Document:

exv10w4

 

Exhibit
10.4

2006 Director Compensation Plan

On December 21, 2005, the Human Resources Committee of the Board approved the terms of the
Company’s 2006 Director Compensation Plan as follows:

In 2006, each non-management Board member (other than the Chairman of the Board), will be paid an
annual retainer of $20,000 and $500 for attendance at each Board meeting including telephonic Board
meetings. The Chairman of the Board will be paid an annual retainer of $27,500 and $2,000 for
attendance at each Board meeting. In addition, the Chairman of each Committee of the Board will
each be paid a supplemental annual retainer of $5,000. All Board compensation is paid quarterly, as
earned. Telephonic Committee meetings are not considered “Board Meetings” for purposes of
calculating Board compensation.exv10w5

 

Exhibit
10.5

LASERSCOPE

2006 INCENTIVE COMPENSATION PLAN

Effective as of December 21, 2005

     This Laserscope 2006 Incentive Compensation Plan (the “Incentive Plan”) has been approved by
the Laserscope (the “Company”) Board of Directors (the “Board”) and is hereby established by the
Company effective as of December 21, 2005.

     1. Purpose. The purpose of this Incentive Plan is to motivate and provide a financial
incentive for selected Company employees (including managers, directors and executives, but not
commissioned sales representatives) by providing cash bonuses for the successful achievement of
specified Company strategic objectives and goals.

     2. Eligibility & Participation. All United States based employees of the Company are
eligible to participate in this Incentive Plan and only those employees designated by the
“Committee” (as defined below) to participate in this Incentive Plan shall be “Participants” in
this Incentive Plan. The Committee may designate eligible employees to participate in this
Incentive Plan at any time by listing such employees in Appendix A attached hereto, which
Appendix may be amended at any time by the Committee. Participation in this Incentive Plan does
not guarantee that any bonus payments will ever be made under this Incentive Plan. A Participant’s
rights hereunder may not be anticipated, assigned, attached, garnished, optioned, transferred or
made subject to seizure for the payment of Participant’s debts, judgments, alimony, or separate
maintenance or transferable, whether voluntarily, involuntarily or by operation of law, in the
event of Participant’s bankruptcy, insolvency, divorce or separation.

     3. Bonus Amounts. Bonuses, if any, will be based on the formulas set forth in parts 1
through 4 of Appendix B attached hereto which will take into account the Participant’s base
salary and the degree of satisfaction of certain objective performance goals which must be achieved
by or over a specified period of time (the “Performance Period”), all of which shall be established
by the Committee. Notwithstanding the foregoing, the Chief Executive Officer of the Company may
grant additional, discretionary, bonuses, subject to specified maximums and in consultation with
the Committee. Appendix B may be amended by the Committee, in its sole discretion, at any time and
for any reason; provided that no such amendment shall materially and adversely affect the then
existing rights of any Participant.

     4. Bonus Payment.

          (a) The Committee shall, in its
sole discretion, determine the degree to which the specified performance goals are satisfied and bonuses, if any, are earned for any Performance Period. Any bonus payable to a Participant under this Incentive Plan will be paid in a single-lump
sum cash payment as soon as practicable after such determination is made, provided that (a) if the
Performance Period is based on one or more calendar years, the bonus, if any, will be paid during
the calendar year immediately following the end of the Performance Period, and (b) if the
Performance Period is based on some other period of time, the bonus, if any, shall be paid no later
than the 15th day of the third month following the end of the later of the Participant’s taxable
year during which the bonus is earned and the Company’s fiscal year during which the bonus is
earned. All bonus payments will be reduced by any required tax withholding and/or other

 

 

deductions. In no event shall the Company (or any person connected therewith) be liable to any
person for the failure of any Participant to be entitled to any particular tax consequence with
respect to this Incentive Plan or any bonus paid pursuant to this Incentive Plan.

          (b) If bonuses are earned and are payable for any given Performance Period, the Company will
pay such bonuses first to non-executive employees, including managers and directors, and then to
executives. In the event the Company is unable to pay all bonuses for any given Performance Period
to all the non-executive employees, the bonuses will be paid to such non-executive employees on a
pro rata basis. Bonuses, if any, to executives, including the Company’s Chief Executive Officer,
will be paid only after bonuses earned by non-executives have been paid. In the event the Company
is unable to pay all bonuses for any given Performance Period to all the executive employees after
paying satisfying non-executive bonuses, the executive bonuses will be paid to such executive
employees on a pro rata basis. If the Company is unable to pay in full bonuses earned for a given
Performance Period, the Company shall pay such shortfall at the end of any subsequent Performance
Period, if it is able to do so.

     5. Changes in Employment Status. The rules set forth in this Section 5 will apply to
any Participant who is newly hired or terminates employment during the applicable Performance
Period. However, notwithstanding anything stated herein, the Committee has the authority, in its
sole and absolute discretion, to deviate from these rules for individual Participants.

          (a) New Hires. Any bonus payable under this Incentive Plan to a Participant who is
hired and selected for participation in this Incentive Plan during a Performance Period shall be
pro-rated based on the base pay earned by the Participant during the Performance Period.

          (b) Terminations. A Participant will not be eligible for any bonus payment unless the
Participant is an employee of the Company as of the bonus payment date (even if the
applicable performance goals were partly or entirely satisfied), unless the Participant is on a
Company-approved leave of absence and subject to any rights a Participant may have pursuant to
another written agreement with the Company. Notwithstanding the foregoing, if a Participant
terminates employment before a bonus payment date as a result of his or her death or permanent
disability, such Participant will be eligible for a bonus that is pro-rated based on the base pay
earned by the Participant during the Performance Period.. For purposes of this Incentive Plan,
“permanent disability” shall have the meaning (i) utilized in any Company long-term disability plan
or (ii) as defined in Internal Revenue Code Section 22(e) if no such disability plan exists.

          (c) Leaves of Absence. Any bonus payable under this Incentive Plan to a Participant
who is on a Company-approved leave of absence during any part of the Performance Period shall be
pro-rated based on the base pay earned by the Participant during the Performance Period.

     6. Administration. This Incentive Plan shall be administered by the Board or an
independent committee of the Board appointed by the Board to administer this Incentive Plan (the
“Committee”). Subject to the provisions of this Incentive Plan, the Committee shall have the full
authority and discretion to: (a) determine who will participate in this Incentive Plan, (b)
determine the time or times at which bonuses may be paid, (c) prescribe, amend and rescind rules
and regulations relating to this Incentive Plan; (d) take any actions it deems necessary or
advisable for the administration of this Incentive Plan; and (e) make all other determinations
necessary or advisable

2

 

for Incentive Plan administration. All decisions, interpretations and other actions of the
Committee shall be final, conclusive and binding on all parties who have an interest in this
Incentive Plan. Notwithstanding the foregoing, no decision by the Committee shall have the effect
of impairing the then existing rights of a Participant under this Incentive Plan without such
Participant’s consent.

     7. Indemnification. No member of the Committee shall be personally liable for (i)
any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her
in connection with or resulting from any claim, action, suit, or proceeding to which he or she may
be a party or in which he or she may be involved by reason of any action taken, failure to act,
determination or interpretation made in good faith with respect to this Incentive Plan and (ii) any
and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by
him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against
him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on his or her own behalf.
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 Bylaws, by contract, as a matter of law, or otherwise, or under any power that the Company may
have to indemnify them or hold them harmless.

     8. Amendment and Termination. This Incentive Plan may be amended or terminated at any
time by the Board for any reason or no reason. No payments shall be made under this Incentive Plan
after the plan is terminated. Unless affirmatively terminated by the Board, this Incentive Plan
shall continue to remain in effect even if Performance Periods or performance goals are not
established on a recurring basis. Moreover, there is no requirement that Performance Periods or
performance goals be established whether on a one-time basis or a recurring basis.

     9. No Employment Rights. No provision of this Incentive Plan shall be construed to
give any person any right to become, to be treated as, or to remain an employee or consultant of
the Company. The Company reserves the right to terminate any Participant’s employment or service
at any time and for any reason or for no reason, with or without cause, and with or without advance
notice.

     10. Effect on Other Benefits. Any payments made pursuant to this Incentive Plan shall
not be counted as compensation for purposes of any other employee benefit plan, program or
agreement sponsored, maintained or contributed by the Company unless expressly provided for in such
employee benefit plan, program or agreement.

     11. Unfunded, Unsecured Obligation; No Equity Interest. This Incentive Plan shall at
all times be entirely unfunded and no provision of this Incentive Plan shall require the Company,
for purpose of satisfying any obligations under this Incentive 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 segregated or separately maintained or administered fund for such purposes.
Additionally, nothing contained herein shall be construed as giving a Participant, his or her
beneficiary, or any other person, any equity or other interest of any kind in any assets of the
Company, nor any rights commonly associated with any such interest, including, but not limited to,
the right to vote on any matters put before the Company’s shareholders, or creating a trust of any
kind or a fiduciary relationship of any kind between the Company and any such person. As to any

3

 

claim for any unpaid amounts under this Incentive Plan, a Participant, his or her beneficiary,
and any other person having a claim for payment shall be general unsecured creditors.

     12. Integration. This Incentive Plan represents the entire plan and agreement as to
the matters described herein. This Incentive Plan shall supersede all prior or contemporaneous
plans or arrangements or understandings between the Company and any Participants or other persons,
whether written or oral, express or implied, with respect to any subject covered by this Incentive
Plan.

     13. Enforceability. Whenever possible, each provision or portion of any provision of
this Incentive Plan shall be interpreted in such manner as to be effective and valid under
applicable law but the invalidity or unenforceability of any provision or portion of any provision
of this Incentive Plan in any jurisdiction shall not affect the validity or enforceability of the
remainder of this Incentive Plan in that jurisdiction or the validity or enforceability of this
Incentive Plan, including that provision or portion of any provision, in any other jurisdiction.
In addition, should a court or arbitrator determine that any provision or portion of any provision
of this Incentive Plan, is not reasonable or valid, such provision should be interpreted and
enforced to the maximum extent which such court or arbitrator deems reasonable or valid.

     14. Governing Law. The Incentive Plan shall be governed by, and interpreted,
construed, and enforced in accordance with, the laws of the State of California without regard to
its or any other jurisdiction’s conflicts of laws provisions.

     15. Execution. To record the adoption of this Incentive Plan, the Company has caused
its authorized officer to execute the same.

	 	 	 	 	 
	 	LASERSCOPE

	 
	 	By:  	 	 
	 	 	 	 
	 	Title:  	 	 
	 

4

 

APPENDIX A

PARTICIPANTS

All United States based employees of the Company, including managers, directors and executives, but
not commissioned sales representatives.

A-1

 

APPENDIX B-1: DIRECTORS

Directors will be eligible for quarterly and year-end bonuses as set forth below.

2006 Financial Plan

The 2006 Financial Plan provides that once the Company meets certain target earnings goals for a
given quarter, an amount equal to the Company’s earnings in excess of such target (the “Quarterly
Over Plan Amount”) is available for payment of quarterly bonuses. Target earnings are equal to the
Company’s consolidated pretax earnings budget as approved by the Board on 12/21/05. For purpose of calculating whether actual pretax earnings
exceed the pretax earnings budget, the actual pretax earnings will not include charges for the
bonus or for equity compensation pursuant to FAS 123R.

Quarterly Bonus Payments to Directors

Quarterly bonuses, if any, will be earned and paid under this Incentive Plan based on the
successful achievement at or above planned performance levels as defined in the 2006 Financial
Plan. The maximum amount of any quarterly bonus that a director can earn is equal to 25% of the
director’s applicable quarterly base pay (the “Maximum Bonus”).

The actual amount of a quarterly bonus earned by a director is the sum of (50% x Maximum Bonus) +
(50% x A x Maximum Bonus), where:

	 	A	 	= A director’s individual performance assessment determined by a director’s
direct supervisor that may range from 0% to a maximum of 100%.

Year-End Bonus Payments to Directors

If pre-tax earnings for the year exceed the 2006 Financial Plan by more than the sum of all
quarterly bonus that have been earned and paid to Participants (the “Excess Earnings”), then
directors may be eligible to receive a year-end bonus payment.

The amount of any year-end bonus to a director will be equal to the product of 15% x Excess
Earnings x B, where:

	 	B	 	= The proportion of the total quarterly bonuses the director earned (pro rated
based on base pay earned by the director during the Performance Period).

* * * *

Illustrative and Hypothetical Example

Assumptions:

	 	•	 	Adequate amount in Quarterly Over Plan Amount for payment of all quarterly bonuses.
	 
	 	•	 	Performance assessment of 50% for discretionary portion of quarterly bonus.
	 
	 	•	 	Director’s quarterly base pay at end of applicable quarter is $50,000.

Quarterly Bonus Calculation:

	 	•	 	Maximum Bonus: 25% x $50,000 = $12,500
	 
	 	•	 	Quarterly Bonus Earned:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Ø	 	Non-Discretionary Bonus:	 	50% * $12,500 =	 	$	6,250	 	 	 
	 
	 	Ø	 	Discretionary Bonus:	 	50% * 50% * $12,500 =	 	$	3,125	 	 	 
	 	 	 	 	 	 	 	 
	 
	 	Ø	 	Total Quarterly Bonus Earned:	 	 	 	$	9,375	 	 	 

B-4

 

APPENDIX B-2: MANAGERS

Managers will be eligible for quarterly and year-end bonuses as set forth below.

2006 Financial Plan

The 2006 Financial Plan provides that once the Company meets certain target earnings goals for a
given quarter, an amount equal to the Company’s earnings in excess of such target (the “Quarterly
Over Plan Amount”) is available for payment of quarterly bonuses. Target earnings are equal to the
Company’s consolidated pretax earnings budget as approved by the Board on 12/21/05. For purpose of calculating whether actual pretax earnings
exceed the pretax earnings budget, the actual pretax earnings will not include charges for the
bonus or for equity compensation pursuant to FAS 123R.

Quarterly Bonus Payments to Managers

Quarterly bonuses, if any, will be earned and paid under this Incentive Plan based on the
successful achievement at or above planned performance levels as defined in the 2006 Financial
Plan. The maximum amount of any quarterly bonus that a manager can earn is equal to 12% of the
manager’s applicable quarterly base pay (the “Maximum Bonus”).

The actual amount of a quarterly bonus earned by a manager is the sum of (50% x Maximum Bonus) +
(50% x A x Maximum Bonus), where:

	 	A	 	= A manager’s individual performance assessment as determined by a manager’s
direct supervisor that may range from 0% to a maximum of 100%.

Year-End Bonus Payments to Managers

If pre-tax earnings for the year exceed the 2006 Financial Plan by more than the sum of all
quarterly bonus that have been earned and paid to Participants (the “Excess Earnings”), then
managers may be eligible to receive a year-end bonus payment.

The amount of any year-end bonus to a manager will be equal to the product of 15% x Excess Earnings
x B, where:

	 	B	 	= The proportion of the total quarterly bonuses the manager earned (pro rated
based on base pay earned by the manager during the Performance Period).

* * * *

Illustrative and Hypothetical Example

Assumptions:

	 	•	 	Adequate amount in Quarterly Over Plan Amount for payment of all quarterly bonuses.
	 
	 	•	 	Performance assessment of 50% for discretionary portion of quarterly bonus.
	 
	 	•	 	Manager’s quarterly base pay at end of applicable quarter is $25,000.

Quarterly Bonus Calculation:

	 	•	 	Maximum Bonus: 12% * $25,000 = $3,000
	 
	 	•	 	Quarterly Bonus Earned:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Ø	 	Non-Discretionary Bonus:	 	50% * $3,000 =	 	$	1,500	 	 	 
	 
	 	Ø	 	Discretionary Bonus:	 	50% * 50% * $3,000 =	 	$	750	 	 	 
	 	 	 	 	 	 	 	 
	 
	 	Ø	 	Total Quarterly Bonus Payable:	 	 	 	$	2,250	 	 	 

B-4

 

APPENDIX B-3: OTHER NON-EXECUTIVE EMPLOYEES

Other non-executives will be eligible for quarterly and year-end bonuses as set forth below.

2006 Financial Plan

The 2006 Financial Plan provides that once the Company meets certain target earnings goals for a
given quarter, an amount equal to the Company’s earnings in excess of such target (the “Quarterly
Over Plan Amount”) is available for payment of quarterly bonuses. Target earnings are equal to the
Company’s consolidated pretax earnings budget as approved by the Board on 12/21/05. For purpose of calculating whether actual pretax earnings
exceed the pretax earnings budget, the actual pretax earnings will not include charges for the
bonus or for equity compensation pursuant to FAS 123R.

Quarterly Bonus Payments to General Employees

Quarterly bonuses, if any, will be earned and paid under this Incentive Plan based on the
successful achievement at or above planned performance levels as defined in the 2006 Financial
Plan. The maximum amount of any quarterly bonus that other non-executive employees can earn is
equal to 6% of such employee’s applicable quarterly base pay (the “Maximum Bonus”).

The actual amount of a quarterly bonus earned by other non-executive employees is the sum of (50%
x Maximum Bonus) + (50% x A x Maximum Bonus), where:

	 	A	 	= Such employees’ individual performance assessment as determined by his/her
direct supervisor that may range from 0% to a maximum of 100%.

Year-End Bonus Payments to General Employees

If pre-tax earnings for the year exceed the 2006 Financial Plan by more than the sum of all
quarterly bonus that have been earned and paid to Participants (the “Excess Earnings”), then other
non-executive employee may be eligible to receive a year-end bonus payment.

The amount of any year-end bonus to such an employee will be equal to the product of 15% x Excess
Earnings x B, where:

	 	B	 	= The proportion of the total quarterly bonuses such other employee earned (pro
rated based on base pay earned by the employee during the Performance Period).

* * * *

Illustrative and Hypothetical Example

Assumptions:

	 	•	 	Adequate amount in Quarterly Over Plan Amount for payment of all quarterly bonuses.
	 
	 	•	 	Performance assessment of 50% for discretionary portion of quarterly bonus.
	 
	 	•	 	General Employee’s quarterly base pay at end of applicable quarter is $20,000.

Quarterly Bonus Calculation:

	 	•	 	Maximum Bonus: 6% * $20,000 = $1,200
	 
	 	•	 	Quarterly Bonus Earned:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Ø	 	Non-Discretionary Bonus:	 	50% * $1,200 =	 	$	600	 	 	 
	 
	 	Ø	 	Discretionary Bonus:	 	50% * 50% * $1,200 =	 	$	300	 	 	 
	 	 	 	 	 	 	 	 
	 
	 	Ø	 	Total Quarterly Bonus Payable:	 	 	 	$	900	 	 	 

B-4

 

APPENDIX B-4: EXECUTIVES

Executives will be eligible for quarterly and year-end bonuses as set forth below.

2006 Financial Plan

The 2006 Financial Plan provides that once the Company meets certain target earnings goals for a
given quarter, an amount equal to the Company’s earnings in excess of such target (the “Quarterly
Over Plan Amount”) is available for payment of quarterly bonuses. Target earnings are equal to the
Company’s consolidated pretax earnings budget as approved by the Board on 12/21/05. For purpose of calculating whether actual pretax earnings
exceed the pretax earnings budget, the actual pretax earnings will not include charges for the
bonus or for equity compensation pursuant to FAS 123R.

Quarterly Bonus Payments to Executives

Quarterly bonuses, if any, will be earned and paid under this Incentive Plan based on the
successful achievement at or above planned performance levels as defined in the 2006 Financial
Plan. The maximum amount of any quarterly bonus that an executive can earn is 50% of the
executive’s applicable quarterly base pay (the “Maximum Bonus”).

The actual amount of a quarterly bonus earned by an executive is the sum of (50% x Maximum Bonus) +
(50% x A x Maximum Bonus), where:

	 	A	 	= An executive’s individual performance assessment as determined by the CEO
(and the Compensation Committee in the case of the CEO) that may range from 0% to a
maximum of 100%.

Year-End Bonus Payments to Executives

If pre-tax earnings for the year exceed the 2006 Financial Plan by more than the sum of all
quarterly bonus that have been earned and paid to Participants (the “Excess Earnings”), then
executives may be eligible to receive a year-end bonus payment.

The amount of any year-end bonus to an executive will be equal to the product of 15% x Excess
Earnings x B, where:

	 	B	 	= The proportion of the total quarterly bonuses the executive earned (pro rated
based on base pay earned by the executive during the Performance Period).

* * * *

Illustrative and Hypothetical Example

Assumptions:

	 	•	 	Adequate amount in Quarterly Over Plan Amount for payment of all quarterly bonuses.
	 
	 	•	 	Performance assessment of 50% for discretionary portion of quarterly bonus.
	 
	 	•	 	Executive’s quarterly base pay at end of applicable quarter is $75,000.

Quarterly Bonus Calculation:

	 	•	 	Maximum Bonus: 50% * $75,000 = $37,500
	 
	 	•	 	Quarterly Bonus Earned:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Ø	 	Non-Discretionary Bonus:	 	50% * $37,500 =	 	$	18,750	 	 	 
	 
	 	Ø	 	Discretionary Bonus:	 	50% * 50% * $37,500 =	 	$	9,375	 	 	 
	 	 	 	 	 	 	 	 
	 
	 	Ø	 	Total Quarterly Bonus Payable:	 	 	 	$	28,125	 	 	 

B-4

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