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This Management Continuity Agreement (the "Agreement") is made and
entered into effective as of April 4, 1996, by and between She/He (the
"Employee") and Laserscope, a California corporation (the "Company").
R E C I T A L S
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to the Employee and can cause the Employee to consider alternative
employment opportunities. The Board has determined that it is in the best
interests of the Company and its shareholders to assure that the Company will
have the continued dedication and objectivity of the Employee, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company.
B. The Board believes that it is in the best interests of the Company
and its shareholders to provide the Employee with an incentive to continue his
or her employment with the Company.
C. The Board believes that it is imperative to provide the Employee
with certain benefits upon a Change of Control and, under certain circumstances,
upon termination of the Employee's employment in connection with a Change of
Control, which benefits are intended to provide the Employee with financial
security and provide sufficient income and encouragement to the Employee to
remain with the Company notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 4 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1. At-Will Employment. The Company and the Employee acknowledge that
the Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
written policies at the time of termination. The terms of this Agreement shall
terminate upon the earlier of (i) the date that all obligations of the parties
hereunder have been satisfied, (ii) April 4, 1998, or (iii) twenty-four (24)
months after a Change of Control. A termination of the terms of this Agreement
pursuant to the preceding sentence shall be effective for all purposes, except
that such termination shall not affect the payment or provision of compensation
or benefits on account of a termination of employment occurring prior to the
termination of the terms of this Agreement.
2. Change of Control/Stock Options. Immediately upon the effective
date of the Change of Control, each stock option granted for the Company's
securities held by the Employee shall become immediately vested and shall be
exercisable in full in accordance with the provisions of the option agreement
and plan pursuant to which such option was granted. Upon the immediate vesting
of such stock options, the Employee will have the right (subject to any
limitations imposed by Section 16 of the Securities Exchange Act of 1934 or
other applicable securities laws and the California Corporations Code and only
to the extent permitted by the terms of the applicable option plan) to deliver a
promissory note with a two (2) year term, at the prime rate of interest
determined as of the date of the note (but not in excess of the maximum rate
permitted by applicable law), in payment of the exercise price for such options.
The delivered note will be non-recourse, and the Company or its successor will
look solely to the pledged shares for repayment.
3. Severance Benefits.
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(a) Termination Following A Change of Control. Subject to Section
5 below, if the Employee's employment with the Company is terminated at any time
within 24 months after a Change of Control, then the Employee shall be entitled
to receive severance benefits as follows:
(i) Voluntary Resignation. If the Employee voluntarily
resigns from the Company (other than as an Involuntary Termination (as defined
below) or if the Company terminates the Employee's employment for Cause (as
defined below)), then the Employee shall not be entitled to receive severance
payments. The Employee's benefits will be terminated under the Company's then
existing benefit plans and policies in accordance with such plans and policies
in effect on the date of termination.
(ii) Involuntary Termination. If the Employee's employment is
terminated within 12 months of the Change of Control as a result of Involuntary
Termination other than for Cause, the Employee shall be entitled to receive 12
months severance payments (the "Severance Period") from the date of the
Employee's termination. If the Employee's employment is terminated after 12
months but within 24 months after the Change of Control, the Employee shall be
entitled to receive 9 months severance payments (the "Severance Period") from
the date of the Employee's termination. The Employee's severance payments shall
be equal to the salary which the Employee was receiving immediately prior to the
Change of Control and shall be paid during the Severance Period in accordance
with the Company's standard payroll practices. In addition, during the Severance
Period, the Employee shall be provided with benefits substantially identical to
those to which the Employee was entitled immediately prior to the Change of
Control.
(iii) Involuntary Termination for Cause. If the Employee's
employment is terminated for Cause, then the Employee shall not be entitled to
receive severance payments. The Employee's benefits will be terminated under the
Company's then existing benefit plans and policies in accordance with such plans
and policies in effect on the date of termination.
(b) Termination Apart from Change of Control. In the event the
Employee's employment terminates for any reason prior to the Change of Control,
then the Employee shall not be entitled to receive any severance payments under
this Agreement. The Employee's benefits will be terminated under the Company's
then existing benefit plans and policies in accordance with such plans and
policies in effect on the date of termination.
4. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(i) Ownership. Any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing twenty percent
(20%) or more of the total voting power represented by the Company's then
outstanding voting securities without the approval of the Board of Directors of
the Company; or
(ii) Merger/Sale of Assets. A merger or consolidation of the
Company whether or not approved by the Board of Directors of the Company, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
(iii) Change in Board Composition. A change in the
composition of the Board of Directors of the Company, as a result of which fewer
than a majority of the directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the Company as of April 4,
1996, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
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include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
(b) Cause. "Cause" shall mean (i) material breach of any material
terms of this Agreement, (ii) conviction of a felony, (iii) fraud, (iv) repeated
unexplained or unjustified absence, (v) willful breach of fiduciary duty under
applicable laws, this Agreement or Company policies first in effect prior to the
occurrence of a Change in Control or (vi) gross negligence or willful misconduct
where such gross negligence or willful misconduct has resulted or is likely to
result in substantial and material damage to the Company or its subsidiaries.
(c) Involuntary Termination. "Involuntary Termination" will
include the Employee's voluntary termination, upon 30 days prior written notice
to the Company, following (i) a material reduction in job responsibilities
inconsistent with the Employee's position with the Company and the Employee's
prior responsibilities, i.e., corporate versus subsidiary level or type
responsibility, or (ii) relocation to a facility or location more than 50 miles
from the Company's current location.
5. Limitation on Payments. To the extent that any of the payments or
benefits provided for in this Agreement or otherwise payable to the Employee
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and, but for this Section
5, would be subject to the excise tax imposed by Section 4999 of the Code, the
Company shall reduce the aggregate amount of such payments and benefits such
that the present value thereof (as determined under the Code and the applicable
regulations) is equal to 2.99 times the Employee's "base amount" as defined in
Section 280G(b)(3) of the Code.
6. Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agree expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employee's rights
hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
7. Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. Mailed notices to the Employee shall be
addressed to the Employee at the home address which the Employee most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
8. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
supersedes any agreement of the same title and concerning similar subject matter
dated prior to the date of this Agreement, and by execution of this Agreement
both parties agree that any such predecessor agreement shall be deemed null and
void.
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(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable the remaining terms and
provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or unenforceable,
and a suitable and equitable term or provision shall be substituted therefor to
carry out, insofar as may be valid and enforceable, the intent and purpose of
the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of Santa Clara, California, in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction. Punitive
damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall each bear their own
expenses, legal fees and other fees incurred in connection with this Agreement.
(h) No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this subsection (h) shall be void.
(i) Employment Taxes. All payments made pursuant to this Agreement will
be subject to withholding of applicable income and employment taxes.
(j) Assignment by Company. The Company may assign its rights under this
Agreement to an affiliate, and an affiliate may assign its rights under this
Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case of
any such assignment, the term "Company" when used in a section of this Agreement
shall mean the corporation that actually employs the Employee.
(k) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together will constitute
one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
LASERSCOPE She/He
By: By:
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Title:
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