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Upheaval for American Medical Systems

American Medical Systems Holdings, Inc., a maker of devices that treat incontinence, erectile dysfunction, pelvic disorders, and related problems, is off to a bad start this week. Today it announced that President and CEO Martin J. Emerson has resigned. It did not say why. COO Ross A. Longhini will take over on an interim basis while a search is conducted.

The firm also announced today that an arbitrator has ruled that it must pay $13.8 million to shareholders of Cryogen, which it acquired in 2002. There had been a dispute over an earnout payment related to the acquisition. The Cryogen shareholders had argued that American Medical Systems failed to properly promote and market its product called Her Option, and that the bad-faith action led to a missed milestone and denial of an earnout payment. The shareholders had asked for $110 million. It is not known at this time whether the two issues are related, but together they paint a picture of a company that doesn't have its act together, despite a positive 4th quarter earnings report. UPDATE: The Star Tribune of Minneapolis attributes the resignation to too many missed earnings projections, which took a toll on stock price, and difficulties with integrating a 2006 acquisiton, Laserscope.

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