TABLE OF CONTENTS




|                                   |                                                                                               |  |  |  |  |  |  | 
|---------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                            
|                                   | ITEM 1. BUSINESS                                                                             
|                                   | ITEM 1A. CERTAIN IMPORTANT FACTORS                                                           
|                                   | ITEM 2. PROPERTIES                                                                           
|                                   | ITEM 3. LEGAL PROCEEDINGS                                                                    
|                                   | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                   | ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT                                                
|PART II                           
|                                   | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCK-HOLDER MATTERS               
|                                   | ITEM 6. SELECTED FINANCIAL DATA                                                              
|                                   | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                   | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                                   | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                                   | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|PART III                          
|                                   | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|                                   | ITEM 11. EXECUTIVE COMPENSATION                                                              
|                                   | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|                                   | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|PART IV                           
|                                   | ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                     
|1st Amendment to Credit Agreement 
|2nd Amendment to Release Agreement
|Excerpts From 2000 Annual Report  
|Consent of Ernst & Young LLP      



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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



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Form 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

|                                            |  |                                 
|------------------------------------------- |  | --------------------------------
|For the fiscal year ended:December 31, 2000 |  | Commission file number:000-30733



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AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

|                                  |  |                                                
|--------------------------------- |  | -----------------------------------------------
|Delaware
(State of incorporation) |  | 13-4018241
(I.R.S. Employer Identification No.)

10700 Bren Road West
Minnetonka, MN 55343
(Address of principal executive offices)

Registrants telephone number:(952) 933-4666



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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share



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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

As of February 28, 2001, 27,814,527 shares of Common Stock of the
Registrant were deemed outstanding, and the aggregate market value of the
Common Stock of the Registrant (based upon the closing price of the Common
Stock at that date as reported by The Nasdaq Stock Market), excluding
outstanding shares beneficially owned by directors, executive officers and
affiliates of AMS, was approximately $84,353,141.

Part II of this Annual Report on Form 10-K incorporates by reference
information (to the extent specific pages are referred to in this Report) from
the Registrants Annual Report to Stockholders for the year ended December 31,
2000 (the 2000 Annual Report). Part III of this Annual Report on Form 10-K
incorporates by reference information (to the extent specific sections are
referred to in this Report) from the Registrants Proxy Statement for the
Annual Meeting of the Stockholders to be held May 8, 2001 (the 2001 Proxy
Statement).



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##### Table of Contents



AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.

FORM 10-K

For the Fiscal Year Ended December 31, 2000

TABLE OF CONTENTS

|         |  |          |  |                                                                                      |      |  |    | 
|-------- |  | -------- |  | ------------------------------------------------------------------------------------ | ---- |  | -- | 
|         |  |          |  | Description                                                                          | Page
|PART I  
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|         |  | Item 1.  |  | Business                                                                             |      |  | 1  | 
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|         |  | Item 1A. |  | Certain Important Factors                                                            |      |  | 16 | 
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|         |  | Item 2.  |  | Properties                                                                           |      |  | 17 | 
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|         |  | Item 3.  |  | Legal Proceedings                                                                    |      |  | 17 | 
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|         |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                  |      |  | 18 | 
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|         |  | Item 4A. |  | Executive Officers of the Registrant                                                 |      |  | 18 | 
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|PART II 
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|         |  | Item 5.  |  | Market for Registrants Common Equity and Related Stockholders Matters               |      |  | 20 | 
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|         |  | Item 6.  |  | Selected Financial Data                                                              |      |  | 20 | 
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|         |  | Item 7.  |  | Managements Discussion and Analysis of Financial Condition and
Results of Operation |      |  | 20 | 
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|         |  | Item 7A. |  | Quantitative and Qualitative Disclosures about Market Risk                           |      |  | 21 | 
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|         |  | Item 8.  |  | Financial Statements and Supplementary Data                                          |      |  | 21 | 
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|         |  | Item 9.  |  | Change in and Disagreements with Accountants on Accounting and
Financial Disclosure  |      |  | 21 | 
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|PART III
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|         |  | Item 10. |  | Directors and Executive Officers of the Registrant                                   |      |  | 22 | 
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|         |  | Item 11. |  | Executive Compensation                                                               |      |  | 22 | 
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|         |  | Item 12. |  | Security Ownership of Certain Beneficial Owners and Management                       |      |  | 22 | 
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|         |  | Item 13. |  | Certain Relationships and Related Transactions                                       |      |  | 22 | 
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|PART IV 
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|         |  | Item 14. |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                     |      |  | 23 | 

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FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Any statements not of historical fact may be considered forward-looking
statements. Written words such as may, expect, believe, anticipate, or
estimate, or other variations of these or similar words, identify such
forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, and actual results may differ materially
from those expressed in such forward-looking statements. Important factors
known to us that could cause such material differences are identified in this
Annual Report on page 16 and in the Managements Discussion and Analysis of
Results of Operations and Financial Condition on pages 15 to 21 of our 2000
Annual Report to Stockholders, which is incorporated by reference into Part II,
Item 7 of this Annual Report. We undertake no obligation to correct or update
any forward-looking statements, whether as a result of new information, future
events or otherwise. You are advised, however, to consult any future
disclosures we make on related subjects in future reports to the SEC.




PART I




ITEM 1. BUSINESS

General Development of Business

We are the leading independent company focused solely on supplying medical
devices to physicians specializing in the treatment of urological disorders. We
currently manufacture and market a broad and well-established line of
proprietary products directly to urologists, with our principal focus on the
three major urological disorders: incontinence, erectile dysfunction and
prostate disease.

We believe that our broad and diverse product offering is an important
competitive advantage because it allows us to address the various preferences
of doctors and patients, as well as the quality of life issues presented by
urological disorders. We offer medical devices to treat the three major
urological disorders:



| |  |  | Incontinence.We offer a broad line of products designed to treat men
and women suffering from urinary and fecal incontinence. Our products
include artificial sphincters, sling systems and bulking systems. Our
incontinence products represented $42.4 million, or 42.3%, of our 2000
net sales.                                                                                                                               
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Erectile Dysfunction.We are the leader in the surgical erectile
dysfunction market, with more than 70% market share in penile prostheses
in 2000. Our erectile dysfunction products include a full line of
inflatable and malleable penile prostheses and a diagnostic system used
to determine the causes of erectile dysfunction. Our erectile
dysfunction products represented $51.3 million, or 51.2%, of our 2000
net sales.
|
| |  |  | Prostate Disease.We participate in the prostate disease market with
our prostatic stents, resection loops and a minimally-invasive ethanol
injection system which is under development for treatment of enlarged
prostates, also referred to as Benign Prostatic Hyperplasia, or BPH. Our
prostate disease products represented $6.6 million, or 6.5%, of our 2000
net sales.                                                    

Our product development and acquisition strategy has focused on expanding our
product offering and on adding less-invasive medical devices for the treatment
of incontinence, erectile dysfunction and prostate disease. In 1999, we
expanded our commitment to the treatment of incontinence and prostate disease
through the acquisitions of several leading-edge technologies, most notably
technologies related to incontinence, from Influence, Inc. These acquisitions
have enabled us to diversify our product portfolio and offer a sling product
for incontinence, which we believe is one of the fastest growing surgical
procedures for the treatment of incontinence.





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##### Table of Contents



As of March 2001, we have under development five new incontinence products, two
new erectile dysfunction products and three new prostate disease products.

We founded our business in 1972. Pfizer Inc. acquired our business in 1985. In
September 1998, a group of investors led by Warburg, Pincus Equity Partners,
L.P., financed the purchase of our assets from Pfizer. We formed American
Medical Systems Holdings, Inc., our current holding company, in April 2000. In
this Annual Report on Form 10-K, references to AMS, the company, we and
our, unless the context otherwise requires, refer to American Medical Systems
Holdings, Inc. and its subsidiaries, including its wholly owned operating
subsidiary, American Medical Systems, Inc. Our principal executive offices are
located at 10700 Bren Road West, Minnetonka, Minnesota 55343, and our telephone
number is (952) 933-4666. Our website is located at www.visitAMS.com.Our
website is not intended to be part of this Annual Report of Form 10-K.

Financial Information About Segments

Since our inception, we have operated in the single industry segment of
developing, manufacturing and marketing medical devices.

Seasonality

Our sales and operating results have varied and are expected to continue to
vary significantly from quarter to quarter as a result of seasonal patterns.
We believe our business is seasonal, with the third quarter of each year
typically having the lowest sales and fourth quarter of each year typically
having the highest sales. There can be no assurance that future seasonal
fluctuations will not adversely affect our business and results of operations.

Our Incontinence Business

Overview

Our products are designed primarily for patients with stress and mixed
incontinence. Stress and mixed incontinence account for approximately 72% of
incontinence patients, or approximately 23 million people worldwide. Stress
incontinence is the involuntary loss of urine caused by an increase in
abdominal pressure during stress events such as coughing, sneezing, lifting or
exercising. There are two main categories of stress incontinence:
hypermobility which refers to extra movement of the urethra; and intrinsic
sphincter dysfunction, or ISD, which refers to a poorly functioning sphincter
muscle. Mixed incontinence is a combination of stress and urge incontinence.
Urge incontinence is the involuntary loss of urine due to an overwhelming need
to urinate and the inability to suppress it long enough to reach a toilet. We
do not offer products to treat the urge component of mixed incontinence.

The majority of patients who suffer from incontinence have mild incontinence.
These patients will typically attempt to manage their incontinence condition
through the use of disposable adult diapers and pads, pelvic floor muscle
strengthening or, for men, a catheter and a urinary drainage bag. These
approaches only provide the patient a means to manage their incontinence. They
do not permanently cure incontinence.

Patients with moderate to severe incontinence typically find management of
their incontinence unacceptable and may be offered one of the following four
procedures to cure their incontinence:



| |  |  | A bulking procedure, where a bulking product is implanted in the wall
of the urethra at the bladder neck to bulk the sphincter and close the
urethra;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | A sling procedure, where a sling material acts as a back stop to the
urethra to prevent leakage when there is a stress event;                                          
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | A bladder neck suspension procedure, which lifts up vaginal or
periurethral tissue and repositions the bladder to prevent urine leakage
during a stress event; and     
|
| |  |  | An artificial urinary sphincter procedure, where a saline-filled cuff
is inserted around the urethra to gently squeeze the urethra closed to
keep urine in the bladder.

We provide products that are used in all four of these procedures.

Our Incontinence Products

We offer a full line of incontinence products designed to meet a wide range of
patient needs in the treatment of urinary and fecal incontinence for men and
women. The following tables summarize our core incontinence products, products
under development and services. For more information on the FDA regulatory
approval process, see Business  Government Regulation.

|                                     |  |                                                                                                                |  |                                                                                 
|------------------------------------ |  | -------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------
|Current Products                     |  | Description of Product                                                                                         |  | Regulatory Approval Status                                                      
|                                     |  |                                                                                                                |  |                                                                                 
|In-Fast Female Sling System          |  | Female sling fixation system                                                                                   |  | 510(k) cleared
CE mark certified                                                
|                                    
|                                    
|                                    
|                                    
|InVance Male Sling System            |  | Male sling fixation system                                                                                     |  | 510(k) cleared
CE mark certified                                                
|                                    
|                                    
|                                    
|                                    
|Synthetic Sling Material             |  | Synthetic material used in a sling
procedure                                                                   |  | 510(k) cleared                                                                  
|                                    
|                                    
|                                    
|                                    
|AMS Sphincter 800 Urinary
Prosthesis |  | Small, fluid-filled implant for
urinary incontinence; only
commercially available artificial
urinary sphincter |  | 510(k) cleared
Premarket Approval
Application (PMA) in process
CE mark certified
|                                    
|                                    
|                                    
|                                    
|Acticon Neosphincter                 |  | Small, fluid-filled implant for
fecal incontinence                                                             |  | Humanitarian Device
Exemption received
PMA to be submitted
CE mark certified    
|                                    
|                                    
|                                    
|                                    
|UroVive Microballoon System          |  | A durable, reversible microballoon
bulking system                                                              |  | International release only
CE mark certified                                    

|                                      |  |                                                         |  |                                     
|------------------------------------- |  | ------------------------------------------------------- |  | ------------------------------------
|Products Under Development            |  | Description of Product                                  |  | Regulatory Approval Status          
|                                      |  |                                                         |  |                                     
|TransFix Female Sling-Fixation
System |  | Sutureless bone anchor sling
procedure                  |  | 510(k) cleared
CE mark certified    
|                                     
|                                     
|                                     
|                                     
|Sacrocolpopexy                        |  | Product to correct vaginal vault
prolapse               |  | 510(k) to be submitted              
|                                     
|                                     
|                                     
|                                     
|No-Tac                                |  | Sling fixation without anchors                          |  | 510(k) to be submitted              
|                                     
|                                     
|                                     
|                                     
|Next Generation UroVive               |  | A durable, reversible microballoon
system               |  | International release only          
|                                     
|                                     
|                                     
|                                     
|Synthetic Sling                       |  | An alternative to cadaveric tissue
for sling procedures |  | 510(k) cleared
CE mark certification

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|                        |  |                                                    |  |                           
|----------------------- |  | -------------------------------------------------- |  | --------------------------
|Services                |  | Description of Service                             |  | Regulatory Approval Status
|                        |  |                                                    |  |                           
|Cadaveric Fascia Lata   |  | Human fascia lata tissue used in a sling procedure |  | None currently required   
|                       
|                       
|                       
|                       
|Cadaveric Dermal Tissue |  | Human dermal tissue used in a sling procedure      |  | 510(k) will be submitted  

We believe our In-Fast Sling System is one of the leading products for use in
sling procedures in the United States. In the In-Fast sling procedure, two
titanium bone screws are implanted into the pubic bone, one on each side of the
urethra. Either human tissue or a synthetic sling material is then placed in
the space between the urethra and the vagina. The sling material is attached to
each screw and forms a hammock or sling beneath the urethra. The sling
material below the urethra acts as a backstop during a stress event to close
the urethra and prevent leakage. Until recently, a sling procedure required an
invasive surgical procedure requiring hospitalization with associated
discomfort, lengthy recovery and high expense. However, today, less-invasive
systems, such as our In-Fast Sling System, are designed to facilitate a
completely transvaginal approach, which enables the urologist to perform the
sling procedure in approximately 30 minutes in the operating room. These
less-invasive procedures, which can be performed on an outpatient basis with
minimal post-operative pain and recovery time, are driving the growth of sling
procedures. Surgeons using our sling system have reported that 95% of their
patients are dry or improved five months after their procedure.

Our InVance Male Sling System is a novel, less-invasive approach to male
incontinence that we recently introduced to the market. In this procedure, the
physician implants six titanium bone screws in the pubic bone, three on each
side of the urethra. Sling material is attached to the screws, and pulled
tight, to form passive compression and support for the urethra. This procedure
offers immediate relief of incontinence, is minimally invasive and can be
performed in about one hour. It is generally performed on an outpatient basis
and requires minimal recovery time.

Our AMS Sphincter 800 Urinary Prosthesis is the only commercially available
artificial urinary sphincter. A study recently found that five years after
implant, over 90% of the patients have a functioning device. The efficacy rate
with the device ranges from 80% to 94% over a two to seven year period. An
artificial urinary sphincter is an implantable device that mimics the function
of the sphincter muscle making natural urinary control and urination possible.
It is a miniature, hydraulic saline-filled device consisting of an inflatable
cuff placed around the urethra, a pressure-regulating balloon placed
abdominally and a control pump placed in the scrotum. The cuff is implanted
around the urethra at the bladder neck in the female or around the bulbous
urethra in the male, closing off the urethra. To urinate, the patient squeezes
the pump to move fluid out of the cuff into the balloon, opening the urethra.
The fluid then automatically returns from the balloon to the cuff, restoring
continence.

Our Acticon Neosphincter Prosthesis is very similar to our AMS Sphincter 800
Urinary Prosthesis, but the cuff is placed around the anal canal to treat fecal
incontinence.

Our UroVive Microballoon System is designed to treat urinary stress
incontinence, particularly in those women with a weak or poorly functioning
sphincter muscle. The UroVive Microballoon System is a minimally-invasive
procedure that enables the urologist to place hydrogel-filled microballoons
around the bladder neck to help close the urethra, restoring continence. This
procedure is mostly used in females although it can also be used in men. Until
recently, there was one dominant bulking agent commercially available in the
United States. The effectiveness of that product is limited, in part, because
the body resorbs it over time. Once a bulking product resorbs, it loses its
effectiveness and retreatment is often necessary. The body does not resorb the
microballoons used in the UroVive Microballoon System. This feature provides a
durable procedure that can be reversed if necessary by puncturing the balloon.
We are currently marketing this product in Europe. We have suspended clinical
studies in the United States and

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are not pursuing a U.S. launch of this product. We are also developing a next
generation of this product, which will improve its ease of use and reduce its
cost.

As part of the acquisition of Influence, we acquired a number of products that
are currently in development. Several of these products are improvements and
next generation products for female sling procedures. These next generation
products provide the surgeon additional options for performing the procedure,
including a sutureless option and that does not require a metal implant in the
pubic bone, which we believe will be particularly appealing to those urologists
and gynecologists who have historically avoided using a metal bone anchor.

We offer several types of sling materials for use in male and female sling
procedures. In the United States, we provide cadaveric fascia lata sling
material which is harvested from the thigh of a donor, as a service. We
recently added the service of providing a cadaveric dermal tissue, or donor
skin, product in the United States. Cadaveric dermal tissue has superior
strength characteristics over cadaveric fascia lata; however, there is a
limited supply of this type of material. In addition, we offer two types of
synthetic sling material, primarily outside of the United States.

Our Erectile Dysfunction Business

Overview

Approximately 100 million men worldwide suffer from erectile dysfunction,
including approximately 19 million men with severe cases of erectile
dysfunction. The primary treatment options for erectile dysfunction are oral
medications, injectable medications, vacuum devices and penile implants. Today,
the primary oral medication used for treating erectile dysfunction is Viagra.
Patients can also inject medication directly into the penis using a small
needle attached to a syringe or insert medication into the urethra with an
applicator instead of a needle. Before the advent of Viagra, a primary
treatment for erectile dysfunction was a vacuum constriction device, which uses
a vacuum to draw blood into the penis and a constriction ring to prevent blood
from flowing back out of the penis.

Although the success of some of these treatments, especially Viagra, has had a
positive impact on the diagnosis and treatment of patients suffering from
erectile dysfunction, many patients with severe erectile dysfunction are not
successfully treated with these therapies. For an effective treatment, many
patients with severe conditions often have no alternative other than a penile
implant. A penile implant is a device surgically implanted inside the penis to
mechanically simulate an erection. A penile implant provides natural looking
and feeling erections and has a very high patient and partner satisfaction
rate. Patients with a penile implant can generally ejaculate normally and
experience normal sensations during intercourse. Since we introduced the first
inflatable penile prosthesis in 1973, urologists have implanted over 200,000 of
our penile prostheses with patient satisfaction rates approaching 90% at five
years.

Our Erectile Dysfunction Products

In order to meet various physician and patient preferences, we offer a full
line of penile implants. The following tables lists our core erectile
dysfunction products on the market and those currently under development. For
more information on the FDA regulatory approval process, see
Business  Government Regulation.

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|                      |  |                                                            |  |                                                             
|--------------------- |  | ---------------------------------------------------------- |  | ------------------------------------------------------------
|Current Products      |  | Description of Product                                     |  | Regulatory Approval Status                                  
|                      |  |                                                            |  |                                                             
|AMS 700 CX            |  | 3-piece hydraulic implant
that expands in girth only       |  | Product Development
Protocol(PDP) approved
CE mark certified
|                     
|                     
|                     
|                     
|AMS 700 Ultrex        |  | 3-piece hydraulic implant
that expands in length and
girth |  | PDP approved
CE mark certified                              
|                     
|                     
|                     
|                     
|Ambicor               |  | 2-piece hydraulic implant                                  |  | PDP supplement approved
CE mark certified                   
|                     
|                     
|                     
|                     
|AMS Malleable 650     |  | Malleable implant                                          |  | 510(k) cleared
CE mark certified                            
|                     
|                     
|                     
|                     
|NEVA                  |  | Nocturnal monitoring device
for diagnostic purposes        |  | 510(k) cleared
CE mark certified                            
|                     
|                     
|                     
|                     
|Cavernotome           |  | Device to help prepare
cavernosa for implant               |  | 510(k) exempt
CE mark certified                             
|                     
|                     
|                     
|                     
|Testicular prosthesis |  | Small, solid silicone implant                              |  | International release only
CE mark certified                

|                                               |  |                                                       |  |                                                                            
|---------------------------------------------- |  | ----------------------------------------------------- |  | ---------------------------------------------------------------------------
|Products Under Development                     |  | Description of Product                                |  | Regulatory Approval Status                                                 
|                                               |  |                                                       |  |                                                                            
|Parylene Micro Coating
Treated Penile Implants |  | Surface treatment to improve
durability               |  | PDP supplement approved
CE mark certified                                  
|                                              
|                                              
|                                              
|                                              
|Antimicrobial Impregnated
Penile Implants      |  | Surface treatment to manage
post-operative infections |  | PDP supplement submitted
Design dossier submitted
for CE mark certification

Our AMS 700 product is a three-piece hydraulic inflatable implant that consists
of a pair of hollow silicone cylinders implanted into the penis, a control pump
placed in the scrotum and a reservoir balloon filled with saline placed in the
abdomen. The control pump allows the patient to direct the saline to flow out
of the balloon and into the cylinders, expanding the cylinders and causing an
erect penis. Hydraulic implants are the most popular type of implants because
of their natural look and feel in both the flaccid and erect positions. Our AMS
700 line includes our CX model, which expands in girth, and our Ultrex model,
which expands in both length and girth. Our Ultrex model most closely
approximates the process and feel of both a natural erection and a natural
flaccid state and is the only product of its kind on the market. We believe our
AMS 700 line of penile implants is the most widely used implant worldwide.

Our Ambicor product is a two-piece hydraulic implant. This product uses the
distal end of the implant as the reservoir site, which allows us to eliminate
the abdominal balloon used in the AMS 700. The Ambicor product can be implanted
in a less-invasive and shorter procedure than the procedure required for the
three-piece device. For the patient it has the additional benefit of requiring
fewer movements for activation.

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Our AMS Malleable 650 is a malleable penile implant. This product is made of a
silicone-covered wire bundle that allows a man to manually straighten his penis
to allow for intercourse or bend it out of the way when it is not in use. This
product is a lower cost alternative to our hydraulic implants. Most of our
sales of the AMS Malleable 650 are outside of the United States.

We also distribute the NEVA System, an innovative diagnostic system designed to
measure nocturnal erectile events and record pertinent data for physician
review. Based on the information provided by the NEVA System, a physician can
better understand the origin of the erectile dysfunction problem and recommend
appropriate treatment options.

Our Prostate Business

Overview

There are three primary types of prostate disease: enlarged prostate, more
commonly known as BPH, strictures and prostate cancer. We currently offer
products to treat strictures and BPH. We also view the treatment of prostate
cancer as an attractive market opportunity.

In BPH patients, the prostate enlarges which squeezes the urethra, thereby
restricting the normal passage of urine. More than half of men in their 60s
have BPH, and among men in their 70s and 80s, the figure may be as high as
90%. BPH patients also typically suffer from a variety of troubling symptoms
primarily relating to changes in urinary voiding which may have a significant
impact on their quality of life. These symptoms include: increased frequency of
urination; sudden urge to urinate; stopping and starting of flow during
urination; weak flow of urine; difficulty in starting urination and sensation
of incompleteness in emptying of bladder. An estimated 30 million men
worldwide suffer from BPH, approximately 24 million of whom have moderate to
severe BPH symptoms.

Strictures are scarring of the urethra, usually caused by sexually transmitted
diseases or from physical or surgical trauma, including passing of scopes or
other instrumentation within the urethra.

Conventional treatments for prostate disease typically involve a number of
invasive surgical techniques and/or drug therapies. The following summarizes
treatment options for the three types of prostate diseases:



| |  |  | BPH.The primary treatments for patients with mild to moderate BPH
are watchful waiting and drug therapy. Watchful waiting means that the
patient chooses no treatment at all, and seeks treatment only when the
condition worsens. For patients with moderate to severe BPH, the most
common surgical treatment is transurethral resection of the prostate, or
TURP. This procedure involves inserting a tiny looped wire into the
urethra through the penis and up to the prostate to remove the prostatic
tissue. New, less-invasive techniques such as lasers, radio frequency
energy needles, and microwave therapy, are also available. These
therapies are designed to kill prostatic tissue using various forms of
energy without damaging the urethra. While less invasive than TURPs,
these therapies are somewhat less effective at restoring high urine flow
rates to patients. Stents are another alternative for patients who
suffer from BPH. They offer the advantages of a less-invasive procedure,
immediate relief of obstruction, as well as flow rates comparable to
TURP.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Strictures.Treatments of strictures include dilation procedures,
urethrotomy procedures and stents. Urethral dilation involves the use of
metal dilators to gradually stretch out the strictured area of the
urethra. Urethrotomy involves making an incision in the urethra to open
up the scarred area. Urethral stents are placed to hold open the urethra
so that the scar does not reform, a common complication of other
procedures. A urethroplasty procedure is typically used when other
methods                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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| |   |  | fail. In this procedure, the stricture is accessed through a surgical
incision, the strictured area is removed and the urethra is re-attached.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Prostate cancer.A radical prostatectomy is the most widely accepted
treatment to remove a cancerous prostate gland. In this procedure, the
entire prostate is removed in an invasive procedure. Radiation therapy,
particularly brachytherapy, has become an important new technology for
treatment of prostate cancer. Brachytherapy is a less-invasive procedure
in which small radiation seeds are implanted in the prostate through the
perineum to kill the cancerous prostatic tissue. Cryotherapy has also
recently been reintroduced to the market. This procedure uses cryo
probes placed perineally to freeze the prostate and kill the cancerous
tissue.

Our Prostate Products

We have the number one market position in permanent urethral stents for the
treatment of BPH and strictures. The following tables list our core prostate
products and products under development. For more information on the FDA
regulatory approval process, see BusinessGovernment Regulation.

|                              |  |                                                                      |  |                                 
|----------------------------- |  | -------------------------------------------------------------------- |  | --------------------------------
|Current Products              |  | Description of Product                                               |  | Regulatory Approval Status      
|                              |  |                                                                      |  |                                 
|UroLume Endoprosthesis        |  | An expandable braided
wire stent                                     |  | PMA approved
CE mark certified  
|                             
|                             
|                             
|                             
|Coaguloop Resection Electrode |  | A resection loop
using radio frequency
energy to resect the
prostate |  | 510(k) cleared
CE mark certified

|                           |  |                                                                                             |  |                                                                       
|-------------------------- |  | ------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------
|Products Under Development |  | Description of Product                                                                      |  | Regulatory Approval Status                                            
|                           |  |                                                                                             |  |                                                                       
|ProstaJect System          |  | A needle injecting
probe is used to
inject ethanol into
the prostate to
ablate tissue       |  | Investigational New Drug
Application (IND) effective
CE mark certified
|                          
|                          
|                          
|                          
|Next Generation UroLume    |  | An expandable braided
wire stent which is
more comfortable and
designed to be easier
to use |  | PMA supplement has been submitted
CE mark certified                   
|                          
|                          
|                          
|                          
|Biodegradable Stent        |  | Urethral stent
designed to maintain
its structure for 2-4
weeks after implant               |  | Investigational Device
Exemption (IDE)/PMA to be submitted            

Our UroLume Endoprosthesis is an expandable braided wire stent intended as a
treatment to relieve urinary obstruction caused by BPH, detrusor external
sphincter dyssenergia, or DESD, and strictures. Our UroLume procedure is
minimally invasive, using a direct vision delivery system for precise
positioning and easy placement. Urologists perform this procedure under local
or general anesthesia. Our UroLume stent has a 95% success rate seven years
after implant in stricture applications. We are currently developing a next
generation UroLume product which is designed to be easier to remove and less
irritative.

Our Coaguloop Resection Electrode is a premium resection loop used during TURP
and bladder cancer procedures. It is used as a treatment to relieve urinary
obstruction caused by BPH. The main advantage of our loop is that it has
superior coagulation characteristics compared to other loops.

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We acquired the exclusive rights to distribute the ProstaJect injection device
on a worldwide, long-term basis in October 1999. The ProstaJect System is an
injection system designed to treat BPH in a less-invasive manner by injecting
ethanol into the prostate to kill prostatic tissue. The device is made up of a
curved injection needle that facilitates precise placement of the ethanol into
the prostate. This system does not require the physician to invest in any
capital equipment, unlike competitive products currently on the market.
Urologists can perform this transurethral injection procedure in an ambulatory
surgery center without the use of general anesthesia. We are currently seeking
FDA approval to market this product in the United States for BPH. We plan to
launch this product in April 2001 outside of the United States.

We are in the process of developing a biodegradable stent. This product is
designed for use in post-surgical procedures, particularly after less-invasive
BPH procedures. A high percentage of these patients are sent home with
catheters after the procedure because of temporary obstruction caused by
swelling into the urethra. Our product is designed to hold open the urethra for
a period of two to four weeks. This would allow patients immediate
post-operative voiding without the use of a catheter.

Sales and Marketing

United States

We have a strong sales, marketing and distribution infrastructure that includes
well-trained, direct field representatives worldwide. Our U.S. sales force is
comprised of two teams of sales representatives. One team is focused on selling
traditional AMS products, including our penile implants, artificial urinary
sphincters and UroLume stents. The other team, made up primarily of the former
Influence sales force, is focused on selling sling products to the female
incontinence market. We believe this allows both sales teams to focus on their
core competencies and to maximize sales. We also have surgical specialists in
the field who contribute to our selling efforts by supporting surgical
procedures involving our products.

We believe the size and strength of our sales organization are among our
important competitive advantages. Our sales force is very well trained in the
technical aspects of the procedures urologists perform with our products. In
addition, our AMS sales team has strong, long-term relationships with the
urologists who use our products. Our Influence sales team is a competitive
selling organization. Our sales representatives have an average tenure with us
or Influence of six years.

Our marketing department consists of approximately 35 professionals who develop
and implement marketing programs designed to increase awareness, understanding
and preference for our products with patients and urologists. Our marketing
programs have provided us with exceptional access to physicians throughout the
world. These programs include:



| |  |  | Medical Marketing Programsare intended to educate physicians and
their staff about successfully promoting their practices, efficiently
educate patients about the diagnosis and treatment of various urological
conditions and effectively train office staff to work with patients.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Surgical Training Programsare offered to physicians interested in
improving their surgical techniques.                                                                                                                                                                              
|
| |  |  | Education Materials, such as brochures and videos, are developed to
educate patients and urologists about treatment options for
incontinence, erectile dysfunction, prostate disease and about our
products in particular.                                                          
|
| |  |  | Reimbursement Assistanceis provided by our Health Care Affairs
department with the assistance of outside consultants to assist patients
and surgeons in obtaining appropriate reimbursement for our products.                                                                       

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| |  |  | Medical Advisory Boardsare comprised of key U.S. and international
opinion leaders who provide us feedback about our current and future
products, diagnostic and treatment trends and other areas of interest.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Websitemarketing is focused on educating both patients and
urologists about our product alternatives, reimbursement for our
procedures and our marketing programs.                                            

International

In order to grow our international business, which represented 18.6% of our
total net sales in 2000, we have recently added a new senior management team
and restructured our international business. We currently employ a direct sales
force located in five Western European countries, Canada and Australia. All of
our international sales people sell our entire product line. We also have a
network of approximately 45 foreign independent distributors and agents who
supplement our direct sales force. These distributors and agents sell our
products primarily in Eastern Europe, Southeast Asia, South America, the Middle
East and Africa. The local market condition, regulatory situation and
competitive situation determine the type of products sold in our distributor
markets. New product introductions will be key to growing our international
operations.

Manufacturing and Supply

We have approximately 75,000 square feet at our headquarters located in
Minnetonka, Minnesota used for manufacturing, research and development,
warehousing and distribution. We have numerous manufacturing capabilities at
the Minnesota facility, including high-skilled operations specialists and
expertise in plastic injection molding, silicone transfer molding, silicone
molding, dip coating and silicone extrusion using state-of-the-art technology.
We manufacture almost all of our products and related components in our
Minnesota facility, except for certain manufacturing prototypes and
lower-volume incontinence products manufactured at our Israeli facility.

Although most of the components we purchase to use in our manufacturing
facility are available from multiple sources, some materials are only supplied
by a limited number of vendors. The main component of our implantable
prostheses is raw silicone. We currently rely on one supplier to provide the
silicone used in most of our implantable products. We are aware of only two
suppliers of silicone to the medical device industry for permanent implant
usage. We rely mostly on one supplier for some of the components used in
Influences sling procedure kits for the treatment of incontinence, although
there are a few other authorized suppliers of these components. We purchase
other raw materials from multiple suppliers in the United States.

We maintain a comprehensive quality assurance and quality control program,
which includes documentation of all material specifications, operating
procedures, equipment maintenance and quality control test methods. Our
documentation systems comply with FDA and ISO 9001 requirements.

Currently, we are operating one manufacturing shift and are at approximately
30% of our production capacity in our Minnesota facility. We have the ability
to increase production levels of our current product lines without expanding
our facility. We believe that our property in Minnesota is adequate to serve
our business operations for the foreseeable future.

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Research and Development

Our research and development staff of more than 40 people focuses on developing
new products to treat incontinence, erectile dysfunction and prostate disease.
In addition, our research and development staff continually works on enhancing
our current product offerings, also known as continuation engineering. The
incontinence, erectile dysfunction and prostate disease teams focus on
developing new, unique and cost-effective products to treat these disorders.
The continuation engineering team focuses on developing improvements to our
existing products. Our research and development staff also consults with our
network of leading urologists to develop new products and new features to our
existing products.

The following is a partial list of our internal research and development technologies and expertise:



| |  |  | Fluid mechanics, hydraulics and coupling;                                       
| | - |  | --------------------------------------------------------------------------------
|
| |  |  | Micro-valving and switching;                                                    
|
| |  |  | Silicone elastomers (precision molding, extruding, bonding);                    
|
| |  |  | Thermoplastics (precision molding, extruding, bonding, machining);              
|
| |  |  | Braiding of metals and polymers;                                                
|
| |  |  | Biocompatibility of materials (physiologic interaction, long-term implantation);
|
| |  |  | CAD/CAM; and                                                                    
|
| |  |  | Antimicrobial coatings and bioresorbable polymers.                              

In addition to our internal ideas, our research and development department
consults with a global network of leading physicians. A research and
development team evaluates and balances new concepts against our current
business strategies. Viable concepts are prototyped by using our in-house,
state-of-the-art, tooling and molding center. Our research and development
laboratories and highly-skilled technicians provide an in-vitro evaluation of
new concepts before substantial funding is allocated to any development
activities. Once a product and/or system is technically and economically
feasible, dedicated resources are committed to firm timelines and costs.
Physicians are actively involved in the conception of the idea and remain
engaged throughout the development cycle. This unique combination ensures
product designs that are truly customer driven and focussed.

We spent $13.1 million in 1998, $9.6 million in 1999 and $12.2 million in 2000
on research and development. These costs include clinical and regulatory
expenses. Our research and development costs declined in 1999 because we
abandoned a research project in early 1999, and did not spend a significant
amount on this project in 1999.

Competition

Competition in the medical device industry is intense and is characterized by
extensive research efforts and rapid technological progress. We believe that
the primary competitive factors include price, quality, technical capability,
innovation, breadth of product line and distribution capabilities. Many of our
competitors in the urology market have greater resources, more widely-accepted
products, less-invasive therapies, greater technical capabilities and stronger
name recognition than we do. Our ability to compete is affected by our ability
to:



| |  |  | develop new products and innovative technologies;                            
| | - |  | -----------------------------------------------------------------------------
|
| |  |  | obtain regulatory clearance and compliance for our products;                 
|
| |  |  | protect the proprietary technology of our products and manufacturing process;
|
| |  |  | market our products;                                                         

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| |  |  | attract and retain skilled employees; and         
| | - |  | --------------------------------------------------
|
| |  |  | maintain and establish distribution relationships.

Our principal competition in the erectile dysfunction market is Mentor
Corporations penile implants and oral medications such as Pfizers Viagra. We
also compete with companies that provide injectables for erectile dysfunction
such as Pharmacia and Schwarz Pharma. Our principal competitors in the
incontinence market are Boston Scientific Corporation, Johnson & Johnson, C.R.
Bard, Inc. and Mentor Corporation. Our principal competitors in the prostate
disease market are Urologix, Inc., VidaMed, Inc., Johnson & Johnson and Boston
Scientific Corporation.

Our competitors also include academic institutions and other public and private
research organizations that continue to conduct research, seek patent
protection and establish arrangements for commercializing products in this
market which will compete with our products.

Patents and Intellectual Property

We rely on a combination of patents, trade secrets, know-how, trademarks,
copyrights and agreements to protect our business interests. We currently have
73 issued U.S. patents and 245 corresponding international patents that cover
various aspects of our technology. We also have 145 U.S. and international
patent applications pending. A substantial portion of our annual research and
development budget is allocated towards generating new concepts and product
ideas. This, combined with a rewarding patent program, has significantly
increased the number of patentable proposals.

We seek to aggressively protect technology, inventions and improvements that we
consider important through the use of patents and trade secrets in the United
States and significant foreign markets. We cannot assure you that our patents
will provide competitive advantages for our products, or that our competitors
will not challenge or circumvent these rights. In addition, we cannot assure
you that the U.S. Patent and Trademark Office, or PTO, will issue any of our
pending patent applications. The PTO may also deny or significantly narrow
claims made under our patent applications. Any issued patents may not provide
us with significant commercial protection. We could incur substantial costs in
proceedings before the PTO, including interference proceedings. These
proceedings could result in adverse decisions as to the priority of our
inventions. The laws of some of the countries in which our products are or may
be sold may not protect our products and intellectual property to the same
extent as the laws in the United States, or at all.

While we do not believe that any of our products infringe any valid claims of
patents or other proprietary rights held by third parties, we cannot assure you
that we do not infringe any patents or other proprietary rights held by third
parties. If a third party makes an infringement claim, our costs to defend the
claim could be substantial and adversely affect us, even if we were ultimately
successful in defending the claim. If our products were found to infringe any
proprietary right of a third party, we could be required to pay significant
damages or license fees to the third party or cease production. Litigation may
also be necessary to enforce patent rights we hold or to protect trade secrets
or techniques we own. Any claims or litigation could result in substantial
costs and diversion of effort by our management.

We also rely on trade secrets and other unpatented proprietary technology. We
cannot assure you that we can meaningfully protect our rights in these
unpatented proprietary technology or that others will not independently develop
substantially equivalent proprietary products or processes or otherwise gain
access to our proprietary technology. We seek to protect our trade secrets and
proprietary know-how, in part, with confidentiality agreements with employees
and consultants. We cannot assure you, however, that the agreements will not be
breached, that we will have adequate remedies for any breach or that our
competitors will not discover or independently develop our trade secrets.

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This Annual Report on Form 10-K contains references to our trademarks
ActiconTM, American Medical SystemsTM, AMS 700TM, AMS Ambicor®,
AMS Malleable 650TM, AMS Sphincter 800TM, Coaguloop®, FlastTM,
In-FastTM, Influence®, InVanceTM, ProstaJectTM, Straight-InTM,
Triangle®, UroLume®, UroViveTM, and
Ultrex®. All other trademarks or trade names referred to in this
Annual Report on Form 10-K are the property of their respective owners, in
particular Pfizer Inc. owns Viagra®.

Government Regulation

United States

Numerous governmental authorities, principally the FDA and corresponding state
and foreign regulatory agencies, strictly regulate our products and research
and development activities. The Federal Food, Drug, and Cosmetic Act, or FDA
Act, the regulations promulgated under this act, and other federal and state
statutes and regulations, govern, among other things, the pre-clinical and
clinical testing, design, manufacture, safety, efficacy, labeling, storage,
record keeping, advertising and promotion of medical devices.

Generally, before we can market a new medical device, we must obtain marketing
clearance through a 510(k) premarket notification, approval of a premarket
approval application, or PMA, or approval of product development protocol, or
PDP. The FDA will typically grant a 510(k) clearance if we can establish that
the device is substantially equivalent to a predicate device. It generally
takes several months from the date of a 510(k) submission to obtain clearance,
but it may take longer, particularly if a clinical trial is required.

A PMA or PDP application must be submitted if a proposed device does not
qualify for a 510(k) premarket clearance procedure. The scientific data
required to support an approval to market a product using a PMA or PDP is
generally the same. PMA and PDP applications must be supported by valid
scientific evidence to demonstrate the safety and effectiveness of the device,
typically including the results of clinical trials, bench tests, and laboratory
and animal studies. The PMA and PDP must also contain a complete description of
the device and its components, and a detailed description of the methods,
facilities and controls used to manufacture the device. In addition, the
submission must include the proposed labeling, advertising, and any training
materials. The PMA and PDP process can be expensive, uncertain and lengthy,
require detailed and comprehensive data and generally take significantly longer
than the 510(k) process. Toward the end of the PMA review process, the FDA
generally will conduct an inspection of the manufacturers facilities to ensure
compliance with applicable quality standard regulation requirements which
include elaborate testing, control documentation and other quality assurance
procedures. Separate preapproval inspections are required for each PMA
application.

If human clinical trials of a device are required, either for a 510(k)
submission or a PMA application, and the device presents a significant risk to
the patient in the trial, the sponsor of the trial, usually the manufacturer or
the distributor of the device, must file an investigational device exemption,
or an IDE, application prior to commencing human clinical trials. The IDE
application must be supported by data, typically including the results of
animal and/or laboratory testing. If the IDE application is approved by the FDA
and one or more appropriate institutional review boards, or IRBs, human
clinical trials may begin at a specific number of investigational sites with a
specific number of patients, as approved by the FDA. If the device presents a
nonsignificant risk to the patient, a sponsor may begin the clinical trial
after obtaining approval for the study by the IRBs without separate approval
from the FDA. Submission of an IDE does not give assurance that the FDA will
approve the IDE and, if it is approved, there can be no assurance the FDA will
determine that the data derived from the studies support the safety and
efficacy of the device or warrant the continuation of clinical trials. An IDE
supplement must be submitted to and approved by the FDA before a sponsor or
investigator may make a change to the investigational plan that may affect its
scientific soundness, study indication or the rights, safety or welfare of
human subjects.

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Our core implantable products are or will be approved through the PMA or PDP
application process. Most of our other products are approved through the 510(k)
premarketing notification process. We have conducted clinical trials to support
many of our regulatory approvals.

We currently plan to seek approval from the FDA to market the ProstaJect device
and dehydrated alcohol, as a drug/device combination product, in the United
States. An investigational new drug application, commonly known as an IND
application, was cleared by the FDA in January 2001 and allows us to conduct a
clinical study to assess safety and dosage parameters of use. In order to
obtain FDA marketing approval, we will need to conduct adequate and
well-controlled randomized clinical trials to establish the safety and
effectiveness of the combination drug/device product; submit to the FDA a new
drug application, commonly known as an NDA; and obtain FDA approval of the NDA
prior to any commercial sale or shipment of the product in the United States.
Throughout the process, we will be required to submit extensive clinical data
to the FDA, which the FDA will review and analyze. This process is expensive,
uncertain and generally takes several years to complete.

In addition to granting marketing approvals for our products, the FDA and
international regulatory authorities periodically inspect our company. We must
comply with the host of regulatory requirements that apply to medical devices
marketed in the United States and internationally. These requirements include
labeling regulations, manufacturing regulations, quality system regulation
requirements, and the medical device reporting regulations which require a
manufacturer to report to the FDA adverse events involving its products, and
the FDAs general prohibitions against promoting products for unapproved or
off-label uses. The FDA periodically inspects device and drug manufacturing
facilities in the United States or manufacturers of product to be marketed in
the United States in order to assure compliance with applicable quality system
regulations. The FDA last inspected our Minnetonka, Minnesota and our Israeli
facility manufacturing facility in 2000.

If the FDA believes we are not in compliance with law, it can institute
proceedings to detain or seize products, issue a recall, enjoin future
violations and assess civil and criminal penalties against us and our officers
and employees. If we fail to comply with these regulatory requirements, our
business, financial condition and results of operations would be harmed. In
addition, regulations regarding the manufacture and sale of our products are
subject to change. We cannot predict the effect, if any, that these changes
might have on our business, financial condition and results of operations.

In addition to the FDAs regulation of the sale and marketing of medical
devices, we are also subject to the National Organ Transplant Act, or NOTA,
because we provide human tissue in connection with our sling systems for
urinary incontinence. NOTA prohibits the purchase and sale of human organs,
including bone and related tissue, for valuable consideration. NOTA permits the
payment of reasonable expenses associated with the removal, transportation,
processing, preservation, quality control, implantation and storage of human
tissue. NOTA enables the federal government to impose civil and criminal
penalties on those found to have violated this federal statute.

The FDA has issued a more comprehensive regulatory framework that builds upon
and supersedes the existing regulations for human tissue-based products.
Implementation of this proposed regulatory approach may lead to medical device
submissions for some of the tissue products we provide with our sling kits.

International

In order to market our products in European and other foreign countries, we
must obtain required regulatory approvals and comply with extensive regulations
governing product safety, quality and manufacturing processes. These
regulations vary significantly from country to country and with respect to the
nature of the particular medical device. The time required to obtain these
foreign approvals to market

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our products may be longer or shorter than that required in the United States,
and requirements for licensing may differ from FDA requirements.

In order to market our products in the member countries of the European Union,
we are required to comply with the medical devices directive and obtain CE mark
certification. CE mark certification is an international symbol of adherence to
quality assurance standards and compliance with applicable European medical
device directives. Under the medical devices directives, all medical devices
including active implants and in-vitro diagnostic products must qualify for CE
marking.

All our products sold internationally are subject to appropriate foreign
regulatory approvals, like CE Marking for the European Union. Our products are
manufactured in ISO 9001 certified facilities.

Third-Party Reimbursement

In the United States, as well as in foreign countries, government-funded or
private insurance programs, commonly known as third-party payors, pay the cost
of a significant portion of a patients medical expenses. A uniform policy of
reimbursement does not exist among all these payors. Therefore, reimbursement
can be quite different from payor to payor. We believe that reimbursement is an
important factor in the success of any medical device. Consequently, we seek to
obtain reimbursement for all of our products.

Reimbursement in the United States begins with our ability to obtain FDA
clearances and approvals to market these products. Reimbursement also depends
on our ability to demonstrate the short-term and long-term clinical and
cost-effectiveness of our products from the results we obtain from clinical
experience and formal clinical trials. We present these results at major
scientific and medical meetings and publish them in respected, peer-reviewed
medical journals.

The U.S. Health Care Financing Administration, or HCFA, sets reimbursement
policy for the Medicare program in the United States. HCFA has a national
coverage policy, which provides for the diagnosis and treatment of erectile
dysfunction in Medicare beneficiaries. It is estimated that 50-60% of penile
prosthesis procedures are performed on patients covered by Medicare.

Commercial payor coverage for erectile dysfunction varies widely across the
United States. Prior authorization is required for penile prosthesis surgeries,
and we have developed programs to address coverage denials for physicians and
their patients. For example, the introduction of Viagra resulted in some plans
establishing broad coverage exclusions for erectile dysfunction, most notably
some Blue Cross/Blue Shield plans.

Medicare has a national coverage policy that provides coverage for our AMS 800
Artificial Urinary Sphincter. Likewise, the Influence In-Fast and InVance sling
fixation systems are utilized in surgical procedures that are well-accepted and
paid for by third-party payors. Minimally-invasive treatments for prostate
disease are generally covered under many third-party reimbursement programs.
Treatment for stricture of the urethra is covered by all Medicare carriers in
the United States and BPH is covered by Medicare in 48 states.

All third-party reimbursement programs, whether government funded or insured
commercially, whether inside the United States or outside, are developing
increasingly sophisticated methods of controlling health care costs through
prospective reimbursement and capitation programs, group purchasing, redesign
of benefits, second opinions required prior to major surgery, careful review of
bills, encouragement of healthier lifestyles and exploration of more
cost-effective methods of delivering health care. These types of programs can
potentially limit the amount which health care providers may be willing to pay
for medical devices.

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HCFA implemented the Final Rule on its Prospective Payment System For
Outpatient Services on August 1, 2000. We estimate that more than half of the
procedures using our products are used in an outpatient hospital setting. This
rule provides for a new system to reimburse Medicare outpatient surgical
services provided in a hospital made up of two parts: payment to the hospital
for the procedure cost and a separate payment, known as a pass-through payment,
intended to cover the cost of medical devices used during the procedure that
are more than 10% of the total procedure cost. On a quarterly basis, HCFA
publishes a list of pharmaceuticals and medical devices that will be eligible
for pass-through payments. HCFA currently intends only to provide payment for
the products on this list. All of our current products used on an out-patient
basis are on HCFAs list of approved pass-through payment codes.

Employees

As of December 31, 2000, we employed directly and through our subsidiaries 507
people in the following areas: 144 in manufacturing, 196 in sales and
marketing, 78 in administration, 36 in regulatory, clinical and quality
assurance, 46 in research and development and 7 in human resources. We do not
have any active organized labor unions. We believe we have an excellent
relationship with our employees.

Financial Information About Geographic Areas

See Note 8 of our financial statements on page 33 of our 2000 Annual Report for
the information about geographic areas.




ITEM 1A. CERTAIN IMPORTANT FACTORS

There are several important factors that could cause our actual results to
differ materially from our anticipated results or which are reflected in any
forward-looking statements in this Annual Report on Form 10-K. These factors,
and their impact on the success of our operations and our ability to achieve
our goals, include the following:

Successful Introduction of New Products and Product Improvements

As part of our growth strategy, we intend to introduce a number of new products
and product improvements, which are described above. If we do not introduce
these new products and product improvements timely, or they are not
well-accepted by the market, our future growth will suffer.

Continued Use of Non-Invasive Treatment Alternatives

We predominantly sell medical devices for invasive or minimally invasive
surgical procedures. If patients do not accept our products, our sales may
decline. Patient acceptance of our products depends on a number of factors,
including the failure of non-invasive therapies, the degree of invasiveness
involved in the procedures using our products, the rate and severity of
complications from the procedures using our products and other adverse side
effects from the procedures using our products. Patients are more likely first
to consider non-invasive alternatives to treat their urological disorders. The
introduction of new oral medications or other less-invasive therapies may cause
our sales to decline in the future.

Continued Physician Use and Endorsement of our Products

In order for us to sell our products, physicians must recommend and endorse
them. We may not obtain the necessary recommendations or endorsements from
physicians. Many of the products we recently acquired or are developing are
based on new treatment methods. Acceptance of our products is dependent on
educating the medical community as to the distinctive characteristics,
perceived benefits, clinical efficacy and cost-effectiveness of our products
compared to competitive products, and on training physicians in the proper
application of our products.

16



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##### Table of Contents



Increased Supply of Sling Material

We provide human cadaveric tissue as a service in conjunction with the sale of
our sling procedure kits for urinary incontinence. Currently, the available
supply of human tissue is not sufficient to meet demand. In December 2000, we
entered into an agreement with our supplier of cadaveric dermal tissue to act
as a processor of the material we provide. If this agreement proves
inadequate, or we are unable to purchase enough unprocessed dermal tissue,
sales of our sling procedure kits could decline.

Increasing Growth of the Penile Implant Market

In order to grow our business, we need to increase our sales in the penile
implant market. If we are unable to do so, our future growth will suffer.

Actions Related to Reimbursement for our Products

We may be unable to sell our products on a profitable basis if third-party
payors deny coverage or reduce their current levels of reimbursement. Our
revenues depend largely on government health care programs and private health
insurers reimbursing patients medical expenses. Physicians, hospitals and
other health care providers may not purchase our products if they do not
receive satisfactory reimbursement from these third-party payors for the cost
of the procedures using our products. If we are unable to obtain adequate
levels of reimbursement from third-party payors outside of the United States,
international sales of our products may decline. Many foreign markets have
governmentally managed health care systems that govern reimbursement for new
devices and procedures.

Potential Product Recalls

In the event that any of our products prove to be defective, we could
voluntarily recall, or the FDA could require us to redesign or implement a
recall of, any defective product. We believe there is a possibility that we
may recall products in the future and that future recalls could result in
significant costs to us and in significant negative publicity which could harm
our ability to market our products in the future.




ITEM 2. PROPERTIES

Our corporate headquarters, main warehouse and manufacturing operations are
located in a 180,000 square foot building we own in Minnetonka, Minnesota. The
manufacturing operations at this location include sufficient capacity to expand
production of our current product line, as well as absorb the transfer of
Influences high volume manufacturing and assembling operations.

We lease office space for our international operations in France, Spain,
Germany, Belgium, England, Australia and Canada. We also lease space in a
building in Israel that contains research and development and prototype
manufacturing capabilities.




ITEM 3. LEGAL PROCEEDINGS

On February 3, 1999, Boston Scientific Corporation (BSC) filed a complaint in
U.S. District Court for the Northern District of California alleging that
Influence, Inc. (now American Medical Systems International, Inc.)
(Influence) had infringed four patents owned by BSC by encouraging the use of
its bone anchor insertion devices in stress urinary incontinence procedures.
In December 1999, we acquired Influence. On March 27, 2000, we filed a
complaint in U.S. District Court for the District of Minnesota, alleging that
BSC had infringed one patent owned by us through BSCs sales and promotion of
products and methods for the treatment of female stress urinary incontinence
and that BSC had misappropriated trade secrets. Both of these cases were
settled pursuant to a Settlement Agreement, dated January 31, 2001, under which
all parties released all claims raised in the lawsuits.

17



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##### Table of Contents



We have been and are also currently subject to various other legal proceedings
and other matters that arise in the ordinary course of business, including
product liability claims.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 2000.




ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers, with their ages and biographical information as of
March 31,2001, are as follows:

|                      |  |     |    |       |  |                                                                
|--------------------- |  | --- | -- | ----- |  | ---------------------------------------------------------------
|Name                  |  | Age |    | Title
|                      |  |     |    |      
|Douglas W. Kohrs      |  |     | 43 |       |  | President, Chief Executive Officer and
Director                
|                     
|                     
|                     
|                     
|Richard J. Faleschini |  |     | 54 |       |  | Vice President, Sales and Marketing                            
|                     
|                     
|                     
|                     
|Gregory J. Melsen     |  |     | 48 |       |  | Vice President, Finance, Treasurer, and
Chief Financial Officer
|                     
|                     
|                     
|                     
|Janet L. Dick         |  |     | 44 |       |  | Vice President, Human Resources                                
|                     
|                     
|                     
|                     
|Martin J. Emerson     |  |     | 37 |       |  | Vice President and General Manager,
International              
|                     
|                     
|                     
|                     
|Lawrence W. Getlin    |  |     | 55 |       |  | Vice President, Regulatory, Medical Affairs
and Quality Systems
|                     
|                     
|                     
|                     
|Brian A. Millberg     |  |     | 44 |       |  | Vice President, Manufacturing and Operations                   
|                     
|                     
|                     
|                     
|Johann Neisz          |  |     | 43 |       |  | Vice President, Research and Development                       
|                     
|                     
|                     
|                     
|J. Daniel Ruys        |  |     | 50 |       |  | Vice President, International                                  

Douglas W. Kohrshas served as our President, Chief Executive Officer and
Director since April 1999. Mr. Kohrs has 19 years of experience in the medical
device industry, most recently as general manager of Sulzer Spine-Tech, Inc.
from May 1998 to April 1999. Mr. Kohrs was part of the founding team at
Spine-Tech when it was formed in 1991 to develop and commercialize the BAK
spinal fusion cage, a novel implantable device to improve the surgical
treatment of degenerative disc disease. Mr. Kohrs also served as Vice President
of Research and Development and Vice President of Marketing during his tenure
at Spine-Tech. Prior to working for Spine-Tech, Mr. Kohrs spent seven years
with Johnson & Johnson and two years at Zimmer, a division of Bristol-Myers
Squibb. Mr. Kohrs currently serves as a director of Kyphon, Inc., Disc
Dynamics, and Pioneer Surgical Technologies, all privately-held companies.

Richard J. Faleschinihas served as our Vice President, Sales and Marketing
since November 1999. Mr. Faleschini has over 21 years experience in medical
device sales, marketing and general management. From July 1995 to August 1999,
he served in various executive positions at Medtronic, Inc. with
responsibilities for several sectors of its cardiovascular businesses,
including coronary stents, most recently as Vice President, U.S. Cardiovascular
Health Care Systems Marketing. His previous experience also includes sales and
marketing management responsibilities at Cordis Corporation from 1990 to 1995,
at Biomagnetic Technologies from 1985 to 1990 and at ATL and ADR Ultrasound
from 1977 to 1985. Mr. Faleschini currently serves as a director of
MedAcoustics, Inc., a privately-held company.

18



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##### Table of Contents



Gregory J. Melsenhas served as our Vice President, Finance, Treasurer and
Chief Financial Officer since March 1999. From January 1996 to March 1999, Mr.
Melsen was Vice President, Finance, Treasurer and Chief Financial Officer of
Avecor Cardiovascular, Inc., a publicly-traded medical device company that
Medtronic, Inc. acquired in March 1999. His 27-year tenure in accounting and
finance includes two years as Vice President and Chief Financial Officer of
PACE Incorporated, an environmental testing company, and 19 years with Deloitte
& Touche, including nine years as an audit partner.

Janet L. Dickhas served as our Vice President, Human Resources since 1996.
Overall, Ms. Dick has spent almost 15 years in positions of increasing
responsibility within our human resources department and Schneiders human
resources department, both of which were divisions of Pfizer at the time. Prior
to joining us, Ms. Dick was Assistant Vice-President/Personnel Officer for
Utica National Bank & Trust for four years.

Martin J. Emersonhas served as our Vice President, General Manager of
International since June 2000. Mr. Emerson has 15 years experience in the
medical device field in finance and general management capacities. From
September 1998 to February 2000, he served as General Manager and Finance
Director for Boston Scientific Corporation in Singapore. Also in Singapore, he
was Vice President and Regional Financial Officer with MasterCard International
from April 1997 to September 1998. Mr. Emersons early experience was with
Baxter International from June 1985 to March 1988 and from May 1989 to April
1997 in positions of increasing responsibilities in finance and administration,
leading to the positions of Regional Director, Finance and Administration,
Singapore and ultimately, Vice President Finance  Hospital Business, Brussels,
from September 1995 to April 1997.

Lawrence W. Getlin, J.D.has served as our Vice President, Regulatory, Medical
Affairs and Quality Systems and Compliance since 1990. Prior to joining us, Mr.
Getlin served for 14 years with the Pharmaseal Division of Baxter
Healthcare/American Hospital Supply, the last eight years as the Director of
Regulatory Affairs. He is a member of the California State Bar as well as the
U.S. Court of Appeals 9th District, and District Court, Central District of
California, and is Regulatory Affairs Certified.

Brian A. Millberghas served as our Vice President, Manufacturing and
Operations since September 1998. Mr. Millberg joined us in 1984, spending his
first 12 years with us in positions of increasing responsibility within
research and development. In 1996, he was promoted to Director of Operations,
with full responsibility for our manufacturing operations.

Johann Neiszhas served as our Vice President, Research and Development since
May 1999. Mr. Neisz has 17 years of medical device product development
experience. From July 1988 to May 1999, Mr. Neisz was employed by Medtronic,
Inc. in senior level Research and Development capacities in the Netherlands,
Sweden, and in the United States with its Neuro, Synectics-Dantec, Corporate
Ventures and Tachyarrhythmia Instruments businesses.

J. Daniel Ruyshas served as our Vice President, International since July 1999.
Mr. Ruys has 20 years of experience in sales, marketing and general management
with medical device companies and has spent most of his career based in Europe.
From April 1997 to June 1999, he served as the European Director of MICROVENA
International B.V. From March 1995 to March 1997, he served as the Vice
President, Europe of CardioGenesis B.V. From January 1994 to February 1995, he
served as General Manager of Hepatix, Inc. From 1977 through 1993, he served in
various capacities at Baxter Healthcare/American Hospital Supply.

19



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##### Table of Contents






PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The information in the Corporate Information section of our 2000 Annual
Report on page 37 is incorporated in this Annual Report on Form 10-K by
reference.

We had no unregistered sales of equity securities during the fourth quarter of
the year ended December 31, 2000.

We completed an initial public offering (IPO) of our voting common stock,
$.01 par value, on August 15, 2000 pursuant to a Registration Statement on Form
S-1 (File No. 333-37488), which was declared effective by the Securities and
Exchange Commission August 10, 2000. U.S. Bancorp Piper Jaffray, Banc of
America Securities LLC and Chase H&Q were the lead underwriters for the IPO.
In the IPO, we registered 7,187,500 shares of voting common stock with the SEC
for a maximum offering price of $93.4 million. The IPO has terminated and all
securities registered were sold. We sold an aggregate of 6,250,000 shares of
common stock at a public offering price of $11.00 per share in the IPO, and
Warburg, Pincus Equity Partners, L.P. sold 937,500 additional shares of common
stock at a public offering price of $11.00 per share to the underwriters
pursuant to an option to cover over-allotments. The sale of the shares of
common stock by us generated aggregate gross proceeds of approximately $68.7
million for AMS. The aggregate net proceeds to us were approximately $62.9
million, after deducting underwriting discounts and commissions of
approximately $4.8 million and directly paying expenses of the IPO of
approximately $1.0 million.

As of March 31, 2001, we have used approximately $41.0 million of the net
proceeds to repay outstanding indebtedness under the guaranteed portions of our
senior credit facility. Additionally, we have used approximately $4.0 million
of the net proceeds to make contingent purchase price payments under our merger
agreement with Influence. The balance, approximately $17.9 million, was used
to make quarterly payments and prepayments under the term note portion of our
senior credit facility and for working capital and other general corporate
purposes. All of the foregoing amounts are reasonable estimates, and all of
the payments of proceeds and expenses represented direct and indirect payments
to others.




ITEM 6. SELECTED FINANCIAL DATA

The financial information in the Selected Financial Data section of our 2000
Annual Report on page 14 is incorporated in this Annual Report on Form 10-K by
reference.




ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information in the Managements Discussion and Analysis of Financial
Condition and Results of Operations section of our 2000 Annual Report on pages
15 through 21 is incorporated in this Annual Report on Form 10-K by reference.

20



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##### Table of Contents






ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information in the Managements Discussion and Analysis of Financial
Condition and Results of Operations  Interest Rate Hedging and Currency
Fluctuations section of our 2000 Annual Report on page 20 is incorporated in
this Annual Report on Form 10-K by reference.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Financial Statements and the Report of Independent Auditors on pages 22
through 36 of our 2000 Annual Report, the information in the Financial
Highlights section of our 2000 Annual Report on page 2 and the information in
the Quarterly Financial Data section of our 2000 Annual Report on page 36,
are incorporated in this Annual Report on Form 10-K by reference.




ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

21



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##### Table of Contents






PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

A. Directors of the Registrant.

The information in the Election of Directors  Information About Nominees and
Other Directors and Election of Directors  Other Information About Nominees
and Other Directors sections of our 2001 Proxy Statement is incorporated in
this Annual Report on Form 10-K by reference.

B. Executive Officers of the Registrant.

Information about our executive officers is included in this Annual Report on
Form 10-K under Item 4A, Executive Officers of the Registrant.

C. Compliance with Section 16(a) of the Exchange Act.

The information in the Section 16(a) Beneficial Ownership Reporting
Compliance section of our 2001 Proxy Statement is incorporated in this Annual
Report on Form 10-K by reference.




ITEM 11. EXECUTIVE COMPENSATION

The information in the Election of Directors  Director Compensation and
Compensation and Other Benefits sections of our 2001 Proxy Statement is
incorporated in this Annual Report on Form 10-K by reference.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information in the Principal Stockholders and Beneficial Ownership of
Management section of our 2001 Proxy Statement is incorporated in this Annual
Report on Form 10-K by reference.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information in the Certain Transactions section of our 2001 Proxy
Statement is incorporated in this Annual Report on Form 10-K by reference.

22



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##### Table of Contents






PART IV




ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K



|    |  |    |                      
|--- |  | -- | ---------------------
|(a) |  | 1. | Financial Statements:



| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | The following Financial Statements are incorporated in this
Annual Report on Form 10-K by reference from the pages noted
in our 2000 Annual Report:



| |                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Report of Independent Auditors  page 36                                                                                                                                                                                                                                                                                            
|
| | Consolidated Balance Sheets as of December 31, 2000 and
1999  page 22                                                                                                                                                                                                                                                              
|
| | Consolidated Statements of Operations for the years
ended December 31, 2000 and 1999 and the period from
September 11, 1998 to December 31, 1998 and Combined
Predecessor Statement of Operations for the period from
January 1, 1998 to September 10, 1998  page 23                                                               
|
| | Consolidated Statements of Changes in Stockholders
Equity (Deficit) for the years ended December 31, 2000
and 1999 and the period from September 11, 1998 to
December 31, 1998 and Combined Predecessor Statements
of Changes in Stockholders Equity (Deficit) for the
period from January 1, 1998 to September 10, 1998  page 24
|
| | Consolidated Statements of Cash Flows for the years
ended December 31, 2000 and 1999 and the period from
September 11, 1998 to December 31, 1998 and Combined
Predecessor Statements of Cash Flows for the period
from January 1, 1998 to September 10, 1998   page 25                                                             
|
| | Notes to Combined and Consolidated Financial Statements  pages 26 through 36                                                                                                                                                                                                                                                       

23



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##### Table of Contents





| |  |    |                               
| |  | -- | ------------------------------
| |  | 2. | Financial Statement Schedules:

American Medical Systems Holdings, Inc.
Schedule II Valuation and Qualifying Accounts
(In thousands)

|                                                                   |                    |           |            |          |            |            |               |          |  |  |            |       |  |  |   |       | 
|------------------------------------------------------------------ | ------------------ | --------- | ---------- | -------- | ---------- | ---------- | ------------- | -------- |  |  | ---------- | ----- |  |  | - | ----- | 
|                                                                   |                    |           | Balance at |          | Charged to
|                                                                   |                    |           | Beginning  |          | Costs and  |            |               |          |  |  | Balance at
|Description                                                        |                    | of Period |            | Expenses |            | Deductions | End of Period
|                                                                   |                    |           |            |          |            |            |              
|Column A                                                           |                    | Column B  |            | Column C |            | Column D   |               | Column E
|                                                                   |                    |           |            |          |            |            |               |         
|Allowance for doubtful accounts deducted from accounts
receivable:
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|For the period ended:                                             
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 2000  |           | $          | 404      |            |            | $             | 953      |  |  | $          | 661   |  |  | $ | 696   | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 1999  |           | $          | 700      |            |            | $             | 186      |  |  | $          | 482   |  |  | $ | 404   | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 1998  |           | $          | 800      |            |            | $             | 79       |  |  | $          | 179   |  |  | $ | 700   | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | September 10, 1998 |           | $          | 1,655    |            |            | $             | 117      |  |  | $          | 972   |  |  | $ | 800   | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Valuation allowance deducted from inventories:                    
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|For the period ended:                                             
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 2000  |           | $          | 2,193    |            |            | $             | 1,761    |  |  | $          | 814   |  |  | $ | 3,140 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 1999  |           | $          | 2,486    |            |            | $             | 346      |  |  | $          | 639   |  |  | $ | 2,193 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 1998  |           | $          | 2,864    |            |            | $             |         |  |  | $          | 378   |  |  | $ | 2,486 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | September 10, 1998 |           | $          | 831      |            |            | $             | 3,593    |  |  | $          | 1,560 |  |  | $ | 2,864 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Accrued product liability reserve:                                
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|For the period ended:                                             
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 2000  |           | $          | 1,043    |            |            | $             | 571      |  |  | $          | 403   |  |  | $ | 1,211 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 1999  |           | $          | 225      |            |            | $             | 818      |  |  | $          |      |  |  | $ | 1,043 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 1998  |           | $          |         |            |            | $             | 225      |  |  | $          |      |  |  | $ | 225   | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | September 10, 1998 |           | $          |         |            |            | $             | 7,950    |  |  | $          | 7,950 |  |  | $ |      | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Accrued warranty expense:                                         
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|For the period ended:                                             
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 2000  |           | $          | 7,385    |            |            | $             | 1,234    |  |  | $          | 1,071 |  |  | $ | 7,548 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 1999  |           | $          | 6,348    |            |            | $             | 1,037    |  |  | $          |      |  |  | $ | 7,385 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | December 31, 1998  |           | $          | 6,749    |            |            | $             | 294      |  |  | $          | 695   |  |  | $ | 6,348 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | September 10, 1998 |           | $          | 5,925    |            |            | $             | 824      |  |  | $          |      |  |  | $ | 6,749 | 



| |  |    |          
| |  | -- | ---------
| |  | 3. | Exhibits:



| |                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The exhibits to this Annual Report on Form 10-K are listed in
the Exhibit Index on pages 27 through 31. A copy of any of
the exhibits listed will be sent at a reasonable cost to any
stockholder as of March 31, 2001. Requests should be sent to
Gregory J. Melsen at corporate headquarters.
|
| | The following is a list of each management contract or
compensatory plan or arrangement required to be filed as an
exhibit to this Annual Report on Form 10-K under Item 14(c):                                                                                                                



| |    |                                                                                                                      
| | -- | ---------------------------------------------------------------------------------------------------------------------
| | 1. | Employment Agreement, dated April 23, 1999, between Douglas Kohrs and
American Medical Systems, Inc.                 
|
| | 2. | Amendment to the Employment Agreement, dated April 17, 2000, between
Douglas Kohrs and American Medical Systems, Inc.
|
| | 3. | Stock Option Agreement, dated April 23, 1999, between Douglas Kohrs
and American Medical Systems, Inc.               
|
| | 4. | Employment Agreement, dated March 24, 1999, between Gregory J. Melsen
and American Medical Systems, Inc.             

24



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##### Table of Contents





| |     |                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------
| | 5.  | Employment Agreement, dated May 1, 1999, between Johann Neisz and
American Medical Systems, Inc.                
|
| | 6.  | Employment Agreement, dated July 22, 1999, between Jan Daniel Ruys and
American Medical Systems Benelux B.V.B.A.
|
| | 7.  | Consulting Agreement, dated September 1, 1999, between Medical Genesis
and American Medical Systems, Inc.       
|
| | 8.  | 2000 Equity Incentive Plan.                                                                                     
|
| | 9.  | Form of Incentive Stock Option Agreement.                                                                       
|
| | 10. | Form of Non-Qualified Stock Option Agreement.                                                                   
|
| | 11. | Employee Stock Purchase Plan.                                                                                   
|
| | 12. | American Medical Systems Nonfunded Deferred Compensation and
Supplemental Savings Plan.                         
|
| | 13. | American Medical Systems Nonfunded Supplemental Retirement Plan.                                                
|
| | 14. | 2000 Management Incentive Plan.                                                                                 



|    |  |                                                          | 
|--- |  | -------------------------------------------------------- | 
|(b) |  | Reports on Form 8-K filed in the fourth quarter of
2000:



| |      
| | -----
| | None.

25



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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, American Medical Systems Holdings, Inc., the Registrant, has duly
caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|                      |                                         |    |                                                                            
|--------------------- | --------------------------------------- | -- | ---------------------------------------------------------------------------
|Dated: March 27, 2001 | AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
|                     
|                     
|                     
|                     
|                      |                                         | By | /s/ Douglas W. Kohrs
Douglas W. Kohrs
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on March 27, 2001 by the following persons on
behalf of the Registrant and in the capacities indicated.

|                            |  |                                                                                        
|--------------------------- |  | ---------------------------------------------------------------------------------------
|Signature                   |  | Title                                                                                  
|                            |  |                                                                                        
|                            |  |                                                                                        
|/s/ Douglas W. Kohrs        |  | President and Chief Executive Officer
(Principal Executive Officer) and Director       
|                           
|Douglas W. Kohrs            |  |                                                                                        
|                            |  |                                                                                        
|/s/ Gregory J. Melsen       |  | Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|                           
|Gregory J. Melsen           |  |                                                                                        
|                            |  |                                                                                        
|/s/ Richard B. Emmitt       |  | Director                                                                               
|                           
|Richard B. Emmitt          
|                            |  |                                                                                        
|/s/ Christopher H. Porter   |  | Director                                                                               
|                           
|Christopher H. Porter Ph.D.
|                            |  |                                                                                        
|/s/ David W. Stassen        |  | Director                                                                               
|                           
|David W. Stassen           
|                            |  |                                                                                        
|/s/ James T. Treace         |  | Director                                                                               
|                           
|James T. Treace            
|                            |  |                                                                                        
|/s/ Elizabeth H. Weatherman |  | Director                                                                               
|                           
|Elizabeth H. Weatherman    

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##### Table of Contents



AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-K
For the Year Ended December 31, 2000

|        |  |                                                                                                                                                                                                                  |  |                                                                                                                               
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------
|ItemNo. |  | Item                                                                                                                                                                                                             |  | Filing Method                                                                                                                 
|        |  |                                                                                                                                                                                                                  |  |                                                                                                                               
|       
|3.1     |  | Amended and Restated Certificate of
Incorporation of the Company                                                                                                                                                 |  | Incorporated by
reference to Exhibit
3.1 of the Companys
Form 10-Q for the
Quarter Ended
September 30, 2000
(File No. 30733).
|       
|3.2     |  | Bylaws, as amended, of the Company                                                                                                                                                                               |  | Incorporated by
reference to Exhibit
3.2 of the Companys
Form 10-Q for the
Quarter Ended
September 30, 2000
(File No. 30733).
|       
|4.1     |  | Registration Rights Agreement, dated June
30, 2000, among the investors listed on
Schedule 1 to the Agreement and American
Medical Systems Holdings, Inc.                                                        |  | Incorporated by
reference to Exhibit
4.1 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).            
|       
|4.2     |  | Certificate of Incorporation of the Company                                                                                                                                                                      |  | See Exhibit 3.1 above.                                                                                                        
|       
|4.3     |  | Bylaws of the Company                                                                                                                                                                                            |  | See Exhibit 3.2 above.                                                                                                        
|       
|10.1    |  | Stockholders Agreement, dated April 17,
2000, among Warburg, Pincus Equity
Partners, L.P., the then existing
stockholders of American Medical Systems
Holdings, Inc. and American Medical
Systems Holdings, Inc. |  | Incorporated by
reference to Exhibit
10.1 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).           
|       
|10.2    |  | Employment Agreement, dated April 23,
1999, between Douglas Kohrs and American
Medical Systems, Inc.                                                                                                             |  | Incorporated by
reference to Exhibit
10.2 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).           
|       
|10.3    |  | Amendment to the Employment Agreement,
dated April 17, 2000, between Douglas
Kohrs and American Medical Systems, Inc.                                                                                            |  | Incorporated by
reference to Exhibit
10.3 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).           
|       
|10.4    |  | Stock Option Agreement, dated April 23,
1999, between Douglas Kohrs and American
Medical Systems, Inc.                                                                                                           |  | Incorporated by
reference to Exhibit
10.4 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).           
|       
|10.5    |  | Employment Agreement, dated March 24,
1999, between Gregory J. Melsen and
American Medical Systems, Inc.                                                                                                         |  | Incorporated by
reference to Exhibit
10.5 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).           
|       
|10.6    |  | Employment Agreement, dated May 1, 1999,
between Johann Neisz and American Medical
Systems, Inc.                                                                                                                 |  | Incorporated by
reference to Exhibit
10.6 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).           

27



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##### Table of Contents



|        |  |                                                                                                                                                                                                                      |  |                                                                                                                     
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------
|ItemNo. |  | Item                                                                                                                                                                                                                 |  | Filing Method                                                                                                       
|        |  |                                                                                                                                                                                                                      |  |                                                                                                                     
|       
|10.7    |  | Employment Agreement, dated July 22, 1999,
between Jan Daniel Ruys and American
Medical Systems Benelux B.V.B.A.                                                                                                     |  | Incorporated by
reference to Exhibit
10.7 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488). 
|       
|10.8    |  | Consulting Agreement, dated September 1,
1999, between Medical Genesis and American
Medical Systems, Inc.                                                                                                            |  | Incorporated by
reference to Exhibit
10.8 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488). 
|       
|10.9    |  | 2000 Equity Incentive Plan.                                                                                                                                                                                          |  | Incorporated by
reference to Exhibit
10.9 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488). 
|       
|10.10   |  | Form of Incentive Stock Option Agreement.                                                                                                                                                                            |  | Incorporated by
reference to Exhibit
10.10 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.11   |  | Form of Non-Qualified Stock Option
Agreement.                                                                                                                                                                        |  | Incorporated by
reference to Exhibit
10.11 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.12   |  | Employee Stock Purchase Plan.                                                                                                                                                                                        |  | Incorporated by
reference to Exhibit
10.12 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.13   |  | American Medical Systems Nonfunded
Deferred Compensation and Supplemental
Savings Plan.                                                                                                                              |  | Incorporated by
reference to Exhibit
10.13 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.14   |  | American Medical Systems Nonfunded
Supplemental Retirement Plan.                                                                                                                                                     |  | Incorporated by
reference to Exhibit
10.14 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.15   |  | 2000 Management Incentive Plan.                                                                                                                                                                                      |  | Incorporated by
reference to Exhibit
10.15 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.16   |  | Leasing Contract among Oil and Energy
Infrastructures, Ltd., Fuel Products Line,
Ltd. and Influence Medical Technologies
Ltd.                                                                                        |  | Incorporated by
reference to Exhibit
10.16 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.17   |  | Agreement and Plan of Merger, dated
November 12, 1999, by and among American
Medical Systems, Inc., Persuade Merger
Corp, Influence, Inc., Globerman
Engineering Ltd., Urotek Ltd., Katsumi
Oneda and Lewis C. Pell. |  | Incorporated by
reference to Exhibit
10.17 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).

28



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                               |  |                                                                                                                     
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------
|ItemNo. |  | Item                                                                                                                                                                                                                                                          |  | Filing Method                                                                                                       
|        |  |                                                                                                                                                                                                                                                               |  |                                                                                                                     
|       
|10.18   |  | First Amendment to Agreement and Plan of
Merger, dated December 15, 1999, by and
among American Medical Systems, Inc.,
Persuade Merger Corp, Influence, Inc.,
Globerman Engineering Ltd., Urotek Ltd.,
Katsumi Oneda and Lewis C. Pell.                       |  | Incorporated by
reference to Exhibit
10.18 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.19   |  | Second Amendment to Agreement and Plan of
Merger, dated April 17, 2000, by and among
American Medical Systems, Inc., Persuade
Merger Corp, Influence, Inc., Globerman
Engineering Ltd., Urotek Ltd., Katsumi
Oneda and Lewis C. Pell.                         |  | Incorporated by
reference to Exhibit
10.19 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.20   |  | Exchange Agreement, dated December 16,
1999, between American Medical Systems,
Inc. and Urotek Ltd.                                                                                                                                                           |  | Incorporated by
reference to Exhibit
10.20 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.21   |  | First Amendment to Exchange Agreement,
dated April 17, 2000, between American
Medical Systems Holdings, Inc., American
Medical Systems, Inc. and Urotek Ltd.                                                                                                  |  | Incorporated by
reference to Exhibit
10.21 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.22   |  | Credit Agreement, dated March 24, 2000,
among American Medical Systems, Inc.,
American Medical Systems Holdings, Inc.,
Bank of America, N.A., as agent for the
four lenders, and Banc of America
Securities LLC, as sole lead arranger and
sole book manager. |  | Incorporated by
reference to Exhibit
10.22 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.23   |  | Security Agreement, dated March 24, 2000,
among American Medical Systems Holdings,
Inc., American Medical Systems, Inc.,
Influence, Inc. and Banc of America, N.A.                                                                                            |  | Incorporated by
reference to Exhibit
10.23 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.24   |  | Form of Revolving Note issued under Credit
Agreement.                                                                                                                                                                                                         |  | Incorporated by
reference to Exhibit
10.24 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.25   |  | Form of Tranche A Term Note issued under
Credit Agreement.                                                                                                                                                                                                    |  | Incorporated by
reference to Exhibit
10.25 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.26   |  | Form of Tranche B Term Note issued under
Credit Agreement.                                                                                                                                                                                                    |  | Incorporated by
reference to Exhibit
10.26 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.27   |  | Parent Joinder Agreement, dated March 24,
2000, between American Medical Systems
Holdings, Inc. and Bank of America, N.A.                                                                                                                                     |  | Incorporated by
reference to Exhibit
10.27 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).

29



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                  |  |                                                                                                                     
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------
|ItemNo. |  | Item                                                                                                                                                                                                                                                                             |  | Filing Method                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                  |  |                                                                                                                     
|       
|10.28   |  | Pledge Agreement, dated March 24, 2000,
among American Medical Systems Holdings,
Inc., American Medical Systems, Inc.,
Influence, Inc. and Banc of America, N.A.                                                                                                                 |  | Incorporated by
reference to Exhibit
10.28 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.29   |  | Guaranty and Investment Agreement, dated
March 24, 2000, among Warburg, Pincus
Equity Partners, L.P., other affiliates of
Warburg Pincus and Bank of America, N.A.                                                                                                               |  | Incorporated by
reference to Exhibit
10.29 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.30   |  | Letter Agreement, dated March 24, 2000,
among Warburg, Pincus Equity Partners,
L.P., other affiliates of Warburg Pincus
and Bank of America, N.A.                                                                                                                                |  | Incorporated by
reference to Exhibit
10.30 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.31   |  | Separation Agreement, dated April 23,
1999, between American Medical Systems,
Inc. and Sam B. Humphries.                                                                                                                                                                         |  | Incorporated by
reference to Exhibit
10.31 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.32   |  | Letter Agreement, dated September 27,
1999, amending the Separation Agreement
between American Medical Systems, Inc. and
Sam B. Humphries.                                                                                                                                       |  | Incorporated by
reference to Exhibit
10.32 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.33   |  | Separation Agreement, dated April 29,
1999, between Helen Vallerand and American
Medical Systems, Inc.                                                                                                                                                                           |  | Incorporated by
reference to Exhibit
10.35 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.34   |  | Separation Agreement, dated July 15, 1999,
between William R. Stein and American
Medical Systems, Inc.                                                                                                                                                                           |  | Incorporated by
reference to Exhibit
10.36 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.35   |  | Mortgage and Security Agreement and
Fixture Financing Statement with
Assignment of Leases and Rents, dated
April 17, 2000, between American Medical
Systems, Inc. and Bank of America, N.A.                                                                                      |  | Incorporated by
reference to Exhibit
10.39 of the Companys
Registration Statement
on Form S-1 (File No.
333-37488).
|       
|10.36   |  | First Amendment to Credit Agreement, dated
January 3, 2001, among American Medical
Systems, Inc., American Medical Systems
Holdings, Inc., Bank of America, N.A., as
agent for the four lenders, and Banc of
America Securities LLC, as sole lead
arranger and sole book manager |  | Filed with this Report.                                                                                             

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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                       |  |                        
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------
|ItemNo. |  | Item                                                                                                                                                                                                                                                                                  |  | Filing Method          
|        |  |                                                                                                                                                                                                                                                                                       |  |                        
|       
|10.37   |  | Second Amendment and Release Agreement,
dated February 20, 2001, among American
Medical Systems, Inc., American Medical
Systems Holdings, Inc., Bank of America,
N.A., as agent for the four lenders, and
Banc of America Securities LLC, as sole
lead arranger and sole book manager |  | Filed with this Report.
|       
|13.1    |  | Excerpts from the 2000 Annual Report to
Stockholders                                                                                                                                                                                                                                  |  | Filed with this Report.
|       
|23.1    |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                                          |  | Filed with this Report.

31