIVE




The quarterly pool contributions will be calculated at the end of each fiscal quarter using the
following formula: 6.2 percent of (A) the product of (x) each fiscal quarter’s year-over-year
sales growth rate (percent) less 14.25 percent and (y) each quarter’s year-over-year increase in
sales dollars; plus (B) 1.5 percent of operating income in excess of a capital charge (15 percent
annually of net non-cash assets employed in the business).




Each quarter, the actual pool contributions for four quarters (the current plus three past
quarters) will be averaged to calculate the actual bonus pool for payout. Each participant will
receive a quarterly bonus payment in relation to their individual target payment equivalent to the
relationship between that quarter’s actual bonus pool calculation and the quarter’s target pool
amount.




III. BONUS PAYOUT




The pool is divided among Plan participants according to an individual bonus amount assigned
according to the competitive level of variable compensation for that position.




Bonus potential increases for all participants as the pool increases due to results.




IV. PARTICIPATION




Participants in this Plan effective January 1, 2005 will be members of the Operating Team of the
Company. Participation by new operating team members during the year who are not officers, but who
were anticipated as plan participants at the time of plan approval, will require the approval of
the President and CEO who will determine if new operating team members will be added during the
year on a pro-rated basis or at the beginning of the next year. Participation by new operating
team members who were not anticipated at the time of plan approval will also be subject to approval
of the Compensation Committee. Participation by new operating team members who are also officers
will also be subject to approval of the Compensation Committee and the Board of Directors.




If employment of a participant is terminated due to his/her performance or the individual
voluntarily leaves the Company, the incentive award is forfeited for that individual for that Plan
year.




IV. APPROVAL, AUTHORIZATION, AND TERMS




The Executive Variable Incentive Plan, its terms, policies, revisions and measures are under the
full approval of the Compensation Committee of the Board of Directors. Any modifications or
adjustments to the Plan and performance measures or consideration of unusual transactions must be
approved by the Compensation Committee of the Board of Directors.




Participation in the Plan is not an employment contract or any implied assurance of continued
employment.




V. INCENTIVE PAYMENT




Bonus payment will be issued as soon as feasible after the close of the quarter’s financial
statements. Payment will be in lump sum.




If an individual’s position changes during the year, the individual’s target bonus may be changed,
if so approved by the President and CEO and the Compensation Committee.