Exhibit 10.3
EXECUTION COPY
PLEDGE AND SECURITY AGREEMENT
     THIS PLEDGE AND SECURITY AGREEMENT (as the same may be amended, restated,
supplemented or otherwise modified from time to time, this “Security Agreement”)
is entered into as of April 15, 2011 by and among AMERICAN MEDICAL SYSTEMS
HOLDINGS, INC., a Delaware corporation (“Holdings”), AMERICAN MEDICAL SYSTEMS,
INC., a Delaware corporation (the “Borrower”), the Subsidiaries of the Borrower
listed on the signature pages hereto (together with the Borrower, the “Initial
Grantors,” and together with any additional Subsidiaries, whether now existing
or hereafter formed or acquired which become parties to this Security Agreement
from time to time, in accordance with the terms of the Credit Agreement (as
defined below), by executing a Supplement hereto in substantially the form of
Annex I, the “Grantors”), and JPMORGAN CHASE BANK, N.A., a national banking
association, in its capacity as administrative agent (the “Administrative
Agent”) for itself and for the Secured Parties (as defined in the Credit
Agreement identified below).
PRELIMINARY STATEMENT
     The Borrower, the Administrative Agent and the Lenders are entering into a
Credit Agreement dated as of the date hereof (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”). The Grantors are entering into this Security Agreement in order to
induce the Lenders to enter into and extend credit to the Borrower under the
Credit Agreement.
     ACCORDINGLY, the Grantors and the Administrative Agent, on behalf of the
Secured Parties, hereby agree as follows:
ARTICLE I
DEFINITIONS
     1.1. Terms Defined in the Credit Agreement. All capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Credit Agreement.
     1.2. Terms Defined in UCC. Terms defined in the UCC which are not otherwise
defined in this Security Agreement are used herein as defined in the UCC.
     1.3. Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined in the Preliminary Statement, the
following terms shall have the following meanings: “Accounts” shall have the
meaning set forth in Article 9 of the UCC.
     “Article” means a numbered article of this Security Agreement, unless
another document is specifically referenced.
     “Chattel Paper” shall have the meaning set forth in Article 9 of the UCC.

 

--------------------------------------------------------------------------------

 

     “Collateral” means all Accounts, Chattel Paper, Commercial Tort Claims,
Deposit Accounts, Documents, Equipment, Farm Products, Fixtures, General
Intangibles, Goods, Instruments, Inventory, Investment Property, letters of
credit, Letter-of-Credit Rights, Pledged Deposits, Supporting Obligations and
Other Collateral, wherever located, in which any Grantor now has or hereafter
acquires any right or interest, and the proceeds (including Stock Rights),
insurance proceeds and products thereof, together with all books and records,
customer lists, credit files, computer files, programs, printouts and other
computer materials and records related thereto; provided that, notwithstanding
the foregoing, Collateral shall expressly exclude the Excluded Property.
     “Commercial Tort Claims” means commercial tort claims, as defined in the
UCC of any Grantor, including each commercial tort claim specifically described
in Exhibit “F”.
     “Control” shall have the meaning set forth in Article 8 or, if applicable,
in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.
     “Default” means an event described in Section 5.1 hereof.
     “Deposit Account Control Agreement” means an agreement, in form and
substance satisfactory to the Administrative Agent, among any Loan Party, a
banking institution holding such Loan Party’s funds, and the Administrative
Agent with respect to collection and Control of all deposits and balances held
in a deposit account maintained by any Loan Party with such banking institution.
     “Deposit Accounts” shall have the meaning set forth in Article 9 of the
UCC.
     “Documents” shall have the meaning set forth in Article 9 of the UCC.
     “Equipment” shall have the meaning set forth in Article 9 of the UCC.
     “Exhibit” refers to a specific exhibit to this Security Agreement, unless
another document is specifically referenced.
     “Farm Products” shall have the meaning set forth in Article 9 of the UCC.
     “Fixtures” shall have the meaning set forth in Article 9 of the UCC.
     “General Intangibles” shall have the meaning set forth in Article 9 of the
UCC and, in any event, includes payment intangibles, contract rights, rights to
payment, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, programs, programming materials, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable from
pension funds, route lists, rights to payment and other rights under any royalty
or licensing agreements, including infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, pension plan refunds, pension plan refund claims, insurance premium
rebates, tax refunds, and tax refund claims, interests in a partnership or
limited liability company which do not constitute a security under Article 8 of
the Code, and any other personal property other than Commercial Tort Claims,
money, Accounts, Chattel Paper, Deposit Accounts, Goods, Investment Property,
negotiable Collateral, and oil, gas, or other minerals before extraction.
     “Goods” shall have the meaning set forth in Article 9 of the UCC.
     “Instruments” shall have the meaning set forth in Article 9 of the UCC.

2

--------------------------------------------------------------------------------

 

     “Inventory” shall have the meaning set forth in Article 9 of the UCC.
     “Investment Property” shall have the meaning set forth in Article 9 of the
UCC.
     “Letter of Credit Rights” shall have the meaning set forth in Article 9 of
the UCC.
     “Other Collateral” means any property of the Grantors, not included within
the defined terms Accounts, Chattel Paper, Commercial Tort Claims, Deposit
Accounts, Documents, Equipment, Fixtures, Farm Products, General Intangibles,
Goods, Instruments, Inventory, Investment Property, Letter-of-Credit Rights,
Pledged Deposits and Supporting Obligations, including, without limitation, all
cash on hand, letters of credit, Stock Rights or any other deposits (general or
special, time or demand, provisional or final) with any bank or other financial
institution, it being intended that the Collateral include all real and personal
property of the Grantors, subject to the limitations contained in Article II of
this Security Agreement.
     “Pledged Collateral” means all Instruments, Securities and other Investment
Property of the Grantors, whether or not physically delivered to the
Administrative Agent pursuant to this Security Agreement.
     “Pledged Deposits” means all time deposits of money (other than Deposit
Accounts and Instruments), whether or not evidenced by certificates, which a
Grantor may from time to time designate as pledged to the Administrative Agent
or to any Secured Party as security for any Secured Obligations, and all rights
to receive interest on said deposits.
     “Receivables” means the Accounts, Chattel Paper, Documents, Investment
Property, Instruments or Pledged Deposits, and any other rights or claims to
receive money which are General Intangibles or which are otherwise included as
Collateral.
     “Section” means a numbered section of this Security Agreement, unless
another document is specifically referenced.
     “Security” shall have the meaning set forth in Article 8 of the UCC.
     “Securities Account” has the meaning set forth in Article 8 of the UCC.
     “Stock Rights” means any securities, dividends, instruments or other
distributions and any other right or property which any Grantor shall receive or
shall become entitled to receive for any reason whatsoever with respect to, in
substitution for or in exchange for any Equity Interest constituting Collateral,
any right to receive an Equity Interest and any right to receive earnings, in
which any Grantor now has or hereafter acquires any right, issued by an issuer
of such securities.

    “Supporting Obligation” shall have the meaning set forth in Article 9 of the
UCC.

     “Voting Power” means with respect to any share of Voting Stock, the number
of votes that the holder of such share may cast in an election of members of the
Board of Directors (or analogous governing body) of the issuer of such share.
     The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.

3

--------------------------------------------------------------------------------

 

ARTICLE II
GRANT OF SECURITY INTEREST
     Each of the Grantors hereby pledges, assigns and grants to the
Administrative Agent, on behalf of and for the benefit of the Secured Parties, a
security interest in all of such Grantor’s right, title and interest, whether
now owned or hereafter acquired, in and to the Collateral to secure the prompt
and complete payment and performance of the Secured Obligations; provided that,
notwithstanding anything to the contrary contained in this Article II, the
amount of Equity Interests in any First-Tier Foreign Subsidiary that is an
Affected Foreign Subsidiary pledged or required to be pledged to the
Administrative Agent hereunder or under any other Collateral Document shall be
automatically limited to the Voting Stock of such First-Tier Foreign Subsidiary
representing not more than 65% of the total Voting Power of all outstanding
Voting Stock of such First-Tier Foreign Subsidiary (and the term “Collateral”
shall not include any other Equity Interests of such First-Tier Foreign
Subsidiary).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
     Each of the Initial Grantors represents and warrants to the Administrative
Agent and the Secured Parties, and each Grantor that becomes a party to this
Security Agreement pursuant to the execution of a Security Agreement Supplement
in substantially the form of Annex I represents and warrants (after giving
effect to supplements to each of the Exhibits hereto with respect to such
subsequent Grantor as attached to such Security Agreement Supplement), that:
     3.1. Title, Authorization, Validity and Enforceability. Such Grantor has
good and valid rights in or the power to transfer the Collateral owned by it and
title to the Collateral with respect to which it has purported to grant a
security interest hereunder, free and clear of all Liens except for Liens
permitted under Section 4.1.6 hereof, and has full corporate, limited liability
company or partnership, as applicable, power and authority to grant to the
Administrative Agent the security interest in such Collateral pursuant hereto.
The execution and delivery by such Grantor of this Security Agreement have been
duly authorized by proper corporate, limited liability company, limited
partnership or partnership, as applicable, proceedings, and this Security
Agreement constitutes a legal, valid and binding obligation of such Grantor and
creates a security interest which is enforceable against such Grantor in all
Collateral it now owns or hereafter acquires, except as enforceability may be
limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws relating to or affecting the enforcement of creditors’ rights
generally, (ii) general equitable principles (whether considered in a proceeding
in equity or at law), and (iii) requirements of reasonableness, good faith and
fair dealing. When financing statements have been filed in the appropriate
offices against such Grantor in the locations listed in Exhibit “E”, the
Administrative Agent will have a fully perfected first priority security
interest in the Collateral owned by such Grantor in which a security interest
may be perfected by filing of a financing statement under the UCC, subject only
to Liens permitted under Section 4.1.6 hereof.
     3.2. Conflicting Laws and Contracts. Neither the execution and delivery by
such Grantor of this Security Agreement, the creation and perfection of the
security interest in the Collateral granted hereunder, nor compliance with the
terms and provisions hereof will violate (i) any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on such Grantor, or
(ii) such Grantor’s charter, articles or certificate of incorporation,
partnership agreement or by-laws (or similar constitutive documents), or
(iii) the provisions of any indenture, instrument or agreement to which such
Grantor is a party or is subject, or by which it, or its property may be bound
or affected, or conflict with or constitute a default thereunder, or result in
or require the creation or imposition of any Lien in, of or on the property

4

--------------------------------------------------------------------------------

 

of such Grantor pursuant to the terms of any such indenture, instrument or
agreement (other than any Lien of the Administrative Agent on behalf of the
Secured Parties).
     3.3. Principal Location. Such Grantor’s mailing address and the location of
its place of business (if it has only one) or its chief executive office (if it
has more than one place of business), are disclosed in Exhibit “A”; such Grantor
has no other places of business except those set forth in Exhibit “A”.
     3.4. Property Locations. The Inventory, Equipment and Fixtures of each
Grantor are located solely at the locations of such Grantor described in Exhibit
“A”. All of said locations are owned by such Grantor except for locations
(i) which are leased by such Grantor as lessee and designated in Part B of
Exhibit “A” and (ii) at which Inventory is held in a public warehouse or is
otherwise held by a bailee or on consignment by such Grantor as designated in
Part C of Exhibit “A”.
     3.5. No Other Names; Etc.. Within the five-year period ending as of the
date such Person becomes a Grantor hereunder, such Grantor has not conducted
business under any name, changed its jurisdiction of formation, merged with or
into or consolidated with any other Person, except as disclosed in Exhibit “A”.
The name in which such Grantor has executed this Security Agreement is the exact
name as it appears in such Grantor’s organizational documents, as amended, as
filed with such Grantor’s jurisdiction of organization as of the date such
Person becomes a Grantor hereunder.
     3.6. No Default. No Default or Event of Default exists.
     3.7. Accounts and Chattel Paper. The names of the obligors, amounts owing,
due dates and other information with respect to the Accounts and Chattel Paper
owned by such Grantor are and will be correctly stated in all records of such
Grantor relating thereto and in all invoices and reports with respect thereto
furnished to the Administrative Agent by such Grantor from time to time. As of
the time when each Account or each item of Chattel Paper arises, such Grantor
shall be deemed to have represented and warranted that such Account or Chattel
Paper, as the case may be, and all records relating thereto, are genuine and in
all respects what they purport to be.
     3.8. Filing Requirements. None of the Equipment owned by such Grantor is
covered by any certificate of title, except for motor vehicles. None of the
Collateral owned by such Grantor is of a type for which security interests or
liens may be perfected by filing under any federal statute except for motor
vehicles. The legal description, county and street address of the property on
which any Fixtures owned by such Grantor are located is set forth in Exhibit “C”
together with the name and address of the record owner of each such property.
     3.9. No Financing Statements, Security Agreements. No financing statement
or security agreement describing all or any portion of the Collateral which has
not lapsed or been terminated naming such Grantor as debtor has been filed or is
of record in any jurisdiction except financing statements (i) naming the
Administrative Agent on behalf of the Secured Parties as the secured party and
(ii) in respect of Liens permitted by Section 6.02 of the Credit Agreement;
provided, that nothing herein shall be deemed to constitute an agreement to
subordinate any of the Liens of the Administrative Agent under the Loan
Documents to any Liens otherwise permitted under Section 6.02 of the Credit
Agreement.
     3.10. Federal Employer Identification Number; State Organization Number;
Jurisdiction of Organization. Such Grantor’s federal employer identification
number is, and if such Grantor is a registered organization, such Grantor’s
State of organization, type of organization and State of organization
identification number are, listed in Exhibit “G”.

5

--------------------------------------------------------------------------------

 

     3.11. Pledged Securities and Other Investment Property. Exhibit “D” sets
forth a complete and accurate list of the Instruments, Securities and other
Investment Property constituting Collateral and delivered to the Administrative
Agent. Each Grantor is the direct and beneficial owner of each Instrument,
Security and other type of Investment Property listed in Exhibit “D” as being
owned by it, free and clear of any Liens, except for the security interest
granted to the Administrative Agent for the benefit of the Secured Parties
hereunder or as permitted by Section 6.02 of the Credit Agreement. Each Grantor
further represents and warrants that (i) all Pledged Collateral owned by it
constituting an Equity Interest has been (to the extent such concepts are
relevant with respect to such Pledged Collateral) duly authorized and validly
issued, are fully paid and non-assessable and constitute the percentage of the
issued and outstanding shares of stock (or other Equity Interests) of the
respective issuers thereof indicated in Exhibit “D” hereto, (ii) with respect to
any certificates delivered to the Administrative Agent representing an Equity
Interest, either such certificates are Securities as defined in Article 8 of the
UCC of the applicable jurisdiction as a result of actions by the issuer or
otherwise, or, if such certificates are not Securities, such Grantor has so
informed the Administrative Agent so that the Administrative Agent may take
steps to perfect its security interest therein as a General Intangible and
(iii) to the extent requested by the Administrative Agent, all such Pledged
Collateral held by a securities intermediary is covered by a control agreement
among such Grantor, the securities intermediary and the Administrative Agent
pursuant to which the Administrative Agent has Control.
     3.12. Deposit Accounts and Securities Accounts. All of such Grantor’s
Deposit Accounts and Securities Accounts are listed on Exhibit “H”.
ARTICLE IV
COVENANTS
     From the date of this Security Agreement and thereafter until this Security
Agreement is terminated, each of the Initial Grantors agrees, and from and after
the effective date of any Security Agreement Supplement applicable to any
Grantor (and after giving effect to supplements to each of the Exhibits hereto
with respect to such subsequent Grantor as attached to such Security Agreement
Supplement) and thereafter until this Security Agreement is terminated each such
subsequent Grantor agrees:
     4.1. General.
     4.1.1 Inspection. Each Grantor will permit the Administrative Agent or any
Secured Party, by its representatives and agents (i) to inspect the Collateral,
(ii) to examine and make copies of the records of such Grantor relating to the
Collateral and (iii) to discuss the Collateral and the related records of such
Grantor with, and to be advised as to the same by, such Grantor’s officers and
employees (and, in the case of any Receivable, with any person or entity which
is or may be obligated thereon), all at such reasonable times and intervals as
the Administrative Agent or such Secured Party may determine, upon reasonable
notice by the Administrative Agent or such Secured Party to such Grantor and all
at such Grantor’s expense.
     4.1.2 Taxes. Such Grantor will pay when due all taxes, assessments and
governmental charges and levies upon the Collateral owned by such Grantor,
except (i) those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside in
accordance with GAAP and with respect to which no Lien exists, and (ii) those
which by reason of the amount involved or the remedies available to the taxing
authority could not reasonably be expected to have a Material Adverse Effect.

6

--------------------------------------------------------------------------------

 

     4.1.3 Records and Reports; Notification of Default. Each Grantor shall keep
and maintain complete, accurate and proper books and records with respect to the
Collateral owned by such Grantor, and furnish to the Administrative Agent, such
reports relating to the Collateral as the Administrative Agent shall from time
to time reasonably request. Each Grantor will give prompt notice in writing to
the Administrative Agent and the Lenders of the occurrence of any Default or
Event of Default and of any other development, financial or otherwise, which
might materially and adversely affect the Collateral.
     4.1.4 Financing Statements and Other Actions; Defense of Title. Each
Grantor hereby authorizes the Administrative Agent to file, and if requested
will execute and deliver to the Administrative Agent, all financing statements
describing the Collateral owned by such Grantor and other documents and take
such other actions as may from time to time reasonably be requested by the
Administrative Agent in order to maintain a first priority, perfected security
interest in and, if applicable, Control of, the Collateral owned by such
Grantor, subject to Liens permitted under Section 6.02 of the Credit Agreement,
provided that nothing herein shall be deemed to constitute an agreement to
subordinate any of the Liens of the Administrative Agent under the Loan
Documents to any Liens otherwise permitted under Section 6.02 of the Credit
Agreement. Such financing statements may describe the Collateral in the same
manner as described herein or may contain an indication or description of
collateral that describes such property in any other manner as the
Administrative Agent may determine, in its sole discretion, is necessary,
advisable or prudent to ensure that the perfection of the security interest in
the Collateral granted to the Administrative Agent herein, including, without
limitation, describing such property as “all assets of the debtor whether now
owned or hereafter acquired and wheresoever located, including all accessions
thereto and proceeds thereof.” To the extent requested by the Borrower in
connection with Intellectual Property being sold, disposed or otherwise
transferred to a third-party purchaser, the Administrative Agent shall confirm
in writing that Collateral does not include Intellectual Property and shall
prepare and provide such UCC-3 amendments as are reasonably requested by the
Borrower demonstrating that such Intellectual Property does not constitute
Collateral, such confirmations and UCC-3 amendments to be in form and substance
reasonably satisfactory to the Administrative Agent. Each Grantor will take any
and all actions necessary to defend title to the Collateral owned by such
Grantor against all persons and to defend the security interest of the
Administrative Agent in such Collateral and the priority thereof against any
Lien not expressly permitted hereunder.
     4.1.5 Disposition of Collateral. No Grantor will sell, lease or otherwise
dispose of the Collateral owned by such Grantor except (i) so long as no Default
has occurred and is continuing, dispositions specifically permitted pursuant to
Section 6.03 of the Credit Agreement, (ii) until such time during the
continuation of a Default as such Grantor receives a notice from the
Administrative Agent instructing such Grantor to cease such transactions, sales
or leases of Inventory in the ordinary course of business, and (iii) until such
time as such Grantor receives a notice from the Administrative Agent pursuant to
Article VII, proceeds of Inventory and Accounts collected in the ordinary course
of business.
     4.1.6 Liens. No Grantor will create, incur, or suffer to exist any Lien on
the Collateral owned by such Grantor except Liens permitted pursuant to
Section 6.02 of the Credit Agreement, provided, that nothing herein shall be
deemed to constitute an agreement to subordinate any of the Liens of the
Administrative Agent under the Loan Documents to any Liens otherwise permitted
under Section 6.02 of the Credit Agreement.
     4.1.7 Change in Corporate Existence, Type or Jurisdiction of Organization,
Location, Name. Each Grantor will:

7

--------------------------------------------------------------------------------

 

  (i)    preserve its existence and corporate structure as in effect on the
Effective Date;            (ii)   not change its name or jurisdiction of
organization;     (iii)   not maintain its place of business (if it has only
one) or its chief executive office (if it has more than one place of business)
at a location other than a location specified in Exhibit “A”; and     (iv)   not
(i) have any Inventory, Equipment or Fixtures or proceeds or products thereof
(other than Inventory and proceeds thereof disposed of as permitted by Section
4.1.5) at a location other than a location specified in Exhibit “A”, (ii) change
its taxpayer identification number or (iii) change its mailing address,

unless, in each such case, such Grantor shall have given the Administrative
Agent not less than ten (10) days’ prior written notice of such event or
occurrence and the Administrative Agent shall have either (x) determined in good
faith that such event or occurrence will not adversely affect the validity,
perfection or priority of the Administrative Agent’s security interest in the
Collateral, or (y) taken such steps (with the cooperation of such Grantor to the
extent necessary or advisable) as are necessary or advisable to properly
maintain the validity, perfection and priority of the Administrative Agent’s
security interest in the Collateral owned by such Grantor.
4.1.8 Other Financing Statements. No Grantor will suffer to exist or authorize
the filing of any financing statement naming it as debtor covering all or any
portion of the Collateral owned by such Grantor, except any financing statement
authorized under Section 4.1.4 hereof. Each Grantor acknowledges that it is not
authorized to file any financing statement or amendment or termination statement
with respect to any financing statement filed in connection herewith without the
prior written consent of the Administrative Agent, subject to such Grantor’s
rights under Section 9-509(d)(2) of the UCC.
4.2. Receivables.
     4.2.1 Certain Agreements on Receivables. During the occurrence and
continuation of a Default, no Grantor will make or agree to make any discount,
credit, rebate or other reduction in the original amount owing on a Receivable
or accept in satisfaction of a Receivable less than the original amount thereof.
Notwithstanding the foregoing, such Grantor may reduce the amount of Accounts
arising from the sale of Inventory or the rendering of services in accordance
with its present policies and in the ordinary course of business and as
otherwise permitted under the Credit Agreement, whether or not a Default has
occurred and is continuing.
     4.2.2 Collection of Receivables. Except as otherwise provided in this
Security Agreement, each Grantor will collect and enforce, at such Grantor’s
sole expense, all amounts due or hereafter due to such Grantor under the
Receivables owned by such Grantor.
     4.2.3 Delivery of Invoices. Each Grantor will deliver to the Administrative
Agent immediately upon its request during the continuation of a Default
duplicate invoices with respect to each Account owned by such Grantor bearing
such language of assignment as the Administrative Agent shall specify.
     4.2.4 Disclosure of Counterclaims on Receivables. If (i) any discount,
credit or agreement to make a rebate or to otherwise reduce the amount owing on
a Receivable owned by such Grantor exists or (ii) if, to the knowledge of such
Grantor, any dispute, setoff, claim,

8

--------------------------------------------------------------------------------

 

counterclaim or defense exists or has been asserted or threatened with respect
to a Receivable, such Grantor will disclose such fact to the Administrative
Agent in writing in connection with the inspection by the Administrative Agent
of any record of such Grantor relating to such Receivable and in connection with
any invoice or report furnished by such Grantor to the Administrative Agent
relating to such Receivable.
     4.2.5 Electronic Chattel Paper. Each Grantor shall take all steps necessary
to grant the Administrative Agent Control of all electronic chattel paper in
accordance with the UCC and all “transferable records” as defined in each of the
Uniform Electronic Transactions Act and the Electronic Signatures in Global and
National Commerce Act.
     4.3. Maintenance of Goods. Each Grantor will do all things necessary to
maintain, preserve, protect and keep the Inventory and the Equipment owned by
such Grantor in good repair, working order and saleable condition (ordinary wear
and tear excepted) and make all necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be
properly conducted at all times, except where the failure to do so, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
     4.4. Instruments, Securities, Chattel Paper, Documents and Pledged
Deposits. Each Grantor will (i) deliver to the Administrative Agent immediately
upon execution of this Security Agreement the originals of all Chattel Paper,
Securities (to the extent certificated) and Instruments (to the extent in an
amount in excess of $2,000,000 in the case of intercompany notes) constituting
Collateral (if any then exist), (ii) hold in trust for the Administrative Agent
upon receipt and immediately thereafter deliver to the Administrative Agent any
Chattel Paper, Securities and Instruments constituting Collateral, (iii) upon
the designation of any Pledged Deposits (as set forth in the definition
thereof), deliver to the Administrative Agent such Pledged Deposits which are
evidenced by certificates included in the Collateral endorsed in blank, marked
with such legends and assigned as the Administrative Agent shall specify,
(iv) upon the Administrative Agent’s request, after the occurrence and during
the continuation of a Default, deliver to the Administrative Agent (and
thereafter hold in trust for the Administrative Agent upon receipt and
immediately deliver to the Administrative Agent) any Document evidencing or
constituting Collateral, and (v) upon the Administrative Agent’s request,
deliver to the Administrative Agent a duly executed amendment to this Security
Agreement, in the form of Exhibit “I” hereto (the “Amendment”), pursuant to
which such Grantor will pledge such additional Collateral. Such Grantor hereby
authorizes the Administrative Agent to attach each Amendment to this Security
Agreement and agrees that all additional Collateral owned by it set forth in
such Amendments shall be considered to be part of the Collateral.
     4.5. Uncertificated Securities and Certain Other Investment Property. Each
Grantor will permit the Administrative Agent from time to time to cause the
appropriate issuers (and, if held with a securities intermediary, such
securities intermediary) of uncertificated securities or other types of
Investment Property not represented by certificates which are Collateral owned
by such Grantor to mark their books and records with the numbers and face
amounts of all such uncertificated securities or other types of Investment
Property not represented by certificates and all rollovers and replacements
therefor to reflect the Lien of the Administrative Agent granted pursuant to
this Security Agreement. To the extent requested by the Administrative Agent,
each Grantor will use all commercially reasonable efforts, with respect to
Investment Property constituting Collateral owned by such Grantor held with a
financial intermediary, to cause such financial intermediary to enter into a
control agreement with the Administrative Agent in form and substance reasonably
satisfactory to the Administrative Agent.
     4.6. Stock and Other Ownership Interests.

9

--------------------------------------------------------------------------------

 

     4.6.1 Changes in Capital Structure of Issuers. Except as permitted in the
Credit Agreement, or with respect to NXTHERA, Inc. to the extent it does not
constitute a Subsidiary, no Grantor will (i) permit or suffer any issuer of
privately held corporate securities or other ownership interests in a
corporation, partnership, joint venture or limited liability company
constituting Collateral owned by such Grantor to dissolve, liquidate, retire any
of its capital stock or other Instruments or Securities evidencing ownership,
reduce its capital or merge or consolidate with any other entity, or (ii) vote
any of the Instruments, Securities or other Investment Property in favor of any
of the foregoing except to the extent permitted under Section 6.03 of the Credit
Agreement.
     4.6.2 Issuance of Additional Securities. No Grantor will permit or suffer
the issuer of privately held corporate securities or other ownership interests
in a corporation, partnership, joint venture or limited liability company
constituting Collateral to issue any such securities or other ownership
interests, any right to receive the same or any right to receive earnings,
except to such Grantor.
     4.6.3 Registration of Pledged Securities and other Investment Property.
Each Grantor will permit any registrable Collateral owned by such Grantor to be
registered in the name of the Administrative Agent or its nominee at any time at
the option of the Required Lenders following the occurrence and during the
continuance of an Event of Default and without any further consent of such
Grantor.
     4.6.4 Exercise of Rights in Pledged Securities and other Investment
Property. Each Grantor will permit the Administrative Agent or its nominee at
any time after the continuance of a Default, without notice, to exercise or
refrain from exercising any and all voting and other consensual rights
pertaining to the Collateral owned by such Grantor or any part thereof, and to
receive all dividends and interest in respect of such Collateral.
     4.7. Deposit Accounts. Each Grantor will (i) upon the Administrative
Agent’s request, cause each bank or other financial institution in which it
maintains (a) a Deposit Account (with an average daily balance in excess of
$2,000,000) to enter into a control agreement with the Administrative Agent, in
form and substance satisfactory to the Administrative Agent in order to give the
Administrative Agent Control of the Deposit Account or (b) other deposits
(general or special, time or demand, provisional or final) to be notified of the
security interest granted to the Administrative Agent hereunder and cause each
such bank or other financial institution to acknowledge such notification in
writing and (ii) upon the Administrative Agent’s request after the occurrence
and during the continuance of a Default, deliver to each such bank or other
financial institution a letter, in form and substance acceptable to the
Administrative Agent, transferring ownership of the Deposit Account to the
Administrative Agent or transferring dominion and control over each such other
deposit to the Administrative Agent until such time as no Default exists. In the
case of deposits maintained with Lenders, the terms of such letter shall be
subject to the provisions of the Credit Agreement regarding setoffs.
     4.8. Letter-of-Credit Rights. Each Grantor will, upon the Administrative
Agent’s request, cause each issuer of a letter of credit, to consent to the
assignment of proceeds of such letter of credit in order to give the
Administrative Agent Control of the Letter of Credit Rights to such letter of
credit.
     4.9. Federal, State or Municipal Claims. Each Grantor will notify the
Administrative Agent of any Collateral owned by such Grantor which constitutes a
claim against the United States government or any state or local government or
any instrumentality or agency thereof, the assignment of which claim is
restricted by federal, state or municipal law. Furthermore, in the event the
aggregate amount of such claims are in excess of $2,000,000, each Grantor will
execute and deliver to the Administrative Agent

10

--------------------------------------------------------------------------------

 

such documents, agreements and instruments, and will take such further actions
(including, without limitation, the taking of necessary actions under the
Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq.
and 41 U.S.C. § 15 et seq.)), which the Administrative Agent may, from time to
time, reasonably request, to ensure perfection and priority of the Liens
hereunder in respect of Accounts and General Intangibles owing by any government
or instrumentality or agency thereof, all at the expense of the Borrower.
     4.10. No Interference. Each Grantor agrees that it will not interfere with
any right, power and remedy of the Administrative Agent provided for in this
Security Agreement or now or hereafter existing at law or in equity or by
statute or otherwise, or the exercise or beginning of the exercise by the
Administrative Agent of any one or more of such rights, powers or remedies.
     4.11. Insurance. In the event any Collateral is located in any area that
has been designated by the Federal Emergency Management Agency as a “Special
Flood Hazard Area”, each Grantor shall purchase and maintain flood insurance on
such Collateral (including any personal property which is located on any real
property leased by such Loan Party within a “Special Flood Hazard Area”). The
amount of flood insurance required by this Section shall be in an amount equal
to the lesser of the total Commitment or the total replacement cost value of the
improvements.
     4.12. Commercial Tort Claims. If, after the date hereof, any Grantor
identifies the existence of a Commercial Tort Claim belonging to such Grantor
that has arisen in the course of such Grantor’s business in addition to the
Commercial Tort Claims described in Exhibit “F”, which are all of such Grantor’s
Commercial Tort Claims as of the Effective Date, then such Grantor shall give
the Administrative Agent prompt notice thereof, but in any event not less
frequently than quarterly. Each Grantor agrees promptly upon request by the
Administrative Agent to execute and deliver to the Administrative Agent any
supplement to this Security Agreement or any other document reasonably requested
by the Administrative Agent to evidence the grant of a security interest therein
in favor of the Administrative Agent.
     4.13. Updating of Exhibits to Security Agreement. The Borrower will provide
to the Administrative Agent, concurrently with the delivery of the certificate
of a Financial Officer of the Borrower as required by Section 5.01(c) of the
Credit Agreement, updated versions of the Exhibits to this Security Agreement
(provided that if there have been no changes to any such Exhibits since the
previous updating thereof required hereby, the Borrower shall indicate that
there has been “no change” to the applicable Exhibit(s)); provided that, other
than with respect to the changes described in clauses (i) and (ii) of
Section 4.1.7 and so long as the Leverage Ratio is less than 3.0 to 1.0, the
Borrower may elect to not provide such updates until the earlier of (x) the
delivery of such certificate in respect of its annual financial statements
described in Section 5.01(a) of the Credit Agreement and (y) the delivery of
each certificate required by Section 5.01(c) of the Credit Agreement after there
are Loans outstanding under the Credit Agreement in excess of $20,000,000.
ARTICLE V
DEFAULT
     5.1. The occurrence of any one or more of the following events shall
constitute a Default:
     5.1.1 Any representation or warranty made by or on behalf of any Grantor
under or in connection with this Security Agreement shall be materially false as
of the date on which made.

11

--------------------------------------------------------------------------------

 

     5.1.2 The breach by any Grantor of any of the terms or provisions of
Article IV or Article VII.
     5.1.3 The breach by any Grantor (other than a breach which constitutes a
Default under Section 5.1.1 or 5.1.2 hereof) of any of the terms or provisions
of this Security Agreement which is not remedied within thirty (30) days after
the giving of written notice to such Grantor by the Administrative Agent.
     5.1.4 Any material portion of the Collateral shall be transferred or
otherwise disposed of, either voluntarily or involuntarily, in any manner not
permitted by Section 4.1.5 or 8.8 hereof or shall be lost, stolen, damaged or
destroyed.
     5.1.5 The occurrence of any “Event of Default” under, and as defined in,
the Credit Agreement.
     5.2. Remedies.
     5.2.1 Upon the occurrence of a Default, the Administrative Agent may, and
at the direction of the Required Lenders shall, exercise any or all of the
following rights and remedies:

  (i)   Those rights and remedies provided in this Security Agreement, the
Credit Agreement, or any other Loan Document, provided that this clause
(i) shall not be understood to limit any rights or remedies available to the
Administrative Agent and the Secured Parties prior to a Default.     (ii)  
Those rights and remedies available to a secured party under the UCC (whether or
not the UCC applies to the affected Collateral) or under any other applicable
law (including, without limitation, any law governing the exercise of a bank’s
right of setoff or bankers’ lien) when a debtor is in default under a security
agreement.     (iii)   Give notice of sole control or any other instruction
under any Deposit Account Control Agreement or other control agreement with any
securities intermediary and take any action therein with respect to such
Collateral.     (iv)   Without notice (except as specifically provided in
Section 8.1 hereof or elsewhere herein, demand or advertisement of any kind to
any Grantor or any other Person) enter the premises of any Grantor where any
Collateral is located (through self-help and without judicial process) to
collect, receive, assemble, process, appropriate, sell, lease, assign, grant an
option or options to purchase or otherwise dispose of, deliver, or realize upon,
the Collateral or any part thereof in one or more parcels at public or private
sale or sales (which sales may be adjourned or continued from time to time with
or without notice and may take place at any Grantor’s premises of elsewhere),
for cash, on credit or for future delivery without assumption of any credit
risk, and upon such other terms as the Administrative Agent may deem
commercially reasonable.     (v)   Concurrently with written notice to the
applicable Grantor, transfer and register in its name or in the name of its
nominee the whole or any part of the Pledged Collateral, to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations, to exercise the
voting and all other rights as a holder with respect thereto, to collect and
receive all cash dividends, interest, principal and other distributions made
thereon and to otherwise act with respect

12

--------------------------------------------------------------------------------

 

      to the Pledged Collateral as though the Administrative Agent was the
outright owner thereof.

     5.2.2 The Administrative Agent, on behalf of the Secured Parties, may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral, and such compliance will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral.
     5.2.3 The Administrative Agent shall have the right upon any such public
sale or sales and, to the extent permitted by law, upon any such private sale or
sales, to purchase for the benefit of the Administrative Agent and the other
Secured Parties, the whole or any part of the Collateral so sold, free of any
right of equity redemption, which equity redemption the Grantor hereby expressly
releases.
     5.2.4 Until the Administrative Agent is able to effect a sale, lease, or
other disposition of Collateral, the Administrative Agent shall have the right
to hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by the Administrative Agent. The Administrative
Agent may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of the Administrative Agent’s
remedies (for the benefit of the Administrative Agent and other Secured
Parties), with respect to such appointment without prior notice or hearing as to
such appointment.
     5.2.5 If, after the Credit Agreement has terminated by its terms and all of
the Secured Obligations have been paid in full, there remain outstanding Swap
Obligations or Banking Services Obligations, the Required Lenders may exercise
the remedies provided in this Section 5.2 upon the occurrence of any event which
would allow or require the termination or acceleration of any Swap Obligations
or Banking Services Obligations.
     5.2.6 Notwithstanding the foregoing, neither the Administrative Agent nor
any other Secured Party shall be required to (i) make any demand upon, or pursue
or exhaust any of their rights or remedies against, any Grantor, any other
obligor, guarantor, pledgor or any other Person with respect to the payment of
the Secured Obligations or to pursue or exhaust any of their rights or remedies
with respect to any Collateral therefor or any direct or indirect guarantee
thereof, (ii) marshal the Collateral or any guarantee of the Secured Obligations
or to resort to the Collateral or any such guarantee in any particular order, or
(iii) effect a public sale of any Collateral.
     5.2.7 Each Grantor recognizes that the Administrative Agent may be unable
to effect a public sale of any or all the Pledged Collateral and may be
compelled to resort to one or more private sales thereof in accordance with
Section 5.2.1 above. Each Grantor also acknowledges that any private sale may
result in prices and other terms less favorable to the seller than if such sale
were a public sale and, notwithstanding such circumstances, agrees that any such
private sale shall not be deemed to have been made in a commercially
unreasonable manner solely by virtue of such sale being private. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit any Grantor or the
issuer of the Pledged Collateral to register such securities for public sale
under the Securities Act of 1933, as amended, or under applicable state
securities laws, even if the applicable Grantor and the issuer would agree to do
so.
     5.3. Grantors’ Obligations Upon Default. Upon the request of the
Administrative Agent after the occurrence of a Default, each Grantor will:

13

--------------------------------------------------------------------------------

 

     5.3.1 Assembly of Collateral. Assemble and make available to the
Administrative Agent the Collateral and all books and records relating thereto
at any place or places specified by the Administrative Agent.
     5.3.2 Secured Party Access. Permit the Administrative Agent, by the
Administrative Agent’s representatives and agents, to enter, occupy and use any
premises where all or any part of the Collateral, or the books and records
relating thereto, or both, are located, to take possession of all or any part of
the Collateral, or the books and records relating thereto, or both, to remove
all or any part of the Collateral, or the books and records relating thereto, or
both, and to conduct sales of the Collateral, without any obligation to pay the
Grantor for such use and occupancy.
     5.3.3 Take, or cause an issuer of Pledged Collateral to take, any and all
actions necessary to register or qualify the Pledged Collateral to enable the
Administrative Agent to consummate a public sale or other disposition of the
Pledged Collateral.
     5.4. License. The Administrative Agent is hereby granted a license or other
right to use, following the occurrence and during the continuance of a Default,
without charge, each Grantor’s labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, customer lists and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral, and, following the occurrence and during the continuance of a
Default, such Grantor’s rights under all licenses and all franchise agreements
shall inure to the Administrative Agent’s benefit for the limited purpose of
liquidating the Collateral. In addition, each Grantor hereby irrevocably agrees
that the Administrative Agent may, following the occurrence and during the
continuance of a Default, sell any of such Grantor’s Inventory directly to any
person, including without limitation persons who have previously purchased such
Grantor’s Inventory from such Grantor and in connection with any such sale or
other enforcement of the Administrative Agent’s rights under this Security
Agreement, may sell Inventory which bears any trademark owned by or licensed to
such Grantor and any Inventory that is covered by any copyright owned by or
licensed to such Grantor and the Administrative Agent may finish any work in
process and affix any trademark owned by or licensed to such Grantor and sell
such Inventory as provided herein.
ARTICLE VI
WAIVERS, AMENDMENTS AND REMEDIES
     No delay or omission of the Administrative Agent or any Secured Party to
exercise any right or remedy granted under this Security Agreement shall impair
such right or remedy or be construed to be a waiver of any Default or an
acquiescence therein, and any single or partial exercise of any such right or
remedy shall not preclude any other or further exercise thereof or the exercise
of any other right or remedy. No waiver, amendment or other variation of the
terms, conditions or provisions of this Security Agreement whatsoever shall be
valid unless in writing signed by the Administrative Agent and each Grantor, and
then only to the extent in such writing specifically set forth, provided that
the addition of any Subsidiary as a Grantor hereunder by execution of a Security
Agreement Supplement in the form of Annex I (with such modifications as shall be
acceptable to the Administrative Agent) shall not require receipt of any consent
from or execution of any documentation by any other Grantor party hereto. All
rights and remedies contained in this Security Agreement or by law afforded
shall be cumulative and all shall be available to the Administrative Agent and
the Secured Parties until the Secured Obligations have been paid in full.

14

--------------------------------------------------------------------------------

 

ARTICLE VII
PROCEEDS; COLLECTION OF RECEIVABLES
     7.1. Lockboxes. Upon request of the Administrative Agent after the
occurrence and during the continuation of a Default, each Grantor shall execute
and deliver to the Administrative Agent irrevocable lockbox agreements in the
form provided by or otherwise acceptable to the Administrative Agent, which
agreements shall be accompanied by an acknowledgment by the bank where the
lockbox is located of the Lien of the Administrative Agent granted hereunder and
of irrevocable instructions to wire all amounts collected therein to a special
collateral account at the Administrative Agent.
     7.2. Collection of Receivables. The Administrative Agent may at any time
after the occurrence and during the continuation of a Default, by giving each
Grantor written notice, elect to require that the Receivables be paid directly
to the Administrative Agent for the benefit of the Secured Parties. In such
event, each Grantor shall, and shall permit the Administrative Agent to,
promptly notify the account debtors or obligors under the Receivables owned by
such Grantor of the Administrative Agent’s interest therein and direct such
account debtors or obligors to make payment of all amounts then or thereafter
due under such Receivables directly to the Administrative Agent. Upon receipt of
any such notice from the Administrative Agent, each Grantor shall thereafter
hold in trust for the Administrative Agent, on behalf of the Secured Parties,
all amounts and proceeds received by it with respect to the Receivables and
Other Collateral and immediately and at all times thereafter deliver to the
Administrative Agent all such amounts and proceeds in the same form as so
received, whether by cash, check, draft or otherwise, with any necessary
endorsements. The Administrative Agent shall hold and apply funds so received as
provided by the terms of Sections 7.3 and 7.4 hereof.
     7.3. Special Collateral Account. After the occurrence and during the
continuation of a Default, the Administrative Agent may require all cash
proceeds of the Collateral to be deposited in a special non-interest bearing
cash collateral account with the Administrative Agent and held there as security
for the Secured Obligations. No Grantor shall have any control whatsoever over
said cash collateral account. If no Secured Obligations are outstanding or if
the outstanding Secured Obligations are cash collateralized as required under
the Credit Agreement, the Administrative Agent shall immediately deposit the
collected balances in said cash collateral account into the applicable Grantor’s
general operating account with the Administrative Agent. If there are Secured
Obligations outstanding, and such Secured Obligations are not cash
collateralized as may be required under the Credit Agreement, the Administrative
Agent may (and shall, at the direction of the Required Lenders), from time to
time, apply the collected balances in said cash collateral account to the
payment of the Secured Obligations whether or not the Secured Obligations shall
then be due.
     7.4. Application of Proceeds. The proceeds of the Collateral shall be
applied by the Administrative Agent to payment of the Secured Obligations as
provided under Section 2.18 of the Credit Agreement.
ARTICLE VIII
GENERAL PROVISIONS
     8.1. Notice of Disposition of Collateral; Condition of Collateral. Each
Grantor hereby waives notice of the time and place of any public sale or the
time after which any private sale or other disposition of all or any part of the
Collateral may be made. To the extent such notice may not be waived under
applicable law, any notice made shall be deemed reasonable if sent to the
Borrower, addressed as set forth in Article IX, at least ten (10) days prior to
(i) the date of any such public sale or (ii) the time after which

15

--------------------------------------------------------------------------------

 

any such private sale or other disposition may be made. The Administrative Agent
shall have no obligation to clean-up or otherwise prepare the Collateral for
sale. To the maximum extent permitted by applicable law, each Grantor waives all
claims, damages, and demands against the Administrative Agent or any other
Secured Party arising out of the repossession, retention or sale of the
Collateral, except such as arise solely out of the gross negligence or willful
misconduct of the Administrative Agent or such other Secured Party as finally
determined by a court of competent jurisdiction. To the extent it may lawfully
do so, each Grantor absolutely and irrevocably waives and relinquishes the
benefit and advantage of, and covenants not to assert against the Administrative
Agent or any other Secured Party, any valuation, stay, appraisal, extension,
moratorium, redemption or similar laws and any and all rights or defenses it may
have as a surety now or hereafter existing which, but for this provision, might
be applicable to the sale of any Collateral made under the judgment, order or
decree of any court, or privately under the power of sale conferred by this
Security Agreement, or otherwise. Except as otherwise specifically provided
herein, each Grantor hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in connection
with this Security Agreement or any Collateral.
     8.2. Limitation on Administrative Agent’s and other Secured Parties’ Duty
with Respect to the Collateral. The Administrative Agent shall have no
obligation to clean-up or otherwise prepare the Collateral for sale. The
Administrative Agent and each other Secured Party shall use reasonable care with
respect to the Collateral in its possession or under its control. Neither the
Administrative Agent nor any other Secured Party shall have any other duty as to
any Collateral in its possession or control or in the possession or control of
any agent or nominee of the Administrative Agent or such other Secured Party, or
any income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto. To the extent that applicable law imposes
duties on the Administrative Agent to exercise remedies in a commercially
reasonable manner, each Grantor acknowledges and agrees that it is commercially
reasonable for the Administrative Agent (i) to fail to incur expenses deemed
significant by the Administrative Agent to prepare Collateral for disposition or
otherwise to transform raw material or work in process into finished goods or
other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party consents
for the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against account debtors or other
Persons obligated on Collateral or to remove Liens on or any adverse claims
against Collateral, (iv) to exercise collection remedies against account debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
Persons, whether or not in the same business as such Grantor, for expressions of
interest in acquiring all or any portion of such Collateral, (vii) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase insurance or
credit enhancements to insure the Administrative Agent against risks of loss,
collection or disposition of Collateral or to provide to the Administrative
Agent a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by the Administrative Agent, to obtain
the services of other brokers, investment bankers, consultants and other
professionals to assist the Administrative Agent in the collection or
disposition of any of the Collateral. Each Grantor acknowledges that the purpose
of this Section 8.2 is to provide non-exhaustive indications of what actions or
omissions by the Administrative Agent would be commercially reasonable in the
Administrative Agent’s exercise of remedies against the Collateral and that
other actions or omissions by the Administrative Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 8.2. Without limitation upon the foregoing, nothing contained in this
Section 8.2 shall be construed to grant

16

--------------------------------------------------------------------------------

 

any rights to any Grantor or to impose any duties on the Administrative Agent
that would not have been granted or imposed by this Security Agreement or by
applicable law in the absence of this Section 8.2.
     8.3. Compromises and Collection of Collateral. Each Grantor and the
Administrative Agent recognize that setoffs, counterclaims, defenses and other
claims may be asserted by obligors with respect to certain of the Receivables,
that certain of the Receivables may be or become uncollectible in whole or in
part and that the expense and probability of success in litigating a disputed
Receivable may exceed the amount that reasonably may be expected to be recovered
with respect to a Receivable. In view of the foregoing, each Grantor agrees that
the Administrative Agent may at any time and from time to time, if a Default has
occurred and is continuing, compromise with the obligor on any Receivable,
accept in full payment of any Receivable such amount as the Administrative Agent
in its sole discretion shall determine or abandon any Receivable, and any such
action by the Administrative Agent shall be commercially reasonable so long as
the Administrative Agent acts in good faith based on information known to it at
the time it takes any such action.
     8.4. Secured Party Performance of Grantor’s Obligations. Without having any
obligation to do so, the Administrative Agent may perform or pay any obligation
which any Grantor has agreed to perform or pay in this Security Agreement and
such Grantor shall reimburse the Administrative Agent for any reasonable amounts
paid by the Administrative Agent pursuant to this Section 8.4. Each Grantor’s
obligation to reimburse the Administrative Agent pursuant to the preceding
sentence shall be a Secured Obligation payable on demand.
     8.5. Authorization for Secured Party to Take Certain Action. Each Grantor
irrevocably authorizes the Administrative Agent at any time and from time to
time in the sole discretion of the Administrative Agent and appoints the
Administrative Agent as its attorney in fact (i) to execute on behalf of such
Grantor as debtor and to file financing statements necessary or desirable in the
Administrative Agent’s sole discretion to perfect and to maintain the perfection
and priority of the Administrative Agent’s security interest in the Collateral,
(ii) to indorse and collect any cash proceeds of the Collateral, (iii) to file a
carbon, photographic or other reproduction of this Security Agreement or any
financing statement with respect to the Collateral as a financing statement and
to file any other financing statement or amendment of a financing statement
(which does not add new collateral or add a debtor) in such offices as the
Administrative Agent in its sole discretion deems necessary or desirable to
perfect and to maintain the perfection and priority of the Administrative
Agent’s security interest in the Collateral, (iv) to contact and enter into one
or more agreements with the issuers of uncertificated securities which are
Collateral owned by such Grantor and which are Securities or with financial
intermediaries holding other Investment Property as may be necessary or
advisable to give the Administrative Agent Control over such Securities or other
Investment Property, (v) subject to the terms of Section 4.1.5 hereof, to
enforce payment of the Instruments, Accounts and Receivables in the name of the
Administrative Agent or such Grantor, (vi) to apply the proceeds of any
Collateral received by the Administrative Agent to the Secured Obligations as
provided in Article VII and (vii) to discharge past due taxes, assessments,
charges, fees or Liens on the Collateral (except for such Liens as are
specifically permitted hereunder or under any other Loan Document), and each
Grantor agrees to reimburse the Administrative Agent on demand for any
reasonable payment made or any reasonable expense incurred by the Administrative
Agent in connection therewith, provided that this authorization shall not
relieve any Grantor of any of its obligations under this Security Agreement or
under the Credit Agreement.
     8.6. Specific Performance of Certain Covenants. Each Grantor acknowledges
and agrees that a breach of any of the covenants contained in Sections 4.1.5,
4.1.6, 4.4, 5.3, or 8.8 or in Article VII hereof will cause irreparable injury
to the Administrative Agent and the Secured Parties, that the Administrative
Agent and Secured Parties have no adequate remedy at law in respect of such
breaches and therefore agrees, without limiting the right of the Administrative
Agent or the Secured Parties to seek and obtain

17

--------------------------------------------------------------------------------

 

specific performance of other obligations of the Grantors contained in this
Security Agreement, that the covenants of the Grantors contained in the Sections
referred to in this Section 8.6 shall be specifically enforceable against the
Grantors.
     8.7. Use and Possession of Certain Premises. Upon the occurrence of a
Default, the Administrative Agent shall be entitled to occupy and use any
premises owned or leased by the Grantors where any of the Collateral or any
records relating to the Collateral are located until the Secured Obligations are
paid or the Collateral is removed therefrom, whichever first occurs, without any
obligation to pay any Grantor for such use and occupancy.
     8.8. Dispositions Not Authorized. No Grantor is authorized to sell or
otherwise dispose of the Collateral except as set forth in Section 4.1.5 hereof
and notwithstanding any course of dealing between any Grantor and the
Administrative Agent or other conduct of the Administrative Agent, no
authorization to sell or otherwise dispose of the Collateral (except as set
forth in Section 4.1.5 hereof) shall be binding upon the Administrative Agent or
the Secured Parties unless such authorization is in writing signed by the
Administrative Agent with the consent or at the direction of the Required
Lenders.
     8.9. Reinstatement. This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Grantor’s assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
     8.10. Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Grantors, the
Administrative Agent and the Secured Parties and their respective successors and
assigns (including all persons who become bound as a debtor to this Security
Agreement), except that the Grantors shall not have the right to assign their
rights or delegate their obligations under this Security Agreement or any
interest herein, without the prior written consent of the Administrative Agent.
No sales of participations, assignments, transfers, or other dispositions of any
agreement governing the Secured Obligations or any portion thereof or interest
therein shall in any manner impair the Lien granted to the Administrative Agent,
for the benefit of the Administrative Agent and the other Secured Parties,
hereunder.
     8.11. Survival of Representations. All representations and warranties of
the Grantors contained in this Security Agreement shall survive the execution
and delivery of this Security Agreement.
     8.12. Taxes and Expenses. Any taxes payable or ruled payable by a Federal
or State authority in respect of this Security Agreement shall be paid by the
Grantors, together with interest and penalties, if any. The Grantors shall
reimburse the Administrative Agent for any and all reasonable out-of-pocket
expenses and internal charges (including the fees, charges and disbursements of
one U.S. counsel and one additional local counsel and regulatory counsel in each
applicable jurisdiction and additional counsel in light of actual or potential
conflicts of interest or the availability of different claims or defenses) paid
or incurred by the Administrative Agent in connection with the preparation,
execution, delivery, administration, collection and enforcement of this Security
Agreement and in the audit, analysis, administration, collection, preservation
or sale of the Collateral (including the expenses and charges

18

--------------------------------------------------------------------------------

 

associated with any periodic or special audit of the Collateral). Any and all
costs and expenses incurred by the Grantors in the performance of actions
required pursuant to the terms hereof shall be borne solely by the Grantors.
     8.13. Headings. The title of and section headings in this Security
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Security Agreement.
     8.14. Termination. This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) any and all commitments to extend credit
under the Loan Documents have terminated, and the Credit Agreement has
terminated pursuant to its express terms and (ii) all of the Secured Obligations
(other than Unliquidated Obligations) have been indefeasibly paid in cash and
performed in full (or with respect to any outstanding Letters of Credit, a cash
deposit or backup Letter of Credit has been delivered to the Administrative
Agent as required by the Credit Agreement) and no commitments of the
Administrative Agent or the Secured Parties which would give rise to any
Obligations are outstanding.
     8.15. Entire Agreement. This Security Agreement embodies the entire
agreement and understanding between the Grantors and the Administrative Agent
relating to the Collateral and supersedes all prior agreements and
understandings among the Grantors and the Administrative Agent relating to the
Collateral.

     8.16. Governing Law; Jurisdiction; Waiver of Jury Trial.

     8.16.1 THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
     8.16.2 Each Grantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Security Agreement or any other Loan Document, or for recognition or enforcement
of any judgment, and each Grantor hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each Grantor agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Security Agreement or any other Loan Document shall affect any right that the
Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring
any action or proceeding relating to this Security Agreement or any other Loan
Document against any Grantor or its properties in the courts of any
jurisdiction.
     8.16.3 Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Security Agreement or any other Loan Document
in any court referred to in Section 8.16.2. Each Grantor hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

19

--------------------------------------------------------------------------------

 

     8.16.4 Each party to this Security Agreement irrevocably consents to
service of process in the manner provided for notices in Article IX of this
Security Agreement, and each of the Grantors hereby appoints the Borrower as its
agent for service of process. Nothing in this Security Agreement or any other
Loan Document will affect the right of any party to this Security Agreement to
serve process in any other manner permitted by law.
     8.16.5 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT (WHETHER BASED ON CONTRACT, TORT
OR ANY OTHER THEORY). EACH GRANTOR (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER GRANTOR HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER GRANTOR WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER GRANTORS HAVE BEEN
INDUCED TO ENTER INTO THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
     8.17. Indemnity. Each Grantor hereby agrees, jointly with the other
Grantors and severally, to indemnify the Administrative Agent and the Secured
Parties (each such Person, an “Indemnitee”), and their respective successors,
assigns, agents and employees, from and against any and all liabilities,
damages, penalties, suits, costs, and expenses of any kind and nature
(including, without limitation, all expenses of litigation or preparation
therefor whether or not the Administrative Agent or any Secured Party is a party
thereto) imposed on, incurred by or asserted against the Administrative Agent or
the Secured Parties, or their respective successors, assigns, agents and
employees, in any way relating to or arising out of this Security Agreement or
any other Loan Document, or the manufacture, purchase, acceptance, rejection,
ownership, delivery, lease, possession, use, operation, condition, sale, return
or other disposition of any Collateral (including, without limitation, latent
and other defects, whether or not discoverable by the Administrative Agent or
the Secured Parties or any Grantor, and any claim for patent, trademark or
copyright infringement); provided that such indemnity shall not, be available to
any Indemnitee to the extent that such liabilities, damages, penalties, suits,
costs, and expenses are determined by a court of competent jurisdiction in a
final and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Indemnitee.
     8.18. Subordination of Intercompany Indebtedness. Each Grantor agrees that
any and all claims of such Grantor against any other Grantor (each an “Obligor”)
with respect to any “Intercompany Indebtedness” (as hereinafter defined), any
endorser, obligor or any other guarantor of all or any part of the Secured
Obligations, or against any of its properties shall be subordinate and subject
in right of payment to the prior payment, in full and in cash, of all Secured
Obligations, provided that, and not in contravention of the foregoing, so long
as no Default or Event of Default has occurred and is continuing, such Grantor
may make loans to and receive payments in the ordinary course of business with
respect to such Intercompany Indebtedness from each such Obligor to the extent
not prohibited by the terms of this Security Agreement and the other Loan
Documents. Notwithstanding any right of any Grantor to ask, demand, sue for,
take or receive any payment from any Obligor, all rights, liens and security
interests of such Grantor, whether now or hereafter arising and howsoever
existing, in any assets of any other Obligor shall be and are subordinated to
the rights of the Secured Parties and the Administrative Agent in those assets.
No Grantor shall have any right to possession of any such asset or to foreclose
upon any such asset, whether by judicial action or otherwise, unless and until
this Security Agreement has terminated in accordance with Section 8.14. If all
or any part of the assets of any Obligor, or the proceeds thereof, are

20

--------------------------------------------------------------------------------

 

subject to any distribution, division or application to the creditors of such
Obligor, whether partial or complete, voluntary or involuntary, and whether by
reason of liquidation, bankruptcy, arrangement, receivership, assignment for the
benefit of creditors or any other action or proceeding, or if the business of
any such Obligor is dissolved or if substantially all of the assets of any such
Obligor are sold, then, and in any such event (such events being herein referred
to as an “Insolvency Event”), any payment or distribution of any kind or
character, either in cash, securities or other property, which shall be payable
or deliverable upon or with respect to any indebtedness of any Obligor to any
Grantor (“Intercompany Indebtedness”) shall be paid or delivered directly to the
Administrative Agent for application on any of the Secured Obligations, due or
to become due, until such Secured Obligations (other than contingent indemnity
obligations) shall have first been fully paid and satisfied (in cash). Should
any payment, distribution, security or instrument or proceeds thereof be
received by the applicable Grantor upon or with respect to the Intercompany
Indebtedness after any Insolvency Event and prior to the termination of this
Security Agreement in accordance with Section 8.14, such Grantor shall receive
and hold the same in trust, as trustee, for the benefit of the Secured Parties
and shall forthwith deliver the same to the Administrative Agent, for the
benefit of the Secured Parties, in precisely the form received (except for the
endorsement or assignment of the Grantor where necessary), for application to
any of the Secured Obligations, due or not due, and, until so delivered, the
same shall be held in trust by the Grantor as the property of the Secured
Parties. If any such Grantor fails to make any such endorsement or assignment to
the Administrative Agent, the Administrative Agent or any of its officers or
employees is irrevocably authorized to make the same. Each Grantor agrees that
until the termination of this Security Agreement in accordance with Section
8.14, no Grantor will assign or transfer to any Person (other than the
Administrative Agent or the Borrower or another Grantor) any claim any such
Grantor has or may have against any Obligor.
     8.19. Severability. Any provision in this Security Agreement that is held
to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to
that jurisdiction, be inoperative, unenforceable, or invalid without affecting
the remaining provisions in that jurisdiction or the operation, enforceability,
or validity of that provision in any other jurisdiction, and to this end the
provisions of this Security Agreement are declared to be severable.
     8.20. Counterparts. This Security Agreement may be executed in counterparts
(and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. Delivery of an executed counterpart of a signature page of this
Security Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Security Agreement.
ARTICLE IX
NOTICES
     9.1. Sending Notices. Any notice required or permitted to be given under
this Security Agreement shall be sent (and deemed received) in the manner and to
the addresses set forth in Section 9.01 of the Credit Agreement. Any notice
delivered to the Borrower shall be deemed to have been delivered to all of the
Grantors.
     9.2. Change in Address for Notices. Each of the Grantors, the
Administrative Agent and the Lenders may change the address for service of
notice upon it by a notice in writing to the other parties.

21

--------------------------------------------------------------------------------

 

ARTICLE X
THE ADMINISTRATIVE AGENT
     JPMorgan Chase Bank, N.A. has been appointed Administrative Agent for the
Secured Parties hereunder pursuant to Article VIII of the Credit Agreement. It
is expressly understood and agreed by the parties to this Security Agreement
that any authority conferred upon the Administrative Agent hereunder is subject
to the terms of the delegation of authority made by the Secured Parties to the
Administrative Agent pursuant to the Credit Agreement, and that the
Administrative Agent has agreed to act (and any successor Administrative Agent
shall act) as such hereunder only on the express conditions contained in such
Article VIII. Any successor Administrative Agent appointed pursuant to
Article VIII of the Credit Agreement shall be entitled to all the rights,
interests and benefits of the Administrative Agent hereunder.
[Signature Pages Follow]

22

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, each of the Grantors and the Administrative Agent have
executed this Security Agreement as of the date first above written.

            AMERICAN MEDICAL SYSTEMS, INC., as a
Grantor
      By:   /s/ Mark A. Heggestad         Name:   Mark A. Heggestad       
Title:   Executive Vice President and
Chief Financial Officer     

            AMERICAN MEDICAL SYSTEMS HOLDINGS,
INC., as a Grantor
      By:   /s/ Mark A. Heggestad         Name:   Mark A. Heggestad       
Title:   Executive Vice President and
Chief Financial Officer     

            AMS SALES CORPORATION, as a Grantor
      By:   /s/ Mark A. Heggestad         Name:   Mark A. Heggestad       
Title:   Executive Vice President and
Chief Financial Officer     

            LASERSCOPE, as a Grantor
      By:   /s/ Mark A. Heggestad         Name:   Mark A. Heggestad       
Title:   Executive Vice President and
Chief Financial Officer     

            AMS RESEARCH CORPORATION, as a Grantor
      By:   /s/ Mark A. Heggestad         Name:   Mark A. Heggestad       
Title:   Executive Vice President and
Chief Financial Officer     

Signature Page to Pledge and Security Agreement

--------------------------------------------------------------------------------

 

          JPMORGAN CHASE BANK, N.A., as Administrative Agent
  By:   /s/ Krys Szremski       Name:   Krys Szremski    Title:   Vice
President   

Signature Page to Pledge and Security Agreement

--------------------------------------------------------------------------------

 

Exhibit “A”
(See Sections 3.3, 3.4, 3.5 and 4.1.7 of Security Agreement)
Prior names, jurisdiction of formation, place of business (if Grantor has only
one place of business), chief executive office (if Grantor has more than one
place of business), mergers and mailing address:
American Medical Systems Holdings, Inc.
10700 Bren Road West
Minnetonka MN 55343
Attention: Scott Wold
Tax Id# 41-1978822
Entity Id# 3196262
State of Incorporation: Delaware
American Medical Systems, Inc.
10700 Bren Road West
Minnetonka MN 55343
Attention: Scott Wold
Tax Id# 13-4018241
Entity Id# 2922261
State of Incorporation: Delaware
AMS Research Corporation
10700 Bren Road West
Minnetonka MN 55343
Attention: Scott Wold
Tax Id# 13-3798523
Entity Id# 2451184
State of Incorporation: Delaware
AMS Sales Corporation
10700 Bren Road West
Minnetonka MN 55343
Attention: Scott Wold
Tax Id# 41-1978822
Entity Id# 3445596
State of Incorporation: Delaware

 

--------------------------------------------------------------------------------

 

Laserscope
3070 Orchard Drive San
Jose, CA 95134
Attention: Scott Wold
Tax Id# 77-0049527
Entity Id# C1249512
State of Incorporation: California
Locations of Real Property, Inventory, Equipment and Fixtures:

A.   Owned Locations of Inventory, Equipment and Fixtures of the Grantors:      
10700 Bren Road West
Minnetonka MN 55343
Title Holder: American Medical Systems, Inc.

B.   Leased Locations of Inventory, Equipment and Fixtures of the Grantors
(Include Landlord’s Name):       3052 Orchard Drive
San Jose, CA 95134
Lessee: Laserscope     3070 Orchard Drive
San Jose, CA 95134
Lessee: Laserscope

C.   Public Warehouses or other Locations pursuant to Bailment or Consignment
Arrangements (include name of warehouse operator or other bailee or consignee of
Inventory and Equipment of the Grantors):       Owens and Minor
6201 Global Distribution Way
Louisville KY       DSV Solutions N.V.
Eddastraat 21, 9042
Ghent, Belgium       Expeditors
1001 Montague Expressway
Milpitas CA 95035

 

--------------------------------------------------------------------------------

 

EXHIBIT “B”
(See Section 3.8 of Security Agreement)
A. [Reserved]
B. Aircraft/engines, ships, vessels, railcars, other vehicles and similar
equipment governed by federal statute:

      Description   Registration Number
2001 Dodge 1500
  VIN Number: 1B7H16Y31S285710

 

--------------------------------------------------------------------------------

 

EXHIBIT “C”
(See Section 3.8 of Security Agreement)
Legal description, county and street address of property on which Fixtures are
located:
Legal Description:
Lots 5, 6 and 8, Block 4, Opus 2 Ninth Addition, Hennepin County, Minnesota.
And
Lot 9, Block 4, Opus 2 Ninth Addition, Hennepin County, Minnesota except that
part of said Lot 9 legally described as follows: That part of Lot 9, Block 4,
Opus 2 Ninth Addition, described as lying Westerly, Southwesterly and Southerly
of a line described as commencing at the most Southeasterly corner of said Lot
9; thence Westerly along the South line of said Lot 9 a distance of 100.05 feet
to its intersection with a line 100.00 feet Westerly of and parallel with that
particular East line of said Lot 9 that bears North 2 degrees 44 minutes 49
seconds East from the point of commencement, to the point of beginning of the
line to be described; thence Northerly along said parallel line and its
extension a distance of 107.53 feet; thence Northwesterly, deflecting to the
left 40 degrees 12 minutes 51 seconds a distance of 88.84 feet; thence Westerly,
deflecting to the left 43 degrees 41 minutes 52 seconds a distance of 299.45
feet to the Southwesterly line of said Lot 9 and said line there terminating.
Note for information:
The following portion of the above property is Abstract:
Lots 5 and 6, Block 4, Opus 2 Ninth Addition, except that part thereof embraced
within Lot 1, Block 2, Opus 2 Fourth Addition.
The balance of the above property is Torrens.
Abstract property
Torrens property: Certificate of Title No. 1012588
Property Address:
10700 Bren Road West
Minnetonka MN 55343
Name and Address of Record Owner:
American Medical Systems, Inc.
10700 Bren Road West
Minnetonka MN 55343

 

--------------------------------------------------------------------------------

 

EXHIBIT “D”
(See Section 3.11 of Security Agreement)
List of Instruments, Pledged Securities and other Investment Property
INSTRUMENTS
Intercompany Notes Payable

          Holder   Maker   Amount       NONE

SECURITIES
Stock

                          Certificate   Number of   % of Existing Holder  
Issuer   Number   Shares   Shares
American Medical Systems Holdings, Inc.
  American Medical Systems, Inc.   1   100   100%
American Medical Systems, Inc.
  Laserscope   2   1,000   100%
Laserscope
  Laserscope International, Inc.   CS-1   1,000   100%
Laserscope
  InnovaQuartz Incorporated   6   15,000   100%
American Medical Systems, Inc.
  Solarant Medical, Inc.   2   100   100%
American Medical Systems, Inc.
  AMS Sales Corporation   1   100   100%
American Medical Systems, Inc.
  AMS Research Corporation   2   1,000   100%
American Medical Systems, Inc.
  TherMatrx, Inc.   1   1,000   100%
AMS Sales Corporation
  AMS India, Inc.   1   100   100%
American Medical Systems, Inc.
  NXThera, Inc.   PB-5   8,713,693   19.5%

Bonds

                 
Issuer
  Number   Face Amount   Coupon Rate   Maturity
 
               

NONE
Government and Other Securities

                     
Issuer
  Number   Type   Face Amount   Coupon Rate   Maturity
 
                   

NONE

 

--------------------------------------------------------------------------------

 

OTHER INVESTMENT PROPERTY
(CERTIFICATED AND UNCERTIFICATED):

         
Issuer
  Description of Collateral   Percentage Ownership Interest
 
       

NONE

 

--------------------------------------------------------------------------------

 

EXHIBIT “E”
(See Section 3.1 of Security Agreement)
OFFICES IN WHICH FINANCING STATEMENTS HAVE BEEN FILED
California Secretary of State
Laserscope
Delaware Secretary of State
American Medical Systems Holdings, Inc.
American Medical Systems, Inc.
AMS Research Corporation
AMS Sales Corporation

 

--------------------------------------------------------------------------------

 

EXHIBIT “F”
(See Definition of “Commercial Tort Claims”)
COMMERCIAL TORT CLAIMS
[Describe parties, case number (if applicable), nature of dispute]
In the matter captioned American Medical Systems, Inc. and Laserscope vs.
Biolitec, Inc. venued in the United States District Court for the District of
Massachusetts, case no. 07-CV-30109, AMS is suing Biolitec for infringement of
an AMS patent. We have also asserted a false advertising claim against Biolitec.

 

--------------------------------------------------------------------------------

 

EXHIBIT “G”
(See Section 3.10 of Security Agreement)
FEDERAL EMPLOYER IDENTIFICATION NUMBER;
STATE ORGANIZATION NUMBER; JURISDICTION OF INCORPORATION

                      Federal Employer       State of   State     Identification
  Type of   Organization or   Organization GRANTOR   Number   Organization  
Incorporation   Number
American Medical Systems, Inc.
  13-4018241   Corporation   Delaware    3196262
American Medical Systems Holdings, Inc.
  41-1978822   Corporation   Delaware    2922261
AMS Research Corporation
  13-3798523   Corporation   Delaware    2451184
AMS Sales Corporation
  41-2018414   Corporation   Delaware    3445596
Laserscope
  77-0049527   Corporation   California    C1249512

 

--------------------------------------------------------------------------------

 

EXHIBIT “H”
(See Section 3.12 of Security Agreement)
DEPOSIT ACCOUNTS

          Name of Grantor   Name of Institution   Account Number
American Medical Systems Holdings, Inc.
  Citibank New York    30664692
American Medical Systems Holdings, Inc.
  Citibank New York    30665441
American Medical Systems, Inc.
  Citibank New York    30664705
AMS Research Corporation
  Citibank New York    30664713
AMS Sales Corporation
  Citibank New York    30665468
AMS India, Inc.
  Citibank New York    30844087
American Medical Systems, Inc.
  Citibank Delaware    38756196
American Medical Systems, Inc.
  Citibank Delaware    38756516

SECURITIES ACCOUNTS

          Name of Grantor   Name of Institution   Account Number
American Medical Systems, Inc.
  Bank of America Securities, LLC    383361
American Medical Systems, Inc.
  US Bancorp    388000341
American Medical Systems, Inc.
  Morgan Stanley Smith Barney LLC    243-90456-14 350

 

--------------------------------------------------------------------------------

 

EXHIBIT “I”
(See Section 4.4 of Security Agreement)
AMENDMENT
     This Amendment, dated ________________, 20____ is delivered pursuant to
Section 4.4 of the Security Agreement referred to below. All defined terms
herein shall have the meanings ascribed thereto or incorporated by reference in
the Security Agreement. The undersigned hereby certifies that the
representations and warranties in Article III of the Security Agreement are and
continue to be true and correct. The undersigned further agrees that this
Amendment may be attached to that certain Pledge and Security Agreement, dated
April 15, 2011, between the undersigned, as the Grantors, and JPMorgan Chase
Bank, N.A., as the Administrative Agent, (the “Security Agreement”) and that the
Collateral listed on Schedule I to this Amendment shall be and become a part of
the Collateral referred to in said Security Agreement and shall secure all
Secured Obligations referred to in said Security Agreement.

            By:          Name:        Title:   

9

--------------------------------------------------------------------------------

 

SCHEDULE I TO AMENDMENT
STOCKS

                                          Percentage of       Certificate  
Number of       Outstanding Name of Grantor   Issuer   Number(s)   Shares  
Class of Stock   Shares
 
                   

BONDS

                                            Name of Grantor   Issuer   Number  
Face Amount   Coupon Rate   Maturity
 
                   

GOVERNMENT SECURITIES

                                                    Name of Grantor   Issuer  
Number   Type   Face Amount   Coupon Rate   Maturity
 
                       

OTHER SECURITIES OR OTHER INVESTMENT PROPERTY
(CERTIFICATED AND UNCERTIFICATED)

                          Percentage Ownership Name of Grantor   Issuer  
Description of Collateral   Interest
 
           

[Add description of custody accounts or arrangements with securities
intermediary, if applicable]

10

--------------------------------------------------------------------------------

 

ANNEX I
to
PLEDGE AND SECURITY AGREEMENT
          Reference is hereby made to the Pledge and Security Agreement (as
amended, restated, supplemented or otherwise modified from time to time, the
“Agreement”), dated as of April 15, 2011, made by each of AMERICAN MEDICAL
SYSTEMS HOLDINGS, INC., a Delaware corporation (“Holdings”), AMERICAN MEDICAL
SYSTEMS, INC., a Delaware corporation (the “Borrower”) and the other
Subsidiaries of the Borrower listed on the signature pages thereto (together
with the Borrower, the “Initial Grantors”, and together with any additional
Subsidiaries, including the undersigned, which become parties thereto by
executing a Supplement in substantially the form hereof, the “Grantors”), in
favor of the Administrative Agent. Capitalized terms used herein and not defined
herein shall have the meanings given to them in the Agreement.
          By its execution below, the undersigned, [NAME OF NEW GRANTOR], a
[__________] [corporation/limited liability company/limited partnership] (the
“New Grantor”) agrees to become, and does hereby become, a Grantor under the
Agreement and agrees to be bound by the Agreement as if originally a party
thereto. The New Grantor hereby collaterally assigns and pledges to the
Administrative Agent for the benefit of the Secured Parties, and grants to the
Administrative Agent for the benefit of the Secured Parties, a security interest
in all of the New Grantor’s right, title and interest in and to the Collateral,
whether now owned or hereafter acquired, to secure the prompt and complete
payment and performance of the Secured Obligations; provided that, the amount of
Equity Interests in any First-Tier Foreign Subsidiary that is an Affected
Foreign Subsidiary pledged or required to be pledged to the Administrative Agent
hereunder or under any other Collateral Document shall be automatically limited
to the Voting Stock of such First-Tier Foreign Subsidiary representing not more
than 65% of the total Voting Power of all outstanding Voting Stock of such
First-Tier Foreign Subsidiary (and the term “Collateral” shall not include any
other Equity Interests of such First-Tier Foreign Subsidiary). For the avoidance
of doubt, the grant of a security interest herein shall not be deemed to be an
assignment of intellectual property rights owned by the New Grantor.
          By its execution below, the undersigned represents and warrants as to
itself that all of the representations and warranties contained in the Agreement
are true and correct in all respects as of the date hereof. The New Grantor
represents and warrants that the supplements to the Exhibits to the Agreement
attached hereto are true and correct in all respects and that such supplements
set forth all information required to be scheduled under the Agreement with
respect to the New Grantor. The New Grantor shall take all steps necessary and
required under the Agreement to perfect, in favor of the Administrative Agent, a
first-priority security interest in and lien against the New Grantor’s
Collateral.
     THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
          IN WITNESS WHEREOF, the New Grantor has executed and delivered this
Security Agreement Supplement as of this ___________ day of ____________, 20__.

1

--------------------------------------------------------------------------------

 

            [NAME OF NEW GRANTOR]
      By:           Title:             

2