Document:

<PAGE>   1

                                 March 24, 2000

Bank of America, N.A., as Agent
100 North Tryon Street
Charlotte, North Carolina  28255

Dear Sir or Madam:

     Reference is made to the Credit Agreement dated as of March 24, 2000 among
American Medical Systems, Inc. (the "Borrower"), the guarantors party thereto,
the lenders party thereto and Bank of America, N.A., as agent (the "Credit
Agreement"). Capitalized terms not otherwise defined herein shall have the
meanings assigned to them in the Credit Agreement or the Warburg Guaranty, as
applicable. As an inducement to the Agent and the Lenders to enter into the
Credit Agreement and make the extensions of credit thereunder, the parties
hereto agree with the Agent, for the benefit of each of the Lenders, as follows:

          1.  Upon the execution of the Warburg Guaranty, the definition of
     Guaranteed Obligations appearing in the Warburg Guaranty is amended as
     follows:

          "Guaranteed Obligations" means, without duplication, all of the
     obligations (including, but not limited to, in respect of interest accruing
     after the occurrence of a Bankruptcy Event, regardless of whether such
     interest is an allowed claim under the Bankruptcy Code) of the Borrower to
     the Lenders (including the Issuing Lender) and the Agent, whenever arising,
     under (i) Sections 2.1, 2.2, 2.4, 3.5(a) and 3.5(b) of the Credit
     Agreement, the Revolving Notes and the Tranche B Term Notes and (ii) to the
     extent relating to the payment of principal, interest, fees or other
     amounts payable in respect of Revolving Loans, Letters of Credit, LOC
     Obligations or the Tranche B Term Loan, Sections 3.1, 3.3(b), 3.5(b), 3.6,
     3.8, 3.9, 3.11, 3.12 or 11.5 of the Credit Agreement. Notwithstanding the
     foregoing, (a) if Consolidated EBIDTA for the 12 month period ending
     December 31, 1999 is equal to or greater than $21,000,000 but less than
     $21,700,000, the Warburg Guarantors agree that $5,000,000 of the
     outstanding principal amount of the Tranche A Term Loan shall be converted
     into a Tranche B Term Loan, and the aggregate outstanding principal amount
     of the Tranche B Term Loan shall be increased by $5,000,000; or (b) if
     Consolidated EBIDTA for the 12 month period ending December 31, 1999 is
     less than $21,000,000, the Warburg Guarantors agree that the entire
     outstanding principal amount of the Tranche A Term Loan shall be converted
     into a Tranche B Term Loan, and the aggregate outstanding principal amount
     of the Tranche B Term Loan shall be increased by the principal amount of
     the Tranche A Term Loan so converted, provided, however, the amount of the
     Tranche A Term Loans so converted shall amortize on the same basis as if
     such conversion had not occurred as provided in Section 2.3(d) of the
     Credit Agreement. Any Tranche A Term Loan converted into a Tranche B Term
     Loan and the related amounts described in clause (ii) of the first sentence
     of this definition with respect to such converted Tranche A Term Loans,
     shall constitute Guaranteed Obligations.

<PAGE>   2
          2. The Warburg Guarantors and the Credit Parties agree to execute
     such amendments, agreements and other documents, including, without
     limitation, the delivery of new or replacement Notes, as are necessary to
     effect the intent of this letter.

     NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THIS LETTER AND
THE AGREEMENTS CONTAINED HEREIN AUTOMATICALLY SHALL TERMINATE, AND THE AMENDMENT
TO THE DEFINITION OF "GUARANTEED OBLIGATIONS" EFFECTED HEREBY AUTOMATICALLY
SHALL BE CANCELLED, AT SUCH TIME AS THE BORROWER DELIVERS TO THE AGENT THE
AUDITED FINANCIAL STATEMENTS OF THE CONSOLIDATED PARTIES FOR THE 12 MONTH PERIOD
ENDING DECEMBER 31, 1999 DEMONSTRATING THAT CONSOLIDATED EBITDA FOR SUCH PERIOD
IS AT LEAST $21,700,000.

     This agreement shall be governed by the laws of the State of New York.

                                       2
<PAGE>   3
     IN WITNESS WHEREOF, each of the undersigned WPEP Entities has caused this
Agreement to be duly executed and delivered as of the day and year above
written.

                         WARBURG, PINCUS EQUITY PARTNERS, L.P.,
                         a Delaware limited partnership

                         By:      E.M. Warburg, Pincus & Co., LLC, a New York
                                  limited liability company, its manager

                                  By: /s/ Elizabeth Weatherman
                                     -------------------------------
                                  Name:  Elizabeth Weatherman
                                       -----------------------------
                                  Title: Managing Director
                                        ----------------------------

                         WARBURG, PINCUS NETHERLANDS
                         EQUITY PARTNERS I, C.V.,
                         a commanditaire vennootschap (limited partnership)
                         established under the laws of the Netherlands

                         By:      E.M. Warburg, Pincus & Co., LLC, a New York
                                  limited liability company, its manager

                                  By: /s/ Elizabeth Weatherman
                                     -------------------------------
                                  Name:  Elizabeth Weatherman
                                       -----------------------------
                                  Title: Managing Director
                                        ----------------------------

                         WARBURG, PINCUS NETHERLANDS
                         EQUITY PARTNERS II, C.V.,
                         a commanditaire vennootschap (limited partnership)
                         established under the laws of the Netherlands

                         By:      E.M. Warburg, Pincus & Co., LLC, a New York
                                  limited liability company, its manager

                                  By: /s/ Elizabeth Weatherman
                                     -------------------------------
                                  Name:  Elizabeth Weatherman
                                       -----------------------------
                                  Title: Managing Director
                                        ----------------------------

                                       3

<PAGE>   4

                         WARBURG, PINCUS NETHERLANDS
                         EQUITY PARTNERS III, C.V.,
                         a commanditaire vennootschap (limited partnership)
                         established under the laws of the Netherlands

                         By:      E.M. Warburg, Pincus & Co., LLC, a New York
                                  limited liability company, its manager

                                  By: /s/ Elizabeth Weatherman
                                     -------------------------------
                                  Name:  Elizabeth Weatherman
                                       -----------------------------
                                  Title: Managing Director
                                        ----------------------------

ACCEPTED:

BANK OF AMERICA, N.A.,
as Agent

By: /s/ David H. Strickert
   -------------------------
Name: David H. Strickert
Title: Managing Director

                                       4
<PAGE>   5

ACCEPTED AND AGREED:

                         AMERICAN MEDICAL SYSTEMS, INC.

                         By: /s/ Gregory J. Melsen
                            -----------------------------
                         Name: Gregory J. Melsen
                              ---------------------------
                         Title: Vice President - Finance,
                               --------------------------
                               Treasurer and Chief
                               --------------------------
                               Financial Officer
                               --------------------------

                         INFLUENCE, INC.

                         By: /s/ Gregory J. Melsen
                            -----------------------------
                         Name: Gregory J. Melsen
                              ---------------------------
                         Title: Chief Financial Officer
                               --------------------------

                                       5<PAGE>   1

                              SEPARATION AGREEMENT

         The Employer and Employee wish to end their employment relationship in
an honorable, dignified and orderly fashion. To that end, the parties have
agreed to discontinue the Employee's employment with the Employer on the
following terms.

         This Separation Agreement ( the "Agreement") and Release, which is
attached and incorporated herein by reference as Exhibit A (the "Release"), are
made by and between Sam B. Humphries (the "Employee"), including the Employee's
agents, heirs, and successors, and American Medical Systems, Inc., including
Warburg, Pincus Equity Partners, L.P. and their respective affiliates,
shareholders, Board members, successors, predecessors, present or former
officers, directors, agents, employees, attorneys, whether in their individual
or official capacities, benefit plans and insurers (the "Employer").

IN CONSIDERATION OF THIS ENTIRE SEPARATION AGREEMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, THE PARTIES AGREE AS FOLLOWS:

         1. EMPLOYMENT TERMINATION. The Employee's termination of employment
will be effective as of the close of business on April 23, 1999 (the
"Termination Date"). Effective as of that date, the Employee will relinquish his
current titles of President and Chief Executive Officer of the Employer, as well
as any other positions, titles, or directorships he may hold with the Employer
and any of its affiliated companies. Except as expressly provided herein, this
Agreement supersedes in all respects the provisions of the Employee's Employment
Agreement with the Employer dated September 25, 1998 (the "Employment
Agreement") and the provisions of the Employee's Stock Option Agreement with the
Employer dated September 25, 1998 (the "Stock Option Agreement").

         2. CONSIDERATION. The Employer shall, after receipt of a fully executed
Agreement and Release, and after expiration of the statutory recission periods
without any rescission of the Agreement or Release, provide the Employee with
the payments and other benefits that are set forth in the Separation Benefits
Summary, which is attached and incorporated herein by reference as Exhibit B
(the "Benefits Summary"), 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. The parties agree that the above
consideration is over and above anything owed to the Employee by law, contract
(including as provided under the Employment Agreement) or under the policies of
Employer, and such additional consideration 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 has not and will not
disclose the terms of this Agreement to any person other than his 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

<PAGE>   2

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 at the same time he signs this Agreement.

         5. STIPULATION OF NO CHARGES. The Employee affirmatively represents
that he 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 or on his behalf based on his employment or terms of employment
with or resignation from the Employer.

         6. NON-DISPARAGEMENT. The parties to this Agreement agree that they
will make no disparaging or defamatory comments regarding the other party 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 the Employer.

         7. DUTY OF CONFIDENTIALITY AND NON-COMPETITION. After the Termination
Date, the Employee will continue to be bound by the provisions of Sections 8(a),
(b), (c) and (d) of the Employment Agreement, in accordance with the terms
thereof. In addition, the provisions of Section 9 of the Employment Agreement
shall apply to this Agreement, and is incorporated herein by reference. However,
except as otherwise described in the Benefits Summary, the Employee will not be
entitled to any other compensation or benefits provided under the Employment
Agreement, including specifically and without limitation the benefits provided
under Section 6 thereof. In addition to the legal remedies of the Employer under
the Employment Agreement, the Employee acknowledges and understands that any
violation by the Employee of the terms of this Agreement shall entitle the
Employer to bring legal action for other appropriate equitable relief as well as
damages, including reasonable attorneys' fees, and the return to the Employer of
the consideration 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
attorneys, that he has read and understands the terms of this Agreement and
attached Release, and that he has voluntarily and knowingly entered into this
Agreement.

         12. RESCISSION/REVOCATION. The Employee may consider the terms of this
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 and Release 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 the Agreement
in its entirety. 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.

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

         13. INDEMNIFICATION AND OTHER RIGHTS. Notwithstanding anything herein
to the contrary, by signing this Agreement and the Release the Employee will not
have relinquished (i) his right to indemnification for acts occurring or
liabilities arising on or prior to the Termination Date from the Employer under
any charter provision, insurance arrangement or under applicable law with
respect to any claim asserted against the Employee in his capacity as a
director, officer or employee of the Employer, as a trustee of any employee
benefit plan maintained by the Employer, or as a member of any board of
director's committee or employee benefit plan committee, which right shall be no
greater nor less than the indemnification right of other officers and directors
of the Employer, as the case may be, or (ii) his right to payments and benefits
under, or to enforce the provisions of, this Agreement.

                                       3
<PAGE>   4

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

                                       4
<PAGE>   5

         IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement effective as of April 23, 1999.

                                  THE EMPLOYEE

Dated:    6/4/99                  /s/ Sam B. Humphries
       ---------------            ----------------------------------------

                                  THE EMPLOYER

Dated:    5/11/99                 By:     /s/ Janet L. Dick
       ---------------               -------------------------------------

                                  Its:    Vice President, Human Resources
                                     -------------------------------------

                                       5
<PAGE>   6

                                                                       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;
provided, however, that any capitalized term that is not otherwise defined in
this Release shall have the meaning set forth in the Agreement to which this
Release is attached:

         A.       "I," "me" and "my" includes both me, SAM B. HUMPHRIES, and
                  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., Warburg, Pincus Equity
                  Partners, L.P. and their respective affiliates, shareholders,
                  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.

         C.       "My Claims" mean any and all of the actual or potential claims
                  of any kind whatsoever I have now against the 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 will receive satisfactory consideration from
the Employer to which I am not otherwise entitled by law, contract (including my
Employment Contract), or under any policy of the Employer. I agree to give up
all My Claims and withdraw any and all my charges and lawsuits (if any) against
the 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.

<PAGE>   7

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 is responsible or legally obligated for My
Claims or that it 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 me from filing
a charge with the Equal Employment Opportunity Commission, but my release
includes a release of my right to file a court action or to seek individual
remedies or damages in any Equal Employment Opportunity Commission-filed court
action, and my 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 the Agreement shall
be open for acceptance by you for a period of twenty-one (21) days after your
Termination Date, during which time you may consider whether or not to accept
the Release and the Agreement and seek counsel to advise you regarding the same.
You understand that changes to the Release and the Agreement, whether material
or immaterial, will not restart this acceptance period.

Right to Rescind and/or Revoke. You have the right to revoke the Agreement and
this Release only insofar as it extends to potential claims under the Age
Discrimination in Employment Act by informing the Employer in writing of your
intent to revoke the Agreement and this Release within seven (7) calendar days
following execution. You likewise have the right to revoke the Agreement and
this Release only insofar as it extends to potential claims under the Minnesota
Human Rights Act by written notice to the Employer within fifteen (15) calendar
days following your execution of this Agreement. Any such rescission must be in
writing and hand-delivered to the 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, the
Employer may at its option either nullify the Agreement and Release 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 the Agreement and
Release. In the event the Employer opts to nullify the entire Agreement, neither
you nor the Employer will have any rights or obligations

                                       2
<PAGE>   8

whatsoever under the Agreement. Any rescission or revocation, however, does not
affect your separation from employment effective as of the date set forth in
Section 1 of the Agreement.

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 the Employer or their
attorneys.

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

Dated:  6/4/99                      /s/ Sam B. Humphries
      --------------                -------------------------------
                                    Signature

                                    Sam B. Humphries
                                    -------------------------------
                                    Name

Subscribed and sworn to before me
this 4th day of June, 1999.

/s/ Jacquelyn M. Endy
---------------------------------
Notary Public

                                       3
<PAGE>   9

                                                                       EXHIBIT B

                           SEPARATION BENEFITS SUMMARY

The following is a Separation Benefits Summary ("Benefits Summary") of the
severance and other benefits that are to be provided to Sam B. Humphries (the
"Employee") by American Medical Systems, Inc. (the "Employer") in connection
with the Employee's termination of employment pursuant to the terms of the
Agreement to which this Benefits Summary is attached:

A.       SEVERANCE PAY - The Employee will be paid his regular base salary in
         effect as of his Termination Date ($225,000 per annun) for a period of
         six (6) months in accordance with the Employer's normal payroll
         practice and subject to applicable withholding taxes and without
         reduction for subsequent employment by the Employee. Thereafter, the
         Employee will be paid his regular base salary as of his Termination
         Date, in accordance with the Employer's normal payroll practice and
         subject to applicable employment taxes, for twelve (12) additional
         months; provided, however, if the Employee is subsequently employed
         (including employment as a consultant or independent contractor) during
         such 12-month period, all such additional severance payments shall be
         discontinued. The Employee shall notify the Employer of any such
         subsequent employment immediately. The payments to be made hereunder
         shall not commence until after the Employee's statutory recission
         rights have expired as further described in the Agreement.

B.       LUMP SUM PAYMENT - The Employee shall be paid a lump sum payment in the
         amount of $37,500. The payments to be made hereunder shall be made
         within two weeks after the Employee's statutory recission rights have
         expired as further described in the Agreement.

C.       STOCK OPTIONS - All vested and unvested Options (150,000) granted under
         the terms of the AMS 1998 Equity Incentive Plan (the "Plan") shall be
         canceled, and the terms of the Employee's Stock Option Agreement with
         the Employer dated September 25, 1998 shall be of no force or effect as
         of the Termination Date.

D.       OSI NOTE - The Employee's Non-Recourse Promissory Note dated September
         25, 1998 to the Employer in the principal amount of $208,250 shall
         remain in effect until September 25, 2001 in accordance with its terms
         or until the earlier occurrence of an Event of Default, as defined in
         the Pledge Agreement of even date.

E.       WARBURG NOTE - The Secured Recourse Promissory Note and Pledge
         Agreement, dated September 25, 1998 (the "Note"), between the Employee
         and Warburg, Pincus Equity Partners, L.P. ("Warburg") in the principal
         amount of $400,000 shall be canceled as to $200,000 of the outstanding
         principal amount, and interest thereon. In consideration for such
         cancellation, the Employee shall

<PAGE>   10

         immediately surrender to Warburg all right, title and interest in
         certificates representing 200 shares of Series A non-convertible
         preferred stock of the Employer acquired by the Employee pursuant to
         the terms of Section 3(e) of the employment agreement dated as of
         September 25, 1998, between the Employer and the Employee (the
         "Employment Agreement"). The remaining outstanding principal balance of
         the Note, and accrued interest, shall be paid in accordance with, and
         remain subject to, the current terms of the Note, including Warburg's
         security interest in the 40,000 shares of Series B convertible
         preferred stock of the Employer acquired by the Employee pursuant to
         Section 3(e) of the Employment Agreement; provided, however:

         (1) If the remaining outstanding principal balance of the Note, plus
         accrued interest (the "Balance"), is not repaid in full prior to the
         third anniversary of the Termination Date, the Employee shall repay
         such Balance in five equal annual installments, plus accrued interest
         on the unpaid Balance. The first such annual installment shall become
         due and payable on the third anniversary of the Termination Date; and
         the remaining annual installments, plus accrued interest on the
         remaining outstanding Balance, shall become due and payable on each of
         the four succeeding anniversaries of the Termination Date. The Employee
         may prepay the outstanding Balance, plus accrued interest, at any time.

         (2) Anything contained in Paragraph E(1) to the contrary
         notwithstanding, the remaining principal balance of the Note, plus
         accrued interest, shall become immediately due and payable to Warburg
         upon the earliest of: (i) the occurrence of an event of Default (as
         defined in the Note) other than the Employee's termination of
         employment with the Employer, (ii) any failure to make any required
         installment payment, plus accrued interest, on the Note as provided in
         Paragraph E(1), (iii) 60 days following the end of the "lockup period"
         of an initial public offering of shares of common stock of the Employer
         pursuant to a registration statement declared effective under the
         Securities Act of 1933, as amended, or (iv) the Employer's reasonable
         determination that the Employee has not complied with the Employee's
         obligations and duties under the Separation Agreement.

F.       VACATION/FLOATING HOLIDAYS/UNITED WAY DAYS - All accrued and unused
         vacation, floating holidays, and United Way Days will be calculated
         using the Employee's base rate of pay as of the Termination Date. This
         payment, including any accrued 1999 vacation, will be paid in the form
         of a lump sum and will be issued within two weeks after the Termination
         Date, subject to any required withholding taxes.

G.       HEALTH CARE BENEFITS - The Employee shall continue to receive the
         health insurance coverage that was provided to him as of the
         Termination Date on the same basis and at the same cost until the end
         of the 18-month period following the Termination Date; provided,
         however, if the Employee is subsequently employed (including employment
         as a consultant or independent contractor)

                                       2
<PAGE>   11

         during such 18-month period, the health insurance benefits provided
         hereunder may be discontinued by the Employer to the extent the
         Employee is receiving comparable health insurance coverage as a result
         of his subsequent employment. The Employee shall notify the Employer of
         any such subsequent employment immediately. At the end of the 18-month
         period following the Termination Date, the Employee shall be entitled
         to elect health care continuation coverage permitted under Section 601
         through 608 of the Employee Retirement Income Security Act of 1974, as
         amended, as if his employment with the Employer had then terminated.

H.       WELFARE BENEFITS - To the extent permitted under the Employer's welfare
         plans, the Employee shall continue to receive the welfare benefit
         coverage (other than health insurance benefits as provided above) that
         was provided to him as of the Termination Date on the same basis and at
         the same cost until the end of the 18-month period following the
         Termination Date; provided, however, if the Employee is subsequently
         employed (including employment as a consultant or independent
         contractor) during such 18-month period, the welfare benefits provided
         hereunder may be discontinued by the Employer to the extent the
         Employee is receiving comparable welfare benefit coverage as a result
         of his subsequent employment. The Employee shall notify the Employer of
         any such subsequent employment immediately.

I.       OUTPLACEMENT BENEFITS - The Employee shall be entitled, at the
         Employer's expense, to participate in an executive outplacement program
         provided through Drake Beam Morin for the 6-month period commencing on
         the date the Employee's statutory recission rights have expired, as
         further described in the Agreement. If the Employee has not secured
         employment by the end of such 6-month period (including employment as a
         consultant or independent contractor), the outplacement benefits
         provided hereunder may be continued by the Employer, at its discretion,
         for an additional 6-month period or until subsequent employment is
         secured, whichever first occurs. The Employee shall notify the Employer
         of any such subsequent employment immediately.

J.       OTHER BENEFITS INFORMATION - THE FOLLOWING IS INTENDED TO HIGHLIGHT HOW
         OTHER EMPLOYER BENEFITS ARE AFFECTED.

         AMS Savings Investment Plan (SIP): The Employee's contributions and
         Employer match monies to the SIP will cease upon the Termination Date.

         The Employee may choose to have his monies rolled into a qualified IRA
         plan or a company-sponsored qualified plan OR the employee may choose
         to take a full distribution of his account which may be subject to the
         payment of income taxes and penalty taxes. If the value of the
         Employee's account is less than $5,000 as of the Employee's Termination
         Date, the Employee must take a distribution of his account within 60
         days from the Termination Date.

                                       3
<PAGE>   12

         If the value of the Employee's account is $5,000 or more as of the
         Employee's Termination Date, the Employee may elect to keep his monies
         in the SIP. If the Employee elects this option, the Employee may elect
         to take his final distribution at any time before age 65. If the
         Employee elects to keep his monies in the SIP, he will have the same
         investment direction rights and withdrawal privileges as if he were an
         active employee and will continue to receive quarterly status notices.
         Please refer to the AMS Savings and Investment Plan highlight booklet
         for a full description of the terms of the SIP. Further information and
         forms will be provided upon request to the Human Resources
         representative.

         AMS Retirement Plan: Creditable service under the AMS Retirement Plan
         will be calculated based on the Termination Date. Employees who have a
         minimum of 5 years of service are considered "vested annuitants."
         Employees who are "retirement eligible" will be provided with
         additional retirement information on an individual basis by a Human
         Resources representative.

                                       4

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