Document:

exv10w1

 

Exhibit 10.1

AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.

2005 STOCK INCENTIVE PLAN

(As Amended through May 5, 2005)

	1.	 	Purpose of Plan.

     The purpose of the American Medical Systems Holdings, Inc. 2005 Stock Incentive Plan (the
“Plan”) is to advance the interests of American Medical Systems Holdings, Inc. (the “Company”) and
its stockholders by enabling the Company and its Subsidiaries to attract and retain qualified
individuals through opportunities for equity participation in the Company, and to reward those
individuals who contribute to the achievement of the Company’ economic objectives.

	2.	 	Definitions.

     The following terms will have the meanings set forth below, unless the context clearly
otherwise requires:

     2.1 “Board” means the Board of Directors of the Company.

     2.2 “Broker Exercise Notice” means a written notice pursuant to which a Participant,
upon exercise of an Option, irrevocably instructs a broker or dealer to sell a sufficient number of
shares or loan a sufficient amount of money to pay all or a portion of the exercise price of the
Option and/or any related withholding tax obligations and remit such sums to the Company and
directs the Company to deliver stock certificates to be issued upon such exercise directly to such
broker or dealer or their nominee.

     2.3 “Cause” means (i) dishonesty, fraud, misrepresentation, embezzlement or deliberate
injury or attempted injury, in each case related to the Company or any Subsidiary, (ii) any
unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a
duty or duties that, individually or in the aggregate, are material in relation to the
Participant’s overall duties, or (iv) any material breach of any confidentiality, non-compete or
non-solicitation agreement entered into with the Company or any Subsidiary.

     2.4 “Change in Control” means an event described in Section 13.1 of the Plan;
provided, however, if distribution of an Incentive Award subject to Section 409A of the Code is
triggered by a Change in Control, the term Change in Control will mean a change in the ownership or
effective control of the Company, or in the ownership of a substantial portion of the assets of the
Company, as such term is defined in Section 409A of the Code and the regulations and rulings issued
thereunder.

     2.5 “Code” means the Internal Revenue Code of 1986, as amended.

     2.6 “Committee” means the group of individuals administering the Plan, as provided in
Section 3 of the Plan.

 

 

     2.7 “Common Stock” means the voting common stock of the Company, par value $0.01 per
share, or the number and kind of shares of stock or other securities into which such Common Stock
may be changed in accordance with Section 4.3 of the Plan.

     2.8 “Disability” means the disability of the Participant such as would entitle the
Participant to receive disability income benefits pursuant to the long-term disability plan of the
Company or Subsidiary then covering the Participant or, if no such plan exists or is applicable to
the Participant, the permanent and total disability of the Participant within the meaning of
Section 22(e)(3) of the Code; provided, however, if distribution of an Incentive Award subject to
Section 409A of the Code is triggered by an Eligible Recipient’s Disability, such term will mean
that the Eligible Recipient is disabled as defined by Section 409A of the Code and the regulations
and rulings issued thereunder.

     2.9 “Eligible Recipients” means all employees (including, without limitation, officers
and directors who are also employees) of the Company or any Subsidiary, and any non-employee
directors, consultants, advisors and independent contractors of the Company or any Subsidiary.

     2.10 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     2.11 “Fair Market Value” means, with respect to the Common Stock, as of any date: (i)
the mean between the reported high and low sale prices of the Common Stock as of such date during
the regular daily trading session, as reported on the Nasdaq National Market System or on any
national exchange (or, if no shares were traded or quoted on such date, as of the next preceding
date on which there was such a trade or quote); or (ii) if the Common Stock is not so listed,
admitted to unlisted trading privileges, or reported on any national exchange or on the Nasdaq
National Market System, the mean between the reported high and low sale prices as of such date
during the regular daily trading session, as reported by the Nasdaq SmallCap Market, OTC Bulletin
Board, the Bulletin Board Exchange (BBX) or the National Quotation Bureaus, Inc., or other
comparable service (or, if no shares were traded or quoted on such date, as of the next preceding
date on which there was such a trade or quote); or (iii) if the Common Stock is not so listed or
reported, such price as the Committee determines in good faith in the exercise of its reasonable
discretion.

     2.12 “Good Reason,” unless otherwise defined in an agreement evidencing an Incentive
Award, means the occurrence of any of the following in connection with a Change in Control: (i) a
substantial diminution in the Participant’s authority, duties or responsibilities as in effect
prior to the Change in Control, (ii) a reduction by the Company in the Participant’s base salary,
or an adverse change in the form or timing of the payment thereof, as in effect immediately prior
to the Change in Control or as thereafter increased, or (iii) the Company’s requiring the
Participant to be based at any office or location that is more than fifty (50) miles further from
the office or location thereof immediately preceding the Change in Control; provided, however, Good
Reason shall not include any of the circumstances or events described above unless (A) the
Participant has first provided written notice of such circumstance or event to the Company or its
successor and the Company or such successor has not corrected such circumstance or event within
thirty (30) days thereafter; and (B) the Participant has not otherwise consented to the occurrence
in writing.

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     2.13 “Incentive Award” means an Option, Stock Appreciation Right, Restricted Stock
Award, Stock Unit Award, Performance Award or Stock Bonus granted to an Eligible Recipient pursuant
to the Plan.

     2.14 “Incentive Stock Option” means a right to purchase Common Stock granted to an
Eligible Recipient pursuant to Section 6 of the Plan that qualifies as an “incentive stock option”
within the meaning of Section 422 of the Code.

     2.15 “Non-Statutory Stock Option” means a right to purchase Common Stock granted to an
Eligible Recipient pursuant to Section 6 of the Plan that does not qualify as an Incentive Stock
Option.

     2.16 “Option” means an Incentive Stock Option or a Non-Statutory Stock Option.

     2.17 “Participant” means an Eligible Recipient who receives one or more Incentive
Awards under the Plan.

     2.18 “Performance Criteria” means the performance criteria that may be used by the
Committee in granting Incentive Awards contingent upon achievement of performance goals, consisting
of net sales, operating income, income before income taxes, net income, net income per share (basic
or diluted), profitability as measured by return ratios (including return on assets, return on
equity, return on investment and return on sales), cash flows, market share, cost reduction goals,
margins (including one or more of gross, operating and net income margins), stock price, total
return to stockholders, economic value added, working capital and strategic plan development and
implementation. The Committee may select one criterion or multiple criteria for measuring
performance, and the measurement may be based upon Company, Subsidiary or business unit
performance, either absolute or by relative comparison to other companies or any other external
measure of the selected criteria.

     2.19 “Performance Award” means a right granted to an Eligible Recipient pursuant to
Section 10 of the Plan to receive an amount of cash, a number of shares of Common Stock, or a
combination of both, contingent upon achievement of Performance Criteria or other objectives during
a specified period.

     2.20 “Previously Acquired Shares” means shares of Common Stock that are already owned
by the Participant.

     2.21 “Restricted Stock Award” means an award of Common Stock granted to an Eligible
Recipient pursuant to Section 8 of the Plan that are subject to restrictions on transferability and
a risk of forfeiture.

     2.22 “Retirement” means termination of employment or service at age 55 or older and
completion of at least ten years of continuous service.

     2.23 “Securities Act” means the Securities Act of 1933, as amended.

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     2.24 “Stock Appreciation Right” means a right granted to an Eligible Recipient
pursuant to Section 7 of the Plan to receive a payment from the Company, in the form of shares of
Common Stock, cash or a combination of both, equal to the difference between the Fair Market Value
of one or more shares of Common Stock and a specified exercise price of such shares.

     2.25 “Stock Bonus” means an award of Common Stock granted to an Eligible Recipient
pursuant to Section 11 of the Plan.

     2.26 “Stock Unit Award” means a right granted to an Eligible Recipient pursuant to
Section 9 of the Plan to receive the Fair Market Value of one or more shares of Common Stock,
payable in cash, shares of Common Stock, or a combination of both, the payment, issuance, retention
and /or vesting of which is subject to the satisfaction of specified conditions, which may include
achievement of Performance Criteria or other objectives.

     2.27 “Subsidiary” means any entity that is directly or indirectly controlled by the
Company or any entity in which the Company has a significant equity interest, as determined by the
Committee.

     2.28 “Tax Date” means the date any withholding tax obligation arises under the Code
for a Participant with respect to an Incentive Award.

	3.	 	Plan Administration.

     3.1 The Committee. The Plan will be administered by the Board or by a committee of
the Board. So long as the Company has a class of its equity securities registered under Section 12
of the Exchange Act, any committee administering the Plan will consist solely of two or more
members of the Board who are “non-employee directors” within the meaning of Rule 16b-3 under the
Exchange Act, who are “independent” as required by the listing standards of the Nasdaq Stock Market
(or other applicable market or exchange on which the Company’s Common Stock may be quoted or
traded) and who are “outside directors” within the meaning of Section 162(m) of the Code. Such a
committee, if established, will act by majority approval of the members (unanimous approval with
respect to action by written consent), and a majority of the members of such a committee will
constitute a quorum. As used in the Plan, “Committee” will refer to the Board or to such a
committee, if established. To the extent consistent with applicable corporate law of the Company’s
jurisdiction of incorporation, the Committee may delegate to any officers of the Company the
duties, power and authority of the Committee under the Plan pursuant to such conditions or
limitations as the Committee may establish; provided, however, that only the Committee may exercise
such duties, power and authority with respect to Eligible Recipients who are subject to Section 16
of the Exchange Act or whose compensation in the fiscal year may be subject to the limits on
deductible compensation pursuant to Section 162(m) of the Code. The Committee may exercise its
duties, power and authority under the Plan in its sole and absolute discretion without the consent
of any Participant or other party, unless the Plan specifically provides otherwise. Each
determination, interpretation or other action made or taken by the Committee pursuant to the
provisions of the Plan will be conclusive and binding for all purposes and on all persons, and no
member of the Committee will be liable for any action or

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determination made in good faith with respect to the Plan or any Incentive Award granted under
the Plan.

     3.2 Authority of the Committee.

     (a) In accordance with and subject to the provisions of the Plan, the Committee will
have the authority to determine all provisions of Incentive Awards as the Committee may deem
necessary or desirable and as consistent with the terms of the Plan, including, without
limitation, the following: (i) the Eligible Recipients to be selected as Participants; (ii)
the nature and extent of the Incentive Awards to be made to each Participant (including the
number of shares of Common Stock to be subject to each Incentive Award, any exercise price,
the manner in which Incentive Awards will vest or become exercisable and whether Incentive
Awards will be granted in tandem with other Incentive Awards) and the form of written
agreement, if any, evidencing such Incentive Award; (iii) the time or times when Incentive
Awards will be granted; (iv) the duration of each Incentive Award; and (v) the restrictions
and other conditions to which the payment or vesting of Incentive Awards may be subject;
provided, however, that notwithstanding any other provision of the Plan: (A) any Incentive
Award other than an Option or Stock Appreciation Right will not vest or become payable over
a period of less than three (3) years from the date of grant, if vesting or payment is based
solely upon the passage of time, and will have a performance measurement period of not less
than one (1) year, if vesting or payment is based upon satisfaction of Performance Criteria
or other objectives; and (B) all Incentive Awards granted to non-employee directors shall be
granted pursuant to bona fide formulas or policies established by the Committee from time to
time for the compensation of such directors, as a group, in respect of service as a
non-employee director, a member of a committee of the Board or chair of the Board or a
committee of the Board, and the Committee shall not discriminate among individual
non-employee directors in granting or establishing the terms of Incentive Awards (except to
the extent such formulas or policies may be modified from time to time). In addition, the
Committee will have the authority under the Plan in its sole discretion to pay the economic
value of any Incentive Award in the form of cash, Common Stock or any combination of both.

     (b) Subject to Section 3.2(d), the Committee will have the authority under the Plan to
amend or modify the terms of any outstanding Incentive Award in any manner, including,
without limitation, the authority to modify the number of shares or other terms and
conditions of an Incentive Award, extend the term of an Incentive Award, accelerate the
exercisability or vesting or otherwise terminate any restrictions relating to an Incentive
Award, accept the surrender of any outstanding Incentive Award or, to the extent not
previously exercised or vested, authorize the grant of new Incentive Awards in substitution
for surrendered Incentive Awards; provided, however that (A) the Committee shall not be
authorized to accelerate the vesting or payment of any Incentive Award or terminate or waive
any restrictions relating to an Incentive Award without prior approval of the Company’s
stockholders, except in connection with the Participant’s death, Disability or Retirement,
or in connection with a Change in Control; (B) the amended or modified terms are permitted
by the Plan as then in effect; and (C) any Participant
adversely affected by such amended or modified terms has consented to such amendment or
modification.

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     (c) In the event of (i) any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of shares, rights
offering, extraordinary dividend or divestiture (including a spin-off) or any other change
in corporate structure or shares; (ii) any purchase, acquisition, sale, disposition or
write-down of a significant amount of assets or a significant business; (iii) any change in
accounting principles or practices, tax laws or other such laws or provisions affecting
reported results; (iv) any uninsured catastrophic losses or extraordinary non-recurring
items as described in Accounting Principles Board Opinion No. 30 or in management’s
discussion and analysis of financial performance appearing in the Company’s annual report to
stockholders for the applicable year; or (v) any other similar change, in each case with
respect to the Company or any other entity whose performance is relevant to the grant or
vesting of an Incentive Award, the Committee (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving corporation)
may, without the consent of any affected Participant, amend or modify the vesting criteria
(including Performance Criteria) of any outstanding Incentive Award that is based in whole
or in part on the financial performance of the Company (or any Subsidiary or division or
other subunit thereof) or such other entity so as equitably to reflect such event, with the
desired result that the criteria for evaluating such financial performance of the Company or
such other entity will be substantially the same (in the sole discretion of the Committee or
the board of directors of the surviving corporation) following such event as prior to such
event; provided, however, that the amended or modified terms are permitted by the Plan as
then in effect, including the limitations in Section 3.2(a) and 3.2(b).

     (d) Notwithstanding any other provision of this Plan other than Section 4.3, the
Committee may not, without prior approval of the Company’s stockholders, seek to effect any
re-pricing of any previously granted, “underwater” Option or Stock Appreciation Right by:
(i) amending or modifying the terms of the Option or Stock Appreciation Right to lower the
exercise price; (ii) canceling the underwater Option or Stock Appreciation Right and
granting either (A) replacement Options or Stock Appreciation Rights having a lower exercise
price; (B) Restricted Stock Awards; or (C) Stock Unit Awards, Performance Awards or Stock
Bonuses in exchange; or (iii) repurchasing the underwater Options or Stock Appreciation
Rights and granting new Incentive Awards under this Plan. For purposes of this Section
3.2(d), Options and Stock Appreciation Rights 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
or Stock Appreciation Right.

     (e) In addition to the authority of the Committee under Section 3.2(b) and
notwithstanding any other provision of the Plan, the Committee may, in its sole discretion,
amend the terms of the Plan or Incentive Awards with respect to Participants resident
outside of the United States or employed by a non-U.S. Subsidiary in order to comply with
local legal requirements, to otherwise protect the Company’s or Subsidiary’s

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interests, or to meet objectives of the Plan, and may, where appropriate, establish one
or more sub-plans (including the adoption of any required rules and regulations) for the
purposes of qualifying for preferred tax treatment under foreign tax laws. The Committee
shall have no authority, however, to take action pursuant to this Section 3.2(e): (i) to
reserve shares or grant Incentive Awards in excess of the limitations provided in Section
4.1; (ii) to effect any re-pricing in violation of Section 3.2(d); (iii) to grant Options
having an exercise price less than 100% of the Fair Market Value of one share of Common
Stock on the date of grant in violation of Section 6.2; or (iv) for which stockholder
approval would then be required pursuant to Section 19.

     (f) Notwithstanding anything in this Plan to the contrary, the Committee will determine
whether an Incentive Award is subject to the requirements of Section 409A of the Code and,
if determined to be subject to Section 409A of the Code, the Committee will make such
Incentive Award subject to such written terms and conditions determined necessary or
desirable to cause such Incentive Award to comply in form with the requirements of Section
409A of the Code. Further, the Plan, as it relates to Incentive Awards that are subject to
Section 409A of the Code, will be administered in a manner that is intended to comply with
the requirements of Section 409A of the Code and any regulations or rulings issued
thereunder.

	4.	 	Shares Available for Issuance.

     4.1 Maximum Number of Shares Available; Certain Restrictions on Awards. Subject to
adjustment as provided in Section 4.3 of the Plan, the maximum number of shares of Common Stock
that will be available for issuance under the Plan will be the sum of:

     (a) 6,600,000;

     (b) the number of shares subject to outstanding options under the Company’s 2000 Equity
Incentive Plan as of the Effective Date which are not thereafter issued or which have been
issued but are subsequently forfeited and which would otherwise have been available for
further issuance under such plan, assuming, however, that the provisions of Section 4.2 of
the Plan applied thereto;

     (c) the number of shares issued or Incentive Awards granted under the Plan in
connection with the settlement, assumption or substitution of outstanding awards or
obligations to grant future awards as a condition of the Company and/or any Subsidiary(ies)
acquiring, merging or consolidating with another entity; and

     (d) the number of shares that are unallocated and available for grant under a stock
plan assumed by the Company or any Subsidiary(ies) in connection with the merger,
consolidation, or acquisition of another entity by the Company and/or any of its
Subsidiaries, based on the applicable exchange ratio and other transaction terms, but only
to the extent that such shares may be utilized by the Company or its Subsidiaries following
the transaction pursuant to the rules and regulations of the Nasdaq Stock
Market (or other applicable market or exchange on which the Company’s Common Stock may
be quoted or traded).

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The shares available for issuance under the Plan may, at the election of the Committee, be either
treasury shares or shares authorized but unissued, and, if treasury shares are used, all references
in the Plan to the issuance of shares will, for corporate law purposes, be deemed to mean the
transfer of shares from treasury. Notwithstanding any other provisions of the Plan to the
contrary, (i) no Participant in the Plan may be granted Options and Stock Appreciation Rights
relating to more than 1,500,000 shares of Common Stock in the aggregate during any calendar year;
(ii) no Participant in the Plan may be granted Restricted Stock Awards, Stock Unit Awards,
Performance Awards and Stock Bonuses relating to more than 500,000 shares of Common Stock in the
aggregate during any calendar year; (iii) no Participant in the Plan may be granted Incentive
Awards denominated in cash in an amount in excess of $1,000,000 in the aggregate during any
calendar year; and (iv) no more than 6,600,000 shares of Common Stock may be issued pursuant to the
exercise of Incentive Stock Options granted under the Plan. All of the foregoing share limits are
subject, in each case, to adjustment as provided in Section 4.3 of the Plan. In addition, the
limits set forth in clauses (i) and (ii) above will not apply to Incentive Awards granted as a
result of the Company’s assumption or substitution of like awards issued by any acquired, merged or
consolidated entity pursuant to the applicable transaction terms, and the limit in clause (iv)
above will not apply to the any Incentive Stock Options are assumed or substituted pursuant to the
applicable provisions of the Code in connection with any acquisition, consolidation or merger.

     4.2 Accounting for Incentive Awards. Shares of Common Stock that are issued under the
Plan or that are potentially issuable pursuant to outstanding Incentive Awards will be applied to
reduce the maximum number of shares of Common Stock remaining available for issuance under the
Plan; provided, however, that the total number of shares that may be issued under the Plan shall be
reduced by one additional share for each share issued pursuant to an Incentive Award other than an
Option or a Stock Appreciation Right, or potentially issuable pursuant to an outstanding Incentive
Award other than an Option or a Stock Appreciation Right. All shares so subtracted from the amount
available under the Plan with respect to an Incentive Award that lapses, expires, is forfeited
(including issued shares forfeited under a Restricted Stock Award) or for any reason is terminated
unexercised or unvested or is settled or paid in cash or any form other than shares of Common Stock
will automatically again become available for issuance under the Plan; provided, however, that (i)
any shares which would have been issued upon any exercise of an Option but for the fact that the
exercise price was paid by a “net exercise” pursuant to Section 6.4(b) or the tender or attestation
as to ownership of Previously Acquired Shares will not again become available for issuance under
the Plan; and (ii) shares covered by a Stock Appreciation Right, to the extent exercised, will not
again become available for issuance under the Plan.

     4.3 Adjustments to Shares and Incentive Awards. In the event of any reorganization,
merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock
split, combination of shares, rights offering, divestiture or extraordinary dividend (including a
spin-off) or any other change in the corporate structure or shares of the Company, the Committee
(or, if the Company is not the surviving corporation in any such transaction, the board of
directors of the

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surviving corporation) will make appropriate adjustment (which determination will be
conclusive) as to the number and kind of securities or other property (including cash) available
for issuance or payment under the Plan and, in order to prevent dilution or enlargement of the
rights of Participants, (a) the number and kind of securities or other property (including cash)
subject to outstanding Incentive Awards, and (b) the exercise price of outstanding Options and
Stock Appreciation Rights.

	5.	 	Participation.

     Participants in the Plan will be those Eligible Recipients who, in the judgment of the
Committee, have contributed, are contributing or are expected to contribute to the achievement of
economic objectives of the Company or its Subsidiaries. Eligible Recipients may be granted from
time to time one or more Incentive Awards, singly or in combination or in tandem with other
Incentive Awards, as may be determined by the Committee in its sole discretion. Incentive Awards
will be deemed to be granted as of the date specified in the grant resolution of the Committee,
which date will be the date of any related agreement with the Participant.

	6.	 	Options.

     6.1 Grant. An Eligible Recipient may be granted one or more Options under the Plan,
and such Options will be subject to such terms and conditions, consistent with the other provisions
of the Plan, as may be determined by the Committee in its sole discretion. The Committee may
designate whether an Option is to be considered an Incentive Stock Option or a Non-Statutory Stock
Option. To the extent that any Incentive Stock Option granted under the Plan ceases for any reason
to qualify as an “incentive stock option” for purposes of Section 422 of the Code, such Incentive
Stock Option will continue to be outstanding for purposes of the Plan but will thereafter be deemed
to be a Non-Statutory Stock Option.

     6.2 Exercise Price. The per share price to be paid by a Participant upon exercise of
an Option will be determined by the Committee in its discretion at the time of the Option grant,
provided that such price will not be less than 100% of the Fair Market Value of one share of Common
Stock on the date of grant (or 110% of the Fair Market Value of one share of Common Stock on the
date of grant of an Incentive Stock Option if, at the time the Incentive Stock Option is granted,
the Participant owns, directly or indirectly, more than 10% of the total combined voting power of
all classes of stock of the Company or any parent or subsidiary corporation of the Company).
Notwithstanding the foregoing, to the extent that Options are granted under the Plan as a result of
the Company’s assumption or substitution of options issued by any acquired, merged or consolidated
entity, the exercise price for such Options shall be the price determined by the Committee pursuant
to the conversion terms applicable to the transaction.

     6.3 Exercisability and Duration. An Option will become exercisable at such times and
in such installments and upon such terms and conditions as may be determined by the Committee in
its sole discretion at the time of grant (including without limitation (i) the achievement of one
or more of the Performance Criteria; and/or that (ii) the Participant remain in the continuous
employ or service of the Company or a Subsidiary for a certain period; provided, however, that no
Option may be exercisable after seven (7) years from its date of grant (five

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years from its date of grant in the case of an Incentive Option if, at the time the Incentive
Stock Option is granted, the Participant owns, directly or indirectly, more than 10% of the total
combined voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company).

     6.4 Payment of Exercise Price.

     (a) The total purchase price of the shares to be purchased upon exercise of an Option
will be paid entirely in cash (including check, bank draft or money order); provided,
however, that the Committee, in its sole discretion and upon terms and conditions
established by the Committee, may allow such payments to be made, in whole or in part, by
(i) tender of a Broker Exercise Notice; (ii) by tender, or attestation as to ownership, of
Previously Acquired Shares that have been held for the period of time necessary to avoid a
charge to the Company’s earnings for financial reporting purposes and that are otherwise
acceptable to the Committee; (iii) to the extent permissible under applicable law, by
delivery of a promissory note (on terms acceptable to the Committee in its sole discretion)
(iv) by a “net exercise of the Option (as further described in paragraph (b), below); or
(v) by a combination of such methods.

     (b) In the case of a “net exercise” of an Option, the Company will not require a
payment of the exercise price of the Option from the Participant but will reduce the number
of shares of Common Stock issued upon the exercise by the largest number of whole shares
that has a Fair Market Value that does not exceed the aggregate
exercise price for the shares exercised under this method. Shares of Common Stock will no longer be outstanding
under an Option (and will therefore not thereafter be exercisable) following the exercise of
such Option to the extent of (i) shares used to pay the exercise price of an Option under
the “net exercise,” (ii) shares actually delivered to the Participant as a result of such
exercise and (iii) any shares withheld for purposes of tax withholding pursuant to Section
13.1.

     (c) Previously Acquired Shares tendered or covered by an attestation as payment of an
Option exercise price will be valued at their Fair Market Value on the exercise date.

     6.5 Manner of Exercise. An Option may be exercised by a Participant in whole or in
part from time to time, subject to the conditions contained in the Plan and in the agreement
evidencing such Option, by delivery in person, by facsimile or electronic transmission or through
the mail of written notice of exercise to the Company at its principal executive office in
Minnetonka, Minnesota and by paying in full the total exercise price for the shares of Common Stock
to be purchased in accordance with Section 6.4 of the Plan.

	7.	 	Stock Appreciation Rights.

     7.1 Grant. An Eligible Recipient may be granted one or more Stock Appreciation Rights
under the Plan, and such Stock Appreciation Rights will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the

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Committee in its sole discretion. The Committee will have the sole discretion to determine
the form in which payment of the economic value of Stock Appreciation Rights will be made to a
Participant (i.e., cash, Common Stock or any combination thereof) or to consent to or disapprove
the election by a Participant of the form of such payment.

     7.2 Exercise Price. The exercise price of a Stock Appreciation Right will be
determined by the Committee, in its discretion, at the date of grant but may not be less than 100%
of the Fair Market Value of one share of Common Stock on the date of grant, except as provided in
Section 7.4, below. Notwithstanding the foregoing, to the extent that Stock Appreciation Rights
are granted under the Plan as a result of the Company’s assumption or substitution of stock
appreciation rights issued by any acquired, merged or consolidated entity, the exercise price for
such Stock Appreciation Rights shall be the price determined by the Committee pursuant to the
conversion terms applicable to the transaction.

     7.3 Exercisability and Duration. A Stock Appreciation Right will become exercisable
at such time and in such installments as may be determined by the Committee in its sole discretion
at the time of grant; provided, however, that no Stock Appreciation Right may be exercisable after
seven (7) years from its date of grant. A Stock Appreciation Right will be exercised by giving
notice in the same manner as for Options, as set forth in Section 6.5 of the Plan.

     7.4 Grants in Tandem with Options. Stock Appreciation Rights may be granted alone or
in addition to other Incentive Awards, or in tandem with an Option, either at the time of grant of
the Option or at any time thereafter during the term of the Option. A Stock Appreciation Right
granted in tandem with an Option shall cover the same number of shares of Common Stock as covered
by the Option (or such lesser number as the Committee may determine), shall be exercisable at such
time or times and only to the extent that the related Option is exercisable, have the same term as
the Option and shall have an exercise price equal to the exercise price for the Option. Upon the
exercise of a Stock Appreciation Right granted in tandem with an Option, the Option shall be
canceled automatically to the extent of the number of shares covered by such exercise; conversely,
upon exercise of an Option having a related Stock Appreciation Right, the Stock Appreciation Right
shall be canceled automatically to the extent of the number of shares covered by the Option
exercise.

	8.	 	Restricted Stock Awards.

     8.1 Grant. An Eligible Recipient may be granted one or more Restricted Stock Awards
under the Plan, and such Restricted Stock Awards will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the Committee in its sole
discretion. The Committee may impose such restrictions or conditions, not inconsistent with the
provisions of the Plan, to the vesting of such Restricted Stock Awards as it deems appropriate,
including, without limitation, (i) the achievement of one or more of the Performance Criteria;
and/or that (ii) the Participant remain in the continuous employ or service of the Company or a
Subsidiary for a certain period.

11

 

     8.2 Rights as a Stockholder; Transferability. Except as provided in Sections 8.1,
8.3, 8.4 and 15.3 of the Plan, a Participant will have all voting, dividend, liquidation and other
rights with respect to shares of Common Stock issued to the Participant as a Restricted Stock Award
under this Section 8 upon the Participant becoming the holder of record of such shares as if such
Participant were a holder of record of shares of unrestricted Common Stock.

     8.3 Dividends and Distributions. Unless the Committee determines otherwise in its
sole discretion (either in the agreement evidencing the Restricted Stock Award at the time of grant
or at any time after the grant of the Restricted Stock Award), any dividends or distributions
(other than regular quarterly cash dividends) paid with respect to shares of Common Stock subject
to the unvested portion of a Restricted Stock Award will be subject to the same restrictions as the
shares to which such dividends or distributions relate. The Committee will determine in its sole
discretion whether any interest will be paid on such dividends or distributions.

     8.4 Enforcement of Restrictions. To enforce the restrictions referred to in this
Section 8, the Committee may place a legend on the stock certificates referring to such
restrictions and may require the Participant, until the restrictions have lapsed, to keep the stock
certificates, together with duly endorsed stock powers, in the custody of the Company or its
transfer agent, or to maintain evidence of stock ownership, together with duly endorsed stock
powers, in a certificateless book-entry stock account with the Company’s transfer agent.

	9.	 	Stock Unit Awards.  

     An Eligible Recipient may be granted one or more Stock Unit Awards under the Plan, and such
Stock Unit Awards will be subject to such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee in its sole discretion. The
Committee may impose such restrictions or conditions, not inconsistent with the provisions of the
Plan, to the payment, issuance, retention and/or vesting of such Stock Unit Awards as it deems
appropriate, including, without limitation, (i) the achievement of one or more of the Performance
Criteria; and/or that (ii) the Participant remain in the continuous employ or service of the
Company or a Subsidiary for a certain period; provided, however, that in all cases payment of a
Stock Unit Award will be made within two and one-half months following the end of the Eligible
Recipient’s tax year during which receipt of the Stock Unit Award is no longer subject to a
“substantial risk of forfeiture” within the meaning of Section 409A of the Code.

	10.	 	Performance Awards.

     An Eligible Recipient may be granted one or more Performance Awards under the Plan, and such
Performance Awards will be subject to such terms and conditions, if any, consistent with the other
provisions of the Plan, as may be determined by the Committee in its sole discretion, including,
but not limited to, the achievement of one or more of the Performance Criteria; provided, however,
that in all cases payment of the Performance Award will be made within two and one-half months
following the end of the Eligible Recipient’s tax year during which receipt of the Performance
Award is no longer subject to a “substantial risk of forfeiture” within the meaning of Section 409A
of the Code.

12

 

	11.	 	Stock Bonuses.

     An Eligible Recipient may be granted one or more Stock Bonuses under the Plan, and such Stock
Bonuses will be subject to such terms and conditions, if any, consistent with the other provisions
of the Plan, as may be determined by the Committee in its sole discretion, including, but not
limited to, the achievement of one or more of the Performance Criteria; provided, however, that in
all cases payment of the Performance Award will be made within two and one-half months following
the end of the Eligible Recipient’s tax year during which receipt of the Performance Award is no
longer subject to a “substantial risk of forfeiture” within the meaning of Section 409A of the
Code.

	12.	 	Effect of Termination of Employment or Other Service. The following provisions shall
apply upon termination of a Participant’s employment or other service with the Company and all
Subsidiaries, except to the extent that the Committee provides otherwise in an agreement evidencing
an Incentive Award at the time of grant or determines pursuant to Section 12.4.

     12.1 Termination of Employment Due to Death or Retirement. Subject to Section 12.5 of
the Plan, in the event a Participant’s employment or other service with the Company and all
Subsidiaries is terminated by reason of death or Retirement:

     (a) All outstanding Options and Stock Appreciation Rights then held by the Participant
will, to the extent exercisable as of such termination, remain exercisable in full for a
period of twelve months after such termination (but in no event after the expiration date of
any such Option or Stock Appreciation Right). Options and Stock Appreciation Rights not
exercisable as of such termination will be forfeited and terminate.

     (b) All Restricted Stock Awards then held by the Participant that have not vested as of
such termination will be terminated and forfeited; and

     (c) All outstanding but unpaid Stock Unit Awards, Performance Awards and Stock Bonuses
then held by the Participant will be terminated and forfeited.

     12.2 Termination of Employment Due to Disability. Subject to Section 12.5 of the
Plan, in the event a Participant’s employment or other service with the Company and all
Subsidiaries is terminated by reason of Disability:

     (a) All outstanding Options and Stock Appreciation Rights then held by the Participant
will, to the extent exercisable as of such termination, remain exercisable in full for a
period of six months after such termination (but in no event after the expiration date of
any such Option or Stock Appreciation Right). Options and Stock Appreciation Rights not
exercisable as of such termination will be forfeited and terminate.

     (b) All Restricted Stock Awards then held by the Participant that have not vested as of
such termination will be terminated and forfeited; and

13

 

     (c) All outstanding but unpaid Stock Unit Awards, Performance Awards and Stock Bonuses
then held by the Participant will be terminated and forfeited.

     12.3 Termination of Employment for Reasons Other than Death, Disability or Retirement.
Subject to Section 12.5 of the Plan, in the event a Participant’s employment or other service is
terminated with the Company and all Subsidiaries for any reason other than death, Disability or
Retirement, or a Participant is in the employ or service of a Subsidiary and the Subsidiary ceases
to be a Subsidiary of the Company (unless the Participant continues in the employ or service of the
Company or another Subsidiary):

     (a) All outstanding Options and Stock Appreciation Rights then held by the Participant
will, to the extent exercisable as of such termination, remain exercisable in full for a
period of three months after such termination (but in no event after the expiration date of
any such Option or Stock Appreciation Right). Options and Stock Appreciation Rights not
exercisable as of such termination will be forfeited and terminate;

     (b) All Restricted Stock Awards then held by the Participant that have not vested as of
such termination will be terminated and forfeited; and

     (c) All outstanding but unpaid Stock Unit Awards, Performance Awards and Stock Bonuses
then held by the Participant will be terminated and forfeited.

     12.4 Modification of Rights Upon Termination. Notwithstanding the other provisions of
this Section 12, upon a Participant’s termination of employment or other service with the Company
and all Subsidiaries, the Committee may, in its sole discretion (which may be exercised at any time
on or after the date of grant, including following such termination), cause Options or Stock
Appreciation Rights (or any part thereof) then held by such Participant to terminate, become or
continue to become exercisable and/or remain exercisable following such termination of employment
or service, and Restricted Stock Awards, Stock Unit Awards or Performance Awards then held by such
Participant to terminate, vest and/or continue to vest or become free of restrictions and
conditions to payment, as the case may be, following such termination of employment or service, in
each case in the manner determined by the Committee; provided, however, that (i) no Incentive Award
may remain exercisable or continue to vest for more than two years beyond the date such Incentive
Award would have terminated if not for the provisions of this Section 12.4 but in no event beyond
its expiration date; (ii) the Committee shall not be authorized to accelerate the vesting or
payment of any Incentive Award or terminate or waive any restrictions relating to an Incentive
Award without prior approval of the Company’s stockholders, except in connection with the
Participant’s death, Disability or Retirement, or in connection with a Change in Control; and (iii)
any such action adversely affecting any outstanding Incentive Award will not be effective without
the consent of the affected Participant (subject to the right of the Committee to take whatever
action it deems appropriate under Sections 3.2(c), 4.3 and 14 of the Plan).

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     12.5 Effects of Actions Constituting Cause. Notwithstanding anything in the Plan to
the contrary, in the event that a Participant is determined by the Committee, acting in its sole
discretion, to have committed any action which would constitute Cause as defined in Section
2.3, irrespective of whether such action or the Committee’s determination occurs before or after
termination of such Participant’s employment with the Company or any Subsidiary, all rights of the
Participant under the Plan and any agreements evidencing an Incentive Award then held by the
Participant shall terminate and be forfeited without notice of any kind. The Company may defer the
exercise of any Option, the vesting of any Restricted Stock Award or the payment of any Stock Unit
Award, Performance Award or Stock Bonus for a period of up to forty-five (45) days in order for the
Committee to make any determination as to the existence of Cause.

     12.6 Determination of Termination of Employment or Other Service.

     (a) The change in a Participant’s status from that of an employee of the Company or any
Subsidiary to that of a non-employee consultant or advisor of the Company or any Subsidiary
will, for purposes of the Plan, be deemed to result in a termination of such Participant’s
employment with the Company and its Subsidiaries, unless the Committee otherwise determines
in its sole discretion.

     (b) The change in a Participant’s status from that of a non-employee consultant or
advisor of the Company or any Subsidiary to that of an employee of the Company or any
Subsidiary will not, for purposes of the Plan, be deemed to result in a termination of such
Participant’s service as a non-employee consultant or advisor with the Company and its
Subsidiaries, and such Participant will thereafter be deemed to be an employee of the
Company or its Subsidiaries until such Participant’s employment is terminated, in which
event such Participant will be governed by the provisions of this Plan relating to
termination of employment (subject to paragraph (a), above).

     (c) Unless the Committee otherwise determines in its sole discretion, a Participant’s
employment or other service will, for purposes of the Plan, be deemed to have terminated on
the date recorded on the personnel or other records of the Company or the Subsidiary for
which the Participant provides employment or other service, as determined by the Committee
in its sole discretion based upon such records; provided, however, if distribution of an
Incentive Award subject to Section 409A of the Code is triggered by a termination of a
Participant’s employment, such termination must also constitute a “separation from service”
within the meaning of Section 409A of the Code.

     12.7 Breach of Confidentiality, Non-Compete or Non-Solicitation Agreements.
Notwithstanding anything in the Plan to the contrary and in addition to the rights of the Committee
under Section 12.5, in the event that a Participant materially breaches the terms of any
confidentiality, non-compete or non-solicitation agreement entered into with the Company or any
Subsidiary (including a confidentiality, non-compete or non-solicitation agreement made in
connection with the grant of an Incentive Award), whether such breach occurs before or after
termination of such Participant’s employment or other service with the Company or any Subsidiary,
the Committee in its sole discretion may require the Participant to surrender shares of Common
Stock received, and to disgorge any profits (however defined by the Committee), made or realized by
the Participant in connection with any Incentive Awards or any shares issued upon the exercise or
vesting of any Incentive Awards.

15

 

	13.	 	Payment of Withholding Taxes.

     13.1 General Rules. The Company is entitled to (a) withhold and deduct from future
wages of the Participant (or from other amounts that may be due and owing to the Participant from
the Company or a Subsidiary), or make other arrangements for the collection of, all legally
required amounts necessary to satisfy any and all federal, foreign, state and local withholding and
employment-related tax requirements attributable to an Incentive Award, including, without
limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an
Incentive Award or a disqualifying disposition of stock received upon exercise of an Incentive
Stock Option; (b) withhold cash paid or payable or shares of Common Stock from the shares issued or
otherwise issuable to the Participant in connection with an Incentive Award; or (c) require the
Participant promptly to remit the amount of such withholding to the Company before taking any
action, including issuing any shares of Common Stock, with respect to an Incentive Award.

     13.2 Special Rules. The Committee may, in its sole discretion and upon terms and
conditions established by the Committee, permit or require a Participant to satisfy, in whole or in
part, any withholding or employment-related tax obligation described in Section 13.1 of the Plan by
electing to tender, or by attestation as to ownership of, Previously Acquired Shares that have been
held for the period of time necessary to avoid a charge to the Company’s earnings for financial
reporting purposes and that are otherwise acceptable to the Committee, by delivery of a Broker
Exercise Notice or a combination of such methods. For purposes of satisfying a Participant’s
withholding or employment-related tax obligation, Previously Acquired Shares tendered or covered by
an attestation will be valued at their Fair Market Value.

	14.	 	Change in Control.

     14.1 A “Change in Control” shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:

     (a) The acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more (on a
fully diluted basis) of either (A) the then outstanding shares of Common Stock, taking into
account as outstanding for this purpose shares of Common Stock issuable upon the exercise of
options or warrants, the conversion of convertible stock or debt, and the exercise of any
similar right to acquire shares of Common Stock (the “Outstanding Company Common
Stock”) or (B) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this subsection
(i), the following acquisitions shall not constitute a Change of Control: (x) any
acquisition by the Company or any “affiliate” of the Company, within the meaning of 17
C.F.R. ss. 230.405 (an “Affiliate”), (y) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any Affiliate of the
Company, (z) any acquisition by any corporation pursuant to a transaction which complies
with clauses (A), (B) and (C) of subsection (b) of this Section 14.1 (persons and
entities described in clauses (x), (y) and (z) being referred to herein as
“Permitted Holders”); or

16

 

     (b) The consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a “Business
Combination”), in each case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of Stock and the
combined voting power of the then outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, and (B) no Person
(excluding any Permitted Holder) beneficially owns, directly or indirectly, 50% or more (on
a fully diluted basis) of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination, taking into account as outstanding for
this purpose such common stock issuable upon the exercise of options or warrants, the
conversion of convertible stock or debt, and the exercise of any similar right to acquire
such common stock, or the combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed prior to the Business
Combination and (C) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the incumbent Board of
Directors of the Company at the time of the execution of the initial agreement providing for
such Business Combination; or

     (c) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company; or

     (d) The sale of at least 80% of the assets of the Company to an unrelated party, or
completion of a transaction having a similar effect; or

     (e) The individuals who on the Effective Date constitute the Board of Directors
thereafter cease to constitute at least a majority thereof; provided that any person
becoming a member of the Board of Directors subsequent to the Effective Date whose election
or nomination was approved by a vote of at least two-thirds of the directors who then
comprised the Board of Directors immediately prior to such vote shall be considered a member
of the Board of Directors on the Effective Date.

     14.2 Acceleration of Vesting. Without limiting the authority of the Committee under
Sections 3.2 and 4.3 of the Plan, if a Change in Control of the Company occurs, then, if approved
by the Committee in its sole discretion either in an agreement evidencing an Incentive Award at

17

 

the time of grant or at any time after the grant of an Incentive Award: (a) all Options and
Stock Appreciation Rights will become immediately exercisable in full and will remain exercisable
in accordance with their terms; (b) all Restricted Stock Awards will become immediately fully
vested and non-forfeitable; and (c) any conditions to the payment of Stock Unit Awards, Performance
Awards and Stock Bonuses will lapse. The Committee may make any such acceleration subject to
further conditions, including, but not limited to, conditions relating to (i) the failure of any
successor to assume the Incentive Awards in connection with a Change in Control, or (ii) the
Participant’s involuntary termination, other than for Cause, or voluntary termination for Good
Reason, in each case within a specified period of time following a Change in Control.

     14.3 Cash Payment. If a Change in Control of the Company occurs, then the Committee,
if approved by the Committee in its sole discretion either in an agreement evidencing an Incentive
Award at the time of grant or at any time after the grant of an Incentive Award, and without the
consent of any Participant affected thereby, may determine that: (i) some or all Participants
holding outstanding Options will receive, with respect to some or all of the shares of Common Stock
subject to such Options, as of the effective date of any such Change in Control of the Company,
cash in an amount equal to the excess of the Fair Market Value of such shares immediately prior to
the effective date of such Change in Control of the Company over the exercise price per share of
such Options (or, in the event that there is no excess, that such Options will be terminated); and
(ii) some or all Participants holding Performance Awards will receive, with respect to some or all
of the shares of Common Stock subject to such Performance Awards, as of the effective date of any
such Change in Control of the Company, cash in an amount equal the Fair Market Value of such shares
immediately prior to the effective date of such Change in Control.

     14.4 Limitation on Change in Control Payments. Notwithstanding anything in Section
14.2 or 14.3 of the Plan to the contrary, if, with respect to a Participant, the acceleration of
the vesting of an Incentive Award as provided in Section 14.2 or the payment of cash in exchange
for all or part of an Incentive Award as provided in Section 14.3 (which acceleration or payment
could be deemed a “payment” within the meaning of Section 280G(b)(2) of the Code), together with
any other “payments” that such Participant has the right to receive from the Company or any
corporation that is a member of an “affiliated group” (as defined in Section 1504(a) of the Code
without regard to Section 1504(b) of the Code) of which the Company is a member, would constitute a
“parachute payment” (as defined in Section 280G(b)(2) of the Code), then the “payments” to such
Participant pursuant to Section 13.3 or 13.4 of the Plan will be reduced to the largest amount as
will result in no portion of such “payments” being subject to the excise tax imposed by Section
4999 of the Code; provided, that such reduction shall be made only if the aggregate amount of the
payments after such reduction exceeds the difference between (A) the amount of such payments absent
such reduction minus (B) the aggregate amount of the excise tax imposed under Section 4999 of the
Code attributable to any such excess parachute payments. Notwithstanding the foregoing sentence,
if a Participant is subject to a separate agreement with the Company or a Subsidiary that expressly
addresses the potential application of Sections 280G or 4999 of the Code (including, without
limitation, that “payments” under such agreement or otherwise will be reduced, that the Participant
will have the discretion to determine which “payments” will be reduced, that such “payments” will
not be

18

 

reduced or that such “payments” will be “grossed up” for tax purposes), then this Section 14.4
will not apply, and any “payments” to a Participant pursuant to Section 14.2 or 14.3 of the Plan
will be treated as “payments” arising under such separate agreement.

	15.	 	Rights of Eligible Recipients and Participants; Transferability.

     15.1 Employment or Service. Nothing in the Plan will interfere with or limit in any
way the right of the Company or any Subsidiary to terminate the employment or service of any
Eligible Recipient or Participant at any time, nor confer upon any Eligible Recipient or
Participant any right to continue in the employ or service of the Company or any Subsidiary.

     15.2 Rights as a Stockholder; Dividends. As a holder of Incentive Awards (other than
Restricted Stock Awards), a Participant will have no rights as a stockholder unless and until such
Incentive Awards are exercised for, or paid in the form of, shares of Common Stock and the
Participant becomes the holder of record of such shares. Except as otherwise provided in the Plan
or otherwise provided by the Committee, no adjustment will be made in the amount of cash payable or
in the number of shares of Common Stock issuable under Incentive Awards denominated in or based on
the value of shares of Common Stock as a result of cash dividends or distributions paid to holders
of Common Stock prior to the payment of, or issuance of shares of Common Stock under, such
Incentive Awards. In its discretion, the Committee may provide in an agreement evidencing an
Incentive Award that the Participant will be entitled to receive dividend equivalents, in the form
of a cash credit to an account for the benefit of the Participant, for any such dividends and
distributions. The terms of any rights to dividend equivalents will be determined by the Committee
and set forth in the agreement evidencing the Incentive Award, including the time and form of
payment and whether such equivalents will be credited with interest or deemed to be reinvested in
Common Stock; provided, however, that dividend equivalents in respect of Options and Stock
Appreciation Rights will only be paid out in cash.

     15.3 Restrictions on Transfer.

     (a) Except pursuant to testamentary will or the laws of descent and distribution or as
otherwise expressly permitted by subsections (b) and (c) below, no right or interest of any
Participant in an Incentive Award prior to the exercise (in the case of Options) or vesting
or issuance (in the case of Restricted Stock Awards and Performance Awards) of such
Incentive Award will be assignable or transferable, or subjected to any lien, during the
lifetime of the Participant, either voluntarily or involuntarily, directly or indirectly, by
operation of law or otherwise.

          (b) A Participant will be entitled to designate a beneficiary to receive an Incentive
Award upon such Participant’s death, and in the event of such Participant’s death, payment
of any amounts due under the Plan will be made to, and exercise of any Options (to the
extent permitted pursuant to Section 12 of the Plan) may be made by, such beneficiary. If
a deceased Participant has failed to designate a beneficiary, or if a beneficiary designated
by the Participant fails to survive the Participant, payment of any amounts due under the
Plan will be made to, and exercise of any Options (to the extent permitted pursuant to
Section 12 of the Plan) may be made by, the Participant’s legal

19

 

representatives, heirs and legatees. If a deceased Participant has designated a
beneficiary and such beneficiary survives the Participant but dies before complete payment
of all amounts due under the Plan or exercise of all exercisable Options, then such payments
will be made to, and the exercise of such Options may be made by, the legal representatives,
heirs and legatees of the beneficiary.

     (c) Upon a Participant’s request, the Committee may, in its sole discretion, permit a
transfer of all or a portion of a Non-Statutory Stock Option, other than for value, to such
Participant’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, any person sharing such Participant’s household (other
than a tenant or employee), a trust in which any of the foregoing have more than fifty
percent of the beneficial interests, a foundation in which any of the foregoing (or the
Participant) control the management of assets, and any other entity in which these persons
(or the Participant) own more than fifty percent of the voting interests. Any permitted
transferee will remain subject to all the terms and conditions applicable to the Participant
prior to the transfer. A permitted transfer may be conditioned upon such requirements as
the Committee may, in its sole discretion, determine, including, but not limited to
execution and/or delivery of appropriate acknowledgements, opinion of counsel, or other
documents by the transferee.

     15.4 Non-Exclusivity of the Plan. Nothing contained in the Plan is intended to modify
or rescind any previously approved compensation plans or programs of the Company or create any
limitations on the power or authority of the Board to adopt such additional or other compensation
arrangements as the Board may deem necessary or desirable.

	16.	 	Securities Law and Other Restrictions.

     Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the
Plan, the Company will not be required to issue any shares of Common Stock under this Plan, and a
Participant may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued
pursuant to Incentive Awards granted under the Plan, unless (a) there is in effect with respect to
such shares a registration statement under the Securities Act and any applicable securities laws of
a state or foreign jurisdiction or an exemption from such registration under the Securities Act and
applicable state or foreign securities laws, and (b) there has been obtained any other consent,
approval or permit from any other U.S. or foreign regulatory body which the Committee, in its sole
discretion, deems necessary or advisable. The Company may condition such issuance, sale or
transfer upon the receipt of any representations or agreements from the parties involved, and the
placement of any legends on certificates representing shares of Common Stock, as may be deemed
necessary or advisable by the Company in order to comply with such securities law or other
restrictions.

20

 

	17.	 	Performance-Based Compensation Provisions. 

     The Committee, when it is comprised solely of two or more outside directors meeting the
requirements of Section 162(m) of the Code (“Section 162(m)”), in its sole discretion, may
designate whether any Incentive Awards are intended to be “performance-based compensation”
within the meaning of Section 162(m). Any Incentive Awards so designated will, to the extent
required by Section 162(m), be conditioned upon the achievement of one or more Performance
Criteria, and such Performance Criteria will be established by the Committee within the time period
prescribed by, and will otherwise comply with the requirements of, Section 162(m) giving due regard
to the disparate treatment under Section 162(m) of Options and Stock Appreciation Rights (where
compensation is determined based solely on an increase in the value of the underlying stock after
the date of grant or award), as compared to other forms of compensation, including Restricted Stock
Awards, Stock Unit Awards and Performance Awards. The Committee shall also certify in writing that
such Performance Criteria have been met prior to payment of compensation to the extent required by
Section 162(m).

	18.	 	Compliance with Section 409A.

     It is intended that the Plan and all Incentive Awards hereunder be administered in a manner
that will comply with Section 409A of the Code, including proposed, temporary or final regulations
or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with
respect thereto. The Committee is authorized to adopt rules or regulations deemed necessary or
appropriate to qualify for an exception from or to comply with the requirements of Section 409A of
the Code (including any transition or grandfather rules relating thereto). Notwithstanding
anything in this Section 18 to the contrary, with respect to any Incentive Award subject to Section
409A of the Code, no amendment to or payment under such Incentive Award will be made unless
permitted under Section 409A and the regulations or rulings issued thereunder.

	19.	 	Plan Amendment, Modification and Termination.

     The Board may suspend or terminate the Plan or any portion thereof at any time. In addition
to the authority of the Committee to amend the Plan under Section 3.2(e), the Board may amend the
Plan from time to time in such respects as the Board may deem advisable in order that Incentive
Awards under the Plan will conform to any change in applicable laws or regulations or in any other
respect the Board may deem to be in the best interests of the Company; provided, however, that no
such amendments to the Plan will be effective without approval of the Company’s stockholders if:
(i) stockholder approval of the amendment is then required pursuant to Section 422 of the Code or
Section 162(m) of the Code or the rules of the Nasdaq Stock Market (or other applicable market or
exchange on which the Company’s Common Stock may be quoted or traded); or (ii) such amendment seeks
to increase the number of shares authorized for issuance hereunder (other than by virtue of an
adjustment under Section 4.3) or to modify Section 3.2(d) hereof. No termination, suspension or
amendment of the Plan may adversely affect any outstanding Incentive Award without the consent of
the affected Participant; provided, however, that this sentence will not impair the right of the
Committee to take whatever action it deems appropriate under Sections 3.2(c), 4.3 and 14 of the
Plan.

21

 

	20.	 	Effective Date and Duration of the Plan.

     The Plan will be effective as of May 5, 2005, or such later date on which the Plan is
initially approved by the Company’s stockholders. The Plan will terminate at midnight on the
tenth (10th) anniversary of such effective date, and may be terminated prior to such time by Board
action. No Incentive Award will be granted after termination of the Plan. Incentive Awards
outstanding upon termination of the Plan may continue to be exercised, earned or become free of
restrictions, according to their terms.

	21.	 	Miscellaneous.

     21.1 Governing Law. Except to the extent expressly provided herein or in connection
with other matters of corporate governance and authority (all of which shall be governed by the
laws of the Company’s jurisdiction of incorporation), the validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions relating to the Plan
will be governed by and construed exclusively in accordance with the laws of the State of
Minnesota, notwithstanding the conflicts of laws principles of any jurisdictions.

     21.2 Successors and Assigns. The Plan will be binding upon and inure to the benefit
of the successors and permitted assigns of the Company and the Participants.

22exv10w2

 

EXHIBIT 10.2

AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.

EMPLOYEE STOCK PURCHASE PLAN

(As amended through October 26, 2005)

1. Purpose. The purpose of this Employee Stock Purchase Plan (the “Plan”) is to advance
the interests of American Medical Systems Holdings, Inc. (the “Company”) and its stockholders by
providing Employees (as defined below) of the Company and its Designated Subsidiaries (as defined
below) with an opportunity to acquire an ownership interest in the Company through the purchase of
Common Stock (as defined below) of the Company on favorable terms through payroll deductions. It
is the intention of the Company that the Plan qualify as an “employee stock purchase plan” under
Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, provisions
of the Plan shall be construed so as to extend and limit participation in a manner consistent with
the requirements of Section 423 of the Code.

2. Definitions.

(a) “Board” means the Board of Directors of the Company.

(b) “Common Stock” means the voting common stock, par value $.01 per share, of the Company,
or the number and kind of shares of stock or other securities into which such voting common
stock may be changed in accordance with Section 13 of the Plan.

(c) “Committee” means the entity administering the Plan, as provided in Section 3 below.

(d) “Compensation” means all regular straight-time earnings, commissions, bonuses paid under
incentive plans, overtime, shift differentials and premium pay, but excluding severance
payments, extraordinary bonuses (e.g., spot bonuses), allowances, contest awards and other
similar payments determined in a manner consistent with the requirements of Section 423 of
the Code.

(e) “Designated Subsidiary” means a Subsidiary that has been designated by the Board from
time to time, in its sole discretion, as eligible to participate in the Plan.

(f) “Employee” means any person, including an officer, who is customarily employed by the
Company or one of its Designated Subsidiaries for at least 20 hours per week and more than
five (5) months in a calendar year.

(g) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(h)
“Fair Market Value” means, with respect to the Common Stock, as of any date (or, if no shares were traded or quoted on such date, as of the next preceding date on which there was
such a trade or quote) (i) the closing sale price of the Common Stock if the Common Stock is
listed, admitted to unlisted trading privileges or reported on any foreign or national
securities exchange or on the Nasdaq National Market or an equivalent foreign market on
which sale prices are reported; (ii) if the Common Stock is not so listed, admitted to
unlisted trading privileges or reported, the closing bid price as reported by the Nasdaq
SmallCap Market, OTC

 

 

Bulletin Board or the National Quotation Bureau, Inc. or other comparable service; or (iii)
if the Common Stock is not so listed or reported, such price as the Committee determines in
good faith in the exercise of its reasonable discretion, but in a manner acceptable under
Section 423 of the Code.

(i) “Offering” means any of the offerings to Participants of options to purchase Common
Stock under the Plan, each continuing for three months, except for the initial Offering
which shall continue for the period set forth in Section 5 below.

(j) “Offering Date” means the first day of the Offering Period under the Plan, as described
in Section 5 below.

(k) “Offering Period” means the time period commencing on the Offering Date and ending on
the Termination Date.

(l) “Option Price” is defined in Section 8 below.

(m) “Participant” means an Eligible Employee who elects to participate in the Plan pursuant
to Section 6 below.

(n) “Securities Act” means the Securities Act of 1933, as amended.

(o) “Subsidiary” means any subsidiary corporation of the Company within the meaning of
Section 424(f) of the Code.

(p) “Termination Date” means the last day of the Offering Period under the Plan, as
described in Section 5 below.

3. Administration. The Plan will be administered by the Board or by a committee of the
Board. So long as the Company has a class of its equity securities registered under Section 12 of
the Exchange Act, the Plan will be administered by a committee of the Board consisting solely of
not less than two members of the Board who are “non-employee directors” within the meaning of Rule
16b-3 under the Exchange Act and, if the Board so determines in its sole discretion, who are
“outside directors” within the meaning of Section 162(m) of the Code (the “Committee”). Members of
the Committee shall be appointed from time to time by the Board, shall serve at the pleasure of the
Board, and may resign at any time upon written notice to the Board. A majority of the members of
the Committee shall constitute a quorum. The Committee shall act by majority approval of the
members and shall keep minutes of its meetings. Action of the Committee may be taken without a
meeting if unanimous written consent is given. Copies of minutes of the Committee’s meetings and
of its actions by written consent shall be kept with the corporate records of the Company. In
accordance with and subject to the provisions of the Plan, the Committee shall have authority to
make, administer and interpret such rules and regulations as it deems necessary to administer the
Plan, and any determination, decision or action in connection with construction, interpretation,
administration or application of the Plan shall be final, conclusive and binding upon all
Participants and any and all persons claiming under or through any Participant. No member of the
Committee shall be liable for any action or determination made in good faith with respect to the
Plan or any option granted under the Plan.

2

 

4. Eligibility.

(a) Any Employee who is employed by the Company or a Designated Subsidiary on the date that
this Plan is approved by the Board and any Employee who becomes an employee after such date
and has been employed by the Company or a Designated Subsidiary for at least one month prior
to an Offering Date shall be eligible to participate in the Plan, beginning with the
Offering commencing on such Offering Date, subject to the limitations imposed by Section
423(b) of the Code. With respect to a Designated Subsidiary that has been acquired by the
Company, the period of employment of Employees of such Designated Subsidiary occurring prior
to the time of such acquisition shall be included for purposes of determining whether an
Employee has been employed for the requisite period of time under the Plan.

(b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted
an option under the Plan if:

(i) immediately after the grant, such Employee (or any other person whose stock
ownership would be attributed to such Employee pursuant to Section 424(d) of the
Code) would own shares of Common Stock and/or hold outstanding options to purchase
            shares of Common Stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of shares of the Company or of any Subsidiary;
or

(ii) the amount of payroll deductions that the Employee has elected to have withheld
under such option (pursuant to Section 7 below) would permit the
Employee to purchase shares of Common Stock under all “employee stock purchase plans” (within the meaning
of Section 423 of the Code) of the Company and its Subsidiaries to accrue (i.e.,
become exercisable) at a rate that exceeds $25,000 of the Fair Market
Value of such shares of Common Stock (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time.

5. Offerings. Options to purchase shares of Common Stock shall be offered to Participants
under the Plan through a continuous series of Offerings, each continuing for three months, except
for the initial Offering Period, and each of which shall commence on January 1, April 1, July 1 and
October 1 of each year, as the case may be, except for the initial Offering Period (the “Offering
Date”), and shall terminate on March 31, June 30, September 30 and December 31 of each year, as the
case may be (the “Termination Date”). The initial Offering Period under the Plan shall continue
for four months, commencing on September 1, 2000 and terminating on December 31, 2000. Offerings
under the Plan shall continue until either (a) the Committee decides, in its sole discretion, that
no further Offerings shall be made because the Common Stock remaining available under the Plan is
insufficient to make an Offering to all eligible Employees, or (b) the Plan is terminated in
accordance with Section 17 below.

3

 

6. Participation.

(a) An eligible Employee may become a Participant in the Plan by completing a subscription
agreement authorizing payroll deductions on the form provided by the Company
(the “Participation Form”) and filing the Participation Form with the Company’s Human
Resources Department not less than 15 days before the Offering Date of the first Offering in
which the Participant wishes to participate.

(b) Except as provided in Section 7(a) below, payroll deductions for a Participant shall
begin with the first payroll following the applicable Offering Date, and shall continue
until the termination date of the Plan, subject to earlier termination by the Participant as
provided in Section 11 below or increases or decreases by the Participant in the amount of
payroll deductions as provided in Section 7(c) below.

(c) A Participant may discontinue participation in the Plan at any time as provided in
Section 11 below.

7. Payroll Deductions.

(a) By completing and filing a Participation Form, a Participant shall elect to have payroll
deductions made from the Participant’s total Compensation (in whole percentages from one
percent (1%) to a maximum of ten percent (10%) of the Participant’s total Compensation) on
each payday during the time he or she is a Participant in the Plan in such amount as he or
she shall designate on the Participation Form.

(b) All payroll deductions authorized by a Participant shall be credited to an account
established under the Plan for the Participant. The monies represented by such account
shall be held as part of the Company’s general assets, usable for any corporate purpose, and
the Company shall not be obligated to segregate such monies. A Participant may not make any
separate cash payment or contribution to such account.

(c) No increases or decreases of the amount of payroll deductions for a Participant may be
made during an Offering. A Participant may increase or decrease the amount of payroll
deductions under the Plan for subsequent Offerings by completing an amended Participation
Form and filing it with the Company’s Human Resources Department not less than 15 days prior
to the Offering Date as of which such increase or decrease is to be effective.

8. Grant of Option. On each Offering Date, each eligible Employee who is then a
Participant shall be granted (by operation of the Plan) an option to purchase (at the Option Price)
as many shares of Common Stock as the Participant will be able to purchase with the payroll
deductions credited to the Participant’s account during the Offering Period. Notwithstanding the
foregoing, in no event may the number of shares purchased by any Participant during an Offering
exceed 1,000 shares of Common Stock. The option price per share of such shares (the “Option
Price”) shall be the lesser of (a) eighty-five percent (85%) of the Fair Market Value of one share
of Common Stock on the Offering Date, or (b) eighty-five (85%) of the Fair Market Value of one
share of Common Stock on the Termination Date.

4

 

9. Exercise of Option.

(a) Unless a Participant gives written notice to the Company as provided in Section 9(d)
below or withdraws from the Plan pursuant to Section 11 below, the Participant’s option for
the purchase of shares of Common Stock granted for an Offering will be exercised automatically
at the Termination Date of such Offering for the purchase of the number of full and
fractional shares calculated to the third (3rd) decimal place of Common Stock that the
accumulated payroll deductions in the Participant’s account on such Termination Date will
purchase at the applicable Option Price.

(b) A Participant may purchase one or more shares in connection with the automatic exercise
of an option granted for any Offering. If the Committee elects to deliver a statement of
account to Participants pursuant to Section 10(a)(i)(A) below, that portion of any balance
remaining in a Participant’s payroll deduction account at the close of business on the
Termination Date of any Offering that is less than the purchase price of one full share will
be deemed to have purchased such number of fractional shares of Common Stock as would then
be purchasable at the applicable Option Price, with such fractional shares calculated to the
third (3rd) decimal place. If the Committee elects to deliver stock certificates to
Participants pursuant to Section 10(a)(i)(B) below, that portion of any balance remaining in
a Participant’s payroll deduction account at the close of business on the Termination Date
of any Offering that is less than the purchase price of one full share will be carried
forward into the Participant’s payroll deduction account for the following Offering;
provided that in no event will the balance carried forward be equal to or greater than the
purchase price of one share on the Termination Date of an Offering.

(c) No Participant (or any person claiming through such Participant) shall have any interest
in any Common Stock subject to an option under the Plan until such option has been
exercised, at which point such interest shall be limited to the interest of a purchaser of
the Common Stock purchased upon such exercise pending the delivery or credit of such Common
Stock in accordance with Section 10 below. During the Participant’s lifetime, a
Participant’s option to purchase shares of Common Stock under the Plan is exercisable only
by such Participant.

(d) By written notice to the Company prior to the Termination Date of any Offering, a
Participant may elect, effective on such Termination Date, to:

(i) withdraw all of the accumulated payroll deductions in the Participant’s account
as of the Termination Date (which withdrawal may, but need not, also constitute a
notice of termination and withdrawal pursuant to Section 11(a)); or

(ii) exercise the Participant’s option for a specified number of full shares not less
than five that is less than the number of full shares of Common Stock that the
accumulated payroll deductions in the Participant’s account will purchase on the
Termination Date of the Offering at the applicable Option Price, and withdraw the
balance in the Participant’s payroll deduction account.

5

 

10. Delivery.

(a) As promptly as practicable after the Termination Date of each Offering, the Company will
deliver to each Participant, as appropriate, the following:

(i) At the election of the Committee, either issue (A) in certificated or
uncertificated form to a third party the aggregate number of shares of Common Stock
purchased in connection with an Offering (including an aggregate of all of the
fractional shares deemed to have been purchased pursuant to Section 9(b) above)
rounded to the nearest full share, which shares will be held by such third party for
the benefit of the Participants in accordance with their respective interests, and to
each Participant a statement summarizing the number of whole shares of Common Stock
purchased and fractional shares deemed purchased upon exercise of the Participant’s
option granted for such Offering, or (B) a certificate representing the number of
full shares of Common Stock purchased upon exercise of the Participant’s option
granted for such Offering, registered in the name of the Participant or, if the
Participant so directs on the Participation Form, in the names of the Participant and
his or her spouse.

(ii) If the Participant makes an election pursuant to Section 9(d)(i) above for the
Offering, a check in an amount equal to the total of the payroll deductions credited
to the Participant’s account.

(iii) If Participant makes an election pursuant to Section 9(d)(ii) above, a check in
the amount of the balance of any payroll deductions credited to the Participant’s
account that were not used for the purchase of Common Stock.

(iv) If the balance in the Participant’s payroll deduction account exceeds the dollar
amount necessary to purchase the maximum amount of shares that may be purchased in an
Offering, a check in an amount equal to the excess balance.

(b) If the Company delivers a statement of account as provided in Section 10(a)(i)(A) above,
a Participant may at any time request that a certificate for the number of whole shares of
Common Stock purchased by such Participant in an Offering or in any previous Offering (with
respect to which such participant has not been issued a certificate) be issued and delivered
to such Participant by making a written request to the Company. Such written request shall
be made to the Company’s Human Resources Department or, at the direction of the Company, to
the transfer agent and registrar for the Company’s Common Stock. In lieu of issuing
certificates for fractional shares, Participants will receive a cash distribution
representing any fractional shares, calculated in accordance with Section 11(a) below.

(c) If the Company delivers a statement of account as provided in Section 10(a)(i)(A) above,
all full shares purchased and fractional shares deemed to have been purchased by a
Participant in an Offering and in any subsequent Offerings will accumulate for the benefit
of the Participant until the Participant’s withdrawal or termination pursuant to Section 11
below.

6

 

11. Withdrawal; Termination of Employment.

(a) A Participant may terminate participation in the Plan and withdraw all, but not less
than all, of the payroll deductions credited to the Participant’s account under the Plan at
any time prior to the Termination Date of an Offering, for such Offering, by giving written
notice to the Company. Such notice shall state that the Participant wishes to terminate the
Participant’s involvement in the Plan, specify a termination date and request the withdrawal of all of the
Participant’s payroll deductions held under the Plan. All of the Participant’s payroll
deductions credited to the Participant’s account will be paid to such Participant as soon as
practicable after the termination date specified in the notice of termination and withdrawal
(or, if no such date is specified, as soon as practical after receipt of notice of
termination and withdrawal), and the Participant’s option for such Offering will be
automatically canceled, and no further payroll deductions for the purchase of shares of
Common Stock will be made for such Offering or for any subsequent Offering, except in
accordance with a new Participation Form filed pursuant to Section 6 above. If the
Committee elects to deliver a statement of account pursuant to Section 10(a)(i)(A) above,
then on the withdrawal and termination of a Participant’s participation in the Plan, the
Participant will be entitled to receive, at the Participant’s option, (i) cash equal to the
Fair Market Value of all full shares of Common Stock and any fractional share deemed
purchased pursuant to Section 9(b) then held for the benefit of the Participant; or (ii) a
certificate representing the number of full shares of Common Stock held for the benefit of
the Participant plus cash in an amount equal to the Fair Market Value of any remaining
fractional shares deemed to have been purchased. In any event, Fair Market Value will be
determined as set forth in Section 11(d) below, and such certificate will be delivered and
such amounts paid as soon thereafter as practicable.

(b) Upon termination of a Participant’s employment for any reason, including retirement or
death, the payroll deductions accumulated in the Participant’s account will be returned to
the Participant as soon as practicable after such termination or, in the case of death, to
the person or persons entitled thereto under Section 14 below, and the Participant’s option
will be automatically canceled. If the Committee elects to deliver a statement of account
pursuant to Section 10(a)(i)(A), then upon the termination of a Participant’s employment for
any reason, including retirement or death, the Participant, or, in the case of death, the
Participant’s designated beneficiary (if allowed by the Committee) as determined in
accordance with Section 14 or the executor or administrator of the Participant’s estate will
be entitled to receive, at their option, (i) cash equal to the
Fair Market Value of all full shares of Common Stock and any fractional share deemed purchased pursuant to Section 9(b)
then held for the benefit of the Participant; or (ii) a certificate representing the number
of full shares of Common Stock held for the benefit of the Participant plus cash in an
amount equal to the Fair Market Value of any remaining fractional share deemed to have been
purchased. In any event, Fair Market Value will be determined as set forth in Section 11(d)
below and such certificate will be delivered and such amounts paid as soon thereafter as
practicable. For purposes of the Plan, the termination date of employment shall be the
Participant’s last date of actual employment and shall not include any period during which
such Participant receives any severance payments. A transfer of employment between the
Company and a Designated Subsidiary or between one Designated Subsidiary and another
Designated Subsidiary, or absence or leave approved by the Company, shall not be deemed a
termination of employment under this Section 11(b).

7

 

(c) A Participant’s termination and withdrawal pursuant to Section 11(a) above will not have
any effect upon the Participant’s eligibility to participate in a subsequent Offering by
completing and filing a new Participation Form pursuant to Section 6 above or in any similar
plan that may hereafter be adopted by the Company.

(d) For purposes of this Section 11 only, “Fair Market Value” means the prevailing market
price of the Common Stock on any national securities exchange (if the Common Stock is listed
on any such exchange) or as reported by the Nasdaq National Market, the Nasdaq SmallCap
System or the National Quotation Bureau, Inc. (or any comparable reporting service), as the
case may be, (if transactions or bid and asked prices are reported in the over-the-counter
market are so reported) on the first day on which shares of Common Stock are traded
following the day on which the Company, or if the Company so designates, the Company’s
agent, receives notice from a Participant of an event specified in Section 11(a) or 11(b)
above.

12. Interest. No interest shall accrue on a Participant’s payroll deductions under the
Plan.

13. Stock Subject to the Plan.

(a) The maximum number of shares of Common Stock that shall be reserved for sale under the
Plan shall be 1,000,000 shares, subject to adjustment upon changes in capitalization of the
Company as provided in Section 13(b) below. The shares to be sold to Participants under the
Plan may be, at the election of the Company, either treasury shares or shares authorized but
unissued. If the total number of shares of Common Stock that would otherwise be subject to
options granted pursuant to Section 8 above on any Termination
Date exceeds the number of shares then available under the Plan (after deduction of all shares for which options have
been exercised or are then outstanding), the Company shall make a pro
rata allocation of the shares of Common Stock remaining available for issuance in as uniform and equitable a manner
as is practicable as determined in the Company’s sole discretion. In such event, the
Company shall give written notice of such reduction of the number of shares subject to the
option to each Participant affected thereby and shall return any excess funds accumulated in
each Participant’s account as soon as practicable after the Termination Date of such
Offering.

(b) In the event of any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of shares, rights
offering, divestiture or extraordinary dividend (including a spin-off) or any other change
in the corporate structure or shares of the Company, the Committee (or, if the Company is
not the surviving corporation in any such transaction, the board of directors of the
surviving corporation) will make appropriate adjustment (which determination will be
conclusive) as to the number and kind of securities or other property (including cash)
available for issuance or payment under the Plan and, in order to prevent dilution or
enlargement of the rights of Participants, the number and kind of securities or other
property (including cash) subject to, and the exercise price of, outstanding options.

(c) In the event that Participants are deemed to have purchased fractional shares of Common
Stock pursuant to Section 9(b) above, the aggregate of such fractional share interests at
any given time will be applied to reduce the maximum number of shares of Common Stock
remaining available for issuance under the Plan.

8

 

14. Designation of Beneficiary.

(a) In the discretion of the Committee, a Participant may file written designation of a
beneficiary who is to receive shares of Common Stock and/or cash, if any, from the
Participant’s account under the Plan in the event of such Participant’s death at a time when
cash or shares of Common Stock are held for the Participant’s account.

(b) Such designation of beneficiary may be changed by the Participant at any time by written
notice. In the event of the death of a Participant in the absence of a valid designation of
a beneficiary who is living at the time of such Participant’s death, the Company shall
deliver such shares of Common Stock and/or cash to the executor or administrator of the
estate of the Participant; or, if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such shares of
Common Stock and/or cash to the spouse or to any one or more dependents or relatives of the
Participant; or, if no spouse, dependent or relative is known to the Company, then to such
other person as the Company may designate.

15. Transferability. Neither payroll deductions credited to a Participant’s account nor
any rights with regard to the exercise of an option or to receive shares of Common Stock under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will,
the laws of descent and distribution, or as provided in Section 14 above) by the Participant. Any
such attempt at assignment, transfer, pledge or other disposition shall be without effect, except
that the Company may treat such act as an election to withdraw funds in accordance with Section
11(a) above.

16. Amendment or Termination. The Plan may be amended by the Board from time to time to
the extent that the Board deems necessary or appropriate in light of, and consistent with, Section
423 of the Code; provided, however, that no such amendment shall be effective, without approval of
the stockholders of the Company, if stockholder approval of the amendment is then required pursuant
to Rule 16b-3 under the Exchange Act or any successor rule or Section 423 of the Code. The Board
also may terminate the Plan or the granting of options pursuant to the Plan at any time; provided,
however, that the Board shall not have the right to modify, cancel, or amend any outstanding option
granted pursuant to the Plan before such termination unless each Participant consents in writing to
such modification, amendment or cancellation.

17. Notices. All notices or other communications by a Participant to the Company in
connection with the Plan shall be deemed to have been duly given when received in the Company’s
Human Resources Department or in such other department or by such other person as may be designated
by the Company for the receipt of such notices or other communications, in the form and at the
location specified by the Company.

18. Term of Plan. The Plan shall be effective as of May 24, 2000, the date the Plan was
adopted by the Board. The Plan has been adopted by the Board subject to stockholder approval
within twelve months before or after the date the Board adopted the Plan and subject to completion
of the Company’s initial public offering of Common Stock. Prior to stockholder approval, shares of
Common Stock may be issued under the Plan subject to such approval. The Plan will terminate at
midnight on May 24, 2010, and may be terminated prior to such time by Board action in accordance
with Section 16.

9

 

19. Conditions Upon Issuance Of Shares.

(a) Compliance. Shares shall not be issued with respect to an option unless the
exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with
all applicable provisions of law, domestic or foreign, including, without limitation, the
Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange or Nasdaq upon which the shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect to such
compliance. As a condition to the exercise of an option, if required by applicable
securities laws, the Company may require the Participant for whose account the option is
being exercised to represent and warrant at the time of such exercise that the shares are
being purchased only for investment and without any present intention to sell or distribute
such shares if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned applicable provisions of law.

(b) Share Transfers. Shares of Common Stock issued pursuant to options granted under
the Plan may not be sold, assigned, transferred, pledged, encumbered or otherwise disposed
of, whether voluntarily or involuntarily, directly or indirectly, by operation of law or
otherwise, except pursuant to registration under the Securities Act and applicable state
securities laws or pursuant to exemptions from such registrations. The Company may condition
the sale, assignment, transfer, pledge, encumbrance or other disposition of such shares not
issued pursuant to an effective and current registration statement under the Securities Act
and all applicable state securities laws on the receipt from the party to whom the shares of
Common Stock are to be so transferred of any representations or agreements requested by the
Company in order to permit such transfer to be made pursuant to exemptions from registration
under the Securities Act and applicable state securities laws.

(c) Legends. Unless a registration statement under the Securities Act and applicable
state securities laws is in effect with respect to the issuance or transfer of shares of
Common Stock under the Plan, each certificate representing any such shares shall be endorsed
with a legend in substantially the following form, unless counsel for the Company is of the
opinion as to any such certificate that such legend is unnecessary:

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (“THE ACT”), OR UNDER APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH
STATE LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE LAWS, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.

20. Miscellaneous. The headings to Sections in the Plan have been included for convenience
of reference only. Except as otherwise expressly indicated, all references to Sections in the Plan
shall be to Sections of the Plan. The Plan shall be interpreted and construed in accordance with
the laws of the State of Delaware.

10

 

EXHIBIT 10.2

American Medical Systems Holdings, Inc.

EMPLOYEE STOCK PURCHASE PLAN

PAYROLL DEDUCTION AUTHORIZATION FORM AND 

SUBSCRIPTION AGREEMENT

	 	 	 
	___

	 	Original Application
	___

	 	Change in Payroll Deduction Amount

1. I,                                          hereby elect to participate in the American Medical Systems
Holdings, Inc. Employee Stock Purchase Plan (the “Plan”) and subscribe to purchase shares of the
Company’s Common Stock (the “Shares”) in accordance with this Agreement and the Plan.

2. I hereby authorize payroll deductions, beginning                     , 200___, from each paycheck in the
amount of ___% of my compensation (may not exceed ten percent (10%) of total compensation on each
payday) in accordance with the Plan.

3. I understand that said payroll deductions shall be accumulated for the purchase of shares in
accordance with the Plan, and that shares will be purchased for me automatically at the end of each
Offering Period under the Plan unless I withdraw my accumulated payroll deductions, withdraw from
the Plan, or both, by giving written notice to the Company prior to the end of the offering period,
as provided in the Plan.

4. Shares purchased for me under the Plan should be issued or held in an account in the name(s) of:

	 	 	 	 	 
	 

	 	 

(name(s))
	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	(address)	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	(social security number)	 	 

 

 

5. I understand that if I dispose of any Shares received by me pursuant to the Plan within two years
after the first day of the Offering Period during which I purchased such Shares, I may be treated
for federal income tax purposes as having received ordinary income at the time of such disposition
in an amount equal to the excess of the fair market value of the Shares at the time such Shares
were delivered to me over the option price paid for the Shares. I hereby agree to notify the
Company in writing within 30 days after the date of any such disposition. However, if I
dispose of such shares at any time after the expiration of the two-year holding period, I
understand that I will be treated for federal income tax purposes as having received income only at
the time of such disposition, and that such income will be taxed as ordinary income only to the
extent of an amount equal to the lesser of (a) the excess of the fair market value of the Shares at
the time of such disposition over the amount paid for the Shares under the option, or (b) the
excess of the fair market value of the Shares over the option price, measured as if the option had
been exercised on the first day of the offering period during which I purchased such shares. The
remainder of the gain, if any, recognized on such disposition will be taxed at capital gains rates.

I have read the current prospectus for the American Medical Systems Holdings, Inc. Employee Stock
Purchase Plan.

	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 
	 	Signature of Employee

CERTIFICATION OF TAX IDENTIFICATION NUMBER

Please indicate your Social Security or Tax Identification Number

I certify under penalties of perjury (1) that the number above is my correct Social Security or
Taxpayer Identification Number and (2) that I am not subject to backup withholding either because I
have not been notified by the IRS that I am subject to backup withholding as a result of failure to
report all interest or dividends, or the IRS has notified me that I am no longer subject to backup
withholding.

	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 
	 	Signature

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