**AMERICAN MEDICAL SYSTEMS, INC.**
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT is made and entered into effective as of April26, 2004, between American Medical Systems, Inc., a Delaware corporation (the“Company”), and Martin J. Emerson(the “Executive”).
R E C I T A L S:
     WHEREAS, the Company currently employs the Executive as the Company’sPresident and Chief Operating Officer, and the Company recognizes that thefuture growth, profitability and success of the Company’s business will besubstantially and materially enhanced by the continued employment of theExecutive by the Company; and
     WHEREAS, the Company desires to employ the Executive and the Executive hasindicated his willingness to provide his services to the Company, on the termsand conditions set forth herein;
     NOW, THEREFORE, on the basis of the foregoing premises and inconsideration of the mutual covenants and agreements contained herein, theparties hereto agree as follows:
     Section 1. Employment. The Company hereby agrees to employ the Executiveand the Executive hereby accepts employment with the Company, on the terms andsubject to the conditions hereinafter set forth. The Executive shall serve asthe President and Chief Operating Officer, in such capacity, shall reportdirectly to the Company’s Chief Executive Officer and shall have such duties asare typically performed by the President of a corporation, together with suchadditional duties, commensurate with the Executive’s position as the ChiefFinancial Officer of the Company, as may be assigned to the Executive from timeto time by the Company’s Chief Executive Officer. The principal location ofthe Executive’s employment shall be at the Company’s principal executive officelocated in Minnetonka, Minnesota, although the Executive understands and agreesthat he may be required to travel from time to time for Company businessreasons.
     Section 2. Term. Unless terminated pursuant to Section 6 hereof, theExecutive’s employment hereunder shall commence on the date hereof and shallcontinue during the period ending on the second anniversary of the date hereof(the “Initial Term”). Thereafter, the Executive’s employment term shall extendautomatically for consecutive periods of one year unless either party shallprovide notice of termination not less than sixty (60) days prior to ananniversary date of this Agreement. The Initial Term, together with anyextension pursuant to this
 

 

Section 2, is referred to herein as the “Employment Term.” The EmploymentTerm shall terminate upon any termination of the Executive’s employmentpursuant to Section 6.
     Section 3. Compensation. During the Employment Term, the Executive shallbe entitled to the following compensation and benefits:
     (a) Salary. As compensation for the performance of the Executive’sservices hereunder, the Company shall pay to the Executive a base salary (the“Salary”) of $250,000 per year with increases, if any, as may be approved bythe Board of Directors (the “Board” or “Board of Directors”) of AmericanMedical Systems Holdings, Inc. (the “Parent Corporation”) or the CompensationCommittee of the Board. The Salary shall be payable in accordance with thecustomary payroll practices of the Company as the same shall exist from time totime. In no event shall the Salary be decreased during the Employment Term.
     (b) Bonus. During the Employment Term, in addition to Salary, theExecutive shall be eligible to participate in such bonus plans as may beadopted from time by the Board of Directors for other officers of the Company(the “Bonus”) for each such calendar year ending during the Employment Period;provided that, unless the Board of Directors or the Compensation Committee ofthe Board determines otherwise, the Executive must be employed on the last dayof such calendar year in order to receive the Bonus attributable thereto. TheExecutive’s entitlement to the Bonus for any particular calendar year shall bebased on the attainment of performance objectives established by the Board ofDirectors or the Compensation Committee of the Board in any such bonus plan.
     (c) Benefits. Except as otherwise provided in this Agreement, inaddition to the Salary and Bonus, if any, the Executive shall be entitledduring the Employment Term to participate in health, insurance, retirement,disability, and other benefit programs provided to other officers of theCompany on terms no less favorable than those available to the other officersof the Company. The Executive shall also be entitled to the same number ofvacation days, holidays, sick days and other benefits as are generally allowedto other senior executives of the Company in accordance with the Company’spolicies in effect from time to time.
     Section 4. Exclusivity. During the Employment Term, the Executive shalldevote his full time to the business of the Company and its subsidiaries, shallfaithfully serve the Company and its subsidiaries, shall in all respectsconform to and comply with the lawful and reasonable directions andinstructions given to him by the Chief Executive Officer or the Board ofDirectors in accordance with the terms of this Agreement, shall use his
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best efforts to promote and serve the interests of the Company and itssubsidiaries and shall not engage in any other business activity, whether ornot such activity shall be engaged in for pecuniary profit, except that theExecutive may (i) participate in the activities of professional tradeorganizations related to the business of the Company and its subsidiaries, (ii)engage in personal investing activities and (iii) serve on the board ofdirectors of not more than two (2) other companies whose businesses are not incompetition with the business interests of the Company, provided that theactivities set forth in these clauses (i), (ii) and (iii), either singly or inthe aggregate, do not interfere in any material respect with the services to beprovided by the Executive hereunder.
     Section 5. Reimbursement for Expenses. During the Employment Term, theExecutive is authorized to incur reasonable expenses in the discharge of theservices to be performed hereunder, including expenses for travel,entertainment, lodging and similar items in accordance with the Company’sexpense reimbursement policy, as the same may be modified by the Company fromtime to time. The Company shall reimburse the Executive for all such properexpenses upon presentation by the Executive of itemized accounts of suchexpenditures in accordance with the financial policy of the Company, as ineffect from time to time.
     Section 6. Termination and Default.
     (a) Death. The Executive’s employment shall automatically terminate uponhis death and upon such event, the Executive’s estate shall be entitled toreceive the amounts specified in Section 6(e) below.
     (b) Disability. If the Executive is unable to perform the dutiesrequired of him under this Agreement because of illness, incapacity, orphysical or mental disability, the Employment Term shall continue and theCompany shall pay all compensation required to be paid to the Executivehereunder, unless the Executive is disabled such that the Executive would beentitled to receive disability benefits under the Company’s long-termdisability plan, or if no such plan exists, the Executive is unable to performthe duties required of him under this Agreement for an aggregate of 180 days(whether or not consecutive) during any 12-month period during the term of thisAgreement, in which event the Executive’s employment shall terminate.
     (c) Cause. The Company may terminate the Executive’s employment at anytime, with or without Cause. In the event of termination pursuant to thisSection 6(c) for Cause (as defined below), the Company shall deliver to theExecutive written notice setting forth the basis for such termination, whichnotice shall specifically set forth the nature of the Cause which is the reasonfor such termination. Termination of the Executive’s
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employment hereunder shall be effective upon delivery of such notice oftermination. For purposes of this Agreement, “Cause” shall mean: (i) theExecutive’s failure (except where due to a disability contemplated bysubsection (b) hereof), neglect or refusal to perform his duties hereunderwhich failure, neglect or refusal shall not have been corrected by theExecutive within 30 days of receipt by the Executive of written notice from theCompany of such failure, neglect or refusal, which notice shall specificallyset forth the nature of said failure, neglect or refusal, (ii) any willful orintentional act of the Executive that has the effect of injuring the reputationor business of the Company or its affiliates in any material respect; (iii) anycontinued or repeated absence from the Company, unless such absence is (A)approved or excused by the Chief Executive Officer or (B) is the result of theExecutive’s illness, disability or incapacity (in which event the provisions ofSection 6(b) hereof shall control); (iv) use of illegal drugs by the Executiveor repeated drunkenness; (v) conviction of the Executive for the commission ofa felony; or (vi) the commission by the Executive of an act of fraud orembezzlement against the Company.
     (d) Resignation. The Executive shall have the right to terminate hisemployment at any time by giving notice of his resignation.
     (e) Payments. In the event that the Executive’s employment terminatesfor any reason, the Company shall pay to the Executive all amounts and benefitsaccrued but unpaid hereunder through the date of termination in respect ofSalary or unreimbursed expenses, including accrued and unused vacation. Inaddition, in the event the Executive’s employment is terminated by the Companywithout Cause, whether during or upon expiration of the then current term ofthis Agreement, in addition to the amounts specified in the foregoing sentence,(i) the Executive shall continue to receive the Salary (less any applicablewithholding or similar taxes) at the rate in effect hereunder on the date ofsuch termination periodically, in accordance with the Company’s prevailingpayroll practices, for a period of twelve (12) months following the date ofsuch termination (the “Severance Term”) and (ii) to the extent permissibleunder the Company’s health and welfare plans, the Executive shall continue toreceive any health and welfare benefits provided to him as of the date of suchtermination in accordance with Section 3(c) hereof during the Severance Term,on the same basis and at the same cost as during the Employment Term. Further,in the event the Executive’s employment is terminated without Cause by reasonof the Company having notified the Executive that this Agreement will not beextended pursuant to Section 2, the Executive shall be entitled to receive apro-rated amount of the Bonus in a lump sum based on the Executive’s period ofemployment during the calendar year in which such termination occurs (less anyapplicable withholding or similar taxes). Following the end of the SeveranceTerm, the Executive shall be entitled to elect
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health care continuation coverage permitted under Section 601 through 608of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),as if his employment had then terminated. In the event the Executive acceptsother employment or engages in his own business prior to the last date of theSeverance Term, the Executive shall forthwith notify the Company and theCompany shall be entitled to set off from amounts and benefits due theExecutive under this Section 6(e) (other than in respect of the Bonus) theamounts paid to and benefits received by the Executive in respect of such otheremployment or business activity. Amounts owed by the Company in respect of theSalary, Bonus or reimbursement for expenses under the provisions of Section 5hereof shall, except as otherwise set forth in this Section 6(e), be paidpromptly upon any termination. The payments and benefits to be provided to theExecutive as set forth in this Section 6(e) in the event the Executive’semployment is terminated by the Company without Cause: (i) shall be lieu ofany and all benefits otherwise provided under any severance pay policy, plan orprogram maintained from time to time by the Company for its employees, and (ii)shall not be paid to the extent that Executive’s employment is terminatedfollowing a Change in Control under circumstances entitling the Executive tothe benefits described in Section 6(f).
     (f) Change in Control Benefit. In the event that the Executive’semployment is terminated by the Company without Cause or by the Executive forGood Reason, as defined below, during the 12-month period immediately followinga Change in Control, as defined below, whether during or upon expiration of thethen current term of this Agreement: (i) the Company shall pay to theExecutive all amounts and benefits accrued but unpaid hereunder through thedate of termination in respect of Salary or unreimbursed expenses, includingaccrued and unused vacation (less any applicable withholding or similar taxes),(ii) all unvested shares that are subject to outstanding options to purchaseshares of common stock of Parent Corporation shall become immediately vestedand exercisable to the extent and on the terms set forth in the related stockoption agreement or certificate, (iii) the Company shall pay to Executive alump sum payment equal to his Salary at the rate in effect hereunder on thedate of such termination, plus his target Bonus for the year in which theChange in Control occurs (less any applicable withholding or similar taxes),and (iv) to the extent permissible under the Company’s health and welfareplans, the Executive shall continue to receive, at the Company’s cost, anyhealth and welfare benefits provided to him as of the date of such terminationfor the 12-month period following his termination of employment. Following theend of the 12-month period described in clause (iv) of the preceding sentence,the Executive shall be entitled to elect health care continuation coveragepermitted under Sections 601 through 608 of ERISA as if his employment with theCompany then terminated.
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     (g) Gross-Up Payment. If the Executive becomes entitled to payments andbenefits following a Change in Control under Section 6(f) or the vesting ofstock options accelerate following a Change in Control as provided in any stockoption agreement or certificate, the Company will cause its independentauditors promptly to review, at the Company’s sole expense, the applicabilityof Code Section 4999 to any payment or distribution of any type by the Companyto or for the Executive’s benefit, whether paid or payable or distributed ordistributable pursuant to the terms of this Agreement, any stock optionagreement or certificate or otherwise (the “Total Payments”). If the auditordetermines that the Total Payments result in an excise tax imposed by CodeSection 4999 or any comparable state or local law, or any interest or penaltieswith respect to such excise tax (such excise tax, together with any suchinterest and penalties, are collectively referred to as the “Excise Tax”), theCompany will make an additional cash payment (a “Gross-Up Payment”) to theExecutive within 10 days after such determination equal to an amount such thatafter payment by the Executive of all taxes (including any interest orpenalties imposed with respect to such taxes), including any Excise Tax,imposed upon the Gross-Up Payment, the Executive would retain an amount of theGross-Up Payment equal to the Excise Tax imposed upon the Total Payments. Forpurposes of the foregoing determination, the Executive’s tax rate will bedeemed to be the highest statutory marginal state and federal tax rate (on acombined basis) then in effect. If no determination by the Company’s auditorsis made prior to the time the Executive is required to file a tax returnreflecting the Total Payments, the Executive will be entitled to receive fromthe Company a Gross-Up Payment calculated on the basis of the Excise Tax theExecutive reported in such tax return, within 10 days after the later of thedate on which the Executive files such tax return or the date on which theExecutive provides a copy thereof to the Company. In all events, if any taxauthority determines that a greater Excise Tax should be imposed upon the TotalPayments than is determined by the Company’s independent auditors or reflectedin the Executive’s tax return pursuant to this Section 6(g), the Executive willbe entitled to receive from the Company the full Gross-Up Payment calculated onthe basis of the amount of Excise Tax determined to be payable by such taxauthority within 10 days after the Executive notifies the Company of suchdetermination.
     For purposes of this Agreement, “Change in Control” shall mean:
     (i) The acquisition by any individual, entity or group (within themeaning 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 (withinthe 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 commonstock of the Parent Corporation, taking into account as
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outstanding for this purpose such common stock issuable upon the exerciseof options or warrants, the conversion of convertible stock or debt, and theexercise of any similar right to acquire such common stock (the “OutstandingParent Corporation Common Stock”) or (B) the combined voting power of the thenoutstanding voting securities of the Parent Corporation entitled to votegenerally in the election of directors (the “Outstanding Parent CorporationVoting Securities”); provided, however, that for purposes of this subsection(i), the following acquisitions shall not constitute a Change in Control: (x)any acquisition by the Parent Corporation or any “affiliate” of the ParentCorporation, within the meaning of 17 C.F.R. § 230.405 (an “Affiliate”), (y)any acquisition by any employee benefit plan (or related trust) sponsored ormaintained by the Parent Corporation or any Affiliate of the ParentCorporation, (z) any acquisition by any corporation or business entity pursuantto a transaction which complies with clauses (A), (B) and (C) of subsection(ii) of this Section 6(f) (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 orsale or other disposition of all or substantially all of the assets of theParent Corporation (a “Business Combination”), in each case, unless, followingsuch Business Combination, (A) all or substantially all of the individuals andentities who were the beneficial owners, respectively, of the OutstandingParent Corporation Common Stock and Outstanding Parent Corporation VotingSecurities immediately prior to such Business Combination beneficially own,directly or indirectly, more than 60% of, respectively, the then outstandingshares of common stock and the combined voting power of the then outstandingvoting securities entitled to vote generally in the election of directors, asthe case may be, of the corporation resulting from such Business Combination(including, without limitation, a corporation which as a result of suchtransaction owns the Parent Corporation or all or substantially all of theParent Corporation’s assets either directly or through one or moresubsidiaries) in substantially the same proportions as their ownership,immediately prior to such Business Combination of the Outstanding ParentCorporation Common Stock and Outstanding Parent Corporation 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 dilutedbasis) of, respectively, the then outstanding shares of common stock of thecorporation resulting from such Business Combination, taking into account asoutstanding for this purpose such common stock issuable upon the exercise ofoptions or warrants, the conversion of convertible stock or debt, and theexercise of any similar right to acquire such common stock, or the combinedvoting power of the then outstanding voting securities of such corporationexcept to the extent that such ownership existed prior to the BusinessCombination and (C) at least a majority of the members of the board ofdirectors of the corporation resulting from such
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Business Combination were members of the incumbent Board of Directors ofthe Parent Corporation at the time of the execution of the initial agreementproviding for such Business Combination; or
     (iii) Approval by the shareholders of the Parent Corporation of acomplete liquidation or dissolution of the Parent Corporation; or
     (iv) The sale of at least 80% of the assets of the Parent Corporation toan unrelated party, or completion of a transaction having a similar effect; or
     (v) The individuals who on the date of this Agreement constitute theBoard of Directors thereafter cease to constitute at least a majority thereof;provided that any person becoming a member of the Board of Directors subsequentto the date of this Agreement and whose election or nomination was approved byeither (A) a vote of at least two-thirds of the directors who then comprisedthe Board of Directors immediately prior to such vote or (B) the NominatingCommittee of the Board of Directors shall be considered a member of the Boardof Directors on the date of this Agreement.
     For purposes of this Agreement, “Good Reason” shall mean, without theExecutive’s prior written consent, (i) a substantial diminution in theExecutive’s authority, duties or responsibilities as in effect prior to theChange in Control, (ii) a reduction by the Company in the Executive’s baseSalary as in effect immediately prior to the Change in Control or as thereafterincreased, (iii) the failure by the Company to cover the Executive underemployee benefit plans that, in the aggregate, provide substantially similarbenefits to the Executive and/or his family and dependents at a substantiallysimilar total cost to the Executive (e.g., premiums, deductibles, co-pays, outof pocket maximums, required contributions, taxes and the like) relative to thebenefits and total costs under such benefit plans in which the Executive(and/or his family or dependents) was participating at any time during the90-day period immediately preceding the Change in Control, or (iv) theCompany’s requiring the Executive to be based at any office or location that ismore than fifty (50) miles further from the office or location thereofimmediately preceding a Change in Control; provided, however, Good Reason shallnot include any of the circumstances or events described herein unless theExecutive has first provided written notice of such circumstance or event andthe Company has not corrected such circumstance or event within thirty (30)days of receipt by the Company of such written notice from the Executive.
     (h) Survival of Operative Sections. Upon any termination of theExecutive’s employment, the provisions of Sections 6(e), 6(f), 6(g) and 7through 18 of this Agreement shall survive to the extent necessary to giveeffect to the provisionsthereof.
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     Section 7. Secrecy and Non-Competition**.**
     (a) No Competing Employment. The Executive acknowledges that theagreements and covenants contained in this Section 7 are essential to protectthe value of the Company’s business and assets and by his current employmentwith the Company and its subsidiaries, the Executive has obtained and willobtain such knowledge, contacts, know-how, training and experience and there isa substantial probability that such knowledge, know-how, contacts, training andexperience could be used to the substantial advantage of a competitor of theCompany and to the Company’s substantial detriment. Therefore, the Executiveagrees that for the period commencing on the date of this Agreement and endingon the first anniversary of the termination of the Executive’s employmenthereunder (such period is hereinafter referred to as the “Restricted Period”)with respect to any State in which the Company is engaged in business duringthe Employment Term, the Executive shall not participate or engage, directly orindirectly, for himself or on behalf of or in conjunction with any person,partnership, corporation or other entity, whether as an employee, agent,officer, director, partner or joint venturer, in any business activities ifsuch activity consists of any activity undertaken or expressly contemplated tobe undertaken by the Company or any of its subsidiaries or by the Executive atany time during the last three (3) years of the Employment Term. The foregoingrestrictions contained in this Section 7(a) shall not prevent the Executivefrom accepting employment with a large diversified organization with separateand distinct divisions that do not compete, directly or indirectly, with theCompany, so long as prior to accepting such employment the Company receivesseparate written assurances from the prospective employer and from theExecutive, satisfactory to the Company, to the effect that the Executive willnot render any services, directly or indirectly, to any division or businessunit that competes, directly or indirectly, with the Company. During theRestricted Period, the Executive will inform any new employer, prior toaccepting employment, of the existence of this Agreement and provide suchemployer with a copy of this Agreement.
     (b) Nondisclosure of Confidential Information. The Executive, except inconnection with his employment hereunder, shall not disclose to any person orentity or use, either during the Employment Term or at any time thereafter, anyinformation not in the public domain or generally known in the industry thatthe Company treats as confidential or proprietary, in any form, acquired by theExecutive while employed by the Company or any predecessor to the Company’sbusiness or, if acquired following the Employment Term, such information which,to the Executive’s knowledge, has been acquired, directly or indirectly, fromany
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person or entity owing a duty of confidentiality to the Company or any ofits subsidiaries or affiliates, relating to the Company, its subsidiaries oraffiliates, including but not limited to information regarding customers,vendors, suppliers, trade secrets, training programs, manuals or materials,technical information, contracts, systems, procedures, mailing lists, know-how,trade names, improvements, price lists, financial or other data (including therevenues, costs or profits associated with any of the Company’s products orservices), business plans, code books, invoices and other financial statements,computer programs, software systems, databases, discs and printouts, plans(business, technical or otherwise), customer and industry lists,correspondence, internal reports, personnel files, sales and advertisingmaterial, telephone numbers, names, addresses or any other compilation ofinformation, written or unwritten, which is or was used in the business of theCompany or any subsidiaries or affiliates thereof. The Executive agrees andacknowledges that all of such information, in any form, and copies and extractsthereof, are and shall remain the sole and exclusive property of the Company,and upon termination of his employment with the Company, the Executive shallreturn to the Company the originals and all copies of any such informationprovided to or acquired by the Executive in connection with the performance ofhis duties for the Company, and shall return to the Company all files,correspondence and/or other communications received, maintained and/ororiginated by the Executive during the course of his employment.
     (c) No Interference. During the Restricted Period, the Executive shallnot, whether for his own account or for the account of any other individual,partnership, firm, corporation or other business organization (other than theCompany), directly or indirectly solicit, endeavor to entice away from theCompany or its subsidiaries, or otherwise directly interfere with therelationship of the Company or its subsidiaries with any person who, to theknowledge of the Executive, is employed by or otherwise engaged to performservices for the Company or its subsidiaries (including, but not limited to,any independent sales representatives or organizations) or who is, or waswithin the then most recent twelve-month period, a customer or client of theCompany, its predecessors or any of its subsidiaries. The placement of anygeneral classified or “help wanted” advertisements and/or general solicitationsto the public at large shall not constitute a violation of this Section 7(c)unless the Executive’s name is contained in such advertisements orsolicitations.
     (d) Inventions, etc. The Executive hereby sells, transfers and assignsto the Company or to any person or entity designated by the Company all of theentire right, title and interest of the Executive in and to all inventions,ideas, disclosures and improvements, whether patented or unpatented, andcopyrightable material, made or conceived by the Executive,
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solely or jointly, during his employment by the Company which relate tomethods, apparatus, designs, products, processes or devices, sold, leased, usedor under consideration or development by the Company, or which otherwise relateto or pertain to the business, functions or operations of the Company or whicharise from the efforts of the Executive during the course of his employment forthe Company. The Executive shall communicate promptly and disclose to theCompany, in such form as the Company requests, all information, details anddata pertaining to the aforementioned inventions, ideas, disclosures andimprovements; and the Executive shall execute and deliver to the Company suchformal transfers and assignments and such other papers and documents as may benecessary or required of the Executive to permit the Company or any person orentity designated by the Company to file and prosecute the patent applicationsand, as to copyrightable material, to obtain copyright thereof. Any inventionrelating to the business of the Company and disclosed by the Executive withinone year following the termination of his employment with the Company shall bedeemed to fall within the provisions of this paragraph unless proved to havebeen first conceived and made following such termination. The foregoingrequirements of this Section 7(d) shall not apply to any invention for which noequipment, supplies, facility or trade secret information of the Company wasused and which was developed entirely on the Executive’s own time, and (i)which does not relate directly to the Company’s business or to the Company’sactual or demonstrably anticipated research or development, or (ii) which doesnot result from any work the Executive performed for the Company.
     Section 8. Injunctive Relief. Without intending to limit the remediesavailable to the Company, the Executive acknowledges that in the event of abreach of any of the covenants contained in Section 7 hereof may result inmaterial irreparable injury to the Company or its subsidiaries or affiliatesfor which there is no adequate remedy at law, that it will not be possible tomeasure damages for such injuries precisely and that, in the event of such abreach or threat thereof, the Company shall be entitled to obtain a temporaryrestraining order and/or a preliminary or permanent injunction, without thenecessity of proving irreparable harm or injury as a result of such breach orthreatened breach of Section 7 hereof, restraining the Executive from engagingin activities prohibited by Section 7 hereof or such other relief as may berequired specifically to enforce any of the covenants in Section 7 hereof.
     Section 9. Representations and Warranties of the Executive. TheExecutive represents and warrants to the Company as follows:
     (a) This Agreement, upon execution and delivery by the Executive, will beduly executed and delivered by the Executive and (assuming due execution anddelivery hereof by the Company) will be the valid and binding obligation of the Executive enforceableagainst the Executive in accordance with its terms.
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     (b) Neither the execution and delivery of this Agreement, theconsummation of the transactions contemplated hereby nor the performance ofthis Agreement in accordance with its terms and conditions by the Executive (i)requires the approval or consent of any governmental body or of any otherperson or (ii) conflicts with or results in any breach or violation of, orconstitutes (or with notice or lapse of time or both would constitute) adefault under, any agreement, instrument, judgment, decree, order, statute,rule, permit or governmental regulation applicable to the Executive. Withoutlimiting the generality of the foregoing, the Executive is not a party to anynon-competition, non-solicitation, no hire or similar agreement that restrictsin any way the Executive’s ability to engage in any business or to solicit orhire the employees of any person.
     The representations and warranties of the Executive contained in thisSection 9 shall survive the execution and delivery of this Agreement and theconsummation of the transactions contemplated hereby.
     Section 10. Representations and Warranties of the Company. The Companyrepresents and warrants to the Executive as follows:
     (a) This Agreement, upon execution and delivery by the Company, will beduly executed and delivered by the Company and (assuming due execution anddelivery hereof by the Executive) will be the valid and binding obligation ofthe Company enforceable against the Company in accordance with its terms.
     (b) Neither the execution and delivery of this Agreement, theconsummation of the transactions contemplated hereby nor the performance ofthis Agreement in accordance with its terms and conditions by the Company (i)requires the approval or consent of any governmental body or of any otherperson or (ii) conflicts with or results in any breach or violation of, orconstitutes (or with notice or lapse of time or both would constitute) adefault under, any agreement, instrument, judgment, decree, order, statute,rule, permit or governmental regulation applicable to the Company.
     The representations and warranties of the Company contained in thisSection 10 shall survive the execution and delivery of this Agreement and theconsummation of the transactions contemplated hereby.
     Section 11. Successors and Assigns; No Third-Party Beneficiaries. ThisAgreement shall inure to the benefit of, and
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be binding upon, the successors and assigns of each of the parties,including, but not limited to, the Executive’s heirs and the personalrepresentatives of the Executive’s estate; provided, however, that neitherparty shall assign or delegate any of the obligations created under thisAgreement without the prior written consent of the other party.Notwithstanding the foregoing, the Company shall have the unrestricted right toassign this Agreement and to delegate all or any part of its obligationshereunder to any of its subsidiaries or Affiliates, but in such event suchassignee shall expressly assume all obligations of the Company hereunder andthe Company shall remain fully liable for the performance of all of suchobligations in the manner prescribed in this Agreement. Nothing in thisAgreement shall confer upon any person or entity not a party to this Agreement,or the legal representatives of such person or entity, any rights or remediesof any nature or kind whatsoever under or by reason of this Agreement.
     Section 12. Waiver and Amendments. Any waiver, alteration, amendment ormodification of any of the terms of this Agreement shall be valid only if madein writing and signed by the parties hereto; provided, however, that any suchwaiver, alteration, amendment or modification is consented to on the Company’sbehalf by the Board of Directors. No waiver by either of the parties hereto oftheir rights hereunder shall be deemed to constitute a waiver with respect toany subsequent occurrences or transactions hereunder unless such waiverspecifically states that it is to be construed as a continuing waiver.
     Section 13. Severability and Governing Law. The Executive acknowledgesand agrees that the covenants set forth in Section 7 hereof are reasonable andvalid in geographical and temporal scope and in all other respects. If any ofsuch covenants or such other provisions of this Agreement are found to beinvalid or unenforceable by a final determination of a court of competentjurisdiction (a) the remaining terms and provisions hereof shall be unimpairedand (b) the invalid or unenforceable term or provision shall be deemed replacedby a term or provision that is valid and enforceable and that comes closest toexpressing the intention of the invalid or unenforceable term or provision.**THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWSOF THE STATE OF MINNESOTA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMEDENTIRELY WITHIN SUCH STATE; PROVIDED, HOWEVER, THE PROVISIONS OF THIS AGREEMENTRELATING TO THE OPTION UNDER SECTION****3(d)****HEREOF SHALL BE GOVERNED BY ANDCONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.**
     Section 14. Notices.
     (a) All communications under this Agreement shall be in writing and shallbe delivered by hand or mailed by overnight courier or by registered orcertified mail, postage prepaid:
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(i) If to the Executive, at 9696 Falcons Way, Eden Prairie, MN55347 or at such other address as the Executive may have furnishedthe Company in writing, and
(ii) If to the Company, at 10700 Bren Road West, Minnetonka,Minnesota 55343, marked for the attention of the Chairman of theBoard or Chief Executive Officer, or at such other address as itmay have furnished in writing to the Executive.
     (b) Any notice so addressed shall be deemed to be given: if delivered byhand, on the date of such delivery; if mailed by courier, on the first businessday following the date of such mailing; and if mailed by registered orcertified mail, on the third business day after the date of such mailing.
     Section 15. Section Headings. The headings of the sections andsubsections of this Agreement are inserted for convenience only and shall notbe deemed to constitute a part thereof, affect the meaning or interpretation ofthis Agreement or of any term or provision hereof.
     Section 16. Entire Agreement. Except as provided in this Section 16,this Agreement constitutes the entire understanding and agreement of theparties hereto regarding the employment of the Executive, and this Agreementsupersedes all prior negotiations, discussions, correspondence, communications,understandings and agreements between the parties relating to the subjectmatter of this Agreement. The Agreement, executed by the Executive on June 13,2000, in connection with the Executive’s initial employment with the Companywill remain in full force and effect; provided, however, to the extent suchprior agreement conflicts with this Agreement, the terms of this Agreement willcontrol.
     Section 17. Severability. In the event that any part or parts of thisAgreement shall be held illegal or unenforceable by any court or administrativebody of competent jurisdiction, such determination shall not effect theremaining provisions of this Agreement which shall remain in full force andeffect.
     Section 18. Counterparts. This Agreement may be executed in one or morecounterparts, each of which shall be deemed an original and all of whichtogether shall be considered one and the same agreement.
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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as ofthe date first above written.       AMERICAN MEDICAL SYSTEMS, INC.      By:  /s/ Martin J. Emerson       Name: Martin J. Emerson   Title: President, ChiefOperating Officer
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