exv10w1






Exhibit 10.1




SETTLEMENT AGREEMENT AND LIMITED WAIVER




          This Settlement Agreement and Limited Waiver (“Agreement”), effective as of July 15,
2008, is between American Medical Systems Holdings, Inc., a Delaware corporation, on its behalf and
on behalf of all of its Affiliates (as defined in the Change in Control Agreement referenced
herein) (collectively, and if the context requires, each individually, referred to herein as the
“Company”), Galil Ltd., an Israeli corporation, and its Affiliates, including without
limitation, Galil Medical, Inc., a Delaware corporation (collectively, and if the context requires,
each individually, referred to herein as “Galil”), and Martin J. Emerson, an individual
residing at 4659 Fable Hill Way North, Hugo, Minnesota 55038 (the “Executive”). The
Company, Galil and the Executive are each individually referred to herein as a “Party” and
collectively as the “Parties.”




          WHEREAS, the Executive was formerly employed by the Company until January 4, 2008, most
recently as its President and Chief Executive Officer; and




          WHEREAS, the Company and the Executive are parties to: (1) a Change in Control Severance
Agreement, dated April 2, 2007 (the “Change in Control Agreement”); (2) an Employment
Agreement, dated April 26, 2004, as amended through January 4, 2008 (the “Employment
Agreement”); and (3) a Confidential Separation Agreement, executed by the Executive on January
14, 2008 (the “Separation Agreement”); and




          WHEREAS, pursuant to the terms of the above-referenced agreements, the Executive remains bound
by restrictive covenants in Sections 7(b) and 7(d) of the Employment Agreement and Section 6 of the
Change in Control Agreement (the “Restrictive Covenants”), except as modified as stated in
Sections 1 and 5 below; and




          WHEREAS, Galil wishes to continue to employ the Executive in an executive or senior management
position and Executive wishes to continue to be employed by Galil; and




          WHEREAS, the Parties have a good faith dispute over whether, in the absence of this Agreement,
the Executive’s employment with Galil in an executive or senior management position would place him
in violation of Section 6(e) (Non-Competition) of the Change in Control Agreement; and




          WHEREAS, the Parties wish to define the terms and conditions upon which the Executive may
continue his employment with Galil.




          NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING RECITALS AND THE MUTUAL PROMISES CONTAINED
IN THIS AGREEMENT, THE PARTIES HEREBY AGREE AS FOLLOWS:





	1.	 	Limited Waiver of Non-Competition Provision. With respect to the Executive’s
continued employment with Galil only, the Company hereby grants the Executive a limited waiver
of Section 6(e) (Non-Competition) of the Change in Control Agreement solely for the purpose of
allowing the Executive to continue his employment with Galil. Section 6(e) of the Change in
Control Agreement and the other Restrictive Covenants remain in full force and effect for all
other purposes, except as modified as stated in Section 5 below.






	2.	 	Limited Mutual Release of Claims. For valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each party, the Company, the Executive and
Galil, for themselves and their employees, agents, affiliates, representatives, successors and
assigns, forever and fully release and discharge one another of and from any and all actions,
causes of action, claims or demands for




 









 






	 	 	damages, costs and attorney’s fees, or any other thing whatsoever on account of, or in any way
growing out of, the hiring and employment of the Executive by Galil or the opposition of the
Company to Galil’s hiring and employment of the Executive. This release does not apply to and
does not affect any other rights or claims by any party against any other party, including
without limitation trade secret claims, breach of confidential information covenants, or any
party’s right to assert claims that are based on events occurring after this Agreement becomes
effective.






	3.	 	Payment by Galil. Galil hereby agrees to pay the Company Twenty-Five Thousand
Dollars and no cents ($25,000) within ten (10) days after Galil’s execution of this Agreement.






	4.	 	No Further Severance. The Executive hereby waives his right to receive any
additional severance from the Company, beyond that which has been paid to Executive to the
date of this Agreement, including without limitation, any unpaid severance provided for under
the Employment Agreement, whether accrued or payable on or after the date hereof. The
Executive will neither be requested nor required to repay any monies paid to him by the
Company prior to the date of this agreement. The Company will have no obligation to reimburse
the Executive for COBRA continuation coverage for any period after June 30, 2008.






	5.	 	Agreement Not to Hire. From the date of this Agreement until January 4, 2010, Galil
and the Executive each agree that they will not, directly or indirectly, hire, engage as a
consultant, or induce to leave their employment with the Company, anyone who was, or is,
employed by the Company at any time during the period from July 1, 2006 to and including
January 4, 2010, nor assist any other person or entity in any such hiring, engagement or
inducement. Galil and the Executive acknowledge that the Company’s employees are generally
subject to non-compete agreements that would prevent them from accepting employment with, or
otherwise providing services to, Galil for a period of two years after their employment with
the Company terminates. The restrictions set forth in this Section 5 will not be applicable
to any former employee of the Company who, at the time of hire or engagement by Galil, is no
longer subject to his or her non-compete restrictions with the Company because the term of
such non-compete agreement has expired.






	6.	 	Acknowledgement of Reasonableness and Enforceability. The Executive acknowledges the
legitimate Company interests which the Restrictive Covenants were designed to protect. The
Executive further agrees that the Restrictive Covenants are reasonable in their scope and
duration, and are supported by adequate consideration, including but not limited to the
benefits contained in the Change in Control Agreement and the Separation Agreement. The
Executive agrees that he will fully comply with the Restrictive Covenants in accordance with
their terms, except as modified as stated in Section 5 above. Subject to the limited waiver
set forth in Section 1 above, any terms of the Change in Control Agreement and the Employment
Agreement that by their terms or clear intent are to survive termination of the Change in
Control Agreement or the Employment Agreement, including but not limited to the Restrictive
Covenants, will survive in accordance with their terms, except as modified as stated in
Section 5 above. The Executive and the Company agree and acknowledge that the Restrictive
Period, as defined in Section 6 of the Change in Control Agreement, begins on January 4, 2008
and ends on January 4, 2010.
	 
	7.	 	Royalty Payments.






	 	a.	 	Percentage Royalty. If Galil or any Galil affiliate first sells a Covered
Product within five years of the date of this Agreement, Galil or such Galil affiliate
shall pay to the Company, or its designee, a royalty equal to 1.5% of Net Sales of any
Covered Product sold during the five-year period commencing on the date of the first
commercial sale of such Covered Product by Galil or an affiliate. Royalty payments will be
made quarterly, with payment due within thirty (30) days




 









 






	 	 	 	after the end of each calendar quarter and will be accompanied by a reasonably detailed
report setting forth the royalty calculations for the quarter to which the payment relates.
The Company will keep confidential the contents of all such reports. For purposes of this
Agreement:






	 	i.	 	“Covered Products” means any product or device, or component thereof,
including cryo units and disposable probes, that is developed, designed, modified,
improved, manufactured, used, imported, sold or offered for sale by Galil for the
treatment of menorraghia, whether or not such product, device or component thereof is
indicated or approved for the treatment of menorraghia. “Covered Products” does
not include: (1) any products that are developed and marketed for the interstitial treatment of
fibroids; (2) any endometrial ablation products developed, designed, modified,
improved, manufactured, used, imported, sold or offered for sale for the treatment
of menorraghia by a company that acquires Galil and which products said acquiring
company developed, designed, modified, improved, manufactured, used, imported, sold
or offered for sale, before such acquisition; or (3) any endometrial ablation
products developed, designed, modified, improved, manufactured, used, imported, sold
or offered for sale for the treatment of menorraghia by a company that is acquired
by Galil after July 1, 2010, and which products said acquired company developed,
designed, modified, improved, manufactured, used, imported, sold or offered for
sale, before such acquisition.
	 
	 	ii.	 	“Net Sales” means Galil’s properly recognized consolidated aggregate
net sales of the Covered Products during the royalty period, calculated in accordance
with generally accepted accounting principles in the U.S.A. consistently applied by
Galil in accordance with its audited revenue recognition policies.






	 	b.	 	Audit Rights. Galil agrees to keep complete and accurate books of account and
records covering all transactions relating to this Section 6, including technical records
which will enable the Company to determine which products of Galil constitute Covered
Products. Such books and records shall be kept at Galil’s principal place of business for
at least three (3) years after the end of the annual period to which they pertain. No more
than once annually, during reasonable business hours, upon prior notice, and without undue
interruption of the business and operations of Galil, the Company will have the right to
engage an independent certified public accountant to audit such reports and related records
solely for purposes of verifying Galil’s compliance with this Section 6, provided that such
accountant has signed a nondisclosure agreement with Galil prohibiting such accountant from
disclosing any information obtained in connection with the audit, other than disclosing to
the Company the amount of any over-calculation or under-calculation by Galil of payments
due to the Company. Such right shall not, however, include the right to re-audit books and
records previously audited. Galil will provide reasonable cooperation in connection with
any such audit, including but not limited to providing copies, back-up documents, and
persons to explain any documents or procedures. If any valid audit indicates the payments
due the Company have been under calculated by Galil by five percent or more, then Galil
shall promptly reimburse the Company for all reasonable costs incurred in connection with
the audit.
	 
	 	c.	 	No License Granted. The Parties agree and acknowledge that the Company is not
granting to Galil or the Executive a license or right to any of the Company’s patents,
patent applications, trade secrets or other intellectual property and that the royalty
payments contemplated by this Section 6 are based on the Executive’s general knowledge of
and experience in the markets in which the Company and Galil conduct business.




 









 












	8.	 	Mutual Non-Disparagement. The Executive agrees not to disparage or communicate any
derogatory information, whether oral or written, about the Company or any officer or director
of the Company and will not induce, incite, or encourage others to disparage or communicate
any derogatory information, whether oral or written, about the Company or any officer or
director of the Company. Reciprocally, each officer and director of the Company agrees not to
disparage or communicate any derogatory information, whether oral or written, about the
Executive and will not induce, incite, or encourage others to disparage or communicate any
derogatory information, whether oral or written, about the Executive. Nothing contained in
this Section shall preclude the Parties from giving truthful testimony in response to any
lawful subpoena or any other form of legal process.






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






	10.	 	Entire Agreement. To the extent not inconsistent with this Agreement, the Company
and the Executive remain bound by the terms of Change in Control Agreement, the Employment
Agreement, and the Separation Agreement referenced above, the surviving provisions of which do
and will continue in full force and effect. Subject to these exceptions, this Agreement sets
forth the entire agreement and understanding of the Parties in respect of the transactions
contemplated hereby and supersedes all prior agreements, arrangements and understandings
relating to the subject matter hereof, including all such agreements, arrangements and
understandings between the Parties and all other agreements, certificates, and documents
executed or delivered in connection therewith to the extent inconsistent with the terms
herein.






	11.	 	Successors and Assigns. This Agreement shall be binding upon the successors and
assigns of the Parties.






	12.	 	Amendments. The Parties may only amend, modify or supplement this Agreement in
writing signed by each of the Parties.






	13.	 	Severability. All agreements and covenants contained herein are severable. In the
event that any of them are held to be invalid by any competent court, then (a) the remaining
terms and provisions hereof will be unimpaired, and (b) the invalid or unenforceable term or
provision will be deemed replaced by a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable term or
provision.






	14.	 	Authority. Each Party warrants to the other Parties that it has full right, power,
legal capacity and authority to enter into and perform this Agreement.






	15.	 	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 including, but not limited to, an action to enforce
its terms, or to challenge its validity, such legal action shall be properly filed in U.S.
District Court in the District of Minnesota or Minnesota State District Court in Hennepin
County, Minnesota.






	16.	 	Counterparts. This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.






	17.	 	Expenses. Each of the Parties shall bear its own costs and expenses (including legal
and accounting fees and expenses) incurred in connection with the negotiation and execution of
this Agreement.




 









 










IN WITNESS WHEREOF, the Parties have each caused this Agreement to be executed as of the date first
above written.




	 	 	 	 	 
	AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	GALIL MEDICAL, INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	EXECUTIVE
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	Martin J. Emerson