Document:

<PAGE>   1

                              SEPARATION AGREEMENT

         The Employer and Employee wish to end their employment relationship in
an honorable, dignified and orderly fashion. Toward that end, the parties have
agreed to separate according to the following terms.

         This Separation Agreement ("Agreement") and Release, which is attached
and incorporated by reference as Exhibit A ("the Release") are made by and
between Helen Vallerand ("Employee") on behalf of the Employee's agents, heirs,
and successors, and American Medical Systems, Inc., Pfizer, Inc., and their
respective parent or subsidiary corporations, affiliates, Board members,
successors, predecessors present or former officers, directors, agents,
employees, attorneys, whether in their individual or official capacities,
benefit plans and insurers ("Employer").

         The Employer does not believe that it has any claims against the
Employee, nor do the parties believe that the Employee has any claims against
the Employer. Nevertheless, the parties have agreed upon the following
separation terms to resolve any actual and potential claims arising out of the
Employee's employment with and separation from Employer.

         IN CONSIDERATION OF THIS ENTIRE SEPARATION AGREEMENT, THE PARTIES AGREE
AS FOLLOWS:

         1. CONSIDERATION. Employer shall, after receipt of a fully executed
Separation Agreement and Release, and after expiration of statutory recission
periods without any rescission of the Release:

         (1)               Provide the Employee with the gross amount of
                           $181,555.00, subject to appropriate taxes and
                           withholding, as severance and compensation for any
                           and all alleged claims which may have arisen at any
                           time during the Employee's employment with, or in the
                           course of separation from employment with the
                           Employer.

         (2)               At Employer's option, either (a) amend Employer's
                           post-retirement medical plan such that Employee will
                           be eligible to receive benefits under such plan or
                           (b) provide Employee with coverage under Employer's
                           group insured medical plan or an individual medical
                           Insurance plan which covers Employee; provided that
                           in either case, Employer shall not be obligated to
                           pay more than $12,000 per year in premiums until
                           Employee reaches the age of 65 and Employer shall not
                           be obligated to pay more than $3,000 per year in
                           premiums after Employee reaches the age of 65.

         (3)               The parties agree that the above consideration is
                           over and above anything owed to the Employee by law,
                           contract or under the policies of Employer, and it is
                           provided to the Employee in exchange for entering
                           into this Agreement.

<PAGE>   2
         3. CONFIDENTIALITY. It is the intent of the parties that this Agreement
be and is confidential. The Employee warrants that he/she has not and will not
disclose the terms of this Agreement, to any person other than his/her spouse,
attorney, tax advisor, or representatives of the E.E.O.C., or the Minnesota
Department of Human Rights, who shall be bound by the same prohibitions against
disclosure as bind the Employee, and the Employee shall be responsible for
advising these individuals of this confidentiality provision and obtaining their
commitment to maintain such confidentiality.

         4. MUTUAL RELEASE. In consideration of the compensation paid by and
other undertakings of Employer stated in this Agreement, the Employee will sign
the attached Release (Exhibit A) at the same time he/she signs this Agreement.

         5. STIPULATION OF NO CHARGES. The Employee affirmatively represents
that he/she has not filed nor caused to be filed any charges, claims,
complaints, or actions against the Employer before any federal, state, or local
administrative agency, court, or other forum. The Employee further waives any
right to any form of recovery or compensation from any legal action filed or
threatened to be filed by him/her or on his/her behalf based on his/her
employment or terms of employment with or resignation from Employer.

         6. NON-DISPARAGEMENT. The parties to this Agreement agree that they
will make no disparaging or defamatory comments regarding the other parties in
any respect or make any comments concerning any aspect of their relationship or
the conduct or events which precipitated the Employee's separation. Furthermore,
the Employee agrees not to assist or encourage in any way any individual or
group of individuals to bring or pursue a lawsuit, charge, complaint, or
grievance, or make any other demands against Employer.

         7. DAMAGES FOR VIOLATION OF DUTY OF CONFIDENTIALITY. Any violation by
the Employee of the confidentiality and/or non-disparagement provisions of this
Agreement shall entitle Employer to bring a legal action for appropriate
equitable relief as well as damages, including reasonable attorneys' fees. If
Employee violates his/her duty of confidentiality and/or non-disparagement as
provided in this Agreement, Employee shall be obligated to return to the
Employer the consideration he/she has received under this Agreement.

         8. NON-ADMISSIONS. The parties expressly deny any and all liability or
wrongdoing and agree that nothing in this Agreement shall be deemed to represent
any concession or admission of such liability or wrongdoing or any waiver of any
defense.

         9.       INVALIDITY. In case any one or more of the provisions of this
                  Agreement shall be held invalid, illegal or unenforceable in
                  any respect, the validity, legality and enforceability of the
                  remaining provisions contained in this Agreement will not in
                  any way be affected or impaired thereby.

                                       2
<PAGE>   3

         10. MUTUAL RETURN AND RELEASE OF ALL PROPERTY: The Employee agrees to
immediately return any and all of the Employer's property to the Employer.

         11. VOLUNTARY AND KNOWING ACTION. The Employee acknowledges that having
had sufficient opportunity to review this Agreement and Release with his/her
attorneys, that he/she has read and understands the terms of this Agreement and
attached Release, and that he/she has voluntarily and knowingly entered into
this Agreement.

         12. RESCISSION/REVOCATION. The Employee may consider the terms of this
Separation Agreement and Release for up to twenty-one (21) days and may decide
to rescind/revoke (cancel) this Agreement within fifteen (15) calendar days of
execution of this Agreement with respect to claims under the Minnesota Human
Rights Act, and within seven (7) calendar days for claims under the Age
Discrimination in Employment Act. Rescission/revocation of any portion of this
Agreement will be deemed to be a rescission/revocation of all of the Agreement.
To be effective, Employee's rescission/revocation must be in writing and
delivered to the Employer either by hand or by mail, within the applicable
rescission/revocation period. If sent by mail, the rescission/revocation must
be:

         (a)      post-marked within the seven (7) or fifteen (15) day period;

         (b)      properly addressed to Janet L. Dick, Vice President of Human
                  Resources, American Medical Systems, Inc., 10700 Bren Road
                  West, Minnetonka, MN 55343-9679, and

         (c)      sent by certified mail, return receipt requested.

         Employer shall not be obligated to provide any consideration to
Employee pursuant to this Agreement in the event the Employee elects to
rescind/revoke this Agreement. Any attempt by Employee to rescind any part of
this Agreement or Release obligates Employee to immediately return all
consideration under this Agreement to the Employer.

         13. COMPLIANCE WITH PRIOR AGREEMENT. The Employee remains bound by the
terms of the Employment Agreement which he/she previously entered into with the
Employer, a copy of which is attached as Exhibit B.

         14. GOVERNING LAW. This Agreement will be construed and interpreted in
accordance with applicable federal laws and the laws of the State of Minnesota.

                                       3
<PAGE>   4

                                  THE EMPLOYEE

Dated:   4/29/99                  /s/ Helen Vallerand
       -------------------        -----------------------------------------

                                  THE EMPLOYER

Dated:   4/23/99                  By:      /s/ Janet Dick
       -------------------        -----------------------------------------
                                  Its:     Vice President, Human Resources

                                       4
<PAGE>   5

                                                                       EXHIBIT A
                                     RELEASE

Definitions. I intend all words used in this Release to have their plain
meanings in ordinary English. Technical legal words are not needed to describe
what I mean. Specific terms I use in this Release have the following meanings:

         A.       "I," "me," and "my" include both me, Helen Vallerand, or
                  anyone who has or obtains any legal rights or claims through
                  me.

         B.       "Employer," as used in this Release, shall at all times mean
                  American Medical Systems, Inc., Pfizer, Inc., and their
                  respective parent or subsidiary corporations, affiliates,
                  Board members, successors, predecessors, present or former
                  officers, directors, agents, employees, attorneys, whether in
                  their individual or official capacities, benefit plans and
                  plan administrators, and insurers ("Employer").

         C.       My Claims mean any or all of the actual or potential claims of
                  any kind whatsoever I have now against Employer, regardless of
                  whether I now know about those claims, in any way related to
                  my employment with or separation from the Employer, including,
                  but not limited to, claims for invasion of privacy; breach of
                  contract; fraud or misrepresentation; violation of the
                  Minnesota Human Rights Act, Title VII of the 1964 Civil Rights
                  Act, the Fair Labor Standards Act, the Americans With
                  Disabilities Act, the National Labor Relations Act, the Age
                  Discrimination in Employment Act, the Family and Medical Leave
                  Act, all as amended, Minn. Stat.ss.181.932, or any other
                  federal, state, or local statute, law, rule, regulation,
                  ordinance or order, including but not limited to those civil
                  rights laws based on protected class status; assault, battery,
                  defamation, intentional or negligent infliction of emotional
                  distress; breach of the covenant of good faith and fair
                  dealing; promissory estoppel; negligence; and all other claims
                  for unlawful employment practices, and all other common law or
                  statutory claims. I understand that I am not releasing claims
                  under the Age Discrimination in Employment Act, which arise
                  after the date on which I sign this Release and the Agreement
                  to which it is attached.

Agreement to Release My Claims. I am receiving satisfactory consideration from
Employer to which I am not otherwise entitled by law, contract, or under any
policy of Employer. I agree to give up all My Claims and withdraw any and all my
charges and lawsuits (if any) against Employer in exchange for that
consideration. I will not bring any lawsuits, file any charges, complaints, or
notices, or make any other demands against the Employer based on My Claims. The
consideration I am receiving is a full and fair payment for the release of all
My Claims. Employer does not owe me anything in addition to what I will be
receiving.

Additional Agreements and Understandings. Even though the Employer is paying me
to release My Claims, I understand and acknowledge that the Employer does not
admit

                                       5
<PAGE>   6

that it may be responsible or legally obligated to me. In fact, the Employer
expressly denies that it or he/she is responsible or legally obligated for My
Claims or that it or he/she has engaged in any wrongdoing. I am also hereby
advised to consult with an attorney before I sign this Release and the Agreement
to which it is attached.

Nothing contained herein, however, shall be construed to prohibit you from
filing a charge with the Equal Employment Opportunity Commission, but your
release includes a release of your right to file a court action or to seek
individual remedies or damages in any Equal Employment Opportunity
Commission-filed court action, and your release of these rights shall apply with
full force and effect to any proceedings arising from or relating to such a
charge.

Acceptance Period. You have been informed that the terms of this Agreement shall
be open for acceptance by you for a period of at least twenty-one (21) days
after the date set forth above, during which time you may consider whether or
not to accept this Agreement and seek counsel to advise you regarding the same.
You agree that changes to this Agreement, whether material or immaterial, will
not restart this acceptance period.

Right to Rescind and/or Revoke. You have the right to revoke this Agreement only
insofar as it extends to potential claims under the Age Discrimination in
Employment Act by informing the Employer of your intent to revoke this Agreement
within seven (7) calendar days following your execution of it.

You likewise have the right to rescind this Agreement only insofar as it extends
to potential claims under the Minnesota Human Rights Act by written notice to
Employer within fifteen (15) calendar days following your execution of this
Agreement. Any such rescission must be in writing and hand-delivered to Employer
or, if sent by mail, postmarked within the applicable time period, sent by
certified mail, return receipt requested, and addressed as follows:

         (a)      post-marked within the seven (7) or fifteen (15) day period;

         (b)      properly addressed to Janet L. Dick, Vice President of Human
                  Resources, American Medical Systems, Inc., 10700 Bren Road
                  West, Minnetonka, MN 55343-9679, and

         (c)      sent by certified mail, return receipt requested.

You agree that if you exercise any right of rescission or revocation, Employer
may at its option either nullify this Agreement in its entirety or keep it in
effect as to all claims not rescinded or revoked in accordance with the
rescission or revocation provisions of this Agreement. In the event Employer
opts to nullify the entire Agreement, neither you nor Employer will have any
rights or obligations whatsoever under this Agreement. Any rescission or
revocation, however, does not affect your separation from employment effective
as of the date set forth in Section 1.

                                       6
<PAGE>   7

I have read this Release carefully and understand all its terms. I have reviewed
this Release with my own attorney. In agreeing to sign this Release, I have not
relied on any statements or explanations made by Employer or their attorneys.

I understand and agree that this Release and the Settlement Agreement to which
it is attached contain all the agreements between Employer and me. We have no
other written nor oral agreements.

Dated:   April 29, 1999            /s/ Helen Vallerand
      -----------------------      -------------------------------
                                   Signature

                                   Helen Vallerand
                                   -------------------------------
                                   Name (Print)

Subscribed and sworn to before me
this 29th day of April, 1999

/s/ Judith A. Dian
--------------------------------
Notary Public

                                       7<PAGE>   1
                              SEPARATION AGREEMENT

     The Employer and Employee wish to end their employment relationship in an
honorable, dignified and orderly fashion. Toward that end, the parties have
agreed to separate according to the following terms.

     This Separation Agreement ("Agreement") and Release, which is attached and
incorporated by reference as Exhibit A ("the Release") are made by and between
William Stein ("Employee") on behalf of the Employee's agents, heirs, and
successors, and American Medical Systems, Inc., Pfizer, Inc., and their
respective parent or subsidiary corporations, affiliates, Board members,
successors, predecessors present or former officers, directors, agents,
employees, attorneys, whether in their individual or official capacities,
benefit plans and insurers ("Employer").

     The Employer does not believe that it has any claims against the Employee,
nor do the parties believe that the Employee has any claims against the
Employer. Nevertheless, the parties have agreed upon the following separation
terms to resolve any actual and potential claims arising out of the Employee's
employment with and separation from Employer.

     IN CONSIDERATION OF THIS ENTIRE SEPARATION AGREEMENT, THE PARTIES AGREE AS
FOLLOWS:

     1.   CONSIDERATION. Employer shall, after receipt of a fully-executed
Separation Agreement and Release, and after expiration of statutory recission
periods without any rescission of the Release:

     (1)  Provide the Employee with the gross amount of $146,675.48, subject to
          appropriate taxes and withholding, as severance and compensation for
          any and all alleged claims which may have arisen at any time during
          the Employee's employment with, or in the course of separation from
          employment with the Employer.

     (2)  The parties agree that the above consideration is over and above
          anything owed to the Employee by law, contract or under the policies
          of Employer, and it is provided to the Employee in exchange for
          entering into this Agreement.

     3. CONFIDENTIALITY. It is the intent of the parties that this Agreement be
and is confidential. The Employee warrants that he/she has not and will not
disclose the terms of this Agreement, to any person other than his/her spouse,
attorney, tax advisor, or representatives of the E.E.O.C., or the Minnesota
Department of Human Rights, who shall be bound by the same prohibitions against
disclosure as bind the Employee, and the Employee shall be responsible for
advising these individuals of this confidentiality provision and obtaining their
commitment to maintain such confidentiality.

     4.   MUTUAL RELEASE. In consideration of the compensation paid by and other
undertakings of Employer stated in this Agreement, the Employee will sign the
attached Release (Exhibit A) at the same time he/she signs this Agreement.

<PAGE>   2
     5.   STIPULATION OF NO CHARGES. The Employee affirmatively represents that
he/she has not filed nor caused to be filed any charges, claims, complaints, or
actions against the Employer before any federal, state, or local administrative
agency, court, or other forum. The Employee further waives any right to any form
of recovery or compensation from any legal action filed or threatened to be
filed by him/her or on his/her behalf based on his/her employment or terms of
employment with or resignation from Employer.

     6.   NON-DISPARAGEMENT. The parties to this Agreement agree that they will
make no disparaging or defamatory comments regarding the other parties in any
respect or make any comments concerning any aspect of their relationship or the
conduct or events which precipitated the Employee's separation. Furthermore, the
Employee agrees not to assist or encourage in any way any individual or group of
individuals to bring or pursue a lawsuit, charge, complaint, or grievance, or
make any other demands against Employer.

     7.   DAMAGES FOR VIOLATION OF DUTY OF CONFIDENTIALITY. Any violation by the
Employee of the confidentiality and/or non-disparagement provisions of this
Agreement shall entitle Employer to bring a legal action for appropriate
equitable relief as well as damages, including reasonable attorneys' fees. If
Employee violates his/her duty of confidentiality and/or non-disparagement as
provided in this Agreement, Employee shall be obligated to return to the
Employer the consideration he/she has received under this Agreement.

     8.   NON-ADMISSIONS. The parties expressly deny any and all liability or
wrongdoing and agree that nothing in this Agreement shall be deemed to represent
any concession or admission of such liability or wrongdoing or any waiver of any
defense.

     9.   INVALIDITY. In case any one or more of the provisions of this
Agreement shall be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained in
this Agreement will not in any way be affected or impaired thereby.

     10.  MUTUAL RETURN AND RELEASE OF ALL PROPERTY: The Employee agrees to
immediately return any and all of the Employer's property to the Employer.

     11.  VOLUNTARY AND KNOWING ACTION. The Employee acknowledges that having
had sufficient opportunity to review this Agreement and Release with his/her
attorneys, that he/she has read and understands the terms of this Agreement and
attached Release, and that he/she has voluntarily and knowingly entered into
this Agreement.

     12.  RESCISSION/REVOCATION. The Employee may consider the terms of this
Separation Agreement and Release for up to twenty-one (21) days and may decide
to rescind/revoke (cancel) this Agreement within fifteen (15) calendar days of
execution of this Agreement with respect to claims under the Minnesota Human
Rights Act, and within seven (7) calendar days for claims under the Age
Discrimination in Employment Act. Rescission/revocation of any portion of this
Agreement will be deemed to be a rescission/revocation of all of the Agreement.
To be effective, Employee's rescission/revocation must be in writing and
delivered to the Employer either by hand or by mail, within the applicable
rescission/revocation period. If sent by mail, the rescission/revocation must
be:

                                       2
<PAGE>   3
     (a)  post-marked within the seven (7) or fifteen (15) day period;

     (b)  properly addressed to Janet L. Dick, Vice President of Human
          Resources, American Medical Systems, Inc., 10700 Bren Road West,
          Minnetonka, MN 55343-9679, and

     (c)  sent by certified mail, return receipt requested.

     Employer shall not be obligated to provide any consideration to Employee
pursuant to this Agreement in the event the Employee elects to rescind/revoke
this Agreement. Any attempt by Employee to rescind any part of this Agreement or
Release obligates Employee to immediately return all consideration under this
Agreement to the Employer.

     13. COMPLIANCE WITH PRIOR AGREEMENT. The Employee remains bound by the
terms of the Employment Agreement which he/she previously entered into with the
Employer, a copy of which is attached as Exhibit B.

     14. GOVERNING LAW. This Agreement will be construed and interpreted in
accordance with applicable federal laws and the laws of the State of Minnesota.

                                     THE EMPLOYEE

Dated:  July 15, 1999                 /s/ William Richard Stein
      -------------------------       ----------------------------------

                                      THE EMPLOYER

Dated:  6/2/99                        By:  /s/ Janet L. Dick
      -------------------------       ---------------------------------------
                                      Its:  Vice President, Human Resources
                                      --------------------------------------

                                       3
<PAGE>   4
                                                                       EXHIBIT A

                                     RELEASE

Definitions. I intend all words used in this Release to have their plain
meanings in ordinary English. Technical legal words are not needed to describe
what I mean. Specific terms I use in this Release have the following meanings:

     A.       "I," "me," and "my" include both me, William Stein, or anyone who
              has or obtains any legal rights or claims through me.

     B.       "Employer," as used in this Release, shall at all times mean
              American Medical Systems, Inc., Pfizer, Inc., and their
              respective parent or subsidiary corporations, affiliates, Board
              members, successors, predecessors, present or former officers,
              directors, agents, employees, attorneys, whether in their
              individual or official capacities, benefit plans and plan
              administrators, and insurers ("Employer").

     C.       My Claims mean any or all of the actual or potential claims of
              any kind whatsoever I have now against Employer, regardless of
              whether I now know about those claims, in any way related to my
              employment with or separation from the Employer, including, but
              not limited to, claims for invasion of privacy; breach of
              contract; fraud or misrepresentation; violation of the Minnesota
              Human Rights Act, Title VII of the 1964 Civil Rights Act, the
              Fair Labor Standards Act, the Americans With Disabilities Act,
              the National Labor Relations Act, the Age Discrimination in
              Employment Act, the Family and Medical Leave Act, all as amended,
              Minn. Stat.ss.181.932, or any other federal, state, or local
              statute, law, rule, regulation, ordinance or order, including but
              not limited to those civil rights laws based on protected class
              status; assault, battery, defamation, intentional or negligent
              infliction of emotional distress; breach of the covenant of good
              faith and fair dealing; promissory estoppel; negligence; and all
              other claims for unlawful employment practices, and all other
              common law or statutory claims. I understand that I am not
              releasing claims under the Age Discrimination in Employment Act,
              which arise after the date on which I sign this Release and the
              Agreement to which it is attached.

Agreement to Release My Claims. I am receiving satisfactory consideration from
Employer to which I am not otherwise entitled by law, contract, or under any
policy of Employer. I agree to give up all My Claims and withdraw any and all my
charges and lawsuits (if any) against Employer in exchange for that
consideration. I will not bring any lawsuits, file any charges, complaints, or
notices, or make any other demands against the Employer based on My Claims. The
consideration I am receiving is a full and fair payment for the release of all
My Claims. Employer does not owe me anything in addition to what I will be
receiving.

Additional Agreements and Understandings. Even though the Employer is paying me
to release My Claims, I understand and acknowledge that the Employer does not
admit that it may be responsible or legally obligated to me. In fact, the
Employer expressly denies that it or he/she is responsible or legally obligated
for My Claims or that it or he/she has engaged in any

                                       4
<PAGE>   5
wrongdoing. I am also hereby advised to consult with an attorney before I sign
this Release and the Agreement to which it is attached.

Nothing contained herein, however, shall be construed to prohibit you from
filing a charge with the Equal Employment Opportunity Commission, but your
release includes a release of your right to file a court action or to seek
individual remedies or damages in any Equal Employment Opportunity
Commission-filed court action, and your release of these rights shall apply with
full force and effect to any proceedings arising from or relating to such a
charge.

Acceptance Period. You have been informed that the terms of this Agreement shall
be open for acceptance by you for a period of at least twenty-one (21) days
after the date set forth above, during which time you may consider whether or
not to accept this Agreement and seek counsel to advise you regarding the same.
You agree that changes to this Agreement, whether material or immaterial, will
not restart this acceptance period.

Right to Rescind and/or Revoke. You have the right to revoke this Agreement only
insofar as it extends to potential claims under the Age Discrimination in
Employment Act by informing the Employer of your intent to revoke this Agreement
within seven (7) calendar days following your execution of it.

You likewise have the right to rescind this Agreement only insofar as it extends
to potential claims under the Minnesota Human Rights Act by written notice to
Employer within fifteen (15) calendar days following your execution of this
Agreement. Any such rescission must be in writing and hand-delivered to Employer
or, if sent by mail, postmarked within the applicable time period, sent by
certified mail, return receipt requested, and addressed as follows:

     (a)       post-marked within the seven (7) or fifteen (15) day period;

     (b)       properly addressed to Janet L. Dick, Vice President of Human
               Resources, American Medical Systems, Inc., 10700 Bren Road West,
               Minnetonka, MN 55343-9679, and

     (c)       sent by certified mail, return receipt requested.

You agree that if you exercise any right of rescission or revocation, Employer
may at its option either nullify this Agreement in its entirety or keep it in
effect as to all claims not rescinded or revoked in accordance with the
rescission or revocation provisions of this Agreement. In the event Employer
opts to nullify the entire Agreement, neither you nor Employer will have any
rights or obligations whatsoever under this Agreement. Any rescission or
revocation, however, does not affect your separation from employment effective
as of the date set forth in Section 1.

I have read this Release carefully and understand all its terms. I have reviewed
this Release with my own attorney. In agreeing to sign this Release, I have not
relied on any statements or explanations made by Employer or their attorneys.

I understand and agree that this Release and the Settlement Agreement to which
it is attached contain all the agreements between Employer and me. We have no
other written nor oral agreements.

                                       5
<PAGE>   6

Dated:  July 15, 1999                      /s/ William Richard Stein
      ---------------------                -------------------------------------
                                           Signature

                                           William Richard Stein
                                           -------------------------------------
                                           Name (Print)

Subscribed and sworn to before me
this 15th day of July

/s/ Mark D. Mohlke
---------------------------
Notary Public

                                       6

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