Document:

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                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT, dated as of April 17, 2000 (this "Security
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 "Credit Party" and
collectively the "Credit Parties") 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 Credit Parties
shall have executed and delivered this Security 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.

                  (a) Unless otherwise defined herein, capitalized terms used
         herein shall have the meanings ascribed to such terms in the Credit
         Agreement, and the following terms which are defined in the Uniform
         Commercial Code (the "UCC") in effect in the State of New York on the
         date hereof are used herein as so defined: Accounts, Chattel Paper,
         Deposit Accounts, Documents, Equipment, Farm Products, Fixtures,
         General Intangibles, Instruments, Inventory, Investment Property,
         Proceeds and Securities Intermediary. For purposes of this Security
         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).

                  (b) In addition, the following terms shall have the following
         meanings:

                  "Copyright Licenses": any agreement, now existing or hereafter
         arising, providing for the grant by or to a Credit Party of any right
         under any Copyright including, without limitation, any thereof referred
         to in Schedule 1.1(b) attached hereto.

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                  "Copyrights": (i) all copyrights in all Works, now existing or
         hereafter created or acquired, all registrations and recordings
         thereof, and all applications in connection therewith, whether in the
         United States Copyright Office or in any similar office or agency of
         the United States, any State thereof or any other country or any
         political subdivision thereof, or otherwise, including, without
         limitation, any thereof referred to in Schedule 1.1(b) attached hereto,
         and (ii) all renewals thereof including, without limitation, any
         thereof referred to in Schedule 1.1(b) attached hereto.

                  "Patent License": all agreements, now existing or hereafter
         arising, providing for the grant by or to a Credit Party of any right
         to make, use or sell any invention covered by a Patent, including,
         without limitation, any thereof referred to in Schedule 1.1(b) attached
         hereto.

                  "Patents": (i) all letters patent of the United States or any
         other country, now existing or hereafter arising, and all improvement
         patents, reissues, reexaminations, patents of additions, renewals and
         extensions thereof, including, without limitation, any thereof referred
         to in Schedule 1.1(b) attached hereto, and (ii) all applications for
         letters patent of the United States or any other country, now existing
         or hereafter arising, and all provisionals, divisions, continuations
         and continuations-in-part and substitutes thereof, including, without
         limitation, any thereof referred to in Schedule 1.1(b) attached hereto.

                  "Trademark License": any agreement, now existing or hereafter
         arising, providing for the grant by or to a Credit Party of any right
         to use any Trademark, including, without limitation, any thereof
         referred to in Schedule 1.1(b) attached hereto.

                  "Trademarks": (i) all trademarks, trade names, corporate
         names, company names, business names, fictitious business names, trade
         styles, service marks, logos and other source or business identifiers,
         together with the goodwill of the business symbolized by said marks,
         names, logos and identifiers now existing or hereafter adopted or
         acquired, all registrations and recordings thereof, and all
         applications in connection therewith, whether in the United States
         Patent and Trademark Office or in any similar office or agency of the
         United States, any State thereof or any other country or any political
         subdivision thereof, or otherwise, including, without limitation, any
         thereof referred to in Schedule 1.1(b) attached hereto, and (ii) all
         renewals thereof including, without limitation, any thereof referred to
         in Schedule 1.1(b) attached hereto.

                  "Work": any work of authorship which is subject to copyright
         protection pursuant to Title 17 of the United States Code or the
         applicable copyright laws of any other country.

         2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations (as defined in Section 4 hereof), each
Credit Party hereby 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 Credit Party in and to the following, whether
now owned or existing or owned, acquired, or arising hereafter (collectively,
the "Collateral"):

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                                    (a)     all Accounts;

                                    (b)     all cash and Cash Equivalents;

                                    (c)     all Chattel Paper;

                                    (d)     all Copyrights;

                                    (e)     all Copyright Licenses;

                                    (f)     all Deposit Accounts;

                                    (g)     all Documents;

                                    (h)     all Equipment;

                                    (i)     all Fixtures;

                                    (j)     all General Intangibles, including,
                           without limitation, General Intangibles consisting of
                           rights under the Purchase Agreement;

                                    (k)     all Instruments;

                                    (l)     all Inventory;

                                    (m)     all Investment Property;

                                    (n)     all Patents;

                                    (o)     all Patent Licenses;

                                    (p)     all Trademarks;

                                    (q)     all Trademark Licenses;

                  (r) all books, records, ledger cards, files, correspondence,
         computer programs, tapes, disks, and related data processing software
         (owned by such Credit Party or in which it has an interest) that at any
         time evidence or contain information relating to any Collateral or are
         otherwise necessary or helpful in the collection thereof or realization
         thereupon;

                  (s) all other personal property of any kind or type whatsoever
         owned by such Credit Party; and

                  (t) to the extent not otherwise included, all Proceeds and
         products of any and all of the foregoing.

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         Notwithstanding the foregoing provisions of this Section 2, such grant
of security interest contained herein shall not extend to, and the Collateral
shall not include, any Chattel Paper and General Intangibles which are now or
hereafter held by a Credit Party as licensee, lessee or otherwise, to the extent
that (a) such Chattel Paper and General Intangibles are not assignable or
capable of being encumbered as a matter of law or under the terms of the
license, lease or other agreement applicable thereto (but solely to the extent
that any such restriction shall be enforceable under applicable law), without
the consent of the licensor or lessor thereof or other applicable party thereto,
(b) such consent has not been obtained and (c) with respect to any material
contract of a Credit Party, a commercially reasonable effort has been made to
obtain such consent; provided, however, that the foregoing grant of security
interest shall extend to, and the Collateral shall include, (i) any and all
proceeds of such Chattel Paper and General Intangibles to the extent that the
assignment or encumbering of such proceeds is not so restricted and (ii) upon
any such licensor, lessor or other applicable party's consent with respect to
any such otherwise excluded Chattel Paper or General Intangibles being obtained,
thereafter such Chattel Paper or General Intangibles as well as any and all
proceeds thereof that might theretofore have been excluded from such grant of
security interest contained herein and the Collateral.

         The Credit Parties and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest created hereby in the
Collateral (i) constitutes continuing collateral security for all of the Secured
Obligations, whether now existing or hereafter arising and (ii) is not to be
construed as an assignment of any of the Intellectual Property.

         3. Provisions Relating to Accounts.

                  (a) Anything herein to the contrary notwithstanding, each of
         the Credit Parties shall remain liable under each of the Accounts to
         observe and perform all the conditions and obligations to be observed
         and performed by it thereunder, all in accordance with the terms of any
         agreement giving rise to each such Account. Neither the Agent nor any
         Lender shall have any obligation or liability under any Account (or any
         agreement giving rise thereto) by reason of or arising out of this
         Security Agreement or the receipt by the Agent or any Lender of any
         payment relating to such Account pursuant hereto, nor shall the Agent
         or any Lender be obligated in any manner to perform any of the
         obligations of a Credit Party under or pursuant to any Account (or any
         agreement giving rise thereto), to make any payment, to make any
         inquiry as to the nature or the sufficiency of any payment received by
         it or as to the sufficiency of any performance by any party under any
         Account (or any agreement giving rise thereto), to present or file any
         claim, to take any action to enforce any performance or to collect the
         payment of any amounts which may have been assigned to it or to which
         it may be entitled at any time or times.

                  (b) At any time after the occurrence and during the
         continuance of an Event of Default, (i) at the expense of the Credit
         Parties, the Agent shall have the right, but not the obligation, to
         make test verifications of the Accounts in any manner and through any
         medium that it reasonably considers advisable, and the Credit Parties
         shall furnish all such assistance and information as the Agent may
         require in connection with such test

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         verifications, (ii) upon the Agent's request, and at the expense of the
         Credit Parties, the Credit Parties shall cause independent public
         accountants or others satisfactory to the Agent to furnish to the Agent
         reports showing reconciliations, aging and test verifications of, and
         trial balances for, the Accounts and (iii) the Agent in its own name or
         in the name of others may communicate with account debtors on the
         Accounts to verify with them to the Agent's satisfaction the existence,
         amount and terms of any Accounts.

         4. Security for Obligations. The security interest created hereby in
the Collateral constitutes continuing collateral security for all of the
following, whether now existing or hereafter incurred (the "Secured
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 Security Agreement and the other
         Credit Documents to which the Borrower is a party;

                  (b) Subject to clause (c) of Section 28 hereof, in the case of
         the Guarantors, the prompt performance and observance by such Guarantor
         of all obligations of such Guarantor under the Credit Agreement, this
         Security 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 Security 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) if and to the extent agreed to by such Credit Party in the
         documentation evidencing same, all liabilities and obligations owing
         from such Credit Party to any Lender or any Affiliate of any Lender
         arising under any Hedging Agreements.

         5. Credit Parties Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Credit Party shall remain liable under the contracts
and agreements of such Credit Party included in the Collateral to the extent set
forth therein and to perform all of the duties and obligations thereunder to the
same extent as if this Security Agreement had not been executed, (b) the
exercise by the Agent of any of the rights hereunder shall not release a Credit
Party from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) neither the Agent nor any of the Lenders
shall have any obligation or liability under the contracts and agreements
included in the Collateral by reason of this Security Agreement, nor shall the
Agent or any of the Lenders be obligated to perform any of the obligations or
duties of the Credit Parties thereunder or to take any action to collect or
enforce any claim for payment assigned thereunder.

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         6. Representations and Warranties. Each Credit Party hereby represents
and warrants to the Agent, for the benefit of the Lenders, that until such time
as the Credit Party Obligations are Fully Satisfied:

                  (a) Location of Collateral. The location of all tangible
         property included in the Collateral owned by each Credit Party is as
         shown on Schedule 6.20(b) to the Credit Agreement as such Schedule
         6.20(b) may be updated from time to time.

                  (b) Chief Executive Office; Books & Records. Each Credit
         Party's chief executive office and chief place of business is (and for
         the prior four months have been) located at the locations set forth on
         Schedule 6.20(c) to the Credit Agreement as such Schedule 6.20(c) may
         be updated from time to time, and each Credit Party keeps its books and
         records at such locations.

                  (c) Ownership. Each Credit Party is the legal and beneficial
         owner of its Collateral and has a valid right to use, pledge, sell,
         assign or transfer the same. Each Credit Party's legal name is as shown
         in this Security Agreement, and no Credit Party has in the past four
         months changed its name, been party to a merger, consolidation or other
         change in structure or used any tradename except as set forth in
         Schedule 6(c) attached hereto, which Schedule 6(c) may be updated by
         written notice from such Credit Party to the Agent.

                  (d) Security Interest/Priority. This Security Agreement
         creates a valid security interest in favor of the Agent, for the
         benefit of the Lenders, in the Collateral of each Credit Party and,
         when properly perfected by filing, registration or otherwise, shall
         constitute a valid first priority, perfected security interest in such
         Collateral, to the extent such security can be perfected by filing
         under the UCC, federal law or other applicable personal property
         security legislation, free and clear of all Liens except for Permitted
         Liens.

                  (e) Farm Products. None of the Collateral constitutes, or is
         the Proceeds of, Farm Products.

                  (f) Contracts; Agreements. Except as set forth on Schedule
         6(f) attached hereto, the Credit Parties have no material contracts or
         agreements which are non-assignable by their terms or which prevent the
         granting of a security interest therein. Schedule 6(f) may be updated
         from time to time by the Credit Parties by giving written notice
         thereof to the Agent. No consent of any other person or entity and no
         authorization, approval or other action by, and no notice to or filing
         with, any governmental authority or regulatory body is required (i) for
         the grant by a Credit Party of the assignment and security interest
         granted hereby or for the execution, delivery or performance of this
         Security Agreement by the Credit Parties, (ii) for the perfection or
         maintenance of the assignment and security interest created hereby
         (including the first priority nature of such assignment and security
         interest) or (iii) for the exercise by the Agent of its rights and
         remedies hereunder.

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                  (g) Accounts. (i) Each Account of the Credit Parties and the
         papers and documents relating thereto are genuine and in all material
         respects what they purport to be, (ii) no Account of any Credit Party
         is evidenced by any instrument or chattel paper, unless such instrument
         or chattel paper has been theretofore endorsed over and delivered to
         the Agent, (iii) no surety bond was required or given in connection
         with any receivables of a Credit Party or the contracts out of which
         they arose and (iv) the goods sold and/or services furnished giving
         rise to each Account are not subject to any security interest or Lien
         except for the first priority, perfected security interest granted to
         the Agent herein and except for Permitted Liens.

                  (h) Inventory. No Inventory of a Credit Party is held by a
         third party (other than a Credit Party) pursuant to consignment, sale
         or return, sale on approval or similar arrangement, unless such Credit
         Party has complied with the terms of Section 9-114 of the UCC.

                  (i) Copyrights, Patents and Trademarks.

                           (i) Schedule 1.1(b) attached hereto includes all
                  Intellectual Property owned or used by the Credit Parties, as
                  such Schedule 1.1(b) may be updated from time to time.

                           (ii) No Credit Party has made any assignment or
                  agreement in conflict with the security interest in the
                  Intellectual Property of each Credit Party hereunder.

         7. Covenants. Each Credit Party covenants that, until such time as the
Credit Party Obligations are Fully Satisfied, such Credit Party shall:

                  (a) Other Liens. Defend the Collateral against the claims and
         demands of all other parties claiming an interest therein, keep the
         Collateral free from all Liens, except for Permitted Liens, and not
         sell, exchange, transfer, assign, lease or otherwise dispose of the
         Collateral or any interest therein, except as permitted under the
         Credit Agreement.

                  (b) Preservation of Collateral. Keep the Collateral in good
         order, condition and repair in all material respects, ordinary wear and
         tear excepted, and not use the Collateral in violation of the
         provisions of this Security Agreement.

                  (c) Instruments/Chattel Paper. If any of the Collateral shall
         be or become evidenced by any Instrument or Chattel Paper or if any
         Collateral shall be stored or shipped subject to a Document,
         immediately deliver such Instrument, Chattel Paper or Document to the
         Agent, duly endorsed in a manner satisfactory to the Agent, to be held
         as Collateral pursuant to this Security Agreement.

                  (d) Change in Location or Name. Not, without providing 30 days
         prior written notice to the Agent and without filing (or confirming
         that the Agent has filed) such amendments to any previously filed
         financing statements as the Agent may require, (a)

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         change the location of its chief executive office and chief place of
         business (as well as its books and records) from the locations set
         forth on Schedule 6.20(c) to the Credit Agreement, (b) change the
         location of its Collateral from the locations set forth for such Credit
         Party on Schedule 6.20(b) to the Credit Agreement, or (c) change its
         name, be party to a merger, consolidation or other change in structure
         or use any tradename other than as set forth on Schedule 6(c) attached
         hereto.

                  (e) Inspection. At all times allow the Agent or its
         representatives to visit and inspect the Collateral to the extent set
         forth in Section 7.10 of the Credit Agreement.

                  (f) Perfection of Security Interest. Execute and deliver to
         the Agent such agreements, assignments or instruments (including
         affidavits, notices, reaffirmations and amendments and restatements of
         existing documents, as the Agent may reasonably request) and do all
         such other things as the Agent may reasonably deem necessary or
         appropriate (i) to assure to the Agent the effectiveness and priority
         of its security interests hereunder, including, but not limited to, (A)
         such financing statements (including renewal statements) or amendments
         thereof or supplements thereto or other instruments as the Agent may
         from time to time reasonably request in order to perfect and maintain
         the security interests granted hereunder in accordance with the UCC and
         any other personal property security legislation in the appropriate
         state(s) or province(s), (B) with regard to Investment Property,
         execute and cause the Securities Intermediary with respect to such
         Investment Property to execute a securities control agreement in form
         and substance satisfactory to the Agent, (C) with regard to Copyrights,
         a Notice of Grant of Security Interest in Copyrights for filing with
         the United States Copyright Office substantially in the form of Exhibit
         7(f)-1 attached hereto, and (D) with regard to Patents and Trademarks,
         a Notice of Grant of Security Interest in Patents and Trademarks for
         filing with the United States Patent and Trademark Office substantially
         in the form of Exhibit 7(f)-2 attached hereto, (ii) to consummate the
         transactions contemplated hereby and (iii) to otherwise protect and
         assure the Agent of its rights and interests hereunder. To that end,
         each Credit Party agrees that the Agent may file one or more financing
         statements disclosing the Agent's security interest in any or all of
         the Collateral of such Credit Party without, to the extent permitted by
         law, such Credit Party's signature thereon, and further each Credit
         Party also hereby irrevocably makes, constitutes and appoints the
         Agent, its nominee or any other Person whom the Agent may designate, as
         such Credit Party's attorney in fact with full power and for the
         limited purpose to sign in the name of such Credit Party any such
         financing statements, or amendments and supplements to financing
         statements, renewal financing statements, notices or any similar
         documents which in the Agent's reasonable discretion would be
         necessary, appropriate or convenient in order to perfect and maintain
         perfection of the security interests granted hereunder, such power,
         being coupled with an interest, being and remaining irrevocable until
         the Credit Party Obligations are Fully Satisfied. Each Credit Party
         hereby agrees that a carbon, photographic or other reproduction of this
         Security Agreement or any such financing statement is sufficient for
         filing as a financing statement by the Agent without notice thereof to
         such Credit Party wherever the Agent may in its sole discretion desire
         to file the same. In the event for any reason the law of any
         jurisdiction other than New York becomes or is applicable to the
         Collateral of any Credit Party or any part thereof, or to

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         any of the Secured Obligations, such Credit Party agrees to execute and
         deliver all such instruments and to do all such other things as the
         Agent in its sole discretion reasonably deems necessary or appropriate
         to preserve, protect and enforce the security interests of the Agent
         under the law of such other jurisdiction (and, if a Credit Party shall
         fail to do so promptly upon the request of the Agent, then the Agent
         may execute any and all such requested documents on behalf of such
         Credit Party pursuant to the power of attorney granted hereinabove).
         Each Credit Party agrees to mark its books and records to reflect the
         security interest of the Agent in the Collateral.

                  (g) Collateral Held by Warehouseman, Bailee, etc. If any
         Collateral is at any time in the possession or control of a
         warehouseman, bailee or any agent or processor of such Credit Party,
         notify the Agent of such possession, notify such Person of the Agent's
         security interest for the benefit of the Lenders in such Collateral,
         and instruct such Person to hold all such Collateral for the Agent's
         account subject to the Agent's instructions.

                  (h) Treatment of Accounts. (i) Not grant or extend the time
         for payment of any Account, or compromise or settle any Account for
         less than the full amount thereof, or release any Person or property,
         in whole or in part, from payment thereof, or allow any credit or
         discount thereon, other than in the prudent conduct of a Credit Party's
         business and (ii) maintain at its principal place of business a record
         of Accounts consistent with customary business practices.

                  (i) Covenants Relating to Copyrights. Unless the applicable
         Credit Party believes it is not necessary in the prudent conduct of its
         business,

                                 (i) Employ the Copyright for each Work with
                  such notice of copyright as may be required by law to secure
                  copyright protection.

                                (ii) (A) Not do any act or knowingly omit to do
                  any act whereby any Copyright may become invalidated; (B) not
                  do any act, or knowingly omit to do any act, whereby any
                  Copyright may become injected into the public domain; (C)
                  notify the Agent promptly if it knows, that any material
                  Copyright may become injected into the public domain or of any
                  adverse determination or development (including, without
                  limitation, the institution of, or any such determination or
                  development in, any court or tribunal in the United States or
                  any other country), regarding a Credit Party's ownership of
                  any such Copyright or its validity; (D) take all necessary
                  steps as it shall deem appropriate under the circumstances to
                  maintain and pursue each application (and to use its best
                  efforts to obtain the relevant registration) and to maintain
                  each registration of each Copyright owned by a Credit Party
                  including, without limitation, filing of applications for
                  renewal where necessary; and (E) promptly notify the Agent of
                  any material infringement of any material Copyright of a
                  Credit Party of which it becomes aware and take such actions
                  as it shall reasonably deem appropriate under the
                  circumstances to protect such Copyright, including, where
                  appropriate, the bringing of suit for infringement, seeking
                  injunctive relief and seeking to recover any and all damages
                  for such infringement.

<PAGE>   10

                               (iii) Not make any assignment or agreement in
                  conflict with the security interest in the Copyrights of each
                  Credit Party hereunder.

                  (j) Covenants Relating to Patents and Trademarks. Unless the
         applicable Credit Party believes it is not necessary in the prudent
         conduct of its business,

                                 (i) (A) Continue to use each Trademark in such
                  a manner as to maintain such Trademark in full force free from
                  any claim of abandonment for non-use, (B) maintain as in the
                  past the quality of products and services offered under such
                  Trademark, (C) employ such Trademark with the appropriate
                  notice of registration or notice of trademark or service mark,
                  as applicable, sufficient to protect such Trademark, (D) not
                  adopt or use any mark which is confusingly similar or a
                  colorable imitation of such Trademark unless the Agent, for
                  the ratable benefit of the Lenders, shall obtain a perfected
                  security interest in such mark pursuant to this Security
                  Agreement, and (E) not (and not permit any licensee or
                  sublicensee thereof to) do any act or knowingly omit to do any
                  act whereby any Trademark may be lost.

                                (ii) Not do any act, or omit to do any act,
                  whereby any Patent may become abandoned or dedicated.

                               (iii) Notify the Agent promptly if it knows, that
                  any application or registration relating to any material
                  Patent or material Trademark may become abandoned or
                  dedicated, or of any adverse determination or development
                  (including, without limitation, the institution of, or any
                  such determination or development in, any proceeding in the
                  United States Patent and Trademark Office or any court or
                  tribunal in any country), regarding a Credit Party's ownership
                  of any Patent or Trademark or its right to register the same
                  or to keep and maintain the same.

                                (iv) Take all reasonable and necessary steps,
                  including, without limitation, in any proceeding before the
                  United States Patent and Trademark Office, or any similar
                  office or agency in any other country or any political
                  subdivision thereof, to maintain and pursue each application
                  (and to obtain the relevant registration) and to maintain each
                  registration of the Patents and Trademarks, including, without
                  limitation, filing of applications for renewal, affidavits of
                  use and affidavits of incontestability.

                                 (v) Promptly notify the Agent after it learns
                  that any material Patent or material Trademark is infringed,
                  misappropriated or diluted in any material manner by a third
                  party, and take such actions as it shall reasonably deem
                  appropriate under the circumstances to protect such Patent or
                  Trademark, including, where it shall reasonably deem
                  appropriate, the bringing of suit for infringement,
                  misappropriation or dilution, seeking injunctive relief where

<PAGE>   11

                  appropriate and seeking to recover any and all damages for
                  such infringement, misappropriation or dilution.

                                (vi) Not make any assignment or agreement in
                  conflict with the security interest in the Patents or
                  Trademarks of each Credit Party hereunder.

                  (k) New Intellectual Property. With respect to any
         Intellectual Property acquired or created by a Credit Party after the
         Closing Date, the Credit Parties shall comply with the terms of Section
         7.1(l) and Section 7.13 of the Credit Agreement.

                  (l) Other Additional Collateral. If, subsequent to the Closing
         Date, a Credit Party shall acquire any securities, instruments, chattel
         paper or other personal property required to be delivered to the Agent
         as Collateral hereunder, the Credit Party shall immediately notify the
         Agent of same and take such action (including, but not limited to, the
         actions set forth in Section 7.13 of the Credit Agreement) as requested
         by the Agent and at its own expense, (subject to the limitations set
         forth in Section 7.13 of the Credit Agreement) to ensure that the Agent
         has a first priority perfected Lien in all personal property of the
         Credit Parties whether now owned or hereafter acquired, subject only to
         Permitted Liens.

         8. Advances by Lenders. On failure of any Credit Party to perform any
of the covenants and agreements contained herein, the Agent or the Lenders may,
at its sole option and in its sole discretion, perform the same (provided that
the Agent shall promptly give the Borrower notice of such performance after the
fact) and in so doing may expend such sums as the Agent or the Lenders 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 the Lenders 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 Credit Parties on a joint and several basis (subject
to Section 28 hereof) promptly upon notice thereof and demand therefor, shall
constitute additional Secured Obligations and shall bear interest from the date
said amounts are expended at the default rate provided 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 Credit Party, and no such advance or expenditure therefor, shall relieve
the Credit Parties of any default under the terms of this Security Agreement or
the other Credit Documents. The Agent or the Lenders 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 the Agent or the Lenders are aware that such payment is
being contested in good faith by a Credit Party in appropriate proceedings and
against which adequate reserves are being maintained in accordance with GAAP.

<PAGE>   12

         9. 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").

         10. Remedies.

                  (a) General Remedies. Upon the occurrence of an Event of
         Default and during continuation thereof, the Agent and the Lenders
         shall have, in addition to the rights and remedies provided herein, in
         the Credit Documents or 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 (including,
         but not limited to, the rights and remedies set forth in the UCC or
         equivalent legislation of the jurisdiction applicable to the affected
         Collateral), the rights and remedies of a secured party under the UCC
         to the extent permitted by law (regardless of whether the UCC is the
         law of the jurisdiction where the rights and remedies are asserted and
         regardless of whether the UCC applies to the affected Collateral), and
         further, the Agent may, with or without judicial process or the aid and
         assistance of others, to the extent permitted by applicable law, (i)
         enter on any premises on which any of the Collateral may be located
         and, without resistance or interference by the Credit Parties, take
         possession of the Collateral, (ii) dispose of any Collateral on any
         such premises, (iii) require the Credit Parties to assemble and make
         available to the Agent at the expense of the Credit Parties any
         Collateral at any place and time designated by the Agent which is
         reasonably convenient to both parties, (iv) remove any Collateral from
         any such premises for the purpose of effecting sale or other
         disposition thereof, and/or (v) without demand and without
         advertisement, notice, hearing or process of law, all of which each of
         the Credit Parties hereby waives to the fullest extent permitted by
         law, at any place and time or times, sell and deliver any or all
         Collateral held by or for it at public or private sale, by one or more
         contracts, in one or more parcels, for cash, upon credit or otherwise,
         at such prices and upon such terms as the Agent deems advisable, in its
         sole discretion (subject to any and all mandatory legal requirements).
         Each of the Credit Parties acknowledges that any private sale
         referenced above 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. In addition to all other sums due the Agent and the
         Lenders with respect to the Secured Obligations, the Credit Parties
         shall pay the Agent and each of the Lenders all reasonable costs and
         expenses incurred by the Agent or any such Lender, including, but not
         limited to, reasonable attorneys' fees and court costs, in obtaining or
         liquidating the Collateral, in enforcing payment of the Secured
         Obligations, or in the prosecution or defense of any action or
         proceeding by or against the Agent or the Lenders or the Credit Parties
         concerning any matter arising out of or connected with this Security
         Agreement, any Collateral or the Secured Obligations, including,
         without limitation, any of the foregoing arising in, arising under or
         related to a case concerning a Credit Party under the Bankruptcy Code.
         To the extent the rights of notice cannot be legally waived hereunder,
         each Credit Party agrees that any requirement of reasonable notice
         shall be met if such notice is personally served on or mailed, postage

<PAGE>   13

         prepaid, to the Borrower in accordance with the notice provisions of
         Section 11.1 of the Credit Agreement at least 10 days before the time
         of sale or other event giving rise to the requirement of such notice.
         The Agent and the Lenders shall not be obligated to make any sale or
         other disposition of the Collateral regardless of notice having been
         given. To the extent permitted by law, any Lender may be a purchaser at
         any such sale. To the extent permitted by applicable law, each of the
         Credit Parties hereby waives all of its rights of redemption with
         respect to any such sale. Subject to the provisions of applicable law,
         the Agent and the Lenders may postpone or cause the postponement of the
         sale of all or any portion of the Collateral by announcement at the
         time and place of such sale, and such sale may, without further notice,
         to the extent permitted by law, be made at the time and place to which
         the sale was postponed, or the Agent and the Lenders may further
         postpone such sale by announcement made at such time and place.

                  (b) Remedies relating to Accounts. Upon the occurrence of an
         Event of Default and during the continuance thereof, whether or not the
         Agent has exercised any or all of its rights and remedies hereunder,
         each Credit Party will promptly upon request of the Agent instruct all
         account debtors to remit all payments in respect of Accounts to a
         mailing location selected by the Agent. In addition, the Agent or its
         designee may notify any Credit Party's customers and account debtors
         that the Accounts of such Credit Party have been assigned to the Agent
         or of the Agent's security interest therein, and may (either in its own
         name or in the name of a Credit Party or both) demand, collect
         (including without limitation by way of a lockbox arrangement),
         receive, take receipt for, sell, sue for, compound, settle, compromise
         and give acquittance for any and all amounts due or to become due on
         any Account, and, in the Agent's discretion, file any claim or take any
         other action or proceeding to protect and realize upon the security
         interest of the Lenders in the Accounts. Each Credit Party acknowledges
         and agrees that the Proceeds of its Accounts remitted to or on behalf
         of the Agent in accordance with the provisions hereof shall be solely
         for the Agent's own convenience and that such Credit Party shall not
         have any right, title or interest in such Accounts or in any such other
         amounts except as expressly provided herein. The Agent and the Lenders
         shall have no liability or responsibility to any Credit Party for
         acceptance of a check, draft or other order for payment of money
         bearing the legend "payment in full" or words of similar import or any
         other restrictive legend or endorsement or be responsible for
         determining the correctness of any remittance. Each Credit Party hereby
         agrees to indemnify the Agent and the Lenders from and against all
         liabilities, damages, losses, actions, claims, judgments, costs,
         expenses, charges and reasonable attorneys' fees suffered or incurred
         by the Agent or the Lenders (each, an "Indemnified Party") because of
         the maintenance of the foregoing arrangements except as relating to or
         arising out of the gross negligence or willful misconduct of an
         Indemnified Party or its officers, employees or agents. In the case of
         any investigation, litigation or other proceeding, the foregoing
         indemnity shall be effective whether or not such investigation,
         litigation or proceeding is brought by a Credit Party, its directors,
         shareholders or creditors or an Indemnified Party or any other Person
         or any other Indemnified Party is otherwise a party thereto.

                  (c) Access. In addition to the rights and remedies hereunder,
         upon the occurrence of an Event of Default and during the continuance
         thereof, the Agent shall have the right to enter and remain upon the
         various premises of the Credit Parties without

<PAGE>   14

         cost or charge to the Agent, and use the same, together with materials,
         supplies, books and records of the Credit Parties for the purpose of
         collecting and liquidating the Collateral, or for preparing for sale
         and conducting the sale of the Collateral, whether by foreclosure,
         auction or otherwise. In addition, the Agent may remove Collateral, or
         any part thereof, from such premises and/or any records with respect
         thereto, in order to effectively collect or liquidate such Collateral.

                  (d) Nonexclusive Nature of Remedies. Failure by the Agent or
         the Lenders to exercise any right, remedy or option under this Security
         Agreement or any other Credit Document or as provided by law, or any
         delay by the Agent or the Lenders in exercising the same, shall not
         operate as a waiver of any such right, remedy or option. No waiver
         hereunder shall be effective unless it is in writing, signed by the
         party against whom such waiver is sought to be enforced and then only
         to the extent specifically stated, which in the case of the Agent or
         the Lenders shall only be granted as provided herein. To the extent
         permitted by law, neither the Agent, the Lenders, nor any party acting
         as attorney for the Agent or the Lenders, shall be liable hereunder for
         any acts or omissions or for any error of judgment or mistake of fact
         or law other than their gross negligence or willful misconduct
         hereunder. The rights and remedies of the Agent and the Lenders under
         this Security Agreement shall be cumulative and not exclusive of any
         other right or remedy which the Agent or the Lenders may have.

                  (e) Retention of Collateral. The Agent may, after providing
         the notices required by Section 9-505(2) of the UCC and otherwise
         complying with the requirements of applicable law (including the
         failure to receive written objection from any person to whom the Agent
         is required to send such notice) of the relevant jurisdiction, to the
         extent the Agent is in possession of any of the Collateral, retain the
         Collateral in satisfaction of the Secured Obligations. Unless and until
         the Agent or the Lenders shall have provided such notices, however, the
         Agent or the Lenders shall not, except as otherwise provided under law,
         be deemed to have retained any Collateral in satisfaction of any
         Secured Obligations for any reason.

                  (f) 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, (subject to Section 28
         hereof) the Credit Parties 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, 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 Secured Obligations shall be returned to the Credit
         Parties or to whomsoever a court of competent jurisdiction shall
         determine to be entitled thereto.

         11. Rights of the Agent.

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

<PAGE>   15

         Lenders, and each of its designees or agents, as attorney-in-fact of
         such Credit Party, 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 Collateral of
                  such Credit Party, all as the Agent may reasonably determine;

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

                           (iii) to defend, settle or compromise any action
                  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 Collateral of such Credit Party;

                           (v) to direct any parties liable for any payment
                  under any of the 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 Collateral of
                  such Credit Party;

                           (vii) to sign and endorse any drafts, assignments,
                  verifications, notices and other documents relating to the
                  Collateral of such Credit Party;

                           (viii) to settle, compromise or adjust any suit,
                  action or proceeding described above and, in connection
                  therewith, to give such discharges or releases as the Agent
                  may deem reasonably appropriate;

                           (ix) receive, open and dispose of mail addressed to a
                  Credit Party and endorse checks, notes, drafts, acceptances,
                  money orders, bills of lading, warehouse receipts or other
                  instruments or documents evidencing payment, shipment or
                  storage of the goods giving rise to the Collateral of such
                  Credit Party on behalf of and in the name of such Credit
                  Party, or securing, or relating to such Collateral;

                           (x) sell, assign, transfer, make any agreement in
                  respect of, or otherwise deal with or exercise rights in
                  respect of, any Collateral or the goods or services which have
                  given rise thereto, as fully and completely as though the
                  Agent were the absolute owner thereof for all purposes;

<PAGE>   16

                           (xi) adjust and settle claims under any insurance
                  policy relating thereto;

                           (xii) execute and deliver all assignments,
                  conveyances, statements, financing statements, renewal
                  financing statements, security 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 Security
                  Agreement and in order to fully consummate all of the
                  transactions contemplated therein;

                           (xiii) institute any foreclosure proceedings that the
                  Agent may deem appropriate; and

                           (xiv) 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 Collateral.

         This power of attorney is a power coupled with an interest and shall be
         irrevocable until such time as the Credit Party Obligations are Fully
         Satisfied. 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 Security 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 Collateral.

                  (b) Performance by the Agent of Obligations. If any Credit
         Party fails to perform any agreement or obligation contained herein,
         the Agent itself may perform, or cause performance of, such agreement
         or obligation, and the expenses of the Agent incurred in connection
         therewith shall be payable by the Credit Parties on a joint and several
         basis pursuant to Section 14 hereof.

                  (c) Assignment by the Agent. The Agent may from time to time
         assign the Collateral and any portion thereof to a successor Agent, and
         the assignee shall be entitled to all of the rights and remedies of the
         Agent under this Security Agreement in relation thereto.

                  (d) The Agent's Duty of Care. Other than the exercise of
         reasonable care to assure the safe custody of the 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 the Credit Parties shall be responsible for
         preservation of all rights in the Collateral, and the Agent shall be
         relieved of all responsibility for the Collateral upon surrendering it
         or tendering the surrender of it to the Credit Parties. The Agent shall
         be deemed to have exercised reasonable care in the custody and
         preservation

<PAGE>   17

         of the Collateral in its possession if the Collateral is accorded
         treatment substantially equal to that which the Agent accords its own
         property, it being understood that the Agent shall not have
         responsibility for taking any necessary steps to preserve rights
         against any parties with respect to any of the Collateral.

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

         13. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent or
any of the Lenders in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in Section 3.15(b) of the Credit
Agreement, and each Credit Party 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.

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

         15. Continuing Agreement.

                  (a) This Security Agreement shall be a continuing agreement in
         every respect and shall remain in full force and effect until such time
         as the Credit Party Obligations are Fully Satisfied. At such time as
         the Credit Party Obligations are Fully Satisfied, this Security
         Agreement shall be automatically terminated and the Agent for the
         benefit of the Lenders shall, upon the request and at the expense of
         the Credit Parties, 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 Credit
         Parties evidencing such termination. Notwithstanding the foregoing all
         releases and indemnities provided hereunder shall survive termination
         of this Security Agreement.

                  (b) This Security 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 Secured 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 Secured 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

<PAGE>   18

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

         16. Amendments; Waivers; Modifications. This Security 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.

         17. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Credit Party, 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 assigns; provided, however,
that none of the Credit Parties 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.

         18. No Liability to the Agent or Lenders. To the fullest extent
permitted by law, each Credit Party hereby releases the Agent in its individual
capacity or its capacity as attorney-in-fact, each Lender in its individual
capacity or its capacity as attorney-in-fact, their respective successors and
assigns and any party acting as attorney for the Agent or the Lenders, from any
liability for any act or omission or for any error of judgment or mistake of
fact or law relating to this Security 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.

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

         20. Counterparts. This Security 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 Security Agreement to produce or
account for more than one such counterpart.

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

         22. Governing Law; Submission to Jurisdiction; Venue.

             (a) THIS SECURITY 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 Security 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 Security Agreement, each Credit Party hereby
         irrevocably accepts for itself and in respect of its

<PAGE>   19

         property, generally and unconditionally, the jurisdiction of such
         courts. Each Credit Party 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 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 Credit Party in any other jurisdiction.

             (b) Each Credit Party 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 Security 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.

         23. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS SECURITY
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.

         24. Severability. If any provision of any of the Security 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.

         25. Entirety. This Security Agreement and the other Credit Documents
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 or the
transactions contemplated herein and therein.

         26. Survival. All representations and warranties of the Credit Parties
hereunder shall survive the execution and delivery of this Security Agreement
and the other Credit Documents, the delivery of the Notes and the making of the
Loans under the Credit Agreement.

         27. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by a Credit Party), 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 shall 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 Secured Obligations under this
Security Agreement or under any other of the Credit Documents.

<PAGE>   20

         28.      Joint and Several Obligations of Credit Parties.

                  (a) Subject to clause (c) of this Section 28, each of the
         Credit Parties 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 Credit Parties and in consideration of
         the undertakings of each of the Credit Parties to accept joint and
         several liability for the obligations of each of them.

                  (b) Subject to clause (c) of this Section 28, each of the
         Credit Parties 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 Credit Parties
         with respect to the payment and performance of all of the Secured
         Obligations arising under this Security Agreement and the other Credit
         Documents, it being the intention of the parties hereto that all the
         Secured Obligations shall be the joint and several obligations of each
         of the Credit Parties 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 Guarantor shall be adjudicated to be invalid or
         unenforceable for any reason (including, without limitation, because of
         any applicable state, provincial or federal law relating to fraudulent
         conveyances or transfers) then the obligations of each Guarantor
         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]

<PAGE>   21

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

BORROWER:                            AMERICAN MEDICAL SYSTEMS, INC.

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

GUARANTORS:                          AMERICAN MEDICAL SYSTEMS
                                     HOLDINGS, INC.

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

                                     INFLUENCE, INC.

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

Accepted and agreed to as of the date first above written.

BANK OF AMERICA, N.A., as Agent

By: /s/ John J. O'Neill
   ----------------------------
Name: John J. O'Neill
     --------------------------
Title: Managing Director
      -------------------------<PAGE>   1
                                 REVOLVING NOTE

$_________________                                                        (DATE)

         FOR VALUE RECEIVED, AMERICAN MEDICAL SYSTEMS, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
__________________________, its successors and assigns (the "Lender"), at the
office of Bank of America, N. A., as Agent (the "Agent"), at 101 North Tryon
Street, Independence Center, NC1-001-15-04, Charlotte, North Carolina 28255 (or
at such other place or places as the holder hereof may designate), at the times
set forth in the Credit Agreement dated as of March 24, 2000 among the Borrower,
the Guarantors, the Lenders and the Agent (as it may be as amended, modified,
restated or supplemented from time to time, the "Credit Agreement"; all
capitalized terms not otherwise defined herein shall have the meanings set forth
in the Credit Agreement), but in no event later than the Maturity Date, in
Dollars and in immediately available funds, the principal amount of
________________________DOLLARS ($____________) or, if less than such principal
amount, the aggregate unpaid principal amount of all Revolving Loans made by the
Lender to the Borrower pursuant to the Credit Agreement, and to pay interest
from the date hereof on the unpaid principal amount hereof, in like money, at
said office, on the dates and at the rates selected in accordance with Section
2.1(d) of the Credit Agreement.

         Upon the occurrence and during the continuance of an Event of Default,
the balance outstanding hereunder shall bear interest as provided in Section 3.1
of the Credit Agreement. Further, in the event the payment of all sums due
hereunder is accelerated under the terms of the Credit Agreement, this Note, and
all other indebtedness of the Borrower to the Lender shall become immediately
due and payable, without presentment, demand, protest or notice of any kind, all
of which are hereby waived by the Borrower.

         In the event this Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.

         This Note and the Loans evidenced hereby may be transferred in whole or
in part only by registration of such transfer on the Register maintained by or
on behalf of the Borrower as provided in Section 11.3(c) of the Credit
Agreement.

         IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed by its duly authorized officer as of the day and year first above
written.

                                  AMERICAN MEDICAL SYSTEMS, INC.

                                  By:
                                     ------------------------
                                  Name:
                                       ----------------------
                                  Title:
                                        ---------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00010-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00010-of-00352.parquet"}]]