Document:

exv10w1

 

Exhibit 10.1

AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.

2000 EQUITY INCENTIVE PLAN

(As Amended through March 27, 2003)

	1.	 	Purpose

     The purpose of the Plan is to provide a means through which the Company
may attract able persons to become and remain directors of the Company and its
subsidiaries and enter and remain in the employ of the Company and its
subsidiaries and to provide a means whereby employees, directors and
consultants of the Company and its subsidiaries can acquire and maintain Common
Stock ownership, or be paid incentive compensation measured by reference to the
value of Common Stock, thereby strengthening their commitment to the welfare of
the Company and its subsidiaries and promoting an identity of interest between
stockholders and these employees, directors and consultants.

     So that the appropriate incentive can be provided, the Plan provides for
granting Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights and Stock Bonus Awards, or any combination of the
foregoing.

	2.	 	Definitions

     The following definitions shall be applicable throughout the Plan.

     (a)  "Award" means, individually or collectively, any Incentive Stock
Option, Nonqualified Stock Option, Stock Appreciation Right or Stock Bonus
Award.

     (b)  "Board" means the Board of Directors of the Company.

     (c)  "Cause" means the Company or any of its subsidiaries having cause to
terminate a Participant's employment or service in accordance with the
provisions of any existing employment, consulting or any other agreement
between the Participant and the Company or any of its subsidiaries or, in the
absence of such an employment, consulting or other agreement, upon (i) the
determination by the Committee that the Participant has ceased to perform his
duties to the Company or any of its subsidiaries(other than as a result of his
incapacity due to physical or mental illness or injury), which failure amounts
to intentional and extended neglect of his duties, (ii) the Committee's
determination that the Participant has engaged or is about to engage in conduct
injurious to the Company or any of its subsidiaries, or (iii) the Participant
having plead no contest to a charge of a felony or having been convicted of a
felony.

     (d)  "Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.

     (e)  "Committee" means the full Board, the Compensation Committee of the
Board or such other committee as the Board may appoint to administer the Plan.

 

 

     (f)  "Common Stock" means the common stock par value $0.01 per share, of
the Company.

     (g)  "Company" means American Medical Systems Holdings, Inc., a Delaware
corporation, and any successor thereto.

     (h)  "Date of Grant" means the date on which the granting of an Award is
authorized or such other date as may be specified in such authorization.

     (i)  "Disability" means the complete and permanent inability by reason of
illness or accident to perform the duties of the occupation at which a
Participant was employed or served when such disability commenced or, if the
Participant was retired when such disability commenced, the inability to engage
in any substantial gainful activity, in either case as determined by the
Committee based upon medical evidence acceptable to it.

     (j)  "Eligible Person" means any (i) person regularly employed by the
Company or any subsidiary of the Company; provided, however, that no such
employee covered by a collective bargaining agreement shall be an Eligible
Person unless and to the extent that such eligibility is set forth in such
collective bargaining agreement or in an agreement or instrument relating
thereto; (ii) director of the Company; or (iii) consultant to the Company.

     (k)  "Exchange Act" means the Securities Exchange Act of 1934.

     (l)  "Fair Market Value" on a given date means (i) if the Stock is listed
on a national securities exchange, the mean between the highest and lowest sale
prices reported as having occurred on the primary exchange with which the Stock
is listed and traded on the date prior to such date, or, if there is no such
sale on that date, then on the last preceding date on which such a sale was
reported; (ii) if the Stock is not listed on any national securities exchange
but is quoted in the National Market System of the National Association of
Securities Dealers Automated Quotation System on a last sale basis, the average
between the high bid price and low ask price reported on the date prior to such
date, or, if there is no such sale on that date, then on the last preceding
date on which a sale was reported; (iii) if the Stock is not listed on a
national securities exchange nor quoted in the National Market System of the
National Association of Securities Dealers Automated Quotation System on a last
sale basis, the amount determined by the Committee to be the fair market value
based upon a good faith attempt to value the Stock accurately; or (iv)
notwithstanding clauses (i) - (iii) above, with respect to Awards granted as of
the consummation of an IPO, the price at which Stock is sold to the public in
the IPO.

     (m)  "Holder" means a Participant who has been granted an Award.

     (n)  "Incentive Stock Option" means an Option granted by the Committee to a
Participant under the Plan which is designated by the Committee as an Incentive
Stock Option pursuant to Section 422 of the Code.

     (o)  "IPO" means the initial offering of Common Stock to the public through
an effective registration statement.

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     (p)  "Non-Employee Director" means a "non-employee director" within the
meaning of Rule 16b-3 of the Exchange Act or any successor rule or regulation.

     (q)  "Nonqualified Stock Option" means an Option granted under the Plan
which is not designated as an Incentive Stock Option.

     (r)  "Normal Termination" means termination of employment or service with
the Company and all of its subsidiaries:

	 	(i)	 	Upon retirement pursuant to the retirement plan
of the Company or any of its subsidiaries, as may be
applicable at the time to the Participant in question;
	 
	 	(ii)	 	On account of Disability;
	 
	 	(iii)	 	With the written approval of the Committee; or
	 
	 	(iv)	 	By the Company or any of its subsidiaries without Cause.

     (s)  "Option" means an Award granted under Section 7 of the Plan.

     (t)  "Option Period" means the period described in Section 7(c).

     (u)  "Option Price" means the exercise price set for an Option described in
Section 7(a).

     (v)  "Participant" means an Eligible Person who has been selected by the
Committee to participate in the Plan and to receive an Award.

     (w)  "Plan" means the American Medical Systems Holdings, Inc. 2000 Equity
Incentive Plan, as may be amended from time to time.

     (x)  "Qualified Committee" means a committee composed of at least two
Qualified Directors.

     (y)  "Qualified Director" means a person who is (i) an Non-Employee
Director and (ii) an "outside director" within the meaning of Section 162(m) of
the Code.

     (z)  "Securities Act" means the Securities Act of 1933, as amended.

     (aa)  "Stock" means the Common Stock or such other authorized shares of
stock of the Company as from time to time may be authorized for use under the
Plan.

     (bb)  "Stock Appreciation Right" or "SAR" means an Award granted under
Section 8 of the Plan.

     (cc)  "Stock Bonus" means an Award granted under Section 9 of the Plan.

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     (dd)  "Stock Option Agreement" means the agreement between the Company and
a Participant who has been granted an Option pursuant to Section 7 which
defines the rights and obligations of the parties as required in Section 7(d).

	3.	 	Effective Date, Duration and Shareholder Approval

     The Plan is effective as of April 17, 2000, the date of adoption of the
Plan by the Board. The effectiveness of the Plan and the validity of any and
all Awards granted pursuant to the Plan is contingent upon approval of the Plan
by the stockholders of the Company in a manner which complies with (i) Section
422(b)(1) and, to the extent provided in Section 14 herein, Section 162(m) of
the Code and (ii) the requirements of the primary national securities exchange
with which the Stock is listed, if so listed, and/or the National Market System
of the National Association of Securities Dealers Automated Quotation System,
if the Stock is quoted thereon. Unless and until the stockholders approve the
Plan in compliance with the applicable requirements, no Award granted under the
Plan shall be effective.

     The expiration date of the Plan, after which no Awards may be granted
hereunder, shall be April 17, 2010; provided, however, that the administration
of the Plan shall continue in effect until all matters relating to the payment
of Awards previously granted have been settled.

	4.	 	Administration

     The Committee shall administer the Plan; provided, however, that as of and
after the date the Company first becomes subject to Section 16 of the Exchange
Act, the Plan shall be administered by the full Board or a committee of the
Board composed of at least two persons, each member of which, at the time he
takes any action with respect to an Award under the Plan, shall be a
Non-Employee Director; and further provided, that as of and after the date that
the exemption for the Plan under Section 162(m) of the Code expires, as set
forth in Section 14 herein, to the extent that the Company determines that an
Award is intended to comply with Section 162(m) of the Code, the Plan shall be
administered by a Qualified Committee. The majority of the members of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present or acts approved in writing
by a majority of the Committee shall be deemed the acts of the Committee.

     Subject to the provisions of the Plan, the Committee shall have exclusive
power to:

     (a)  Select the Eligible Persons to participate in the Plan;

     (b)  Determine the nature and extent of the Awards to be made to each
Participant;

     (c)  Determine the time or times when Awards will be made to Participants;

     (d)  Determine the conditions to which the payment of Awards may be
subject;

     (e)  Prescribe the form of Stock Option Agreement or other form or forms
evidencing Awards; and

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     (f)  Cause records to be established in which there shall be entered, from
time to time as Awards are made to Participants, the date of each Award, the
number of Incentive Stock Options, Nonqualified Stock Options, SARs and Stock
Bonuses awarded by the Committee to each Participant.

     The Committee shall have the authority, subject to the provisions of the
Plan, to establish, adopt, or revise such rules and regulations and to make all
such determinations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any documents evidencing Awards granted pursuant thereto and all decisions
and determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties unless otherwise determined by the
Board.

	5.	 	Grant of Awards; Shares Subject to the Plan

     The Committee may, from time to time, grant Awards of Options, Stock
Appreciation Rights, and/or Stock Bonuses to one or more Eligible Persons;
provided, however, that:

		
	 	     (a) Subject to Section 11, the aggregate number of shares of Stock
made subject to all Awards may not exceed 7,355,000 shares and the
aggregate number of shares of Stock that may be granted as a Stock Bonus
under the Plan may not exceed 50,000;

		
	 	     (b) Such shares shall be deemed to have been used in payment of
Awards whether they are actually delivered or the Fair Market Value
equivalent of such shares is paid in cash. In the event any Option or
SAR not attached to an Option, shall be surrendered, terminate, expire,
or be forfeited, the number of shares of Stock no longer subject thereto
shall thereupon be released and shall thereafter be available for new
Awards under the Plan;

		
	 	     (c) Stock delivered by the Company in settlement of Awards under the
Plan may be authorized and unissued Stock or Stock held in the treasury
of the Company or may be purchased on the open market or by private
purchase;
	 
	 	     (d) Following the date that the exemption from the application of
Section 162(m) of the Code described in Section 14 (or any other
exemption having similar effect) ceases to apply to Awards, no
Participant may receive Options or SARs under the Plan with respect to
more than 1,500,000 shares of Stock in any one year; and

		
	 	     (e) The Committee may, in its sole discretion, require a Participant
to pay consideration for an Award in an amount and in a manner as the
Committee deems appropriate.

	6.	 	Eligibility

     Participation shall be limited to Eligible Persons who have received
written notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan.

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	7.	 	Discretionary Grant of Stock Options

     The Committee is authorized to grant one or more Incentive Stock Options
or Nonqualified Stock Options to any Eligible Person; provided, however, that
no Incentive Stock Options shall be granted to any Eligible Person who is not
an employee of the Company. Each Option so granted shall be subject to the
following conditions, or to such other conditions as may be reflected in the
applicable Stock Option Agreement.

     (a)  Option price. The exercise price ("Option Price") per share of Stock
for each Option shall be set by the Committee at the time of grant but shall
not be less than the Fair Market Value of a share of Stock at the Date of
Grant.

     (b)  Manner of exercise and form of payment. Options which have become
exercisable may be exercised by delivery of written notice of exercise to the
Committee accompanied by payment of the Option Price. The Option 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
(i) in other property having a fair market value on the date of exercise equal
to the Option Price, or (ii) 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 Option Price.

     (c)  Option Period and Expiration. Options shall vest and become
exercisable in such manner and on such date or dates determined by the
Committee and shall expire after such period, not to exceed ten years from the
Date of Grant, as may be determined by the Committee (the "Option Period");
provided, however, that notwithstanding any vesting dates set by the Committee,
the Committee may in its sole discretion accelerate the exercisability of any
Option, which acceleration shall not affect the terms and conditions of any
such Option other than with respect to exercisability. If an Option is
exercisable in installments, such installments or portions thereof which become
exercisable shall remain exercisable until the Option expires. Unless
otherwise stated in the applicable Option Agreement, the Option shall
expire earlier than the end of the Option Period in the following
circumstances:

	 	(i)	 	If prior to the end of the Option Period, the
Holder shall undergo a Normal Termination, the Option shall
expire on the earlier of the last day of the Option Period or
the date that is thirty days after the date of such Normal
Termination. In such event, the Option shall remain
exercisable by the Holder until its expiration, only to the
extent the Option was exercisable at the time of such Normal
Termination.
	 
	 	(ii)	 	If the Holder dies prior to the end of the Option
Period and while still in the employ or service of the Company
or within thirty days of Normal Termination, the Option shall
expire on the earlier of the last day of the Option Period or
the date that is thirty days after the date of death of the
Holder. In such event, the Option shall remain exercisable by
the person or persons to whom the Holder's rights under the
Option pass by will or the applicable laws of descent and
distribution until its expiration, only to the extent the
Option was exercisable by the Holder at the time of death.

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	 	(iii)	 	If the Holder ceases employment or service with
the Company for reasons other than Normal Termination or
death, the Option shall expire immediately upon such cessation
of employment or service.

     (d)  Stock Option Agreement - Other Terms and Conditions. Each Option
granted under the Plan shall be evidenced by a Stock Option Agreement, which
shall contain such provisions as may be determined by the Committee and, except
as may be specifically stated otherwise in such Stock Option Agreement, which
shall be subject to the following terms and conditions:

	 	(i)	 	Each Option issued pursuant to this Section 7 or
portion thereof that is exercisable shall be exercisable for
the full amount or for any part thereof.
	 
	 	(ii)	 	Each share of Stock purchased through the
exercise of an Option issued pursuant to this Section 7 shall
be paid for in full at the time of the exercise. Each Option
shall cease to be exercisable, as to any share of Stock, when
the Holder purchases the share or exercises a related SAR or
when the Option expires.
	 
	 	(iii)	 	Subject to Section 10(k), Options issued
pursuant to this Section 7 shall not be transferable by the
Holder except by will or the laws of descent and distribution
and shall be exercisable during the Holder's lifetime only by
him.
	 
	 	(iv)	 	Each Option issued pursuant to this Section 7
shall vest and become exercisable by the Holder in accordance
with the vesting schedule established by the Committee and set
forth in the Stock Option Agreement.
	 
	 	(v)	 	Each Stock Option Agreement may contain a
provision that, upon demand by the Committee for such a
representation, the Holder shall deliver to the Committee at
the time of any exercise of an Option issued pursuant to this
Section 7 a written representation that the shares to be
acquired upon such exercise are to be acquired for investment
and not for resale or with a view to the distribution thereof.
Upon such demand, delivery of such representation prior to
the delivery of any shares issued upon exercise of an Option
issued pursuant to this Section 7 shall be a condition
precedent to the right of the Holder or such other person to
purchase any shares. In the event certificates for Stock are
delivered under the Plan with respect to which such investment
representation has been obtained, the Committee may cause a
legend or legends to be placed on such certificates to make
appropriate reference to such representation and to restrict
transfer in the absence of compliance with applicable federal
or state securities laws.

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	 	(vi)	 	Each Incentive Stock Option Agreement shall
contain a provision requiring the Holder to notify the Company
in writing immediately after the Holder makes a disqualifying
disposition of any Stock acquired pursuant to the exercise of
such Incentive Stock Option. A disqualifying disposition is
any disposition (including any sale) of such Stock before the
later of (a) two years after the Date of Grant of the
Incentive Stock Option or (b) one year after the date the
Holder acquired the Stock by exercising the Incentive Stock
Option.

     (e)  Incentive Stock Option Grants to 10% Stockholders. Notwithstanding
anything to the contrary in this Section 7, if an Incentive Stock Option is
granted to a Holder who owns stock representing more than ten percent of the
voting power of all classes of stock of the Company or of a subsidiary (within
the meaning of Section 424(f) of the Code of the Company), the Option Period
shall not exceed five years from the Date of Grant of such Option and the
Option Price shall be at least 110 percent of the Fair Market Value (on the
Date of Grant) of the Stock subject to the Option.

     (f)  $100,000 Per Year Limitation for Incentive Stock Options. To the
extent the aggregate Fair Market Value (determined as of the Date of Grant) of
Stock for which Incentive Stock Options are exercisable for the first time by
any Participant during any calendar year (under all plans of the Company and
its Subsidiaries) exceeds $100,000, such excess Incentive Stock Options shall
be treated as Nonqualified Stock Options.

     (g)  No Re-Pricing. Notwithstanding any other provision of this Plan other
than Section 11, the Committee may not, without prior approval of the Company's
stockholders, seek to effect any re-pricing of any previously granted,
"underwater" Option by: (i) amending or modifying the terms of the Option to
lower the exercise price; (ii) canceling the underwater Option and granting
replacement Options having a lower exercise price; or (iii) repurchasing the
underwater Options and granting new Options under this Plan. For purposes of
this Section 7(g), an Option will be deemed to be "underwater" at any time when
the Fair Market Value of the Common Stock is less than the exercise price of
the Option.

	8.	 	Stock Appreciation Rights

     Any Option granted under the Plan may include SARs, either at the Date of
Grant or, except in the case of an Incentive Stock Option, by subsequent
amendment. The Committee also may award SARs independent of any Option. An
SAR shall confer on the Holder thereof the right to receive in shares of Stock,
cash or a combination thereof the value equal to the excess of the Fair Market
Value of one share of Stock on the date of exercise over the exercise price for
the SAR, with respect to every share of Stock for which the SAR is granted. An
SAR shall be subject to such terms and conditions not inconsistent with the
Plan as the Committee shall impose, including, but not limited to, the
following:

     (a)  Vesting. SARs granted in connection with an Option shall become
exercisable, be transferable and shall expire according to the same vesting
schedule, transferability rules and expiration provisions as the corresponding
Option. An SAR granted independent of an Option shall become exercisable, be
transferable and shall expire in

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accordance with a vesting schedule,
transferability rules and expiration provisions as established by the Committee
and reflected in an Award agreement.

     (b)  Automatic exercise. If on the last day of the Option Period (or in
the case of an SAR independent of an Option, the period established by the
Committee after which the SAR shall expire), the Fair Market Value of the Stock
exceeds the Option Price (or in the case of an SAR granted independent of an
Option, the Fair Market Value of the Stock on the Date of Grant), the Holder
has not exercised the SAR or the corresponding Option, and neither the SAR nor
the corresponding Option has expired, such SAR shall be deemed to have been
exercised by the Holder on such last day and the Company shall make the
appropriate payment therefor.

     (c)  Payment. Upon the exercise of an SAR, the Company shall pay to the
Holder an amount equal to the number of shares subject to the SAR multiplied by
the excess, if any, of the Fair Market Value of one share of Stock on the
exercise date over the Option Price, in the case of an SAR granted in
connection with an Option, or the Fair Market Value of one share of Stock on
the Date of Grant, in the case of an SAR granted independent of an Option. The
Company shall pay such excess in cash, in shares of Stock valued at Fair Market
Value, or any combination thereof, as determined by the Committee. Fractional
shares shall be settled in cash.

     (d)  Method of exercise. A Holder may exercise an SAR after such time as
the SAR vests by filing an irrevocable written notice with the Committee or its
designee, specifying the number of SARs to be exercised, and the date on which
such SARs were awarded.

     (e)  Expiration. Each SAR shall cease to be exercisable, as to any share
of Stock, when the Holder exercises the SAR or exercises a related Option, with
respect to such share of Stock. Except as otherwise provided, in the case of
SARs granted in connection with Options, an SAR shall expire on a date
designated by the Committee which is not later than seven years after the Date
of Grant of the SAR.

	9.	 	Stock Bonus Awards

     The Committee may issue unrestricted Stock under the Plan to Eligible
Persons, alone or in tandem with other Awards, in such amounts and subject to
such terms and conditions as the Committee shall from time to time in its sole
discretion determine. Stock Bonus Awards under the Plan shall be granted as,
or in payment of, a bonus, or to provide incentives or recognize special
achievements or contributions.

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	10.	 	General

     (a)  Additional Provisions of an Award. Awards under the Plan also may be
subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in
financing the purchase of Stock upon the exercise of Options, provisions for
the forfeiture of or restrictions on resale or other disposition of shares of
Stock acquired under any Award, provisions giving the Company the right to
repurchase shares of Stock acquired under any Award in the event the
Participant elects to dispose of such shares, and provisions to comply with
Federal and state securities laws and Federal and state tax withholding
requirements. Any such provisions shall be reflected in the applicable Award
agreement.

     (b)  Privileges of Stock Ownership. Except as otherwise specifically
provided in the Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Stock which are subject to Awards hereunder
until such shares have been issued to that person.

     (c)  Government and Other Regulations. The obligation of the Company to
make payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by governmental agencies as
may be required. Notwithstanding any terms or conditions of any Award to the
contrary, the Company shall be under no obligation to offer to sell or to sell
and shall be prohibited from offering to sell or selling any shares of Stock
pursuant to an Award unless such shares have been properly registered for sale
pursuant to the Securities Act with the Securities and Exchange Commission or
unless the Company has received an opinion of counsel, satisfactory to the
Company, that such shares may be offered or sold without such registration
pursuant to an available exemption therefrom and the terms and conditions of
such exemption have been fully complied with. The Company shall be under no
obligation to register for sale under the Securities Act any of the shares of Stock to be offered or sold under the Plan. If the shares of
Stock offered for sale or sold under the Plan are offered or sold pursuant to
an exemption from registration under the Securities Act, the Company may
restrict the transfer of such shares and may legend the Stock certificates
representing such shares in such manner as it deems advisable to ensure the
availability of any such exemption.

     (d)  Tax Withholding. Notwithstanding any other provision of the Plan, the
Company or a Subsidiary, as appropriate, shall have the right to deduct from
all Awards cash and/or Stock, valued at Fair Market Value on the date of
payment, in an amount necessary to satisfy all Federal, state or local taxes as
required by law to be withheld with respect to such Awards and, in the case of
Awards paid in Stock, the Holder or other person receiving such Stock may be
required to pay to the Company prior to delivery of such Stock, the amount of
any such taxes which the Company is required to withhold, if any, with respect
to such Stock. Subject in particular cases to the disapproval of the
Committee, the Company may accept shares of Stock of equivalent Fair Market
Value in payment of such withholding tax obligations if the Holder of the Award
elects to make payment in such manner.

     (e)  Claim to Awards and Employment Rights. No employee or other person
shall have any claim or right to be granted an Award under the Plan or, having
been selected for the grant of an Award, to be selected for a grant of any
other Award. Neither the Plan nor any action

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taken hereunder shall be
construed as giving any Participant any right to be retained in the employ or
service of the Company or any of its subsidiaries.

     (f)  Designation and Change of Beneficiary. Each Participant may file with
the Committee a written designation of one or more persons as the beneficiary
who shall be entitled to receive the rights or amounts payable with respect to
an Award due under the Plan upon his death. A Participant may, from time to
time, revoke or change his beneficiary designation without the consent of any
prior beneficiary by filing a new designation with the Committee. The last
such designation received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death,
and in no event shall it be effective as of a date prior to such receipt. If
no beneficiary designation is filed by the Participant, the beneficiary shall
be deemed to be his or her spouse or, if the Participant is unmarried at the
time of death, his or her estate.

     (g)  Payments to Persons Other Than Participants. If the Committee shall
find that any person to whom any amount is payable under the Plan is unable to
care for his affairs because of illness or accident, or is a minor, or has
died, then any payment due to such person or his estate (unless a prior claim
therefor has been made by a duly appointed legal representative) may, if the
Committee so directs the Company, be paid to his spouse, child, relative, an
institution maintaining or having custody of such person, or any other person
deemed by the Committee to be a proper recipient on behalf of such person
otherwise entitled to payment. Any such payment shall be a complete discharge
of the liability of the Committee and the Company therefor.

     (h)  No Liability of Committee Members. No member of the Committee shall
be personally liable by reason of any contract or other instrument executed by
such member or on his behalf in his capacity as a member of the Committee nor
for any mistake of judgment made in good faith, and the Company shall indemnify
and hold harmless each member of the Committee and each other employee, officer
or director of the Company to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or delegated,
against any cost or expense (including counsel fees) or liability (including
any sum paid in settlement of a claim) arising out of any act or omission to
act in connection with the Plan unless arising out of such person's own fraud
or willful bad faith; provided, however, that approval of the Board shall be
required for the payment of any amount in settlement of a claim against any
such person. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.

     (i)  Governing law. The Plan shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
the principles of conflicts of law thereof.

     (j)  Funding. No provision of the Plan shall require the Company, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a

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segregated or
separately maintained or administered fund for such purposes. Holders shall
have no rights under the Plan other than as unsecured general creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.

     (k)  Nontransferability. A person's rights and interest under the Plan,
including amounts payable, may not be sold, assigned, donated, or transferred
or otherwise disposed of, mortgaged, pledged or encumbered except, in the event
of a Holder's death, to a designated beneficiary to the extent permitted by the
Plan, or in the absence of such designation, by will or the laws of descent and
distribution; provided, however, the Committee may, in its sole discretion,
allow for transfer of Awards other than Incentive Stock Options to other
persons or entities.

     (l)  Reliance on Reports. Each member of the Committee and each member of
the Board shall be fully justified in relying, acting or failing to act, and
shall not be liable for having so relied, acted or failed to act in good faith,
upon any report made by the independent public accountant of the Company and
its Subsidiaries and upon any other information furnished in connection with
the Plan by any person or persons other than himself.

     (m)  Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
profit sharing, group
insurance or other benefit plan of the Company except as otherwise
specifically provided in such other plan.

     (n)  Expenses. The expenses of administering the Plan shall be borne by
the Company.

     (o)  Pronouns. Masculine pronouns and other words of masculine gender
shall refer to both men and women.

     (p)  Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings shall control.

     (q)  Shareholders Agreement. As a condition to receiving an Award under
the Plan each Participant receiving Stock or rights to acquire Stock under the
Plan shall agree to enter into a shareholders agreement to be approved by the
Board at such time as the Board deems appropriate.

	11.	 	Changes in Capital Structure

     Awards granted under the Plan and any agreements evidencing such Awards,
the maximum number of shares of Stock subject to all Awards and the maximum
number of shares of Stock with respect to which any one person may be granted
Options or SARs during any year, if applicable, shall be subject to equitable
adjustment or substitution, as determined by the Committee in its sole
discretion, as to the number, price or kind of a share of Stock or other
consideration subject to such Awards (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

12

 

splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the Date of Grant of any
such Award 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, Participants in the
Plan, or which otherwise warrants equitable adjustment because it interferes
with the intended operation of the Plan. In addition, in the event of any such
adjustment or substitution, the aggregate number of shares of Stock available
under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. Following the date that the exemption from
the application of Section 162(m) of the Code described in Section 14 (or any
other exemption having similar effect) ceases to apply to Awards, with respect
to Awards intended to qualify as "performance-based compensation" under Section
162(m) of the Code, such adjustments or substitutions shall be made only to the
extent that the Committee determines that such adjustments or substitutions may
be made without a loss of deductibility for such Awards under Section 162(m) of
the Code. The Company shall give each Participant notice of an adjustment
hereunder and, upon notice, such adjustment shall be conclusive and binding for
all purposes.

     Notwithstanding the above, in the event of any of the following:

		
	 	     A. The Company is merged or consolidated with another
corporation or entity and, in connection therewith, consideration
is received by shareholders of the Company in a form other than
stock or other equity interests of the surviving entity;

		
	 	     B. All or substantially all of the assets of the Company are
acquired by another person;

		
	 	     C. The reorganization or liquidation of the Company; or

		
	 	     D. The Company shall enter into a written agreement to undergo
an event described in clauses A, B or C above,

then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and pay to the
Holders thereof, in cash, the value of such Awards based upon the price per
share of Stock received or to be received by other shareholders of the Company
in the event. The terms of this Section 11 may be varied by the Committee in
any particular Award agreement.

	12.	 	Nonexclusivity of the Plan

     Neither the adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under this Plan, and such
arrangements may be either applicable generally or only in specific cases.

13

 

	13.	 	Amendments and Termination

     The Board may at any time terminate the Plan. Subject to Section 11, with
the express written consent of an individual Participant, the Board or the
Committee may cancel or reduce or otherwise alter outstanding Awards if, in its
judgment, the tax, accounting, or other effects of the Plan or potential
payouts thereunder would not be in the best interest of the Company. The Board
or the Committee may, at any time, or from time to time, amend or suspend and,
if suspended, reinstate, the Plan in whole or in part.

	14.	 	Effect of Section 162(m) of the Code

     The Plan, and all Awards issued thereunder, are intended to be exempt from
the application of Section 162(m) of the Code, which restricts under certain
circumstances the Federal income tax deduction for compensation paid by a
public company to named executives in excess of $1 million per year. The
exemption is based on Treasury Regulation Section 1.162-27(f), in the form
existing on the effective date of the Plan, with the understanding that such
regulation generally exempts from the application of Section 162(m) of the Code
compensation
paid pursuant to a plan that existed before a company becomes publicly
held. Under such Treasury Regulation, this exemption is available to the Plan
for the duration of the period that lasts until the earlier of (i) the
expiration or material modification of the Plan, (ii) the exhaustion of the
maximum number of shares of Stock available for Awards under the Plan, as set
forth in Section 5(a), or (iii) the first meeting of shareholders at which
directors are to be elected that occurs after the close of the third calendar
year following the calendar year in which the Company first becomes subject to
the reporting obligations of Section 12 of the Exchange Act. The Committee
may, without shareholder approval, amend the Plan retroactively and/or
prospectively to the extent it determines necessary in order to comply with any
subsequent clarification of Section 162(m) of the Code required to preserve the
Company's Federal income tax deduction for compensation paid pursuant to the
Plan. To the extent that the Committee determines as of the Date of Grant of
an Award that (i) the Award is intended to comply with Section 162(m) of the
Code and (ii) the exemption described above is no longer available with respect
to such Award, such Award shall not be effective until any stockholder approval
required under Section 162(m) of the Code has been obtained.

*          *          *

As adopted by the Board of Directors of

American Medical Systems Holdings, Inc.

as of April 17, 2000

	 	 	 	 	 
	By:	 	
/s/ Douglas W. Kohrs
	 	 
	 	 	

	 	 
	 	 	 	 	 
	Title:	 	
President	 	 
	 	 	

	 	 

[Effective April 17, 2000 as amended on May 24, 2000, November 29, 2001 and
March 27, 2003]

14exv10w2

 

Exhibit 10.2

AGREEMENT OF PURCHASE AND SALE

Dated as of April 7, 2003

among

AMERICAN MEDICAL SYSTEMS, INC.,

ENDOCARE, INC.

and

TIMM MEDICAL TECHNOLOGIES, INC.

 

 

     THIS AGREEMENT OF PURCHASE AND SALE is entered into as of April 7, 2003,
by and among American Medical Systems, Inc. (“Buyer”), Endocare, Inc.
(“Parent”), and Timm Medical Technologies, Inc. (“Seller”).

ARTICLE I.

SALE OF ASSETS AND ASSUMPTION OF LIABILITIES

Section 1.01 Definitions.

	 	(a)	 	“Assignment and Assumption Agreement” shall have the meaning
set forth in Section 3.01(a)(ii).
	 
	 	(b)	 	“Assumed Contract” shall have the meaning set forth in
Section 1.03.
	 
	 	(c)	 	“Basket Amount” shall have the meaning set forth in Section
4.05(b).
	 
	 	(d)	 	“Bill of Sale” shall have the meaning set forth in Section
3.01(a)(i).
	 
	 	(e)	 	“Closing” shall have the meaning set forth in Section 1.04.
	 
	 	(f)	 	“Closing Date” shall have the meaning set forth in Section
1.04.
	 
	 	(g)	 	“Consent(s)” shall have the meaning set forth in Section
2.01(d).
	 
	 	(h)	 	“Damages” shall have the meaning set forth in Section 4.02.
	 
	 	(i)	 	“Escrow Agent” shall have the meaning set forth in Section
1.05(a).
	 
	 	(j)	 	“Escrow Funds” shall have the meaning set forth in Section
1.05(a).
	 
	 	(k)	 	“Facility Inventory” shall have the meaning set forth in
Section 1.05(b).
	 
	 	(l)	 	“Facility Inventory Estimate” shall have the meaning set
forth in Section 1.05(b).
	 
	 	(m)	 	“Field Inventory” shall have the meaning set forth in Section
1.05(c).
	 
	 	(n)	 	“Income Taxes” shall have the meaning set forth in Section
1.07(a).
	 
	 	(o)	 	“Indemnified Party” shall have the meaning set forth in
Section 4.04(a).
	 
	 	(p)	 	“Intellectual Property Assignment” shall have the meaning set
forth in Section 3.01(a)(iii)
	 
	 	(q)	 	“Intellectual Property Rights” shall have the meaning set
forth in Section 2.01(e).
	 
	 	(r)	 	“Knowledge” shall mean as to an entity that such entity shall
be deemed to have Knowledge of a particular fact or other matter if
any individual who is serving as

 

 

	 	 	 	an executive or corporate-level officer of such entity or its
parent entity is actually aware of such fact or other matter.
	 
	 	(s)	 	“Liens” shall have the meaning set forth in Section 2.01(c).
	 
	 	(t)	 	“Maximum Amount” shall have the meaning set forth in Section
4.05(a).
	 
	 	(u)	 	“Permitted Liens” shall mean any encumbrance for Taxes not
yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting
principles and (ii) any minor imperfections of title or similar
encumbrances which individually or in the aggregate with other such
encumbrances does not impair the value of the property subject to
such encumbrance.
	 
	 	(v)	 	“Product” means Seller’s Dura II malleable penile implant
device and all accessory items.
	 
	 	(w)	 	“Purchased Assets” shall have the meaning set forth in
Section 1.02(a).
	 
	 	(x)	 	“Purchase Price” shall mean all amounts payable by Buyer
pursuant to Section 1.05.
	 
	 	(y)	 	“Schedule or Schedules” means the schedules provided by
Seller and Parent to Buyer at Closing, which are incorporated herein
by reference.
	 
	 	(z)	 	“Taxes” shall have the meaning set forth in Section 1.07(a).
	 
	 	(aa)	 	“Transfer Taxes” shall have the meaning set forth in Section 1.07(a).

Section 1.02 Sale and Purchase of Assets.

	 	(a)	 	Assets to be Purchased. At the Closing, upon satisfaction of
all conditions to the obligations of the parties contained herein
(other than such conditions as will have been waived in accordance
with the terms hereof), Seller shall sell, assign, transfer, convey
and deliver to Buyer and Buyer shall accept and purchase, all of
Seller’s right, title and interest in and to all of the assets set
forth on Schedule 1.02 (collectively, the “Purchased Assets”):
	 
	 	(b)	 	Excluded Assets. The Buyer and Seller acknowledge and agree
that the only assets of Seller to be sold to Buyer are the Purchased
Assets specifically identified on Schedule 1.02 and that no other
assets of Seller are being sold under this Agreement.

Section 1.03 Assumption of Liabilities. Except for the following liabilities
(the “Assumed Liabilities”): (i) Seller’s obligations under the Assumed
Contracts set forth in Schedule 1.03 (collectively, the “Assumed Contracts”),
to the extent that such obligations are incurred, accrue or arise on or after
the Closing Date, and (ii) Seller’s warranty obligations arising from sales of

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the Product, Buyer will not assume, and will not be liable for, any liabilities
or obligations of Seller, whether known, unknown, contingent, absolute,
determined, indeterminable or otherwise on the Closing Date, whether incurred
or accruing prior to, on or after the Closing Date.

Section 1.04 Closing. The closing of the purchase and sale of the Purchased
Assets (the “Closing”) will take place on April 7, 2003 (the “Closing Date”),
at the offices of Morrison & Foerster LLP, 3811 Valley Centre Drive, Suite 500,
San Diego, California, unless another date or place is agreed to in writing by
the parties hereto.

Section 1.05 Purchase Price. In consideration for the Purchased Assets
acquired hereunder, Buyer shall pay the following (the “Purchase Price”):

	 	(a)	 	Initial Cash Payment. In consideration for the Purchased
Assets acquired hereunder, Buyer shall pay at Closing an amount
equal to One Million Nine Hundred Thousand Dollars ($1,900,000) as
follows: (i) One Hundred Fifty Thousand Dollars ($150,000) (the
“Escrow Funds”) to the escrow agent (the “Escrow Agent”) specified
in the Escrow Agreement to be held in escrow to secure any
indemnification obligation of Seller or Parent under Section 4; and
(ii) One Million Seven Hundred Fifty Thousand Dollars ($1,750,000)
to Seller, by bank wire transfer in immediately available funds to
such bank account as is designated in writing by Seller.
	 
	 	(b)	 	Initial Inventory Payment. In addition to the amounts paid
under Section 1.05(a) above, Buyer shall pay to Seller, by bank wire
transfer in immediately available funds to such bank account as is
designated in writing by Seller at Closing, a non-refundable payment
in the amount of Two Hundred Fifty Thousand Dollars ($250,000) (the
“Facility Inventory Estimate”). The Facility Inventory Estimate
represents a good faith estimate of the direct cost of Seller’s raw
material, works-in-process and finished goods inventory that has a
minimum of two (2) years shelf life remaining as of the Closing Date
that is located in one of Seller’s facilities at the time of the
Closing, as set forth in Schedule 1.05(b) (collectively “Facility
Inventory”).
	 
	 	(c)	 	Additional Inventory Payment. Seller shall prepare as
Schedule 1.05(c) and deliver just prior to Closing a good faith
estimate of its direct cost of finished goods inventory that is not
located in one of Seller’s facilities at the time of Closing
(collectively, the “Field Inventory”). Any item of Field Inventory
that is implanted in a surgical procedure that is covered by a
representative of Seller during the two (2) weeks following the
Closing shall constitute a sale of product by Seller and such item
of Field Inventory and any associated purchase order, shall not be
purchased by Buyer. Any item of Field Inventory that is implanted
in a surgical procedure that is not covered by a representative of
Seller during the two (2) weeks following the Closing shall
constitute a sale of product by Buyer and shall be purchased by
Buyer. Seller shall have the option of having one of its
representatives cover any such surgical procedure during the two (2)
weeks following the Closing. Promptly after the second week
following the Closing, Seller shall prepare in good faith and
deliver to Buyer a revised and updated

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	 	 	 	statement of Seller’s direct cost for all remaining Field Inventory
along with all such Field Inventory and any Facility Inventory not
already delivered to Buyer. Within one week following receipt of
such statement, Field Inventory and remaining Facility Inventory,
Buyer shall pay to Seller, by bank wire transfer in immediately
available funds to such bank account as is designated in writing by
Seller, the value of the Field Inventory and Facility Inventory
received that has a minimum of two (2) years shelf life remaining
as of the Closing Date as set forth in such revised and updated
schedule, less the $250,000 initial inventory payment contemplated
by Section 1.05(b); provided, however, that in the event that the
aggregate value of such Field Inventory and Facility Inventory is
less than the $250,000 initial inventory payment contemplated by
Section 1.05(b), Seller shall pay Buyer the difference.

Section 1.06 Release of Escrow Funds. The Escrow Funds shall not be
distributed to Seller until that date which is twelve (12) months after the
Closing Date, and shall only be distributed in accordance with the terms and
conditions of the Escrow Agreement. In the event that Buyer shall have
perfected, prior to the expiration of such 12-month period, a claim for
indemnification pursuant to Article 4, Buyer shall endeavor in good faith to
determine a reasonable estimate of the maximum amount of such claim and shall
instruct the Escrow Agent to distribute any excess amount of Escrow Funds to
Seller in accordance with the terms of the Escrow Agreement.

Section 1.07 Tax Matters.

	 	(a)	 	Notwithstanding any legal requirements to the contrary, Buyer
and Seller shall each be responsible for and pay fifty percent (50%)
of any Transfer Taxes when due, and Buyer shall, at its own expense,
file all necessary Tax returns and other documentation with respect
to all such Transfer Taxes; provided, however, that, if required by
any legal requirement, Seller will join in the execution of any such
Tax returns and other documentation. “Transfer Taxes” shall mean
all federal, state, local or foreign sales, use, transfer, real
property transfer, mortgage recording, stamp duty, value-added or
similar Taxes that may be imposed in connection with the transfer of
Purchased Assets, together with any interest, additions to Tax or
penalties with respect thereto and any interest in respect of such
additions to Tax or penalties; but excluding all Income Taxes.
“Income Taxes” shall mean any net income, gross income, gross
receipts, franchise, profits, gains or alternative or add-on minimum
Tax or comparable governmental fee or other assessment or charge of
any kind whatsoever, together with any interest or any penalty,
addition to Tax or additional amount and any interest on such
penalty, addition to Tax or additional amount, imposed by any Tax
authority. “Tax” (and, with correlative meaning, “Taxes” and
“Taxable”) shall mean any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax,
together with any interest or any penalty, addition to tax or
additional amount and any interest on such penalty, addition to tax
or additional amount, imposed by any Tax authority.

 4 of 15

 

	 	(b)	 	Except as provided in Section 1.07(a), Seller shall be
responsible for and shall (i) pay any Taxes (and shall be entitled
to all refunds of any Taxes) arising or resulting from or in
connection with the ownership or operation of the Purchased Assets
(including Income Taxes arising from or relating to the sale of the
Purchased Assets hereunder) attributable to any Taxable period
ending on or before the Closing Date, or, in the case of any Taxable
period which includes the Closing Date, the portion of such period
up to and including the Closing Date, and (ii) pursuant to Section
4.02, indemnify and hold harmless Buyer and its successors and
assigns for Taxes of Seller or Parent that is imposed with respect
to the Purchased Assets relating to any taxable period or portion
thereof ending on or before the Closing Date (regardless of whether
or not such Taxes result in Liens on the Purchased Assets). Except
as provided in Section 1.07(a), Buyer shall be responsible for and
shall (i) pay any Taxes (and shall be entitled to all refunds of any
Taxes) arising or resulting from or in connection with the ownership
or operation of the Purchased Assets attributable to any Taxable
period beginning after the Closing Date or, in the case of any
Taxable period which includes, but does not begin on, the Closing
Date, the portion of such period beginning after the Closing Date,
and (ii) pursuant to Section 4.03, indemnify and hold harmless
Seller and its successors and assigns for Taxes of Buyer that is
imposed with respect to the Purchased Assets relating to any taxable
period or portion thereof ending after the Closing Date.
	 
	 	(c)	 	All real property, personal property, ad valorem or other
similar Taxes (not including Transfer Taxes or Income Taxes) levied
with respect to the Purchased Assets for a Taxable period which
includes (but does not end on) the Closing Date shall be apportioned
between Seller and Buyer based on the number of days included in
such period up to but not including the Closing Date and the number
of days included in such period beginning on the Closing Date.

Section 1.08 Allocation of Purchase Price. As soon as practicable after the
Closing Date, Buyer shall provide to Seller for Seller’s review and approval
(which approval shall not be unreasonably withheld) a proposed allocation of
the Purchase Price among the various classes of Purchased Assets (as such
classes are defined for the purposes of Section 1060 of the Code). All
allocations made pursuant to this Section 1.08 shall be made in accordance with
the requirements of Section 1060 of the Code. None of the parties shall take a
position on any Tax return (including IRS Form 8594), before any Tax authority
or in any judicial proceeding that is in any manner inconsistent with such
allocation without the written consent of the other parties to this Agreement
or unless specifically required pursuant to a determination by an applicable
Tax authority. The parties shall promptly advise each other of the existence
of any tax audit, controversy or litigation related to any allocation
hereunder.

Section 1.09 Bulk Transfers. The Seller has requested that Buyer waive, and
Buyer hereby agrees to waive, the requirements of the Uniform Commercial Code
concerning bulk transfers, as in effect in the various states in which the
Purchased Assets are located. The parties expressly agree hereto that Seller’s
obligation to indemnify Buyer under Section 4.02 includes any claims by
creditors of Seller against Buyer arising, directly or indirectly, in
connection with such request and waiver.

 5 of 15

 

Section 1.10 Press Releases. After the Closing, Buyer, Seller and Parent may
issue press releases or other publicity announcing the acquisition of the
Purchased Assets without the consent of the other party, provided that such
issuing party provides the other party a copy of such press release prior to
issuing such press release.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES

Section 2.01 Representations and Warranties of Seller and Parent.

     Seller and Parent, jointly and severally, represent and warrant to Buyer
as follows (except as set forth on Schedule 2.01, which exceptions shall be
deemed to be representations and warranties as if made hereunder):

	 	(a)	 	Organization. Each of Parent and Seller is a corporation
duly incorporated, validly existing and in good standing under the
laws of the state of Delaware.
	 
	 	(b)	 	Authorization. Each of Parent and Seller has all requisite
corporate power and authority to enter into and perform its
obligations under this Agreement and to carry out the transactions
contemplated hereby. The respective Boards of Directors of each of
Parent and Seller has duly authorized the execution and delivery of
this Agreement and the other transactions contemplated hereby and,
no other corporate proceedings on the part of Parent or Seller are
necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by Parent and Seller and constitutes a valid and binding
obligation of Parent and Seller enforceable in accordance with its
terms, except as may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors’ rights generally,
and (b) laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
	 
	 	(c)	 	Title. Except as set forth in Schedule 2.01(c) and except
with respect to Intellectual Property Rights, which are addressed in
Section 2.01(e) below, Seller has good and marketable title to all
of the Purchased Assets, in each case free and clear of all
mortgages, liens, security interests, pledges, charges or
encumbrances of any nature whatsoever (“Liens”) other than Permitted
Liens.
	 
	 	(d)	 	Consents and Approvals. Except for filings required for the
assignment of the Intellectual Property Rights set forth on Schedule
1.02 and as otherwise set forth in Schedule 2.01(d), no consent,
approval, order or authorization of or from, or registration,
notification, declaration or filing with (hereinafter sometimes
separately referred to as a “Consent” and sometimes collectively as
“Consents”) of any individual or entity, including without
limitation any governmental authority, is required in connection
with the execution, delivery or performance of this Agreement by the
Seller or the consummation by the Seller of the transactions
contemplated herein.

 6 of 15

 

	 	(e)	 	Intellectual Property Rights. Schedule 1.02 contains a
complete list of all U.S. and foreign patents, patent applications,
registered trademarks and trademark applications owned by Seller,
which relate exclusively to the Products (collectively,
“Intellectual Property Rights”). To Seller’s Knowledge, Seller
owns, free and clear of all Liens, except Permitted Liens, all such
Intellectual Property Rights. No judgment, decree, injunction, rule
or order against Seller directly or indirectly relating to Seller’s
rights in and to the Intellectual Property Rights has been rendered
by any governmental entity which would limit, cancel or question the
validity of or Seller’s rights in and to any of the Intellectual
Property Rights. The Seller has not received written notice, and
does not otherwise have Knowledge, of any pending or threatened
suit, action or proceeding that either does or would limit, cancel
or question the validity of, or Seller’s rights in and to, any of
the Intellectual Property Rights. The Seller has not received
written notice, and does not otherwise have Knowledge, of any
allegations, assertions or other indications that the Product
infringes the intellectual property rights of a third party.
	 
	 	(f)	 	Litigation. Except as set forth in Schedule 2.01(f), there
is no action, suit, proceeding at law or in equity by any person or
entity, or any arbitration or any administrative or other proceeding
by or before (or any investigation by) any governmental authority,
pending or, to Parent’s or Seller’s Knowledge, threatened, against
Parent or Seller, respectively, relating directly to any of the
Purchased Assets, or which questions or challenges the validity of
this Agreement or would prevent Parent or Seller from completing the
transactions contemplated by the Agreement. Neither Parent nor
Seller is not subject to any judgment, order or decree entered in
any lawsuit or proceeding to which it is a party relating directly
to the Purchased Assets.
	 
	 	(g)	 	Tax Matters. There are no Liens for Taxes on the Purchased
Assets, other than Permitted Liens, and no audit of any Tax return
with respect to the Purchased Assets is currently pending or, to
Seller’s Knowledge, threatened.
	 
	 	(h)	 	Inventories. Schedule 1.02 sets forth a complete and
accurate list of all quantities of inventory of the Products as of
the Closing Date, including all raw materials, work-in-process and
finished goods, except for obsolete items and items of
below-standard quality. All items of finished goods inventory set
forth on Schedule 1.02: (i) are of a quality and quantity usable in
the ordinary course of business; (ii) meet the specifications
applicable to such inventory; and (iii) have an expiration date at
least two (2) years after the Closing Date.
	 
	 	(i)	 	Assumed Contracts. Seller has delivered to Buyer true and
complete copies of all of the Assumed Contracts. All of the Assumed
Contracts are valid and enforceable by and against Seller in
accordance with their respective terms. Neither Seller nor, to
Seller’s Knowledge, the other party thereto is in breach of any of
their obligations under any of the Assumed Contracts.

 7 of 15

 

	 	(j)	 	Orders, Commitments and Returns. All accepted and
unfulfilled orders for the sale of the Products were made in bona
fide transactions in the ordinary course of business. To Seller’s
Knowledge, there are no claims against Seller to return the Products
by reason of alleged over-shipments, defective products or
otherwise, or of Products in the hands of customers or distributors
under an understanding that such Products would be returnable.
	 
	 	(k)	 	Dealers and Suppliers. There has not been in the 12-month
period prior to the date hereof any written notice from any material
supplier of any raw materials or components used in manufacturing
the Products of such supplier’s intention to discontinue the
relationship.

Section 2.02 Representations and Warranties of Buyer.

     Buyer represents and warrants to, and agrees with, Seller as follows:

	 	(a)	 	Organization. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of
Delaware.
	 
	 	(b)	 	Binding Obligation. Buyer has all requisite corporate power
and authority to enter into and perform its obligations under this
Agreement and to carry out the transactions contemplated hereby. The
Board of Directors of Buyer has duly authorized the execution and
delivery of this Agreement and the other transactions contemplated
hereby and, no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by Buyer and constitutes a valid and binding obligation of
Buyer enforceable in accordance with its terms, except as may be
limited by (a) applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting
enforcement of creditors’ rights generally, and (b) laws relating to
the availability of specific performance, injunctive relief, or
other equitable remedies.
	 
	 	(c)	 	Consents and Approvals. No Consents of any individual or
entity, including without limitation any governmental authority, is
required in connection with the execution, delivery or performance
of this Agreement by the Buyer or the consummation by the Buyer of
the transactions contemplated herein.
	 
	 	(d)	 	Litigation. To Buyer’s Knowledge, there is no action, suit,
proceeding at law or in equity by any person or entity, or any
arbitration or any administrative or other proceeding by or before
(or any investigation by) any governmental authority, pending or
threatened, against Buyer which questions or challenges the validity
of this Agreement or would prevent Buyer from completing the
transactions contemplated by the Agreement.

ARTICLE III.

CLOSING OBLIGATIONS

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Section 3.01 Seller Closing Deliveries. Notwithstanding any other provision of
this Agreement to the contrary, the obligation of Buyer to complete the
transactions contemplated herein will be subject to the satisfaction at or
prior to the Closing of each of the following conditions:

	 	(a)	 	Seller shall deliver, or cause to be delivered, to Buyer at
or prior to the Closing the following documents:

	 	(i)	 	a bill of sale for all of the Purchased Assets
substantially in the form of Schedule 3.01(a)(i) (the “Bill of
Sale”) executed by Seller;
	 
	 	(ii)	 	an assignment and assumption of the Assumed Contracts
substantially in the form of Schedule 3.01a(ii) (the “Assignment
and Assumption Agreement”) executed by Seller;
	 
	 	(iii)	 	one or more intellectual property assignments, each
substantially in the form of Schedule 3.01(a)(iii) (together,
the “Intellectual Property Assignments”) executed by Seller;
	 
	 	(iv)	 	an escrow agreement substantially in the form of
Schedule 3.01(a)(iv) (the “Escrow Agreement”) executed by
Seller, Parent and the Escrow Agent;
	 
	 	(v)	 	any Consents required to assign the Assumed Contracts
to Buyer; and
	 
	 	(vi)	 	an opinion from Morrison & Foerster LLP, counsel to
the Seller and Parent, in a form acceptable to the Buyer and
dated as of the Closing Date.

Section 3.02 Buyer Closing Deliveries. Notwithstanding any other provision of
this Agreement to the contrary, the obligation of Buyer to complete the
transactions contemplated herein will be subject to the satisfaction at or
prior to the Closing of each of the following conditions:

	 	(a)	 	Buyer shall deliver, or cause to be delivered, to Seller at
or prior to the Closing the following documents:

	 	(i)	 	the initial cash payment contemplated by Section
1.05(a) and the initial inventory payment contemplated by
Section 1.05(b);
	 
	 	(ii)	 	the Assignment and Assumption Agreement executed by
Buyer;
	 
	 	(iii)	 	the Escrow Agreement executed by Buyer and the
Escrow Agent; and the Intellectual Property Assignment executed
by Buyer; and
	 
	 	(iv)	 	an opinion from Oppenheimer Wolff & Donnelly LLP,
counsel to the Buyer, in a form acceptable to the Seller and
Parent, dated as of the Closing Date.

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ARTICLE IV.

SURVIVAL AND INDEMNIFICATION

Section 4.01 Survival. The representations, warranties and covenants of each
party contained in this Agreement, and all claims in respect of any breach of
any such representation, warranty or covenant, will survive the Closing and
shall expire upon that date which is twelve (12) months after the Closing Date.
Notwithstanding the foregoing, any representation, warranty or covenant that
would otherwise terminate in accordance with this Section 4.01 shall continue
to survive, if a notice of Claim pursuant to this Article 4 shall have been
timely given under Section 4.04 on or prior to such termination date, until the
related claim has been satisfied or otherwise resolved as provided herein. The
right to indemnification or any other remedy based on representations,
warranties, covenants and obligations in this Agreement will not be affected by
any investigation conducted, whether before or after the execution and delivery
of this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant
or obligation. The waiver of any condition expressly based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification based on
such representations, warranties, covenants and obligations.

Section 4.02 Indemnification by Seller and Parent. Except as hereinafter set
forth, Seller and Parent shall indemnify and hold harmless Buyer and its
successors and assigns and its and their respective officers, directors,
shareholders, employees and agents, against, and in respect of, any and all
damages, claims, losses, liabilities and expenses, including, without
limitation, reasonable legal, accounting and other expenses (collectively,
“Damages”), which may arise out of: (a) any misrepresentation or other breach
or violation of this Agreement by Seller or Parent; (b) Seller’s ownership or
operation of the Purchased Assets prior to the Closing, other than the Assumed
Liabilities; or (c) any product liability claim or other third party claim
relating to the Product, whether presently in existence or arising hereafter
from acts, events, conditions or circumstances existing or occurring prior to
the Closing Date, including, but not limited to, the Pace Litigation (as
defined in Schedule 2.01(f)).

Section 4.03 Indemnification by Buyer. Except as hereinafter set forth, Buyer
shall indemnify and hold harmless Seller and Parent and their successors and
assigns and each of their respective officers, directors, shareholders,
employees and agents, against, and in respect of, any and all Damages, which
may arise out of: (a) any misrepresentation or other breach or violation of
this Agreement by Buyer; (b) Buyer’s ownership or operation of the Purchased
Assets after the Closing; or (c) any product liability claim or other third
party claim relating to the Product, whether presently in existence or arising
hereafter from acts, events, conditions or circumstances existing or occurring
on or after the Closing Date.

Section 4.04 Claims for Indemnification.

	 	(a)	 	General. The parties intend that all indemnification claims
be made as promptly as practicable by the party seeking
indemnification (the “Indemnified Party”). Whenever any claim
arises for indemnification hereunder the Indemnified Party will
promptly notify the party from whom indemnification is sought (the

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	 	 	 	“Indemnifying Party”) of the claim and, when known, the facts
constituting the basis for such claim. The failure to so notify
the Indemnifying Party will not relieve the Indemnifying Party of
any liability that it may have to the Indemnified Party except to
the extent the Indemnifying Party demonstrates that the defense of
such action is prejudiced thereby.
	 
	 	(b)	 	Claims by Third Parties. With respect to claims made by
third parties, if the Indemnifying Party admits to the Indemnified
Party and agrees in writing that it will be obligated under the
terms of its indemnity hereunder in connection with such claim, the
Indemnifying Party will be entitled to assume control of the defense
of such action or claim, at its sole expense, with counsel
reasonably satisfactory to the Indemnified Party; provided, however,
that:

	 	(i)	 	the Indemnified Party will be entitled to participate
in the defense of such claim and to employ counsel at its own
expense to assist in the handling of such claim;
	 
	 	(ii)	 	no Indemnifying Party will consent to the entry of
any judgment or enter into any settlement that (A) does not
include as an unconditional term thereof the giving by each
claimant or plaintiff to each Indemnified Party of a release
from all liability in respect of such claim or (B) would result
in the imposition against the Indemnified Party of injunctive or
other equitable relief; or (C) could materially interfere with
the business, operations or assets of the Indemnified Party;
and,
	 
	 	(iii)	 	if the Indemnifying Party does not assume control of
the defense of such claim in accordance with the foregoing
provisions within ten (10) business days after receipt of notice
of the claim, the Indemnified Party will have the right to
defend such claim in such manner as it may deem appropriate at
the reasonable cost and expense of the Indemnifying Party, and
the Indemnifying Party will promptly reimburse the Indemnified
Party therefor in accordance with this Section 4.04; provided
that the Indemnifying Party and the Indemnified Party will not
consent to the entry of any judgment or enter into any
settlement without the written consent of the Indemnifying
Party, which consent will not be unreasonably withheld or
delayed, and that (A) does not include as an unconditional term
thereof the giving by each claimant or plaintiff to each
Indemnified Party of a release from all liability in respect of
such claim or (B) would result in the imposition against the
Indemnified Party of injunctive or other equitable relief; or
(C) could materially interfere with the business, operations or
assets of the Indemnified Party; provided, further, that if the
Indemnified Party assumes the defense of such claim, the
Indemnified Party will keep the Indemnifying Party reasonably
informed of the progress of any such defense, compromise or
settlement and will consult with and consider reasonable advice
from the Indemnifying Party. .

Section 4.05 Indemnification Limits.

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	 	(a)	 	Except for fraud, the indemnification provisions set forth in
this Article 4 shall be the exclusive remedy for the Indemnified
Party for a breach of any representation, warranty or covenant by
the Indemnifying Party and shall be in lieu of any rights the
Indemnified Party may have under law or in equity with respect to
any such breaches or otherwise. The liability of each party as an
Indemnifying Party hereunder shall not exceed $1,000,000 in the
aggregate (the “Maximum Amount”).
	 
	 	(b)	 	Except for fraud, none of Seller, Parent or Buyer, as the
case may be, will be entitled to indemnification for any Damages
under this Article 4 unless the aggregate of all Damages is more
than Fifty Thousand Dollars ($50,000) (the “Basket Amount”). When
the aggregate amount of all such Damages hereunder equals or exceeds
the Basket Amount, Buyer, Seller or Parent, as the case may be, will
be entitled to full indemnification of all claims, including the
Basket Amount. The parties hereto agree that the Basket Amount is
not a deductible amount, nor that the Basket Amount will be deemed
to be a definition of “material” for any purpose in this Agreement.

Section 4.06 Escrow Funds. The Escrow Funds will be held in an
interest-bearing escrow account as established pursuant to the Escrow Agreement
for the purpose of satisfying claims by Buyer for indemnification under this
Article 4 and will be released to Buyer only in accordance with the terms of
the Escrow Agreement. Subject to, and in accordance with, the terms and
conditions set forth in the Escrow Agreement, the Escrow Agent shall deliver or
cause to be delivered to Seller the balance, if any, of the Escrow Funds.

ARTICLE V.

GENERAL PROVISIONS

Section 5.01 Further Assurances; Cooperation. Each of the parties hereto will,
until, during, and after Closing, execute and deliver such instruments and take
such other actions as the other party or parties, as the case may be, may
reasonably require in order to carry out the intent of this Agreement. Without
limiting the generality of the foregoing, at any time after the Closing, at the
reasonable request of Buyer and without further consideration, Seller will
execute and deliver such instruments of sale, transfer, conveyance, assignment
and confirmation and take such action as Buyer may reasonably deem necessary or
desirable in order to more effectively transfer, convey and assign to Buyer,
and to confirm Buyer’s title to, all of the Purchased Assets, and to put Buyer
in actual possession and operating control thereof.

Section 5.02 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so delivered, (ii) if mailed, two business days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below, (iii) if given by facsimile, once such notice or other communication is
transmitted to the facsimile number specified below and electronic confirmation
is received, provided that such notice or other communication is promptly
thereafter mailed in accordance with the provisions of clause

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(ii) above or (iv) if sent through an overnight delivery service in
circumstances to which such service guarantees next day delivery, the day
following being so sent:

	 	 	 	 	 	 	 
	 	 	If to Seller or Parent:
	 	 	 	 	 	 	 
	 	 	 	 	Endocare, Inc.

201 Technology Drive

Irvine, California 92618
	 	 	 	 	Attention:
	 	President
	 	 	 	 	Fax  (949) 450-5302

	 	 	 	 	 	 	 
	 	 	with a required copy to:
	 	 	 	 	 	 	 
	 	 	 	 	Morrison & Foerster LLP.

3811 Valley Centre Drive, Suite 500

San Diego, California 92130-2332
	 	 	 	 	Attention:
	 	Steven G. Rowles
	 	 	 	 	Fax  (858) 720-5125

	 	 	 	 	 	 	 
	 	 	If to Buyer:
	 	 	 	 	 	 	 
	 	 	 	 	American Medical Systems, Inc.

10700 Bren Road West

Minnetonka, Minnesota 55343

	 	 	 	 	Attn:  Chief Executive Officer

	 	 	 	 	Fax:  (612) 930-6695

	 	 	 	 	 	 	 
	 	 	with a required copy to:
	 	 	 	 	 	 	 
	 	 	 	 	Oppenheimer Wolff & Donnelly LLP

Plaza VII, Suite 3300

45 South Seventh Street

Minneapolis, MN 55402
	 	 	 	 	Attn:  Tom Letscher

	 	 	 	 	Fax:  (612) 607-7100

Section 5.03 Amendments; No Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by all parties hereto, or in the case of a
waiver, by the party against whom the waiver is to be effective. No waiver by
a party of any default, misrepresentation or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior
or subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent occurrence. No failure or delay by a party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.

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Section 5.04 Expenses. All costs, fees and expenses incurred in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement and in closing and carrying out the transactions contemplated hereby
shall be paid by the party incurring such cost or expense.

Section 5.05 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No party hereto may assign either this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of each other party.

Section 5.06 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of Delaware
(regardless of the laws that might otherwise govern under applicable principles
of conflicts of law).

Section 5.07 Counterparts. This Agreement may be signed in any number of
counterparts and the signatures delivered by facsimile, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.

Section 5.08 Entire Agreement. This Agreement (including all Exhibits and
Schedules and all other agreements referred to herein or therein which are
hereby incorporated by reference and the other agreements executed
simultaneously herewith) constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements,
understandings and negotiations, both written and oral, between the parties
with respect to the subject matter of this Agreement. Neither this Agreement
nor any provision hereof is intended to confer upon any person or entity other
than the parties hereto any rights or remedies hereunder.

Section 5.09 Severability. If any provision of this Agreement shall be held by
a court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement shall remain in full force and effect only if,
after excluding the portion deemed to be unenforceable, the remaining terms
shall provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.

Remainder of Page Intentionally Left Blank

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     IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of
the date first written above.

	 	 	 	 
	AMERICAN MEDICAL SYSTEMS, INC.
	 	 	 
	By:	 	/s/ M. James Call
	 	 	

	 	 	 
	Name:	 	M. James Call
	 	 	

	 	 	 
	Title:	 	Vice President/Chief
Financial Officer
	 	 	

	 	 	 
	ENDOCARE, INC.
	 	 	 
	By:	 	/s/ Paul Mikus
	 	 	

	 	 	 
	Name:	 	Paul Mikus
	 	 	

	 	 	 
	Title:	 	Chairman
	 	 	

	 	 	 
	TIMM MEDICAL TECHNOLOGIES, INC.
	 	 	 
	By:	 	/s/ Paul Mikus
	 	 	

	 	 	 
	Name:	 	Paul Mikus
	 	 	

	 	 	 
	Title:	 	President
	 	 	

[SIGNATURE PAGE TO AGREEMENT OF PURCHASE AND SALE]

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