Document:

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                                PLEDGE AGREEMENT

     THIS PLEDGE AGREEMENT, dated as of April 17, 2000 (this "Pledge Agreement")
is made by American Medical Systems, Inc., a Delaware corporation (the
"Borrower"), American Medical Systems Holdings, Inc., a Delaware corporation
(the "Parent"), certain Subsidiaries of the Borrower (together with the Parent,
individually a "Guarantor" and collectively the "Guarantors"; the Guarantors,
together with the Borrower, individually a "Pledgor" and collectively the
"Pledgors") and Bank of America, N.A., in its capacity as agent (in such
capacity, the "Agent") for the lenders from time to time party to the Credit
Agreement described below (the "Lenders").

                                    RECITALS

     WHEREAS, pursuant to that certain Credit Agreement dated as of March 24,
2000 (as amended, modified, extended, renewed or replaced from time to time, the
"Credit Agreement"), among the Borrower, the Guarantors, the Lenders and the
Agent, the Lenders have agreed to make Loans and issue Letters of Credit upon
the terms and subject to the conditions set forth therein; and

     WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Pledgors shall
have executed and delivered this Pledge Agreement to the Agent for the ratable
benefit of the Lenders.

     NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

     1.   Definitions. Capitalized terms used herein but not otherwise defined
shall have the meanings ascribed to such terms in the Credit Agreement. For
purposes of this Pledge Agreement, the term "Lender" shall include any Affiliate
of any Lender which has entered into a Hedging Agreement with any Credit Party
(to the extent the obligations of such Credit Party thereunder constitute Credit
Party Obligations).

     2.   Pledge and Grant of Security Interest. To secure the prompt payment
and performance in full when due, whether by lapse of time or otherwise, of the
Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby
pledges and assigns to the Agent, for the benefit of the Lenders, and grants to
the Agent, for the benefit of the Lenders, a continuing security interest in,
and a right to set off against, any and all right, title and interest of such
Pledgor in and to the following, whether now owned or existing or owned,
acquired, or arising hereafter (collectively, the "Pledged Collateral"):

          (a)  Pledged Capital Stock. (i) 100% (or, if less, the full
     amount owned by such Pledgor) of the issued and outstanding Capital Stock
     of the Persons set forth on Schedule 2(a) attached hereto that are Domestic
     Subsidiaries and

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     (ii) 65% (or, if less, the full amount owned by such Pledgor) of the issued
     and outstanding Capital Stock of the Persons set forth on Schedule 2(a)
     attached hereto that are Foreign Subsidiaries, in each full amount owned by
     such Pledgor) of the issued and outstanding Capital Stock of the Persons
     set forth on Schedule 2(a) attached hereto that are Foreign Subsidiaries,
     in each case together with the certificates (or other agreements or
     instruments), if any, representing such Capital Stock and all options and
     other rights, contractual or otherwise, with respect thereto (collectively,
     together with the Capital Stock described in Sections 2(b) and 2(c) below,
     the "Pledged Capital Stock"), including, but not limited to, the following:

               (A)  all shares, securities, membership interests or other equity
          interests representing a dividend on any of the Pledged Capital Stock,
          or representing a distribution or return of capital upon or in respect
          of the Pledged Capital Stock, or resulting from a stock split,
          revision, reclassification or other exchange therefor, and any
          subscriptions, warrants, rights or options issued to the holder of, or
          otherwise in respect of, the Pledged Capital Stock; provided, however,
          such Pledgor shall not be required to deliver more than 65% of the
          Person that is a Foreign Subsidiary of such Pledgor; and

               (B)  without affecting the obligations of the Pledgors under any
          provision prohibiting such action hereunder or under the Credit
          Agreement, in the event of any consolidation or merger involving the
          issuer of any Pledged Capital Stock and in which such issuer is not
          the surviving entity, the Capital Stock (in the applicable percentage
          specified in Section 2(a) above) of the successor entity formed by or
          resulting from such consolidation or merger.

          (b)  Additional Shares. (i) 100% (or, if less, the full amount owned
     by such Pledgor) of the issued and outstanding Capital Stock of any Person
     which hereafter becomes a Domestic Subsidiary and (ii) 65% (or, if less,
     the full amount owned by such Pledgor) of the issued and outstanding
     Capital Stock of any Person which hereafter becomes a first-tier Foreign
     Subsidiary, in each case together with the certificates (or other
     agreements or instruments), if any, representing such Capital Stock.

          (c)  Proceeds. All proceeds and products of the foregoing, however and
     whenever acquired and in whatever form.

     Without limiting the generality of the foregoing, it is hereby specifically
understood and agreed that each Pledgor may from time to time hereafter deliver
additional shares of Capital Stock to the Agent as collateral security for the
Pledgor Obligations. Upon delivery to the Agent, such additional Capital Stock
shall be deemed to be part of the Pledged Collateral and shall be subject to the
terms of this Pledge Agreement whether or not Schedule 2(a) is amended to refer
to such additional Capital Stock.

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     3.   Security for Pledgor Obligations. The security interest created hereby
in the Pledged Collateral constitutes continuing collateral security for all of
the following, whether now existing or hereafter incurred (the "Pledgor
Obligations"):

          (a)  In the case of the Borrower, the prompt performance and
     observance by the Borrower of all obligations of the Borrower under the
     Credit Agreement, the Notes, this Pledge Agreement and the other Credit
     Documents to which the Borrower is a party;

          (b)  Subject to clause (c) of Section 26 hereof, in the case of the
     Guarantors, the prompt performance and observance by each Guarantor of all
     obligations of such Guarantor under the Credit Agreement, this Pledge
     Agreement and the other Credit Documents to which such Guarantor is a
     party, including, without limitation, its guaranty obligations arising
     under Section 4 of the Credit Agreement; and

          (c)  All other indebtedness, liabilities, obligations and expenses of
     any kind or nature owing from any Credit Party to any Lender or the Agent
     in connection with (i) this Pledge Agreement or any other Credit Document,
     whether now existing or hereafter arising, due or to become due, direct or
     indirect, absolute or contingent, and howsoever evidenced, held or
     acquired, together with any and all modifications, extensions, renewals
     and/or substitutions of any of the foregoing, (ii) collecting and enforcing
     the Credit Party Obligations and (iii) all liabilities and obligations
     owing from such Credit Party to any Lender or any Affiliate of any Lender
     arising under any Hedging Agreements.

     4.   Delivery of the Pledged Collateral; Perfection of Security Interest.
Each Pledgor hereby agrees that:

          (a)  Delivery of Certificates. Each Pledgor shall deliver to the Agent
     (i) simultaneously with or prior to the execution and delivery of this
     Pledge Agreement, all certificates representing the Pledged Capital Stock
     of such Pledgor and (ii) promptly upon the receipt thereof by or on behalf
     of a Pledgor, all other certificates and instruments constituting Pledged
     Collateral of a Pledgor. Prior to delivery to the Agent, all such
     certificates and instruments constituting Pledged Collateral of a Pledgor
     shall be held in trust by such Pledgor for the benefit of the Agent
     pursuant hereto. All such certificates shall be delivered in suitable form
     for transfer by delivery or shall be accompanied by duly executed
     instruments of transfer or assignment in blank, substantially in the form
     provided in Exhibit 4(a) attached hereto.

          (b)  Additional Securities. If such Pledgor shall receive by virtue of
     its being, becoming or having been the owner of any Pledged Collateral, any
     (i) certificate, including without limitation, any certificate representing
     a dividend or distribution in connection with any increase or reduction of
     capital, reclassification, merger, consolidation, sale of assets,
     combination of shares or membership or equity interests, stock splits,
     spin-off or split-off, promissory notes or other instrument; (ii) option or
     right, whether as an addition to, substitution for, or an exchange for, any
     Pledged Collateral or otherwise; (iii) dividends payable in securities; or
     (iv) distributions of securities or other

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     equity interests in connection with a partial or total liquidation,
     dissolution or reduction of capital, capital surplus or paid-in surplus,
     then, subject to the percentage limitations set forth in Section 2(a)
     above, such Pledgor shall receive such certificate, instrument, option,
     right or distribution in trust for the benefit of the Agent, shall
     segregate it from such Pledgor's other property and shall deliver it
     forthwith to the Agent in the exact form received together with any
     necessary endorsement and/or appropriate stock power duly executed in
     blank, substantially in the form provided in Exhibit 4(a), to be held by
     the Agent as Pledged Collateral and as further collateral security for the
     Pledgor Obligations.

          (c)  Financing Statements. Each Pledgor shall execute and deliver to
     the Agent such UCC or other applicable financing statements as may be
     reasonably requested by the Agent in order to perfect and protect the
     security interest created hereby in the Pledged Collateral of such Pledgor.

          (d)  Control. If necessary to perfect the Lenders' security interest
     in any Pledged Collateral consisting of uncertificated Pledged Capital
     Stock, upon request of the Agent, (i) the Pledgor shall send to each issuer
     of such uncertificated Pledged Capital Stock (each an "Issuer") an
     authorization statement substantially in the form provided in Exhibit
     4(d)(i) (each an "Authorization Statement") and (ii) the Pledgor shall
     cause each such Issuer to, and each such Issuer shall, deliver to the Agent
     (A) an Acknowledgement and Consent substantially in the form provided in
     Exhibit 4(d)(ii)(A) (each an "Acknowledgement and Consent") and (B) a
     Transaction Statement substantially in the form provided in Exhibit
     4(d)(ii)(B) (each a "Transaction Statement"), confirming that such Issuer
     has registered the pledge effected by this Pledge Agreement on its books.
     Each Pledgor hereby authorizes and instructs each Issuer that is a party to
     this Pledge Agreement to comply with any instruction received by it from
     the Agent in writing that (y) states that an Event of Default has occurred
     and is continuing and (z) is otherwise in accordance with the terms of this
     Pledge Agreement, without any other or further instructions from such
     Pledgor, and such Pledgor agrees to indemnify such Issuer for any loss,
     damage or liability incurred by such Issuer in acting upon such
     instructions of the Agent.

     5.   Representations and Warranties. Each Pledgor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Pledgor Obligations remain outstanding (other than any such obligations
which by the terms thereof are stated to survive termination of the Credit
Documents) or any Credit Document or Hedging Agreement between a Credit Party
and any Lender (to the extent the obligations of such Credit Party thereunder
constitute Credit Party Obligations) is in effect, and until all of the
Commitments shall have been terminated:

          (a)  Authorization of Pledged Capital Stock. The Pledged Capital Stock
     is duly authorized and validly issued, is fully paid and, with respect any
     Pledged Capital Stock consisting of stock of a corporation, nonassessable
     and is not subject to the preemptive rights of any Person. All other shares
     of Capital Stock constituting Pledged Collateral will be duly authorized
     and validly issued, fully paid and, with respect any Pledged Capital Stock
     consisting of stock of a corporation, nonassessable and not subject to the
     preemptive rights of any Person.

          (b)  Title. Each Pledgor has good and indefeasible title to the
     Pledged Collateral of such Pledgor and will at all times be the legal and
     beneficial owner of such Pledged Collateral free and clear of any Lien,
     other than Permitted Liens. There exists no "adverse claim" within the
     meaning of Section 8-102 of the Uniform Commercial Code as in effect in the
     State of New York (the "UCC") with respect to the Pledged Capital Stock of
     such Pledgor.

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          (c)  Exercising of Rights. The exercise by the Agent of its rights and
     remedies hereunder will not violate any law or governmental regulation or
     any material contractual restriction binding on or affecting a Pledgor or
     any of its property.

          (d)  Pledgor's Authority. No authorization, approval or action by, and
     no notice or filing with any Governmental Authority or with the issuer of
     any Pledged Capital Stock is required either (i) for the pledge made by a
     Pledgor or for the granting of the security interest by a Pledgor pursuant
     to this Pledge Agreement or (ii) for the exercise by the Agent or the
     Lenders of their rights and remedies hereunder (except as may be required
     by laws affecting the offering and sale of securities).

          (e)  Security Interest/Priority. This Pledge Agreement creates a valid
     security interest in favor of the Agent, for the benefit of the Lenders, in
     the Pledged Collateral. The taking possession by the Agent of the
     certificates, if any, representing the Pledged Capital Stock and all other
     certificates and instruments constituting Pledged Collateral will perfect
     and establish the first priority of the Agent's security interest in the
     Pledged Capital Stock and such certificates and instruments and, upon the
     filing of UCC financing statements or registration of the Agent's security
     interest on the books and records of the Issuers of any uncertificated
     Pledged Capital Stock, the Agent shall have a first priority perfected
     security interest in all other Pledged Collateral represented by such
     Pledged Capital Stock. Except as set forth in this Section 5(e), no action
     is necessary to perfect or otherwise protect such security interest.

          (f)  No Other Capital Stock. No Pledgor owns any Capital Stock other
     than as set forth on Schedule 2(a) attached hereto.

          (g)  Partnership and Limited Liability Company Interests. Except as
     previously disclosed to the Agent, none of the Pledged Capital Stock
     consisting of partnership or limited liability company interests (i) is
     dealt in or traded on a securities exchange or in a securities market, (ii)
     by its terms expressly provides that it is a security governed by Article 8
     of the UCC, (iii) is an investment company security, (iv) is held in a
     securities account or (v) constitutes a "security" or a "financial asset"
     as such terms are defined in Article 8 of the UCC.

     6.   Covenants. Each Pledgor hereby covenants, that so long as any of the
Pledgor Obligations remain outstanding (other than any such obligations which
by the terms thereof are stated to survive termination of the Credit Documents)
or any Credit Document or Hedging Agreement between any Credit Party and any
Lender (to the extent the obligations of such Credit Party thereunder
constitute Credit Party Obligations) is in effect, and until all the
Commitments shall have been terminated, such Pledgor shall:

          (a)  Books and Records. Mark its books and records (and shall cause
     the issuer of the Pledged Capital Stock of such Pledgor to mark its books
     and records) to reflect the security interest granted to the Agent, for the
     benefit of the Lenders, pursuant to this Pledge Agreement.

          (b)  Defense of Title. Warrant and defend title to and ownership of
     the Pledged Collateral of such Pledgor at its own expense against the
     claims and demands of all other parties claiming an interest therein, keep
     the Pledged Collateral free from all Liens, except for Permitted Liens, and
     not sell, exchange, transfer, assign, lease or

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     otherwise dispose of Pledged Collateral of such Pledgor or any interest
     therein, except as permitted under the Credit Agreement and the other
     Credit Documents.

          (c)  Further Assurances. Promptly execute and deliver at its expense
     all further instruments and documents and take all further action that may
     be necessary and desirable or that the Agent may reasonably request in
     order to (i) perfect and protect the security interest created hereby in
     the Pledged Collateral of such Pledgor (including, without limitation, the
     execution and filing of UCC financing statements and any and all action
     necessary to satisfy the Agent that the Agent has obtained a first priority
     perfected security interest in all Pledged Capital Stock); (ii) enable the
     Agent to exercise and enforce its rights and remedies hereunder in respect
     of the Pledged Collateral of such Pledgor; and (iii) otherwise effect the
     purposes of this Pledge Agreement, including, without limitation and if
     requested by the Agent, delivering to the Agent irrevocable proxies in
     respect of the Pledged Collateral of such Pledgor.

          (d)  Amendments. Not make or consent to any amendment or other
     modification or waiver with respect to any of the Pledged Collateral of
     such Pledgor or enter into any agreement or allow to exist any restriction
     with respect to any of the Pledged Collateral of such Pledgor other than
     pursuant hereto or as may be permitted under the Credit Agreement.

          (e)  Compliance with Securities Laws. File all reports and other
     information now or hereafter required to be filed by such Pledgor with the
     United States Securities and Exchange Commission and any other state,
     federal or foreign agency in connection with the ownership of the Pledged
     Collateral of such Pledgor.

          (f)  Issuance or Acquisition of Capital Stock. Not, without providing
     30 days prior written notice to the Agent and without executing and
     delivering, or causing to be executed and delivered, to the Agent such
     agreements, documents and instruments as the Agent may require, issue or
     acquire any Capital Stock consisting of an interest in a partnership or a
     limited liability company that (i) is dealt in or traded on a securities
     exchange or in a securities market, (ii) by its terms expressly provides
     that it is a security governed by Article 8 of the UCC, (iii) is an
     investment company security, (iv) is held in a securities account or (v)
     constitutes a "security" or a "financial asset" as such terms are defined
     in Article 8 of the UCC.

     7.   Performance of Obligations and Advances by Agent or Lenders. On
failure of any Pledgor to perform any of the covenants and agreements contained
herein, the Agent or any of the Lenders may, at its sole option and in its
reasonable discretion, perform or cause to be performed the same and in so doing
may expend such sums as the Agent or such Lender may reasonably deem advisable
in the performance thereof, including, without limitation, the payment of any
insurance premiums, the payment of any taxes, a payment to obtain a release of a
Lien or potential Lien, expenditures made in defending against any adverse claim
and all other expenditures which the Agent or such Lender may make for the
protection of the security hereof or which may be compelled to make by operation
of law. All such sums and amounts so expended shall be repayable by the Pledgors
on a joint and several basis promptly upon timely notice thereof and demand

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therefor, shall constitute additional Pledgor Obligations and shall bear
interest from the date said amounts are expended at the default rate specified
in Section 3.1 of the Credit Agreement for Revolving Loans that are Base Rate
Loans. No such performance of any covenant or agreement by the Agent or the
Lenders on behalf of any Pledgor, and no such advance or expenditure therefor,
shall relieve the Pledgors of any default under the terms of this Pledge
Agreement, the other Credit Documents or any Hedging Agreement between any
Credit Party and any Lender (to the extent the obligations of such Credit Party
thereunder constitute Credit Party Obligations). The Agent or any Lender may
make any payment hereby authorized in accordance with any bill, statement or
estimate procured from the appropriate public office or holder of the claim to
be discharged without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any tax assessment, sale, forfeiture, tax lien,
title or claim except to the extent such payment is being contested in good
faith by a Pledgor in appropriate proceedings and against which adequate
reserves are being maintained in accordance with GAAP.

     8.   Events of Default. The occurrence of an event which under the Credit
Agreement would constitute an Event of Default shall be an event of default
hereunder (an "Event of Default").

     9.   Remedies.

          (a)  General Remedies. Upon the occurrence of an Event of Default and
     during the continuation thereof, the Agent and the Lenders shall have, in
     respect of the Pledged Collateral of any Pledgor, in addition to the rights
     and remedies provided herein, in the Credit Documents, in any Hedging
     Agreement between any Credit Party and any Lender (to the extent the
     obligations of such Credit Party thereunder constitute Credit Party
     Obligations) or by law, the rights and remedies of a secured party under
     the UCC or any other applicable law.

          (b)  Sale of Pledged Collateral. Upon the occurrence of an Event of
     Default and during the continuation thereof, without limiting the
     generality of this Section and without notice, the Agent may, in its sole
     discretion, sell or otherwise dispose of or realize upon the Pledged
     Collateral, or any part thereof, in one or more parcels, at public or
     private sale, at any exchange or broker's board or elsewhere, at such price
     or prices and on such other terms as the Agent may deem commercially
     reasonable, for cash, credit or for future delivery or otherwise in
     accordance with applicable law. To the extent permitted by law, any Lender
     may in such event bid for the purchase of such securities. Each Pledgor
     agrees that, to the extent notice of sale shall be required by law and has
     not been waived by such Pledgor, any requirement of reasonable notice shall
     be met if notice, specifying the place of any public sale or the time after
     which any private sale is to be made, is personally served on or mailed
     postage prepaid to such Pledgor in accordance with the notice provisions of
     Section 11.1 of the Credit Agreement at least 10 days before the time of
     such sale. The Agent shall not be obligated to make any sale of Pledged
     Collateral of such Pledgor regardless of notice of sale having been given.
     The Agent may adjourn any public or private sale from time to time by
     announcement at the time and place fixed therefor, and such sale may,
     without further notice, be made at the time and place to which it was so
     adjourned.

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          (c)  Private Sale. Upon the occurrence of an Event of Default and
     during the continuation thereof, the Pledgors recognize that the Agent may
     deem it impracticable to effect a public sale of all or any part of the
     Pledged Collateral and that the Agent may, therefore, determine to make one
     or more private sales of any such Pledged Collateral to a restricted group
     of purchasers who will be obligated to agree, among other things, to
     acquire such Pledged Collateral for their own account, for investment and
     not with a view to the distribution or resale thereof. Each Pledgor
     acknowledges that any such private sale may be at prices and on terms less
     favorable to the seller than the prices and other terms which might have
     been obtained at a public sale and, notwithstanding the foregoing, agrees
     that such private sale shall be deemed to have been made in a commercially
     reasonable manner and that the Agent shall have no obligation to delay sale
     of any such Pledged Collateral for the period of time necessary to permit
     the issuer of such Pledged Collateral to register such Pledged Collateral
     for public sale under the Securities Act of 1933. Each Pledgor further
     acknowledges and agrees that any offer to sell such Pledged Collateral
     which has been (i) publicly advertised on a bona fide basis in a newspaper
     or other publication of general circulation in the financial community of
     New York, New York (to the extent that such offer may be advertised without
     prior registration under the Securities Act of 1933), or (ii) made
     privately in the manner described above shall be deemed to involve a
     "public sale" under the UCC, notwithstanding that such sale may not
     constitute a "public offering" under the Securities Act of 1933, and the
     Agent may, in such event, bid for the purchase of such Pledged Collateral.

          (d)  Retention of Pledged Collateral. In addition to the rights and
     remedies hereunder, upon the occurrence of an Event of Default, the Agent
     may, after providing the notices required by Section 9-505(2) of the UCC or
     otherwise complying with the requirements of applicable law of the relevant
     jurisdiction, retain all or any portion of the Pledged Collateral in
     satisfaction of the Pledgor Obligations. Unless and until the Agent shall
     have provided such notices, however, the Agent shall not be deemed to have
     retained any Pledged Collateral in satisfaction of any Pledgor Obligations
     for any reason.

          (e)  Deficiency. In the event that the proceeds of any sale,
     collection or realization are insufficient to pay all amounts to which the
     Agent or the Lenders are legally entitled, the Pledgors shall be jointly
     and severally liable for the deficiency, together with interest thereon at
     the default rate specified in Section 3.1 of the Credit Agreement for
     Revolving Loans that are Base Rate Loans and together with the costs of
     collection and the reasonable fees of any attorneys employed by the Agent
     to collect such deficiency. Any surplus remaining after the full payment
     and satisfaction of the Pledgor Obligations shall be returned to the
     Pledgors or to whomsoever a court of competent jurisdiction shall determine
     to be entitled thereto.

     10.  Rights of the Agent.

          (a)  Power of Attorney. In addition to other powers of attorney
     contained herein, each Pledgor hereby designates and appoints the Agent, on
     behalf of the Lenders,

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and each of its designees or agents as attorney-in-fact of such Pledgor,
irrevocably and with power of substitution, with authority to take any or all of
the following actions upon the occurrence and during the continuance of an Event
of Default:

               (i)    to demand, collect, settle, compromise, adjust and give
          discharges and releases concerning the Pledged Collateral of such
          Pledgor, all as the Agent may reasonably determine;

               (ii)   to commence and prosecute any actions at any court for the
          purposes of collecting any of the Pledged Collateral of such Pledgor
          and enforcing any other right in respect thereof;

               (iii)  to defend, settle, adjust or compromise any action, suit
          or proceeding brought and, in connection therewith, give such
          discharge or release as the Agent may deem reasonably appropriate;

               (iv)   to pay or discharge taxes, liens, security interests, or
          other encumbrances levied or placed on or threatened against the
          Pledged Collateral of such Pledgor;

               (v)    to direct any parties liable for any payment under any of
          the Pledged Collateral to make payment of any and all monies due and
          to become due thereunder directly to the Agent or as the Agent shall
          direct;

               (vi)   to receive payment of and receipt for any and all monies,
          claims, and other amounts due and to become due at any time in respect
          of or arising out of any Pledged Collateral of such Pledgor;

               (vii)  to sign and endorse any drafts, assignments, proxies,
          stock powers, verifications, notices and other documents relating to
          the Pledged Collateral of such Pledgor;

               (viii) to execute and deliver all assignments, conveyances,
          statements, financing statements, renewal financing statements, pledge
          agreements, affidavits, notices and other agreements, instruments and
          documents that the Agent may determine necessary in order to perfect
          and maintain the security interests and liens granted in this Pledge
          Agreement and in order to fully consummate all of the transactions
          contemplated herein;

               (ix)   to exchange any of the Pledged Collateral of such Pledgor
          or other property upon any merger, consolidation, reorganization,
          recapitalization or other readjustment of the issuer thereof and, in
          connection therewith, deposit any of the Pledged Collateral of such
          Pledgor with any committee, depository, transfer agent, registrar or
          other designated agency upon such terms as the Agent may determine;

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               (x)    to vote for a shareholder or member resolution, or to sign
          an instrument in writing, sanctioning the transfer of any or all of
          the Pledged Capital Stock of such Pledgor into the name of the Agent
          or one or more of the Lenders or into the name of any transferee to
          whom the Pledged Capital Stock of such Pledgor or any part thereof may
          be sold pursuant to Section 9 hereof; and

               (xi)   to do and perform all such other acts and things as the
          Agent may reasonably deem to be necessary, proper or convenient in
          connection with the Pledged Collateral of such Pledgor.

     This power of attorney is a power coupled with an interest and shall be
     irrevocable (i) for so long as any of the Pledgor Obligations remain
     outstanding (other than any such obligations which by the terms thereof are
     stated to survive termination of the Credit Documents) or any Credit
     Document or any Hedging Agreement between any Credit Party and any Lender
     (to the extent the obligations of such Credit Party thereunder continue
     Credit Party Obligations) is in effect and (ii) until all of the
     Commitments shall have been terminated. The Agent shall be under no duty to
     exercise or withhold the exercise of any of the rights, powers, privileges
     and options expressly or implicitly granted to the Agent in this Pledge
     Agreement and shall not be liable for any failure to do so or any delay in
     doing so. The Agent shall not be liable for any act or omission or for any
     error of judgment or any mistake of fact or law in its individual capacity
     or its capacity as attorney-in-fact except acts or omissions resulting from
     its gross negligence or willful misconduct. This power of attorney is
     conferred on the Agent solely to protect, preserve and realize upon its
     security interest in the Pledged Collateral.

          (b)  Assignment by the Agent. The Agent may from time to time assign
     the Pledgor Obligations and any portion thereof and/or the Pledged
     Collateral and any portion thereof, and the assignee shall be entitled to
     all of the rights and remedies of the Agent under this Pledge Agreement in
     relation thereto.

          (c)  The Agent's Duty of Care. Other than the exercise of reasonable
     care to ensure the safe custody of the Pledged Collateral while being held
     by the Agent hereunder, the Agent shall have no duty or liability to
     preserve rights pertaining thereto, it being understood and agreed that
     each of the Pledgors shall be responsible for preservation of all rights in
     the Pledged Collateral of such Pledgor, and the Agent shall be relieved of
     all responsibility for such Pledged Collateral upon surrendering it or
     tendering the surrender of it to such Pledgor. The Agent shall be deemed to
     have exercised reasonable care in the custody and preservation of the
     Pledged Collateral in its possession if such Pledged Collateral is accorded
     treatment substantially equal to that which the Agent accords its own
     property, which shall be no less than the treatment employed by a
     reasonable and prudent agent in the industry, it being understood that the
     Agent shall not have responsibility for (i) ascertaining or taking action
     with respect to calls, conversions, exchanges, maturities, tenders or other
     matters relating to any Pledged Collateral, whether or not the Agent has or
     is deemed to have knowledge of such matters; or (ii) taking any necessary
     steps to preserve rights against any parties with respect to any Pledged
     Collateral.

                                       10

<PAGE>   11

          (d)  Voting Rights in Respect of the Pledged Collateral.

                    (i)    So long as no Event of Default shall have occurred
          and be continuing, to the extent permitted by law, each Pledgor may
          exercise any and all voting and other consensual rights pertaining to
          the Pledged Collateral of such Pledgor or any part thereof for any
          purpose not inconsistent with the terms of this Pledge Agreement or
          the Credit Agreement; and

                    (ii)   Upon the occurrence and during the continuance of an
          Event of Default, all rights of a Pledgor to exercise the voting and
          other consensual rights which it would otherwise be entitled to
          exercise pursuant to paragraph (i) of this Section shall cease and all
          such rights shall thereupon become vested in the Agent which shall
          then have the sole right to exercise such voting and other consensual
          rights.

          (f)  Dividend and Distribution Rights in Respect of the Pledged
     Collateral.

                    (i)    So long as no Event of Default shall have occurred
          and be continuing and subject to Section 4(b) hereof, each Pledgor may
          receive and retain any and all dividends (other than stock dividends
          and other dividends constituting Pledged Collateral which are
          addressed hereinabove), distributions or interest paid in respect of
          the Pledged Collateral to the extent they are allowed under the Credit
          Agreement.

                    (ii)   Upon the occurrence and during the continuance of an
          Event of Default:

                    (A)    all rights of a Pledgor to receive the dividends,
               distributions and interest payments which it would otherwise be
               authorized to receive and retain pursuant to subsection (i) of
               this Section shall cease and all such rights shall thereupon be
               vested in the Agent which shall then have the sole right to
               receive and hold as Pledged Collateral such dividends,
               distributions and interest payments; and

                    (B)    all dividends, distributions and interest payments
               which are received by a Pledgor contrary to the provisions of
               subsection (A) of this Section shall be received in trust for the
               benefit of the Agent, shall be segregated from other property or
               funds of such Pledgor, and shall be forthwith paid over to the
               Agent as Pledged Collateral in the exact form received, to be
               held by the Agent as Pledged Collateral and as further collateral
               security for the Pledgor Obligations.

          (g)  Release of Pledged Collateral. The Agent may release any of the
     Pledged Collateral from this Pledge Agreement or may substitute any of the
     Pledged Collateral for other Pledged Collateral without altering, varying
     or diminishing in any way the force, effect, lien, pledge or security
     interest of this Pledge Agreement as to any Pledged Collateral

                                       11

<PAGE>   12

     not expressly released or substituted, and this Pledge Agreement shall
     continue as a first priority lien on all Pledged Collateral not expressly
     released or substituted.

     11.  Rights of Required Lenders. All rights of the Agent hereunder, if not
exercised by the Agent, may be exercised by the Required Lenders.

     12.  Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Pledgor
Obligations and any proceeds of any Pledged Collateral, when received by the
Agent or any of the Lenders in cash or its equivalent, will be applied in
reduction of the Pledgor Obligations in the order set forth in Section 3.15(b)
of the Credit Agreement, and each Pledgor irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
the Agent shall have the continuing and exclusive right to apply and reapply any
and all such payments and proceeds in the Agent's sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.

     13.  Costs and Expenses. At all times hereafter, the Pledgors agree to
promptly pay upon demand any and all reasonable costs and expenses of the Agent
or the Lenders, (a) as required under Section 11.5 of the Credit Agreement and
(b) as necessary to protect the Pledged Collateral or to exercise any rights or
remedies under this Pledge Agreement or with respect to any Pledged Collateral.
All of the foregoing costs and expenses shall constitute Pledgor Obligations
hereunder.

     14.  Continuing Agreement.

          (a)  This Pledge Agreement shall be a continuing agreement in every
     respect and shall remain in full force and effect so long as any of the
     Pledgor Obligations remain outstanding (other than any such obligations
     which by the terms thereof are stated to survive termination of the Credit
     Documents) or any Credit Document or Hedging Agreement between any Credit
     Party and any Lender (to the extent the obligations of such Credit Party
     thereunder constitute Credit Party Obligations) is in effect, and until all
     of the Commitments thereunder shall have terminated. Upon such payment and
     termination this Pledge Agreement shall be automatically terminated and the
     Agent and the Lenders shall, upon the request and at the expense of the
     Pledgors, (i) return all certificates representing the Pledged Capital
     Stock, all other certificates and instruments constituting Pledged
     Collateral and all instruments of transfer or assignment which have been
     delivered to the Agent pursuant to this Pledge Agreement and (ii) forthwith
     release all of its liens and security interests hereunder and shall execute
     and deliver all UCC termination statements and/or other documents
     reasonably requested by the Pledgors evidencing such termination.
     Notwithstanding the foregoing, all releases and indemnities provided
     hereunder shall survive termination of this Pledge Agreement.

          (b)  This Pledge Agreement shall continue to be effective or be
     automatically reinstated, as the case may be, if at any time payment, in
     whole or in part, of any of the Pledgor Obligations is rescinded or must
     otherwise be restored or returned by the Agent or any Lender as a
     preference, fraudulent conveyance or otherwise under any bankruptcy,
     insolvency or similar law, all as though such payment had not been made;
     provided that in the event payment of all or any part of the Pledgor
     Obligations is rescinded or must be restored or returned, all reasonable
     costs and expenses (including without limitation any reasonable legal fees
     and disbursements) incurred by the Agent or any Lender in

                                       12

<PAGE>   13

     defending and enforcing such reinstatement shall be deemed to be included
     as a part of the Pledgor Obligations.

     15.  Amendments; Waivers; Modifications. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 11.6 of the Credit Agreement.

     16.  Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Pledgor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their successors and permitted assigns; provided, however,
that none of the Pledgors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Pledgor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Pledge
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.

     17.  Notices. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with Section 11.1 of the Credit
Agreement.

     18.  Counterparts. This Pledge Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.

     19.  Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning,
construction or interpretation of any provision of this Pledge Agreement.

     20.  Governing Law; Submission to Jurisdiction; Venue.

          (a)  THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
     PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
     ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or
     proceeding with respect to this Pledge Agreement may be brought in the
     courts of the State of North Carolina or the State of New York, or of the
     United States for either the Western District of North Carolina or the
     Southern District of New York, and, by execution and delivery of this
     Pledge Agreement, each Pledgor hereby irrevocably accepts for itself and in
     respect of its property, generally and unconditionally, the jurisdiction of
     such courts. Each Pledgor further irrevocably consents to the service of
     process out of any of the aforementioned courts in any such action or
     proceeding by the mailing of copies thereof by registered or certified
     mail, postage prepaid, to it at the address for notices pursuant to Section
     11.1 of the Credit Agreement, such service to become effective 30 days
     after such mailing. Nothing herein

                                       13

<PAGE>   14

     shall affect the right of the Agent to serve process in any other manner
     permitted by law or to commence legal proceedings or to otherwise proceed
     against any Pledgor in any other jurisdiction.

          (b)  Each Pledgor hereby irrevocably waives any objection which it may
     now or hereafter have to the laying of venue of any of the aforesaid
     actions or proceedings arising out of or in connection with this Pledge
     Agreement brought in the courts referred to in subsection (a) hereof and
     hereby further irrevocably waives and agrees not to plead or claim in any
     such court that any such action or proceeding brought in any such court has
     been brought in an inconvenient forum.

     21.  Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
OF THE PARTIES TO THIS PLEDGE AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     22.  Severability. If any provision of this Pledge Agreement is determined
to be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.

     23.  Entirety. This Pledge Agreement, the other Credit Documents and the
Hedging Agreements between any Credit Party and any Lender (to the extent the
obligations of such Credit Party thereunder constitute Credit Party Obligations)
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents, such
Hedging Agreements or the transactions contemplated herein and therein.

     24.  Survival. All representations and warranties of the Pledgors hereunder
shall survive the execution and delivery of this Pledge Agreement, the other
Credit Documents and the Hedging Agreements between any Credit Party and any
Lender (to the extent the obligations of such Credit Party thereunder constitute
Credit Party Obligations), the delivery of the Notes, the making of the Loans
and the issuance of the Letters of Credit.

     25.  Other Security. To the extent that any of the Pledgor Obligations are
now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Agent and the Lenders shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence of any Event of Default,
and the Agent and the Lenders have the right, in their sole discretion, to
determine which rights, security, liens, security interests or remedies the
Agent and the Lenders shall at any time pursue, relinquish, subordinate, modify
or take with respect thereto, without in any way modifying or affecting any of
them or any of the Agent's and the Lenders' rights or the Pledgor Obligations
under this Pledge Agreement, under any other of the Credit Documents or under
any

                                       14

<PAGE>   15

Hedging Agreement between any Credit Party and any Lender (to the extent the
obligations of such Credit Party thereunder constitute Credit Party
Obligations).

     26.  Joint and Several Obligations of Pledgors.

          (a)  Each of the Pledgors is accepting joint and several liability
     hereunder in consideration of the financial accommodation to be provided by
     the Lenders under the Credit Agreement, for the mutual benefit, directly
     and indirectly, of each of the Pledgors and in consideration of the
     undertakings of each of the Pledgors to accept joint and several liability
     for the obligations of each of them.

          (b)  Each of the Pledgors jointly and severally hereby irrevocably and
     unconditionally accepts, not merely as a surety but also as a co-debtor,
     joint and several liability with the other Pledgors with respect to the
     payment and performance of all of the Pledgor Obligations arising under
     this Pledge Agreement, the other Credit Documents and the Hedging
     Agreements between any Credit Party and any Lender (to the extent the
     obligations of such Credit Party thereunder constitute Credit Party
     Obligations), it being the intention of the parties hereto that all the
     Pledgor Obligations shall be the joint and several obligations of each of
     the Pledgors without preferences or distinction among them.

          (c)  Notwithstanding any provision to the contrary contained herein or
     in any other of the Credit Documents, to the extent the obligations of a
     Pledgor shall be adjudicated to be invalid or unenforceable for any reason
     (including, without limitation, because of any applicable state or federal
     law relating to fraudulent conveyances or transfers) then the obligations
     of such Pledgor hereunder shall be limited to the maximum amount that is
     permissible under applicable law (whether federal or state and including,
     without limitation, the Bankruptcy Code).

                  [remainder of page intentionally left blank]

                                       15

<PAGE>   16

     Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.

PLEDGORS:                          AMERICAN MEDICAL SYSTEMS, INC.

                                   By: /s/ Gregory J. Melsen
                                      --------------------------------------

                                   Title: Vice President-Finance, Treasurer
                                          and Chief Financial Officer
                                         -----------------------------------

                                   Name: Gregory J. Melsen
                                        ------------------------------------

                                   AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.

                                   By: /s/ Gregory J. Melsen
                                      --------------------------------------

                                   Title: Vice President-Finance, Treasurer
                                          and Chief Financial Officer
                                         -----------------------------------

                                   Name: Gregory J. Melsen
                                        ------------------------------------

                                   INFLUENCE, INC.

                                   By: /s/ Gregory J. Melsen
                                      --------------------------------------

                                   Title: Chief Financial Officer
                                         -----------------------------------

                                   Name: Gregory J. Melsen
                                        ------------------------------------

             Accepted and agreed as of the date first above written.

                                   BANK OF AMERICA, N.A., as Agent

                                   By: /s/ John J. O'Neill
                                      --------------------------------------

                                   Title: Managing Director
                                         -----------------------------------

                                   Name: John J. O'Neill
                                        ------------------------------------

<PAGE>   17
                                  Schedule 2(a)

                                       to

                                Pledge Agreement

                    dated as of           , 2000 in favor of

                             Bank of America, N.A.,

                                    as Agent

                              PLEDGED CAPITAL STOCK

PLEDGOR: AMERICAN MEDICAL SYSTEMS
         HOLDINGS, INC.

<TABLE>
<CAPTION>

                  Name of                     Number of      Certificate       Percentage       Percentage
            Domestic Subsidiary                Shares         Number           Ownership         Pledged
            -------------------               ------         ------            ---------         -------
<S>                                           <C>            <C>               <C>              <C>
        American Medical Systems, Inc.                                          100%              100%
</TABLE>

PLEDGOR:  AMERICAN MEDICAL SYSTEMS,
          INC.

<TABLE>
<CAPTION>

                  Name of                     Number of      Certificate       Percentage       Percentage
            Domestic Subsidiary                Shares         Number           Ownership         Pledged
            -------------------                ------         ------           ---------         -------
<S>                                           <C>            <C>               <C>              <C>
              Influence, Inc.                 10,000,000                         100%              100%

</TABLE>

<PAGE>   18

                                  Exhibit 4(a)

                                       to

                                Pledge Agreement

                    dated as of __________, 2000 in favor of

                             Bank of America, N.A.,

                                    as Agent

                             Irrevocable Stock Power

   FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to

the following shares of capital stock of            , a             corporation:

          No. of Shares                               Certificate No.
          -------------                               ---------------

and irrevocably appoints                          its agent and attorney-in-fact
to transfer all or any part of such capital stock and to take all necessary and
appropriate action to effect any such transfer. The agent and attorney-in-fact
may substitute and appoint one or more persons to act for him.

                                             --------------------------------,
                                             a                     corporation

                                             By:
                                                -----------------------------
                                             Name:
                                                  ---------------------------
                                             Title:
                                                   --------------------------<PAGE>   1
                        GUARANTY AND INVESTMENT AGREEMENT

         THIS GUARANTY AND INVESTMENT AGREEMENT, dated as of April 17, 2000 (as
amended, modified, restated or supplemented from time to time, the "Agreement"),
is by and among WARBURG, PINCUS EQUITY PARTNERS, L.P., a Delaware limited
partnership ("US Warburg"), WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V.,
a commanditaire vennootschap (limited partnership) established under the laws of
the Netherlands, WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II, C.V., a
commanditaire vennootschap (limited partnership) established under the laws of
the Netherlands and WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V., a
commanditaire vennootschap (limited partnership) established under the laws of
the Netherlands (each, including US Warburg, a "Warburg Guarantor" and
collectively, the "Warburg Guarantors") and BANK OF AMERICA, N.A., as Agent for
the Lenders hereinafter defined (in such capacity, the "Agent").

                               W I T N E S S E T H

         WHEREAS, the Lenders have agreed to make certain loans and extensions
of credit to American Medical Systems, Inc., a Delaware corporation (the
"Borrower") pursuant to the terms of that Credit Agreement dated as of March 24,
2000 (as amended, modified, extended, increased, renewed or replaced, the
"Credit Agreement") among the Borrower, the guarantors party thereto (the
"Guarantors"), the Lenders party thereto (the "Lenders") and the Agent; and

         WHEREAS, the execution of this Agreement by the Guarantors is a
condition precedent to the obligations of the Lenders to make extensions of
credit to the Borrower under the Credit Agreement;

         NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Warburg Guarantors hereby agree as follows:

         1. Definitions. Capitalized terms used herein but not otherwise defined
herein shall have the meanings provided in the Credit Agreement. Capitalized
terms defined herein and also defined in the Credit Agreement shall have the
meanings provided herein. In addition the following terms shall have the
following meanings:

                  "Coverage Ratio" means, as of the end of any fiscal quarter of
         US Warburg, the ratio of (a) the sum of (i) Domestic Public Portfolio
         Investments on the last day of such period plus (ii) the aggregate
         Remaining Capital Commitment Balances of all Limited Partners on the
         last day of such period to (b) Funded Debt of US Warburg (including, in
         any event, obligations of US Warburg under Sections 2 and 12 hereof) on
         the last day of such period.

                  "Domestic Public Portfolio Investments" means, at any time,
         with respect to US Warburg, the sum of:

                           (i) the aggregate value (as shown in the most recent
                  financial statements delivered to the Agent and the Lenders
                  pursuant to Section 11(a)) of all portfolio investments of US
                  Warburg in any Capital Stock (or other securities convertible
                  at the option of US Warburg at any time into Capital Stock)
                  (a) of a

<PAGE>   2

                  Person incorporated or organized under the laws of any
                  State of the United States or the District of Columbia and (b)
                  which is listed on a U.S. national securities exchange, plus

                           (ii) 75% of the aggregate value (as shown in the most
                  recent financial statements delivered to the Agent and the
                  Lenders pursuant to Section 11) of all portfolio investments
                  of US Warburg in any Capital Stock (or of other securities
                  convertible at the option of US Warburg at any time into
                  Capital Stock) (a) of a Person not incorporated or organized
                  under the laws of any State of the United States or the
                  District of Columbia and (b) which is listed on a U.S.
                  national securities exchange.

                  "Event of Default" shall have the meaning assigned to such
         term in Section 14.

                  "Fully Satisfied" means, with respect to the Guaranteed
         Obligations as of any date, that, as of such date, (a) all principal of
         and interest accrued to such date which constitute Guaranteed
         Obligations shall have been paid in full in cash, (b) all fees,
         expenses and other amounts then due and payable which constitute
         Guaranteed Obligations shall have been paid in cash, (c) all
         outstanding Letters of Credit shall have been (i) terminated,
         (ii) fully cash collateralized or (iii) secured by one or more letters
         of credit on terms and conditions, and with one or more financial
         institutions, reasonably satisfactory to the Issuing Lender and (d) the
         Commitments shall have been expired or terminated in full.

                  "Funded Debt" means, without duplication, with respect to US
         Warburg, the sum of (a) all Indebtedness (other than Hedging
         Agreements) of US Warburg for borrowed money (it being understood that
         with respect to Indebtedness incurred with an original issue discount,
         the obligations shall consist of the then accreted value), (b) all
         purchase money Indebtedness of US Warburg, (c) the principal portion of
         all obligations of US Warburg under Capital Leases, (d) commercial
         letters of credit and the maximum amount of all performance and standby
         letters of credit issued or bankers' acceptance facilities created for
         the account of US Warburg, including, without duplication, all
         unreimbursed draws thereunder, (e) all Guaranty Obligations of US
         Warburg with respect to Funded Debt of another Person, (f) all Funded
         Debt of another entity secured by a Lien on any property of US Warburg
         whether or not such Funded Debt has been assumed by such person,
         (g) all Funded Debt of any partnership or unincorporated joint venture
         to the extent US Warburg is legally obligated or has a reasonable
         expectation of being liable with respect thereto, net of any assets of
         such partnership or joint venture and (h) the principal balance
         outstanding under any synthetic lease, tax retention operating lease,
         off-balance sheet loan or similar off-balance sheet financing product
         of US Warburg when such transaction is considered borrowed money
         indebtedness for tax purposes but is classified as an operating lease
         in accordance with GAAP.

                  "General Partner" means Warburg, Pincus & Co., a New York
         general partnership, as general partner of US Warburg.

                  "Guaranteed Obligations" means, without duplication, all of
         the obligations (including, but not limited to, in respect of interest
         accruing after the occurrence of a

                                       2
<PAGE>   3

         Bankruptcy Event, regardless of whether such interest is an allowed
         claim under the Bankruptcy Code) of the Borrower to the Lenders
         (including the Issuing Lender) and the Agent, whenever arising, under
         (i) Sections 2.1, 2.2, 2.4, 3.5(a) and 3.5(b) of the Credit Agreement,
         the Revolving Notes and the Tranche B Term Notes and (ii) to the
         extent relating to the payment of principal, interest, fees or other
         amounts payable in respect of Revolving Loans, Letters of Credit, LOC
         Obligations or the Tranche B Term Loan, Sections 3.1, 3.3(b), 3.5(b),
         3.6, 3.8, 3.9, 3.11, 3.12 or 11.5 of the Credit Agreement.

                  "Holdback Merger Consideration" shall have the meaning
         assigned to such term in Section 2.8(b) of the Purchase Agreement.

                  "Limited Partners" means the limited partners of US Warburg.

                  "Manager" means E.M. Warburg, Pincus & Co., LLC, a New York
         limited liability company.

                  "Mandatory Investment" means a purchase of Capital Stock in
         the Parent in Dollars and in funds immediately available to the Parent
         sufficient in amount to, and made in order to, enable the Borrower to
         fulfill its obligation to make when due payments of Holdback Merger
         Consideration in an aggregate amount of up to $11,000,000 in accordance
         with the terms of the Side Letter.

                  "Material Adverse Effect" means a material adverse effect on
         (i) after taking into account any applicable insurance and any
         applicable indemnification (to the extent the provider of such
         insurance or indemnification has the financial ability to support its
         obligations with respect thereto and is not disputing or refusing to
         acknowledge same), on the operations, financial condition, business or
         prospects US Warburg, (ii) the ability of US Warburg to make payments
         required under this Agreement, (iii) the ability of US Warburg to
         perform any material obligation under this Agreement or (iv) the
         material rights and remedies of the Agent under this Agreement.

                  "Plan" means any employee benefit plan (as defined in Section
         3(3) of ERISA) which is covered by ERISA and with respect to which US
         Warburg or any Subsidiary of US Warburg is (or, if such plan were
         terminated at such time, would under Section 4069 of ERISA be deemed to
         be) an "employer" within the meaning of Section 3(5) of ERISA.

                  "Plan Asset Regulations" means the plan asset regulations of
         the Department of Labor, 29 CFR ss. 2510.3-101 et seq., as amended, and
         the advisory opinions and rulings issued thereunder.

                  "Remaining Capital Commitment Balance" means, at any time, the
         difference of (i) the amount of "Partners Capital-Contributions
         Receivable" as defined in (A) as of the Closing Date, the September 30,
         1999 statement of net assets and partners' capital of US Warburg or
         (B) at any time after the Closing Date, the most recent statement of
         net assets and partners' capital of US Warburg delivered to the Agent
         and the Lenders pursuant to Section 11(a) minus (ii) any portion of the
         amount determined pursuant to clause (i) above with respect to which
         the Limited Partners shall not be obligated, upon request by the

                                       3

<PAGE>   4

         General Partner, to make capital contributions for the purpose of
         providing funds to US Warburg to repay the Guaranteed Obligations.

                  "Side Letter" shall have the meaning assigned to such term in
         Section 2.8(b) of the Purchase Agreement.

         2. The Guaranty. Each of the Warburg Guarantors hereby jointly and
severally guarantees to the Agent, for the ratable benefit of each Lender and
the Agent as hereinafter provided, as primary obligor and not as surety, the
prompt payment of the Guaranteed Obligations in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in
accordance with the terms thereof. In addition, if any of the Guaranteed
Obligations are not paid in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration, as a mandatory cash collateralization or
otherwise), each of the Warburg Guarantors hereby jointly and severally promises
to pay the same promptly, without any demand or notice whatsoever, and that in
the case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, to pay the same promptly in full when due (whether at extended
maturity, as a mandatory prepayment, by acceleration, as a mandatory cash
collateralization or otherwise) in accordance with the terms of such extension
or renewal.

         This guarantee is a guaranty of payment and not of collection, is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.

         Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents, the obligations of each Warburg Guarantor
other than US Warburg under this Agreement shall be limited to an aggregate
amount equal to the largest amount that would not render such obligations
subject to avoidance under Section 548 of the Bankruptcy Code or any comparable
provisions of any applicable state law.

         3. Guaranteed Obligations Unconditional. The obligations of the Warburg
Guarantors are joint and several, absolute and unconditional, irrespective of
the value, genuineness, validity, regularity or enforceability of any of the
Credit Documents, or any other agreement or instrument referred to therein, or
any substitution, release, impairment or exchange of any other guarantee of or
security for any of the Guaranteed Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 3 that the obligations
of the Warburg Guarantors hereunder shall be absolute and unconditional under
any and all circumstances. Each Warburg Guarantor agrees that it shall defer any
right of subrogation, indemnity, reimbursement or contribution against the
Borrower, any Guarantor or any other Warburg Guarantor for amounts paid under
this Agreement until such time as the Guaranteed Obligations have been Fully
Satisfied. Without limiting the generality of the foregoing, it is agreed that,
to the fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Warburg Guarantor
hereunder which shall remain absolute and unconditional as described above:

                  (a) at any time or from time to time, without notice to any
         Warburg Guarantor, the time for any performance of or compliance with
         any of the Guaranteed Obligations shall be extended, or such
         performance or compliance shall be waived;

                                       4
<PAGE>   5

                  (b) any of the acts mentioned in any of the provisions of any
         of the Credit Documents or any other agreement or instrument referred
         to in the Credit Documents shall be done or omitted;

                  (c) the maturity of any of the Guaranteed Obligations shall be
         accelerated, or any of the Guaranteed Obligations shall be modified,
         supplemented or amended in any respect, or any right under any of the
         Credit Documents or any other agreement or instrument referred to in
         the Credit Documents shall be waived or any other guarantee of any of
         the Guaranteed Obligations or any security therefor shall be released,
         impaired or exchanged in whole or in part or otherwise dealt with;

                  (d) any Lien granted to, or in favor of, the Agent or any
         Lender or Lenders as security for any of the Guaranteed Obligations
         shall fail to attach or be perfected; or

                  (e) any of the Guaranteed Obligations shall be determined to
         be void or voidable (including, without limitation, for the benefit of
         any creditor of any Warburg Guarantor) or shall be subordinated to the
         claims of any Person (including, without limitation, any creditor of
         any Warburg Guarantor).

With respect to its obligations hereunder, each Warburg Guarantor hereby
expressly waives diligence, presentment, demand of payment, protest and all
notices whatsoever, and any requirement that the Agent or any Lender exhaust any
right, power or remedy or proceed against any Person under any of the Credit
Documents or any other agreement or instrument referred to in the Credit
Documents, or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations.

         4. Reinstatement. Neither the Warburg Guarantors' obligations hereunder
nor any remedy for the enforcement thereof shall be impaired, modified, changed
or released in any manner whatsoever by an impairment, modification, change,
release or limitation of the liability of the Borrower or any Guarantor, by
reason of the Borrower's or any Guarantor's bankruptcy or insolvency or by
reason of the invalidity or unenforceability of all or any portion of the
Guaranteed Obligations. The obligations of the Warburg Guarantors under this
Agreement shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of any Person in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, and each Warburg Guarantor agrees that it will
indemnify the Agent, for itself and for the benefit of each Lender, on demand
for all reasonable costs and expenses (including, without limitation, fees and
expenses of counsel) incurred by the Agent or any Lender in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.

         5. Certain Additional Waivers. The Warburg Guarantors agree that this
Agreement may be enforced by the Agent on behalf of the Lenders without the
necessity of resorting to or exhausting any other security or collateral and
without the necessity at any time of having recourse to the Credit Parties under
the Credit Agreement or any collateral securing the Guaranteed Obligations or
otherwise, and each Warburg Guarantor agrees not to assert any right to require
the Agent and the Lenders to proceed against the Credit Parties or any other
Person

                                       5
<PAGE>   6

(including any co-guarantor) or to require the Agent and the Lenders to pursue
any other remedy or enforce any other right. Each Warburg Guarantor further
agrees that it shall have no right of subrogation, reimbursement or indemnity,
nor any right of recourse to security, if any, for the Guaranteed Obligations
until the Guaranteed Obligations shall have been Fully Satisfied. Each Warburg
Guarantor further acknowledges and agrees that nothing contained in this
Agreement shall prevent the Agent or the Lenders from suing the Credit Parties
in respect of their obligations under the Credit Agreement and the other Credit
Documents or foreclosing on any security interest or lien on any collateral
securing the Guaranteed Obligations or from exercising any other rights
available to the Agent and the Lenders under the Credit Documents if neither the
Borrower nor the Guarantors timely perform their obligations, and the exercise
of any of such rights and completion of any such foreclosure proceedings shall
not constitute a discharge of any of the Warburg Guarantors' obligations
hereunder unless as a result thereof the Guaranteed Obligations shall have been
Fully Satisfied, it being the purpose and intent that the Warburg Guarantors'
obligations hereunder be absolute, irrevocable, independent and unconditional
under all circumstances.

         Without limiting the generality of the provisions of this Section 5,
each Warburg Guarantor hereby specifically waives the benefits of N.C. Gen.
Stat. ss.ss 26-7 through 26-9, inclusive, to the extent applicable. Each Warburg
Guarantor further agrees that it shall have no right of recourse to security for
the Guaranteed Obligations, except through the exercise of rights of subrogation
pursuant to Section 3 and through the exercise of rights of contribution
pursuant to Section 27.

         6. Remedies. The Warburg Guarantors agree that, to the fullest extent
permitted by law, as between the Warburg Guarantors, on the one hand, and the
Agent on behalf of the Lenders, on the other hand, the Guaranteed Obligations
may be declared to be forthwith due and payable for purposes of Section 2
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or preventing the Guaranteed Obligations from becoming
automatically due and payable) as against any other Person and that, in the
event of such declaration (or the Guaranteed Obligations being deemed to have
become automatically due and payable), the Guaranteed Obligations (whether or
not due and payable by any other Person) shall forthwith become due and payable
by the Warburg Guarantors for purposes of Section 2.

         7. Attorneys' Fees and Costs of Collection. The Warburg Guarantors
further jointly and severally agree to pay on demand all costs and expenses of
the Agent, if any (including, without limitation, reasonable attorneys' fees and
expenses and the cost of internal counsel), in connection with any enforcement
(whether through negotiations, legal proceedings, or otherwise) of this
Agreement.

         8. Right of Set-Off. Upon the occurrence and during the continuance of
any Event of Default, each Lender (and each of its Affiliates) is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender (or any of its Affiliates) to or for the credit or the
account of any Warburg Guarantor against any and all of the obligations of such
Person now or hereafter existing under this Agreement irrespective of whether
the Agent or such Lender shall have made any demand hereunder and although such
obligations may be unmatured. The rights of each Lender under this Section 8 are
in addition to other rights and remedies (including, without limitation, other
rights of set-off) that such Lender may have.

                                       6

<PAGE>   7
        9. Term of Guarantee. This Agreement shall continue in full force and
effect until the Guaranteed Obligations are Fully Satisfied. At any time after
the Guaranteed Obligations have been Fully Satisfied, upon the request of US
Warburg, the Agent, on behalf of the Lenders, shall acknowledge, in writing, the
termination of this Agreement.

         10. Representations and Warranties. US Warburg hereby represents to the
Agent, for the ratable benefit of the Lenders, that:

             (a) Existence and Power; Authorization; No Conflicts; Consents;
         Enforceable Obligations.

                 (i) US Warburg is a limited partnership duly organized, validly
             existing and in good standing under the laws of the jurisdiction of
             its incorporation or organization, and is in good standing in each
             other jurisdiction where ownership of its properties or the conduct
             of its business requires it to be so, and has all power and
             authority under such laws and its partnership agreement and all
             material governmental licenses, authorizations, consents and
             approvals required to carry on its business as now conducted.

                 (ii) (A) The General Partner is a general partnership validly
             existing under the laws of the State of New York and has all
             necessary power and authority under the laws of the State of New
             York and its partnership agreement to execute and deliver this
             Agreement on behalf of US Warburg.

                       (B) The Manager is a limited liability company validly
             existing under the laws of the State of New York and has all
             necessary power and authority under the laws of the State of New
             York and its operating agreement to execute and deliver this
             Agreement on the behalf of US Warburg.

                 (iii) US Warburg has the power and authority to enter into this
             Agreement, and to perform its obligations hereunder and consummate
             the transactions contemplated hereby and has by proper action duly
             authorized the execution and delivery of this Agreement.

                 (iv) Neither the execution and delivery of this Agreement, nor
             the consummation of the transactions contemplated therein, nor
             performance of and compliance with the terms and provisions thereof
             will (i) violate or conflict with any provision of the partnership
             agreement or other governance document of US Warburg, (ii) violate
             any law, regulation (including without limitation Regulation U or
             Regulation X), order, writ, judgment, injunction, decree or permit
             applicable to US Warburg, (iii) violate or materially conflict with
             contractual provisions of, or cause an event of default under, any
             indenture, loan agreement, mortgage, deed of trust, contract or
             other agreement or instrument to which US Warburg is a party or by
             which US Warburg may be bound, (iv) result in or require the
             creation of any Lien (other than those contemplated in or in
             connection with this Agreement) upon or with respect to any
             Property owned by US Warburg.

                                       7
<PAGE>   8

                 (v) No consent, approval, authorization or order of, or filing,
             registration or qualification with, any court or governmental
             authority or other Person is required in connection with the
             execution, delivery or performance by US Warburg of this Agreement.

                 (vi) This Agreement has been duly executed and delivered by US
             Warburg and constitutes the legal, valid and binding obligation of
             US Warburg, enforceable in accordance with its terms.

             (b) Financial Condition; No Material Change; No Default; No
             Litigation.

                 (i) The financial statements and financial information
             heretofore furnished to each Lender for the fiscal quarter of US
             Warburg ended December 31, 1998 are true and correct and fairly
             represent the financial condition of US Warburg as of such date;
             such financial statements and financial information were prepared
             in accordance with GAAP (except as noted therein). Since
             December 31, 1998, there has been no development or event relating
             to or affecting US Warburg which has had or could have a Material
             Adverse Effect.

                 (ii) No Default or Event of Default presently exists.

                 (iii) There are no actions, suits or legal, equitable,
             arbitration or administrative proceedings, pending or, to the
             knowledge of US Warburg threatened, against US Warburg which, if
             adversely determined, would have a Material Adverse Effect.

                 (iv) US Warburg is, and after consummation of the transactions
             contemplated by this Agreement, will be Solvent.

              (c) Compliance with Law; ERISA; Government Regulations.

                 (i) US Warburg is in compliance in all material respects with
             all laws, rules, regulations, orders and decrees applicable to it,
             or to its properties.

                 (ii) US Warburg has not established, nor does it plan to
             establish, any Plan.

                 (iii) US Warburg is not subject to regulation under the Public
             Utility Holding Company Act of 1935, the Federal Power Act, or the
             Interstate Commerce Act, each as amended. In addition, US Warburg
             is not (i) an "investment company" registered or required to be
             registered under the Investment Company Act of 1940, as amended,
             and is not controlled by such a company, or (ii) a "holding
             company," or a "Subsidiary company" of a "holding company," or an
             "affiliate" of a "holding company" or of a "Subsidiary" or a
             "holding company," within the meaning of the Public Utility Holding
             Company Act of 1935, as amended.

                                       8
<PAGE>   9

                 (d) Permitted Investment. The incurrence by US Warburg of its
             obligations hereunder are permitted by such Person's partnership
             agreement.

                 (e) VCOC. The assets of US Warburg do not constitute "plan
             assets" within the meaning of the Plan Asset Regulations because US
             Warburg qualifies as an "venture capital operating company" within
             the meaning of the Plan Asset Regulations and is entitled to the
             exemption provided in the Plan Asset Regulations. US Warburg shall
             deliver to the Agent a copy of the legal opinion provided to the
             Limited Partners that US Warburg qualified, as of the date of US
             Warburg's initial investment that was not a short-term investment
             of funds pending long-term commitment, as a venture capital
             operating company and was entitled to the exemption provided in the
             Plan Asset Regulations.

         11. Covenants. US Warburg hereby covenants and agrees with the Agent,
for the ratable benefit of the Lenders, that until all of the Guaranteed
Obligations shall have Fully Satisfied:

                  (a)      Financial Statements.

                           (i) As soon as available and in any event within 90
                  days after the close of each fiscal year of US Warburg, US
                  Warburg will furnish, or cause to be furnished, to the Agent
                  and each of the Lenders a statement of net assets and
                  partners' capital and statement of operations and changes in
                  capital accounts, all such financial information to be in
                  reasonable form and detail, reasonably acceptable to the Agent
                  and audited by independent certified public accountants of
                  recognized national standing reasonably acceptable to the
                  Agent and whose opinion shall be to the effect that such
                  financial statements have been prepared in accordance with
                  GAAP (except for changes with which such accountants concur)
                  and shall not be limited as to the scope of the audit or
                  qualified as to the status of such Warburg Guarantor as a
                  going concern.

                           (ii) As soon as available and in any event within 60
                  days after the close of each fiscal quarter of US Warburg
                  (other than the fourth fiscal quarter, in which case 90 days
                  after the end thereof), such US Warburg will furnish, or cause
                  to be furnished, to the Agent and each of the Lenders (A) a
                  statement of net assets and partners' capital and statement of
                  operations and changes in capital accounts, all such financial
                  information to be in reasonable form and detail and reasonably
                  acceptable to the Agent and (B) a certificate of an officer of
                  the Manager (1) to the effect that such quarterly financial
                  statements fairly present in all material respects the
                  financial condition of US Warburg and have been prepared in
                  accordance with GAAP, subject to changes resulting from audit
                  and normal year-end audit adjustments and (2) demonstrating
                  compliance with the financial covenants contained in
                  Section 11(c) by calculation thereof as of the end of each
                  such fiscal period.

                  (b)      Plan Assets, etc.; ERISA.

                           (i) US Warburg will do, or cause to be done, all
                  things necessary to ensure that US Warburg will not at any
                  time be deemed to hold "plan assets" within the meaning and as
                  defined in the Plan Asset Regulations.

                                      9
<PAGE>   10

                 (ii) US Warburg will do, or cause to be done, all things
             necessary to ensure that it will not be deemed to hold "plan
             assets" within the meaning of the Plan Asset Regulations at any
             time, and as soon as practicable after the beginning of each
             "annual valuation period" of US Warburg (as defined in the Plan
             Asset Regulations), US Warburg shall deliver to the Agent a copy of
             the legal opinion concerning the compliance of US Warburg with the
             "venture capital operating company" exemption of the Plan Asset
             Regulations as required pursuant to section 12(d) of US Warburg's
             partnership agreement.

                 (iii) US Warburg will not establish any Plan.

            (c)  Financial Covenants.

                 (i) Coverage Ratio. US Warburg shall cause the Coverage Ratio,
             as of the last day of each fiscal quarter of US Warburg, to be
             greater than or equal to 2.0 to 1.0.

                 (ii) Sufficient Liquidity. US Warburg shall at all times
             maintain sufficient liquidity to enable it to make payments
             required under this Agreement.

         12. Holdback Merger Consideration.

             (a) Mandatory Investments. US Warburg hereby agrees that, to the
         extent that Holdback Merger Consideration becomes payable from time to
         time by the Borrower pursuant to the terms of the Side Letter, then US
         Warburg shall immediately make (or cause other investors in the Parent
         to immediately make) a Mandatory Investment.

             (b) Bankruptcy. Notwithstanding the terms of clause (a) above, the
         obligations of US Warburg under this Section 12 shall not be satisfied
         by the making of a Mandatory Investment (or any other capital
         contribution to or investment in the Parent or any of the Consolidated
         Parties) at any time after the Business Day immediately preceding the
         first day that a Bankruptcy Event with respect to the Parent or the
         Borrower shall have occurred.

             (c) Purchase of Participation Interest in Lieu of Mandatory
         Investment. In the event that US Warburg shall fail to make when due
         any Mandatory Investment required pursuant to clause (a) above for any
         reason other than the occurrence of a Bankruptcy Event with respect to
         the Parent or the Borrower as contemplated by clause (b) above, then US
         Warburg hereby promises to pay to the Agent (for the ratable benefit of
         the Lenders), on the date that such Mandatory Investment otherwise
         would have been required in accordance with the terms of clause (a), an
         amount equal to the amount of the Mandatory Investment that otherwise
         would have been so required. All amounts paid by US Warburg to the
         Agent pursuant to this clause (c) immediately shall be applied by the
         Agent (for the ratable benefit of the Lenders) to pay for the purchase
         by US Warburg of an undivided, non-voting participation interest in the
         Tranche A Term Loan (and, after the Tranche A Term Loan has been
         repaid, in all of the Credit Party Obligations then

                                       10
<PAGE>   11

         outstanding under the Credit Documents) on a basis subordinated in
         right of payment on substantially the terms and conditions set forth on
         Exhibit A.

             (d) Indemnity. In the event that US Warburg shall fail to make when
         due any Mandatory Investment required pursuant to clause (a) above due
         to the occurrence of a Bankruptcy Event with respect to the Parent or
         the Borrower as contemplated by clause (b) above, then US Warburg
         agrees to indemnify the Agent and the Lenders for any loss in respect
         of any Credit Party Obligations resulting from the failure of the
         Borrower to make any required payment the Holdback Merger
         Consideration; provided, however, that the obligations of US Warburg
         under this clause (d) shall not exceed the amount of Mandatory
         Investments that otherwise would have been required pursuant to
         clause (a) above but for the occurrence of such Bankruptcy Event.

             (e) Separate Obligations. The obligations of US Warburg under this
         Section 12 shall be separate and apart from, and in addition to, the
         obligations of US Warburg under Section 2 hereof.

         13. Additional Liability of Warburg Guarantors. If any of the Warburg
Guarantors are or become liable for any indebtedness owing by any Credit Party
to the Agent or any Lender by endorsement or otherwise other than under this
Agreement, such liability shall not be in any manner impaired or reduced hereby
but shall have all and the same force and effect it would have had if this
Agreement had not existed and such Warburg Guarantor's liability hereunder shall
not be in any manner impaired or reduced thereby.

         14. Events of Default. An Event of Default shall exist upon the
occurrence of any of the following specified events (each an "Event of
Default"):

             (a) Effectiveness of Agreement. This Agreement or any provision
         hereof shall cease to be in full force and effect with respect to US
         Warburg, or US Warburg or any Person acting by or on behalf of US
         Warburg shall deny or disaffirm US Warburg's obligations under this
         Agreement; or

             (b) Payment. US Warburg shall default in the payment when due of
         any amounts payable by it pursuant to Section 2, 7, 12 or 22 hereof; or

             (c) Representations. Any representation, warranty or statement made
         or deemed to be made by US Warburg herein or in any statement or
         certificate delivered or required to be delivered pursuant hereto or
         thereto shall prove untrue in any material respect on the date as of
         which it was deemed to have been made; or

             (d) Covenants.

                 (i) US Warburg shall default in the due performance or
             observance of any term, covenant or agreement contained in
             Section 11(b) or Section 11(c); or

                 (ii) US Warburg shall default in the due performance or
             observance by it of any term, covenant or agreement (other than
             those referred to in subsections (a), (c) or (d)(i) of this Section
             14) contained in this Agreement and such default shall

                                       11
<PAGE>   12

             continue unremedied for a period of at least 30 days after the
             earlier of an Executive Officer of US Warburg becoming aware of
             such default or notice thereof by the Agent; or

              (e) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect
         to US Warburg; or

              (f) Defaults under Other Agreements. With respect to any
         Indebtedness in excess of $10,000,000 in the aggregate, (A) US Warburg
         shall (1) default in any payment (beyond the applicable grace period
         with respect thereto, if any) with respect to any such Indebtedness, or
         (2) the occurrence and continuance of a default in the observance or
         performance relating to such Indebtedness or contained in any
         instrument or agreement evidencing, securing or relating thereto, or
         any other event or condition shall occur or condition exist, the effect
         of which default or other event or condition is to cause, or permit,
         the holder or holders of such Indebtedness (or trustee or agent on
         behalf of such holders) to cause (determined without regard to whether
         any notice or lapse of time is required), any such Indebtedness to
         become due prior to its stated maturity; or (B) any such Indebtedness
         shall be declared due and payable, or required to be prepaid other than
         by a regularly scheduled required prepayment, prior to the stated
         maturity thereof; or

              (g) Judgments. One or more judgments or decrees shall be entered
         against US Warburg involving a liability of $10,000,000 or more in the
         aggregate (to the extent not paid or fully covered by insurance
         provided by a carrier who has acknowledged coverage and has the ability
         to perform) and any such judgments or decrees shall not have been
         vacated, discharged or stayed or bonded pending appeal within 30 days
         from the entry thereof; or

              (h) General Partner. Warburg, Pincus & Co., a New York general
         partnership, or its Affiliate shall fail to be the sole general partner
         of US Warburg; or

              (i) Permitted Investment. For any reason, US Warburg's ownership
         of all or any portion of the Borrower's Capital Stock shall not be
         permitted by US Warburg's partnership agreement; or

              (j) Event of Default under Credit Agreement. The occurrence of an
         "Event of Default" under and as defined in the Credit Agreement.

         15. Remedies. Upon the occurrence and during the continuance of an
Event of Default, the Agent may, or, upon the request and direction of the
Required Lenders, shall, by written notice to the Warburg Guarantors, enforce
any and all rights, remedies and interests created and existing under this
Agreement.

         16. No Waiver; Cumulative Rights. No failure or delay on the part of
the Agent or any Lender in exercising any right, power or privilege hereunder or
under any other Credit Document and no course of dealing between the Agent or
any Lender and the Credit Parties and the Warburg Guarantors shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies provided herein are cumulative
and not exclusive of any rights or remedies

                                       12
<PAGE>   13

which the Agent or any Lender would otherwise have. No notice to or demand on
the Credit Parties or any of the Warburg Guarantors in any case shall entitle
either of such Person to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agent or the
Lenders to any other or further action in any circumstances without notice or
demand.

         17. Usury. Notwithstanding any other provisions herein contained, no
provision of this Agreement shall require or permit the collection from any of
the Warburg Guarantors of interest in excess of the maximum rate or amount that
such Warburg Guarantor may be required or permitted to pay pursuant to any
applicable law. In the event any such interest is collected, it shall be applied
in reduction of obligations hereunder, and the remainder of such excess
collected shall be returned to the Warburg Guarantors once such obligations have
been fully satisfied.

         13. The Agent. In acting under or by virtue of this Agreement, the
Agent shall be entitled to all the rights, authority, privileges and immunities
provided in the Credit Agreement, all of which provisions are incorporated by
reference herein with the same force and effect as if set forth herein.

         18. Successors and Assigns. This Agreement shall be binding on and
enforceable against each Warburg Guarantor and its successors and assigns;
provided that, none of the Warburg Guarantors may assign or transfer any of its
obligations hereunder without prior written consent of the requisite Lenders as
provided in the Credit Agreement. This Agreement is intended for and shall inure
to the benefit of the Agent for itself and the ratable benefit of the Lenders
and each and every person who shall from time to time be or become the owner or
holder of any of the Guaranteed Obligations, and each and every reference herein
to "Agent" or "Lender" shall include and refer to each and every successor or
assignee of the Agent or any Lender at any time holding or owning any part of or
interest in any part of the Guaranteed Obligations. This Agreement shall be
transferable and negotiable with the same force and effect, and to the same
extent, that the Guaranteed Obligations are transferable and negotiable, it
being understood and stipulated that upon assignment or transfer by the Agent or
any Lender of any of the Guaranteed Obligations the legal holder or owner of the
Guaranteed Obligations (or a part thereof or interest therein thus transferred
or assigned by the Agent or any Lender) shall (except as otherwise stipulated by
the Agent or any such Lender in its assignment) have and may exercise all of the
rights granted to the Agent for the benefit of such Lender under this Agreement
to the extent of that part of or interest in the Guaranteed Obligations thus
assigned or transferred to said person. Each Warburg Guarantor expressly waives
notice of transfer or assignment of the Guaranteed Obligations, or any part
thereof, or of the rights of the Agent hereunder. Failure to give notice will
not affect the liabilities of the Warburg Guarantors hereunder.

         19. Application of Payments. Each of the Agent and the Lenders may
apply any payments received by it from any source against that portion of the
Guaranteed Obligations (principal, interest, court costs, attorneys' fees or
other) in such priority and fashion as it may deem appropriate.

         20. Modifications. Subject to the terms of the Credit Agreement, this
Agreement and the provisions hereof may be changed, discharged or terminated
only by an instrument in writing signed by each of the Warburg Guarantors
affected thereby and the Agent.

                                       13
<PAGE>   14

         21. Notices. Except as otherwise expressly provided herein, all notices
and other communications shall have been duly given and shall be effective
(a) when delivered, (b) when transmitted via telecopy (or other facsimile
device) to the number set out below, (c) the Business Day following the day on
which the same has been delivered prepaid to a reputable national overnight air
courier service, or (d) the third Business Day following the day on which the
same is sent by certified or registered mail, postage prepaid, in each case to
the respective parties at the address set forth below or at such other address
as such party may specify by written notice to the other parties hereto:

         if to any Warburg Guarantor:

              Warburg, Pincus Equity Partners, L.P.
              466 Lexington Avenue
              New York, New York  10017
              Attn:  Elizabeth Weatherman
              Telephone:  (212) 878-0600
              Telecopy:    (212) 878-9361

         if to the Agent:

              Bank of America, N. A.
              Independence Center, 15th Floor
              NC1-001-15-04
              101 North Tryon Street
              Charlotte, North Carolina 28255
              Attn:  Erik Truette, Agency Services
              Telephone:  (704) 388-1108
              Telecopy:    (704) 409-0028

         with a copy to:

              Bank of America, N. A.
              Bank of America Corporate Center, 13th Floor
              NC1-007-13-06
              100 North Tryon Street
              Charlotte, North Carolina 28255
              Attn:  Kip Davis
              Telephone:  (704) 388-7731
              Telecopy:    (704) 386-9607

         22.  Taxes.

              (a) Any and all payments by or on behalf of any of the Warburg
         Guarantors to or for the account of the Agent for the ratable benefit
         of the Lenders hereunder shall be made free and clear of and without
         deduction for any and all present or future taxes, duties, levies,
         imposts, deductions, charges or withholdings, and all liabilities with
         respect thereto, excluding, in the case of each Lender and the Agent,
         taxes measured by or imposed on its income, and franchise taxes imposed
         on it, by the jurisdiction under the laws of which such

                                       14

<PAGE>   15

         Lender (or its Applicable Lending Office) or the Agent (as the case
         may be) is organized or located (or in which its principal executive
         office is located) or any political subdivision thereof (all such
         non-excluded taxes, duties, levies, imposts, deductions, charges,
         withholdings, and liabilities being hereinafter referred to as
         "Taxes"). If any of the Warburg Guarantors shall be required by law to
         deduct any Taxes from or in respect of any sum payable under this
         Agreement to any Lender or the Agent, (i) the sum payable shall be
         increased as necessary so that after making all required deductions
         (including deductions applicable to additional sums payable under this
         Section 22) such Lender or the Agent receives an amount equal to the
         sum it would have received had no such deductions been made, (ii) such
         Person shall make such deductions, (iii) such Person shall pay the
         full amount deducted to the relevant taxation authority or other
         authority in accordance with applicable law, and (iv) such Person
         shall furnish to the Agent, at its address referred to in Section 21,
         the original or a certified copy of a receipt evidencing payment
         thereof.

              (b) In addition, the Warburg Guarantors agree to pay any and all
         present or future stamp or documentary taxes and any other excise or
         property taxes or charges or similar levies which arise from any
         payment made under this Agreement or from the execution or delivery of,
         or otherwise with respect to, this Agreement (hereinafter referred to
         as "Other Taxes").

              (c) The Warburg Guarantors agree to indemnify each Lender and the
         Agent for the full amount of Taxes and Other Taxes (including, without
         limitation, any Taxes or Other Taxes imposed or asserted by any
         jurisdiction on amounts payable under this Section 22) paid by such
         Lender or the Agent (as the case may be) and any liability (including
         penalties, interest, and expenses) arising therefrom or with respect
         thereto.

              (d) Within thirty (30) days after the date of any payment of
         Taxes, the Warburg Guarantors shall furnish to the Agent the original
         or a certified copy of a receipt evidencing such payment.

              (e) Without prejudice to the survival of any other agreement of
         the Guarantors hereunder, the agreements and obligations of the Warburg
         Guarantors contained in this Section 22 shall survive the termination
         of this Agreement and the payment of all amounts payable hereunder.

         23. Severability. If any provision of this Agreement is determined to
be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.

         24. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

              (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
         HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
         INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any
         legal action or proceeding with respect to this Agreement may be
         brought in the courts of the State of New York in New York County, or
         of the United States for the Southern District of New York, and, by
         execution and delivery of this

                                       15

<PAGE>   16

         Agreement, each Warburg Guarantor hereby irrevocably accepts for
         itself and in respect of its property, generally and unconditionally,
         the nonexclusive jurisdiction of such courts. Each Warburg Guarantor
         further irrevocably consents to the service of process out of any of
         the aforementioned courts in any such action or proceeding by the
         mailing of copies thereof by registered or certified mail, postage
         prepaid, to it at the address set out for notices pursuant to Section
         21, such service to become effective three (3) days after such mailing.
         Nothing herein shall affect the right of the Agent on behalf of the
         Lenders to serve process in any other manner permitted by law or to
         commence legal proceedings or to otherwise proceed against the Warburg
         Guarantors in any other jurisdiction.

              (b) Each Warburg Guarantor hereby irrevocably waives any objection
         which it may now or hereafter have to the laying of venue of any of the
         aforesaid actions or proceedings arising out of or in connection with
         this Agreement brought in the courts referred to in subsection (a)
         above and hereby further irrevocably waives and agrees not to plead or
         claim in any such court that any such action or proceeding brought in
         any such court has been brought in an inconvenient forum.

              (c) TO THE EXTENT PERMITTED BY LAW, THE AGENT AND EACH WARBURG
         GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
         ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
         AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

         25. Headings. The headings in this instrument are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provisions hereof.

         26. Counterparts.  This  Agreement  may be executed in any number of
counterparts  and by  different parties  hereto on  separate  counterparts,
each  constituting  an  original,  but all  together  one and the same
instrument.

         27. Rights of the Required Lenders. All rights of the Agent hereunder,
if not exercised by the Agent, may be exercised by the Required Lenders.

         28. Limited Recourse. Notwithstanding anything that may be expressed or
implied in this Agreement or any document or instrument delivered in connection
therewith (collectively, the "Transaction Documents"), the Borrower agrees and
the Agent on behalf of the Lenders, agrees that no recourse under any
Transaction Document shall be had against (i) any officer, agent, employee or
manager (including the Manager) or employee of the Warburg Guarantors, (ii) any
partner of any Warburg Guarantor (or any of its partners), (iii) any director,
officer, employee, partner, Affiliate or assignee of any Person referred to in
clause (i) or clause (ii) (other than any such Affiliate or assignee that is a
party to a Credit Document) (the Persons referred to in clauses (i) through
(iii), inclusive, being "Non-Liable Entities"), whether by the enforcement of
any assessment or by any legal or equitable proceeding, or by virtue of any
statute, regulation or other applicable law, it being expressly agreed and
acknowledged that no personal liability whatsoever shall attach to, be imposed
on or otherwise be incurred by any Non-Liable Entity, in its capacity as such,
for any obligations of any Warburg Guarantor under any Transaction Document for
any claim based on, arising out of, in respect of or by reason of such
obligations or their creation, all such liability being hereby irrevocably
waived.

                                       16
<PAGE>   17

IN WITNESS WHEREOF, each of the undersigned Warburg Guarantors has caused this
Agreement to be duly executed and delivered as of the day and year first above
written.

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

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

                                  By:  /s/ Elizabeth Weatherman
                                     -------------------------------------------
                                  Name:  Elizabeth Weatherman
                                       -----------------------------------------
                                  Title:  Managing Director
                                        ----------------------------------------
                         WARBURG, PINCUS NETHERLANDS
                         EQUITY PARTNERS I, C.V.,
                         a commanditaire vennootschap (limited partnership)
                         established under the laws of the Netherlands

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

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

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

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

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

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

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

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

                                       17
<PAGE>   18

ACCEPTED:

BANK OF AMERICA, N.A.,
as Agent

By: /s/ David H. Strickert
   -------------------------------
Name:  David H. Strickert
Title:  Principal

                                       18
<PAGE>   19

                                    Exhibit A

                             TERMS OF SUBORDINATION

-    No payments or prepayments of principal or interest on the participation
     interest of US Warburg in the Credit Party Obligations (the "Warburg
     Participation Interest") may be made by the Credit Parties or received by
     US Warburg until the Credit Party Obligations have been paid in full in
     cash and the Commitments under the Credit Agreement have been terminated.

-    Until the Credit Party Obligations have been paid in full in cash and the
     Commitments under the Credit Agreement have been terminated, US Warburg
     shall have no right to direct the Agent to exercise remedies in respect of
     Warburg Participation Interest.

-    Until the date 91 days after the Credit Party Obligations have been paid
     in full in cash and the Commitments under the Credit Agreement have been
     terminated, US Warburg shall not take any action in its capacity as holder
     of Warburg Participation Interest to initiate an involuntary bankruptcy
     proceeding in respect of any Credit Party.

-    The Lenders other than US Warburg shall have the right, if not exercised
     by US Warburg, to file proofs of claim (and any notice of assignment of the
     right to receive payments) in respect of Warburg Participation Interest to
     the extent not filed by US Warburg in any bankruptcy proceeding in respect
     of any Credit Party.

-    In any bankruptcy proceeding in respect of any Credit Party, the Lenders
     other than US Warburg shall be entitled to payment in full in cash before
     US Warburg, in its capacity as holder of Warburg Participation Interest,
     shall be entitled to receive any payments, property or assets (other than
     (i) debt securities that are subordinated at least to the extent provided
     in this Exhibit B and (ii) equity securities that are not redeemable for
     cash, and in respect of which no cash dividends are payable), until the
     Credit Party Obligations have been paid in full in cash and the Commitments
     under the Credit Agreement have been terminated.

-    Any payments received by US Warburg, in its capacity as holder of Warburg
     Participation Interest, in contravention of the foregoing subordination
     provisions shall be held in trust for the benefit of, and immediately
     turned over to, the Agent (for the ratable benefit of the Lenders other
     than US Warburg).

-    In any reorganization proceeding in respect of any Credit Party, the
     Lenders other than US Warburg shall be entitled to approve the use of cash
     collateral by such Credit Party.

-    US Warburg, in its capacity as holder of Warburg Participation Interest,
     shall not exercise any right of subrogation in respect of any of the Credit
     Party Obligations until the Credit Party Obligations have been paid in full
     in cash and the Commitments under the Credit Agreement have been
     terminated.

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