ex1045.htm


    Exhibit
10.45

    
 

    PLEDGE AND SECURITY
AGREEMENT

    


    THIS PLEDGE AND SECURITY
AGREEMENT, dated
as of July 21, 2006 (this “Agreement”), made by EMAGIN
CORPORATION, a
Delaware corporation (the “Grantor”), to ALEXANDRA GLOBAL MASTER FUND
LTD., a
British Virgin Islands international business company, as collateral agent (in
such capacity, the “Collateral Agent”) on behalf of the Holders (such
capitalized term and all other capitalized terms used in this Agreement having
the respective meanings provided in this Agreement).

    


    W I T N E S S E T H:

    


    WHEREAS, the
Grantor and the several Buyers are parties to the several Note Purchase
Agreements, pursuant to which, among other things, the Buyers have agreed to
purchase up to $7,000,000 aggregate principal amount of Notes of the
Grantor;

    


    WHEREAS, in
connection with the transactions contemplated by the Note Purchase Agreements,
the Grantor has agreed to grant to the Collateral Agent a security interest in
certain of its property, assets and rights; 

    


    WHEREAS, it is a
condition precedent to the several obligations of the Buyers to purchase their
respective Notes and Warrants pursuant to the Note Purchase Agreements that the
Grantor shall have executed and delivered this Agreement to the Collateral Agent
for the ratable benefit of the Holders; 

    


    WHEREAS,
contemporaneously with the execution and delivery of this Agreement the Company
and the Collateral Agent are executing and delivering the Patent and Trademark
Security Agreement and the Lockbox Agreement; and

    


    NOW, THEREFORE, in
consideration of the premises and to induce the Buyers to purchase their
respective Notes and Warrants, the Grantor hereby agrees with the Collateral
Agent, for the ratable benefit of the Holders, as follows:

    


    1.  Definitions.

    


    (a) As used
in this Agreement, the terms “Agreement”, “Grantor” and “Collateral Agent” shall
have the respective meanings assigned to such terms in the introductory
paragraph of and the recitals to this Agreement.

    


    (b) All the
agreements or instruments herein defined shall mean such agreements or
instruments as the same may from time to time be supplemented or amended or the
terms thereof waived or modified to the extent permitted by, and in accordance
with, the terms thereof and of this Agreement.

    


    (c) Capitalized
terms used herein without definition shall have the respective meanings assigned
to such terms in the Notes.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d) The
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms
defined):

    


    “Accounts”
means all rights to payment for goods sold or leased or for services rendered,
whether or not such rights have been earned by performance.

    


    “Additional
Note” means the Note issued pursuant to the Additional Note Purchase
Agreement.

    


    “Additional
Note Purchase Agreement” means the Note Purchase Agreement, dated as of July 21,
2006, by and between the Grantor and Stillwater LLC, which by its terms
contemplates the issuance of up to $500,000 aggregate principal amount of Notes
on or after December 10, 2006.

    


    “Affiliate”
means, with respect to any Person, any other Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with the subject Person. For purposes of this definition,
“control” (including, with correlative meaning, the terms “controlled by” and
“under common control with”), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.

    


    “Business
Day” means any day other than a Saturday, Sunday or a day on which commercial
banks in The City of New York are authorized or required by law or executive
order to remain closed.

    


    “Buyer”
means any of the several buyers party to a Note Purchase Agreement.

    


    “Chattel
Paper” shall have the meaning assigned to such term under the Code.

    


    “Code”
means the Uniform Commercial Code as from time to time in effect in the State of
Delaware.

    


    “Collateral”
means each of the following, whether now existing or hereafter
arising:

    


    (1) all
Accounts of the Grantor and, if the Collateral Agent exercises its rights under
Section 3(b), the Lockbox and each and every General Intangible relating
thereto;

    


    (2) all
Inventory of the Grantor;

    


    (3) all
Equipment of the Grantor;

    


    (4) all
Proprietary Information owned or licensed by the Grantor, whether existing on
the date hereof or developed or acquired hereafter;

    


    
      
        
        

      

      
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    (5) all of
the Grantor’s right, title and interest in and to all Contracts, Documents,
Chattel Paper, Instruments, Investment Property and General Intangibles, whether
existing on the date hereof or hereafter arising;

    


    (6) all cash,
securities, rights and other property at any time and from time to time
received, receivable or otherwise distributed in respect of the Collateral,
including, without limitation in respect of the cash or other property held in
the Lockbox or the Collateral Account;

    


    (7) all
Patents, Patent Licenses, Trademarks and Trademark Licenses;

    


    (8) all
insurance policies to the extent they relate to items (1) through (7)
above;

    


    (9) all
books, ledgers, books of account, records, writings, databases, information and
other property relating to, used or useful in connection with, evidencing,
embodying, incorporating, or referring to any of the foregoing; and

    


    (10) to the
extent not otherwise included, all Proceeds, products, rents, issues, profits
and returns of and from any and all of the foregoing, which Proceeds may be in
the form of Accounts, Chattel Paper, Inventory or otherwise.

    


    “Collateral
Account” shall have the meaning provided in the Lockbox Agreement.

    


    “Contracts”
shall have the meaning assigned to that term under the Code.

    


    “Documents”
shall have the meaning assigned to such term under the Code.

    


    “Event of
Default” means:

    


    (1) the
failure by the Grantor to perform in any material respect any obligation of the
Grantor under this Agreement as and when required by this Agreement;
or

    


    (2) any
representation or warranty made by the Grantor pursuant to this Agreement shall
have been untrue in any material respect when made or deemed to have been made;
or

    


    (3) the
failure by the Grantor to perform in any material respect any obligation of the
Grantor under the Patent and Trademark Security Agreement as and when required
by the Patent and Trademark Security Agreement;

    


    (4) any
representation or warranty made by the Grantor pursuant to the Patent and
Trademark Security Agreement shall have been untrue in any material respect when
made or deemed to have been made;

    


    
      
        
        

      

      
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    (5) the
failure by the Grantor to perform in any material respect any obligation of the
Grantor under the Lockbox Agreement as and when required by the Lockbox
Agreement;

    


    (6) any
representation or warranty made by the Grantor pursuant to the Lockbox Agreement
shall have been untrue in any material respect when made or deemed to have been
made; or

    


    (7) any Event
of Default, as that term is defined in any of the Notes.

    


    “General
Intangibles” shall have the meaning assigned to such term under the
Code.

    


    “Holder”
means any Buyer or any holder from time to time of any Note.

    


    “Indemnified
Person” shall have the meaning provided in Section 5(j).

    


    “Inventory”
shall have the meaning assigned to such term under the Code, and in any event,
including, without limitation, all raw material, work-in process and finished
goods, inventory, merchandise, goods and other personal property that are held
by or on behalf of a Person for sale or lease or to be furnished under a
contract of service or which give rise to any Account, including, without
limitation, returned goods.

    


    “Issuance
Date” means the date on which the Notes are initially issued.

    


    “Lien”
shall mean any lien, mortgage, security interest, chattel mortgage, pledge or
other encumbrance (statutory or otherwise) of any kind securing satisfaction or
performance of an obligation, including any agreement to give any of the
foregoing, any conditional sales or other title retention agreement, any lease
in the nature thereof, and the filing of or the agreement to give any financing
statement under the Code of any jurisdiction or similar evidence of any
encumbrance, whether within or outside the United States.

    


    “Lockbox”
shall have the meaning assigned to such term in the Lockbox Agreement.


    


    “Lockbox
Agent” means the Person from time to time serving as Lockbox Agent under the
Lockbox Agreement.

    


    “Lockbox
Agreement” means that certain Lockbox Agreement dated as of the date hereof, by
and between the Grantor and the Lockbox Agent.

    


    “Majority
Holders” means at any time such of the holders of the Notes who hold Notes
which, based on the outstanding principal amounts thereof, represent a majority
of the aggregate outstanding principal amount of the Notes at such
time.

    


    
      
        
        

      

      
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    “Note
Purchase Agreements” means the several Note Purchase Agreements, dated as of
July 21, 2006, by and between the Grantor and the respective Buyer party thereto
pursuant to which the Grantor issued the Notes, including, without limitation,
the Additional Note Purchase Agreement.

    


    “Notes”
means the Grantor’s 6% Senior Secured Convertible Notes due 2007-2008 originally
issued pursuant to the Note Purchase Agreements, including, without limitation,
the Additional Note.

    


    “Obligations”
means:

    


    (1) the full
and prompt payment when due of all obligations and liabilities to the Holders,
whether now existing or hereafter arising, under the Transaction Documents and
the due performance and compliance with the terms of the Transaction
Documents;

    


    (2) any and
all sums advanced by the Collateral Agent or any Holder in order to preserve the
Collateral or to preserve the Security Interest;

    


    (3) in the
event of any proceeding for the collection or enforcement of any obligations or
liabilities of the Grantor referred to in the immediately preceding clauses (1)
and (2) in accordance with the terms of the Transaction Documents, the
reasonable expenses of re-taking, holding, preparing for sale, selling or
otherwise disposing of or realizing on the Collateral, or of any other exercise
by the Collateral Agent of its rights hereunder, together with reasonable
attorneys' fees and court costs; and

    


    (4) any
amounts for which the Collateral Agent or any Holder is entitled to
indemnification under Section 5(j).

    


    “Patent(s)”
means all present and future patents, patent applications and patent disclosures
which are presently, or in the future may be, owned, issued, acquired or used
(whether pursuant to a license or otherwise) anywhere in the world by the
Grantor, in whole or in part, and all of the Grantor's right, title and interest
in and to all patentable inventions and to file applications for patents under
patent laws of the United States or of any other jurisdiction, including,
without limitation, any and all extensions, reissues, substitutes,
continuations, continuations-in-part, divisional, patents of addition,
re-examinations and renewals thereof, and patents issuing therefrom, and any
other proprietary rights related to any of the foregoing (including, without
limitation, remedies against infringements thereof and rights of protection of
an interest therein under the laws of all jurisdictions) and any and all foreign
counterparts of any of the foregoing.

    


    “Patent
Licenses” means each license agreement relating to Patents granted to, used or
acquired by the Grantor, in each case together with the right to use and rely
upon the inventions and other intellectual property conveyed
thereunder.

    


    
      
        
        

      

      
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    “Patent
and Trademark Security Agreement” means that certain Patent and Trademark
Security Agreement, dated as of July 21, 2006, between the Grantor and the
Collateral Agent.

    


    “Permitted
Liens” shall have the meaning assigned to such term in the Notes.

    


    “Person”
means any natural person, corporation, partnership, limited liability company,
trust, incorporated organization, unincorporated association or similar entity
or any government, governmental agency or political subdivision.

    


    “Proceeds”
shall have the meaning assigned to such term under the Code.

    


    “Proprietary
Information” means information in whatever form generally unavailable to the
public that has been created, discovered, developed or otherwise become known to
the Grantor or in which property rights have been assigned or otherwise conveyed
to the Grantor, which information has economic value or potential economic value
to the creation, operation, use, modification, extension, upgrade, application,
marketing, sale and distribution of the Grantor’s products and services.
Proprietary Information shall include, but not be limited to, trade secrets,
processes, formulas, writings, data, know-how, negative know-how, improvements,
discoveries, developments, designs, inventions, techniques, technical data,
customer and supplier lists, financial information, business plans or
projections and modifications or enhancements to any of the above. Proprietary
Information shall include all information existing on the date hereof and all
information developed or acquired hereafter.

    


    “Security
Interest” means the security interest granted in the Collateral pursuant to this
Agreement.

    


    “Subsidiary”
means any corporation or other entity of which a majority of the capital stock
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions are at the
time directly or indirectly owned by the Grantor.

    


    “Trademark
License” means each license agreement relating to Trademarks used, adopted or
acquired by the Grantor. 

    


    “Trademarks”
means (a) all trademarks, trade names, corporate names, company names, business
names, fictitious business names, trade styles, service marks, logos and other
source or business identifiers of the Grantor adopted for use in conjunction
with the Grantor’s business products and services, now existing anywhere in the
world or hereinafter adopted or acquired, whether currently in use or not, and
the goodwill associated therewith, all registrations and recordings thereof, and
all applications in connection therewith, and (b) all renewals thereof by the
Grantor.

    


    “Transaction
Documents” means the Notes, the Note Purchase Agreements, this Agreement, the
Patent and Trademark Security Agreement, the Lockbox Agreement, the Warrants,
and the other agreements, instruments and documents contemplated hereby and
thereby.

    


    
      
        
        

      

      
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    2. Grant of Security
Interest. As
collateral security for the prompt and complete payment and performance of the
Obligations and for the other purposes provided in this Agreement, the Grantor
hereby grants to the Collateral Agent for the ratable benefit of the Holders a
first priority security interest in all of the Collateral. Such grant includes,
without limitation, a grant of the security interest to secure the payment and
performance of Obligations relating to the Additional Note upon the date of
issuance of such Additional Note.

    


    3. Rights of Collateral Agent;
Limitations on Collateral Agent's Obligations.

    


    (a) Grantor Remains Liable under Accounts
and Contracts.
Anything herein to the contrary notwithstanding, the Grantor shall remain liable
under each of the Accounts and Contracts that constitute part of the Collateral
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 and in accordance with and pursuant to the
terms and provisions of each such Contract. The Collateral Agent shall not have
any obligation or liability under any Account that constitutes part of the
Collateral (or any agreement giving rise thereto) or under any Contract that
constitutes part of the Collateral by reason of or arising out of this Agreement
or the receipt by the Collateral Agent of any payment relating to such Account
or Contract pursuant hereto, nor shall the Collateral Agent be obligated in any
manner to perform any of the obligations of the Grantor under or pursuant to any
such Account (or any agreement giving rise thereto) or under or pursuant to any
such Contract, 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 such Account (or any agreement giving rise
thereto) or under any such Contract, 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) Notice to Account Debtors and
Contracting Parties. Upon
the direction of the Collateral Agent at any time that an Event of Default has
occurred and is continuing, the
Grantor shall promptly, but in no event later than five Business Days, after
such direction is given, notify all the account debtors on the Accounts that
constitute part of the Collateral and parties to the Contracts that constitute
part of the Collateral that such Accounts and such Contracts have been assigned
to the Collateral Agent for the ratable benefit of the Holders and that payments
in respect thereof shall be made directly to the Collateral Agent or as the
Collateral Agent shall direct in accordance with the Lockbox Agreement.


    


    (c) Verification and Analysis of
Accounts. If an
Event of Default has occurred and the Collateral Agent shall have directed the
Grantor to notify the account debtors on the Accounts and parties to the
Contracts in accordance with Section 3(b), in addition to its rights pursuant to
clause (1) of this Section 3(c) the Collateral Agent shall have the right in its
own name or in the name of others to communicate with account debtors on the
Accounts that constitute part of the Collateral and parties to the Contracts
that constitute part of the Collateral to verify with them to its satisfaction
the existence, amount and terms of any such Accounts or Contracts and to make
test verifications of such Accounts in any manner and through any medium that it
reasonably considers advisable, and the Grantor shall furnish all such
assistance and information as the Collateral Agent may require in connection
therewith. At any time and from time to time, upon the Collateral Agent's
reasonable request and at the expense of the Grantor, the Grantor shall cause
independent public accountants or others satisfactory to the Collateral Agent to
furnish to the Collateral Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, such Accounts.

    


    
      
        
        

      

      
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    4. Representations and
Warranties. The
Grantor hereby represents and warrants that: 

    


    (a) Title; No Other
Liens. Except
for the Lien granted to the Collateral Agent for the ratable benefit of the
Holders pursuant to this Agreement, the Patent and Trademark Security Agreement,
the Lockbox Agreement and the Lien granted to the Collateral Agent for the
ratable benefit of the Holders pursuant to the Patent and Trademark Security
Agreement, the Grantor owns and has good and marketable title to each item of
the Collateral free and clear of any and all Liens or claims of others except
Permitted Liens. No security agreement, financing statement or other public
notice with respect to all or any part of the Collateral is on file or of record
in any public office, except such as may have been filed in favor of the
Collateral Agent, for the ratable benefit of the Holders, pursuant to this
Agreement or pursuant to the Patent and Trademark Security
Agreement.

    


    (b) Perfected First Priority
Liens. The
Liens granted pursuant to this Agreement will constitute upon the completion of
all the filings or notices listed in Schedule I hereto,
perfected Liens on all Collateral in favor of the Collateral Agent for the
benefit of the Holders, which are prior to all other Liens (except Permitted
Liens, if any) on such Collateral and which are enforceable as such against all
Persons.

    


    (c) Accounts. No
amount payable to the Grantor under or in connection with any Account that
constitutes part of the Collateral is evidenced by any Instrument (other than
checks in the ordinary course of business) or Chattel Paper which has not been
delivered to the Collateral Agent. The place where the Grantor keeps its records
concerning the Accounts that constitute part of the Collateral is set forth on
Schedule II
hereto.

    


    (d) Consents under
Contracts. No
consent (other than consents that have been obtained) of any party (other than
the Grantor), to any Contract that constitutes part of the Collateral is
required, or purports to be required, in connection with the execution, delivery
and performance of this Agreement or the exercise of the Collateral Agent's
rights and remedies provided herein or at law.

    


    (e) Inventory. The
items of Inventory that constitute part of the Collateral are, as of the
Issuance Date, kept at the locations listed on Schedule III hereto
and have not been kept at any other location within the six-month period ending
on the Issuance Date.

    


    (f) Chief Executive
Office. The
Grantor's chief executive office and chief place of business is located at 10500
N.E. 8th Street,
Suite 1400, Bellevue,
WA 98004.

    


    
      
        
        

      

      
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    (g) Power and
Authority. The
Grantor has full power, authority and legal right to grant the Collateral Agent
the Lien on the Collateral pursuant to this Agreement.

    


    (h) Approvals, Filings,
Etc. No
authorization, approval or consent of, or filing, registration, recording or
other action with, any United States or foreign court, governmental body,
regulatory agency, self-regulatory organization, or stock exchange or market,
the stockholders of the Grantor or any other Person, is required to be obtained
or made by the Grantor or any Subsidiary (x) for the grant by the Grantor of the
Security Interest in the Collateral pursuant to this Agreement, (y) to perfect
the Security Interest purported to be created by this Agreement, or (z) for the
exercise of the Collateral Agent's rights and remedies provided herein or at
law, in each case except as has been obtained or made.

    


    5. Covenants. The
Grantor covenants and agrees with the Collateral Agent that from and after the
date of this Agreement until the payment or performance in full by the Grantor
of all of the Obligations:

    


    (a) Further Documentation; Pledge of
Instruments and Chattel Paper. At any
time and from time to time, upon the written request of the Collateral Agent,
and at the sole expense of the Grantor, the Grantor will promptly and duly
execute and deliver such further instruments and documents and take such further
action as the Collateral Agent may reasonably request for the purpose of
obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, the filing of any
financing or continuation statements under the Code or similar laws in effect in
any such jurisdiction with respect to the Liens created hereby. The Grantor also
hereby authorizes the Collateral Agent to file any such financing or
continuation statement without the signature of the Grantor to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement for filing in any
jurisdiction. If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any Instrument or Chattel Paper, such
Instrument or Chattel Paper shall be immediately delivered to the Collateral
Agent, duly endorsed in a manner satisfactory to the Collateral Agent, to be
held as Collateral pursuant to this Agreement.

    


    (b) Maintenance of
Records.
 The
Grantor will keep and maintain at its own cost and expense satisfactory and
complete records of the Collateral, including, without limitation, a record of
all payments received and all credits granted with respect to any Accounts that
may constitute part of the Collateral. For the further security of the
Collateral Agent, the Grantor hereby grants to the Collateral Agent a security
interest in all of the Grantor's books and records pertaining to the Collateral,
and the Grantor shall turn over any such books and records for inspection at the
office of the Grantor to the Collateral Agent or to its representatives during
normal business hours at the request of the Collateral Agent.

    


    (c) Limitation on Liens on
Collateral. The
Grantor (x) will not create, incur or permit to exist, will defend the
Collateral against, and will take such other action as is necessary to remove,
any Lien or claim on or to the Collateral, other than the Security Interest
created hereby and Liens created by the Patent and Trademark Security Agreement,
and (y) will defend the right, title and interest of the Collateral Agent in and
to any of the Collateral against the claims and demands of all
Persons.

    


    
      
        
        

      

      
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    (d) Limitations on Dispositions of
Collateral. The
Grantor will not sell, transfer, lease, assign, grant any participation or
interest in, or otherwise dispose of, any of the Collateral to any Person,
including, without limitation, any Subsidiary or Affiliate of the Grantor, or
attempt, offer or contract to do so. 

    


    (e) Performance of Contracts and
Agreements Giving Rise to Accounts. The
Grantor shall (i) exercise promptly and diligently each and every material right
and perform each material obligation which it may have under each Contract that
constitutes part of the Collateral and each agreement giving rise to an Account
that constitutes part of the Collateral (other than any right of termination)
and (ii) deliver to the Collateral Agent, upon request, a copy of each material
demand, notice or document received by it relating in any way to any Contract
that constitutes part of the Collateral or any agreement giving rise to an
Account that constitutes part of the Collateral. The Grantor shall not amend or
modify the terms of, or waive any rights under, any Contracts, in a manner which
would materially adversely affect the Security Interest or the value of such
Contracts.

    


    (f) Further Identification of
Collateral. The
Grantor shall furnish to the Collateral Agent from time to time, upon the
request of the Collateral Agent, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in reasonable
detail.

    


    (g) Notices. The
Grantor will advise the Collateral Agent within two Business Days of the
occurrence thereof, in reasonable detail, at its address in accordance with
Section 16, (i) of any Lien (other than Liens permitted hereunder) on, or claim
asserted against, any of the Collateral, (ii) of any Event of Default or any
event which, with notice or the lapse of time, or both, would become an Event of
Default and (iii) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the Collateral, the Security
Interest or the rights of the Collateral Agent hereunder.

    


    (h) Changes in Locations, Name, Etc.
The
Grantor will not 

    


    (1) change
the location of its chief executive office/chief place of business from that
specified in Section 4(f) or remove its books and records from the location
specified in Section 4(c), or

    


    (2) change
its name, identity or corporate structure to such an extent that any financing
statement filed in connection with this Agreement and naming the Collateral
Agent as secured party would become misleading or invalid, or

    


    (3) change
the location at which any item of Inventory that constitutes Collateral is kept
from the locations specified in Section 4(e),

    


    unless in
any such case it shall have given the Collateral Agent at least 30 days prior
written notice thereof and, prior to such action or event, shall have taken
appropriate action satisfactory to the Collateral Agent to preserve and protect
the Collateral Agent's security interest under this Agreement.

    


    
      
        
        

      

      
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    (i) Subsidiaries. This
Agreement is entered into on behalf of and for the benefit of the Grantor. The
Subsidiaries and the Affiliates of the Grantor have no ownership or other rights
in the Collateral. The Grantor will not permit any Subsidiary or any Affiliate
of the Grantor to have any ownership or other rights in or to exercise any
control over the Collateral.

    


    (j) Indemnification. The
Grantor agrees to indemnify and hold harmless the Collateral Agent and each
Holder and their respective officers, directors, Affiliates, agents, members,
shareholders and investment advisors (each, an “Indemnified Person”) from and
against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, and to
reimburse the Collateral Agent and each Holder for all costs and expenses,
including reasonable attorneys’ fees and expenses, arising out of or resulting
from this Agreement, including any breach hereof or Event of Default hereunder,
or the exercise by the Collateral Agent or any Holder, as the case may be, of
any right or remedy granted to it hereunder or under the other Transaction
Documents under applicable law; provided,
however, that the
Grantor shall not be required to indemnify a particular Indemnified Person to
the extent any claim, demand, loss, judgment, liability, cost or expense is
determined by final judgment (not subject to further appeal) of a court of
competent jurisdiction to have arisen primarily from the gross negligence or
willful misconduct of such Indemnified Person. In no event shall any Indemnified
Person other than the Collateral Agent have any liability or obligation to the
Grantor under this Agreement or applicable law (liability under which the
Grantor hereby waives) for any matter or thing in connection with this
Agreement, and in no event shall the Collateral Agent be liable, in the absence
of a determination of gross negligence or willful misconduct on its part by
final judgment (not subject to further appeal) of a court of competent
jurisdiction, for any matter or thing in connection with this Agreement other
than to account for moneys actually received by it in accordance with the terms
hereof. If and to the extent that the obligations of the Grantor under this
Section 4(j) are unenforceable for any reason, the Grantor hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law. 

    


    6. Collateral Agent's
Powers.

    


    (a) Powers. The
Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any
officer or agent thereof or investment advisor thereto, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Grantor and in the name of the
Grantor or in its own name, from time to time in the Collateral Agent's
discretion, during any period in which an Event of Default is continuing, for
the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, the Grantor hereby gives the
Collateral Agent and each such officer, agent and investment advisor the power
and right, on behalf of the Grantor, without notice to or assent by the Grantor,
except any notice required by law, to do the following:

    


    (i) to take
possession of and endorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under or with respect to any
Collateral and to file any claim or to take any other action or proceeding in
any court of law or equity or otherwise deemed appropriate by the Collateral
Agent for the purpose of collecting any and all such moneys due under or with
respect to any such Collateral whenever payable, in each case in the name of the
Grantor or its own name, or otherwise;

    


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (ii) to pay or
discharge taxes and liens levied or placed on or threatened against the
Collateral and to pay all or any part of the premiums therefor and the costs
thereof; and

    


    (iii) (A) to
direct any party liable for any payment under any of the Collateral to make
payment of any and all moneys due or to become due thereunder directly to the
Collateral Agent or as the Collateral Agent shall direct; (B) to ask or demand
for, collect, receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising out of
any Collateral; (C) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with any
of the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any other right in respect
of any Collateral; (E) to defend any suit, action or proceeding brought against
the Grantor with respect to any Collateral; (F) to settle, compromise or adjust
any suit, action or proceeding described in clause (E) above and, in connection
therewith, to give such discharges or releases as the Collateral Agent may deem
appropriate; and (G) generally, to sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Collateral Agent were the absolute owner thereof for
all purposes, and to do, at the Collateral Agent's option and the Grantor's
expense, at any time, or from time to time, all acts and things which the
Collateral Agent deems necessary to protect, preserve or realize upon the
Collateral and the Collateral Agent's Liens thereon and to effect the intent of
this Agreement, all as fully and effectively as the Grantor might
do.

    


    The
Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be
done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable until the Grantor shall have paid and
performed in full all of the Obligations.

    


    (b) Other Powers. The
Grantor also authorizes the Collateral Agent, from time to time during any
period in which an Event of Default is continuing, to
execute, in connection with the sale provided for herein, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.

    


    (c) No Duty on Collateral Agent's
Part. The
powers conferred on the Collateral Agent hereunder are solely to protect the
Collateral Agent's interests in the Collateral for the pro rata benefit
of the Holders and shall not impose any duty upon the Collateral Agent to
exercise any such powers. The Collateral Agent shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers,
and neither it nor any of its officers, directors, employees or agents shall be
responsible to the Grantor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.

    


    
      
        
        

      

      
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    7. Performance by Collateral Agent of
Grantor's Obligations. If the
Grantor fails to perform or comply with any of its agreements contained herein
and the Collateral Agent, as provided for by the terms of this Agreement and
following reasonable notice to the Grantor, may itself perform or comply, or
otherwise cause performance or compliance, with such agreement, and the expenses
of the Collateral Agent incurred in connection with such performance or
compliance shall be payable by the Grantor to the Collateral Agent on demand and
shall constitute Obligations secured hereby.

    


    8. Remedies in
General. If an
Event of Default has occurred and is continuing, the Collateral Agent may
exercise, in addition to all other rights and remedies granted to it in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, if an Event of
Default has occurred and is continuing, the Collateral Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below or expressly
provided for) to or upon the Grantor or any other Person (all and each of which
demands, defenses, advertisements and notices are, to the extent permitted by
applicable law, hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, license, assign, give option or options to purchase,
or otherwise dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), at public or private sale or sales, at any
exchange, broker's board or office of the Collateral Agent or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Collateral Agent shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Grantor, which right or equity is
hereby waived, to the extent permitted by applicable law, or released.


    


    The
Grantor further agrees that, if an Event of Default has occurred and is
continuing, at the
Collateral Agent's request, to assemble the Collateral and make it available to
the Collateral Agent at places which the Collateral Agent shall reasonably
select, whether at the Grantor's premises or elsewhere. The Collateral Agent
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or the rights
of the Collateral Agent hereunder, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Obligations, in such order as the Collateral Agent may elect, and only after
such application and after the payment by the Collateral Agent of any other
amount required by any provision of law, need the Collateral Agent account for
the surplus, if any, to the Grantor. To the extent permitted by applicable law,
the Grantor waives all claims, damages and demands it may acquire against the
Collateral Agent arising out of the exercise by it of any rights hereunder,
provided, that
nothing contained in this Section 8 shall relieve the Collateral Agent from
liability arising solely from its gross negligence or willful misconduct. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least ten
days before such sale or other disposition. The Grantor shall remain liable for
any deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Collateral Agent to collect such
deficiency.

    


    
      
        
        

      

      
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    9. Limitation on Duties Regarding
Preservation of Collateral. The
Collateral Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under the Code or
otherwise, shall be to deal with it in the same manner as the Collateral Agent
deals with similar property for its own account. Neither the Collateral Agent
nor any of its directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Grantor or
otherwise.

    


    10. Powers Coupled with an
Interest. All
authorizations and agencies herein contained with respect to the Collateral are
irrevocable and powers coupled with an interest until the Grantor has paid and
performed in full all of its obligations under the Transaction
Documents.

    


    11. Severability. Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

    


    12. Paragraph Headings, Captions,
Etc. The
paragraph headings, the captions and the footers used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.

    


    13. No Waiver; Cumulative
Remedies. The
Collateral Agent shall not by any act, delay, indulgence, omission or otherwise
be deemed to have waived any right or remedy hereunder or to have acquiesced in
any Event of Default or in any breach of any of the terms and conditions hereof.
No failure to exercise, nor any delay in exercising, on the part of the
Collateral Agent, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Collateral Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Collateral Agent would otherwise have on any
future occasion. The rights and remedies herein and in the Notes and the other
Transaction Documents are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law or in equity or
by statute.

    


    14. Waivers and Amendments; Successors
and Assigns. None of
the terms or provisions of this Agreement may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the party to be
charged with enforcement; provided, however,
that any
provision of this Agreement may be waived, amended, supplemented or otherwise
modified by the Collateral Agent only with the prior written approval of the
Majority Holders. This Agreement shall be binding upon the successors and
permitted assigns of the Grantor and shall inure to the benefit of the
Collateral Agent and its successors and assigns. The Grantor may not assign its
rights or obligations under this Agreement without the prior written consent of
the Collateral Agent, which the Collateral Agent may withhold in the sole
discretion of the Majority Holders. The requirements for resignation, and
appointment of a successor to, the Collateral Agent are established by
Schedule IV hereto
and not by this Agreement.

    


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    15. Termination of Security Interest;
Release of Collateral.  

    


    (a) Upon the
payment in full of all principal of and premium, if any, and interest on the
Notes and the payment in full of all other amounts for Obligations that are due
and payable at such time, and if no claims for payment by the Company of any
Obligations are at the time pending, the Security Interest shall terminate and
all rights to the Collateral shall revert to the Grantor. 

    


    (b) If an
Event of Default shall have occurred and be continuing, the Collateral Agent
shall disburse the funds held by it pursuant to this Agreement as
follows:

    


    (i) First, to
pay any amounts payable to the Collateral Agent pursuant to Section 17 that have
not been paid by the Grantor;

    


    (ii) Second,
to pay each Holder on a pro rata basis the amount of all accrued and unpaid
interest (and interest, if any, thereon at the Default Rate) then due each
Holder in accordance with the terms of their respective Notes through the most
recent Interest Payment Date;

    


    (iii) Third, to
pay each Holder on a pro rata basis the amount, if any, of unpaid principal then
due on the Maturity Date of any installment of principal of such Holder’s Notes;


    


    (iv) Fourth,
to pay each Holder, on a pro rata basis, the amount then due upon acceleration,
if any, pursuant to Section 4 of such Holder’s Note(s); and then

    


    (v) Fifth, to
pay each Holder who has exercised its repurchase rights under Section 5 of the
Notes, on a pro rata basis, all of the applicable unpaid Repurchase Price for
each of the Notes or portions thereof required to be repurchased; and
then

    


    (vi) Sixth, to
pay each Holder any other amount due and payable to such Holder under the
Transaction Documents; and then

    


    (vii) Seventh,
the remaining amount, if any, to the Grantor.

    


    provided,
however, that if
the amount of funds held by the Collateral Agent is insufficient to pay all
amounts due to the Holders pursuant to clauses (ii) and (iv) above, then the
amount paid to the Holders pursuant to this Section 15(b) shall be prorated
among the Holders in proportion to the respective amounts due each Holder
pursuant to the particular such clause or clauses for which such funds are
insufficient.

    


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    (c) At any
time and from time to time prior to termination of the Security Interest
pursuant to Section 15(a), the Collateral Agent shall release any of the
Collateral only with the prior written consent of the Majority Holders.


    


    (d) Upon any
such termination of the Security Interest or release of all the Collateral, the
Collateral Agent will, at the expense of the Grantor, execute and deliver to the
Grantor such documents and take such other actions as the Grantor shall
reasonably request to evidence the termination of the Security Interest and
deliver to the Grantor all Collateral so released then in its
possession.

    


    16. Notices. Any
notices required or permitted to be given under the terms of this Agreement
shall be in writing and shall be sent by mail, personal delivery, telephone line
facsimile transmission or courier and shall be effective five days after being
placed in the mail, if mailed, or upon receipt, if delivered personally, by
telephone line facsimile transmission or by courier, in each case addressed to a
party at such party's address (or telephone line facsimile transmission number)
shown below or such other address (or telephone line facsimile transmission
number) as a party shall have provided by notice to the other party in
accordance with this provision. In the case of any notice to the Grantor, such
notice shall be addressed to the Grantor at 10500 N.E. 8th Street,
Suite 1400,Bellevue, WA 98004, Attention: Chief Financial Officer (telephone
line facsimile number (425) 749-3601), with a copy to Sichenzia Ross Friedman
Ference LLP, 1065 Avenue of the Americas, 21st Floor,
New York, New York 10018, Attention: Richard A. Friedman, Esq. (telephone line
facsimile number (212) 930-9725) and in the case of any notice to the Collateral
Agent, such notice shall be addressed to the Collateral Agent at c/o Alexandra
Investment Management, LLC, 767 Third Avenue, 39th Floor,
New York, New York 10017 (telephone line facsimile number (212) 301-1810), with
a copy to Law Offices of Brian W Pusch, Penthouse Suite, 29 West 57th Street,
New York, New York (telephone line facsimile number (212)
980-7055).

    


    17. Fees and Expenses. The
Grantor agrees to pay the fees of the Collateral Agent in performing its
services under this Agreement and all expenses (including but not limited to
reasonable attorneys' fees and costs for legal services, costs of insurance and
payments of taxes or other charges) of, or incidental to, the custody, care,
sale or realization on any of the Collateral or in any way relating to the
performance of the obligations or the enforcement or protection of the rights of
the Collateral Agent hereunder. 

    


    18. Concerning Collateral
Agent. The
Grantor acknowledges that the rights and responsibilities of the Collateral
Agent under this Agreement with respect to any action taken by the Collateral
Agent or the exercise or nonexercise by the Collateral Agent of any option,
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Collateral
Agent and the Holders, be governed by Schedule IV hereto
and by such other agreements with respect thereto as may exist from time to time
among them, but, as between the Collateral Agent and the Grantor, except as
expressly provided in Sections 14 and 15, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Holders with full and valid
authority so to act or refrain from acting, and the Grantor shall not be under
any obligation to make any inquiry respecting such authority. The Collateral
Agent hereby waives for the benefit of the Holders any claim, right or lien of
the Collateral Agent against the Collateral arising under applicable law or
arising from any business or transaction between the Collateral Agent and the
Grantor other than pursuant to this Agreement or any of the other Transaction
Documents.

    


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    19. Survival. All
representations, warranties, covenants and agreements of the Grantor and of the
Collateral Agent contained herein will survive the execution and delivery hereof
and the release of any Collateral pursuant hereto and shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
the Collateral Agent or the Grantor or any person who controls the Collateral
Agent or the Grantor.

    


    20. Grantor’s Obligations Absolute, Etc.
The
obligations of the Grantor under this Agreement shall be absolute and
unconditional and shall remain in full force and effect without regard to, and
shall not be released, suspended, discharged, terminated or otherwise affected
by, any circumstance or occurrence whatsoever, including, without limitation:
(a) any renewal, extension, amendment or modification of or addition or
supplement to or deletion from any of the Transaction Documents or any other
agreement or instrument referred to therein, or any assignment or transfer of
any thereof; (b) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such Transaction Document or other agreement
or instrument; (c) any furnishing of any additional security to the Collateral
Agent or its assignees or any acceptance thereof or any release of any security
by the Collateral Agent or its assignees; (d) any limitation on any party’s
liability or obligations under any such Transaction Document or other agreement
or instrument or any invalidity or unenforceability, in whole or in part, of any
such Transaction Document or other agreement or instrument or any term thereof;
or (e) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to the Grantor, or
any action taken with respect to this Agreement by any trustee or receiver, or
by any court, in any such proceeding, whether or not the Grantor shall have
notice or knowledge of any of the foregoing.

    


    21. Integration. This
Agreement represents the entire agreement of the Grantor and the Collateral
Agent with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the parties relative to the
subject matter hereof not expressly set forth or referred to herein or
therein.

    


    22. Governing Law. This
Agreement and the rights and obligations of the Grantor under this Agreement
shall be governed by, and construed and interpreted in accordance with, the law
of the State of New York, except to the extent that under the New York Uniform
Commercial Code the laws of another jurisdiction govern matters of perfection
and the effect of perfection or non-perfection of any security interest granted
hereunder.

    


    23. Counterparts;
Execution. This
Agreement may be executed in any number of counterparts and by the parties
hereto on separate counterparts, but all the counterparts taken together shall
be deemed to constitute one and the same instrument. This Agreement, once
executed by a party, may be delivered to the other party hereto by telephone
line facsimile transmission of a copy of this Agreement bearing the signature of
the party so delivering this Agreement.

    


    
      
        
        

      

      
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    24. Construction. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party.

    


    


    [Signature page
follows]


    
      
         

        
        

      

      
        18

        
          

        

      

      
        
        

      

    


    IN WITNESS WHEREOF, the
Grantor and the Collateral Agent have caused this Agreement to be duly executed
and delivered by their respective officers or other representatives thereunto
duly authorized as of the date first above written.

     

     

    
      	 	 	 
	 	EMAGIN
    CORPORATION
	 
 	 
 	 
 
	 	By:  	/s/ Gary W.
      Jones
	 	
              
      Name:
      Gary W. Jones
	 	Title: Chief
      Executive Officer



      	 	 	 
	 	
              ALEXANDRA GLOBAL MASTER
      FUND LTD., as Collateral
      Agent

            
	 
 	 
 	
               

               

              ALEXANDRA INVESTMENT
      MANAGEMENT, LLC, as Investment Advisor
 

               

            
	 	By:  	/s/ Mikhail
      Filimonov 
	 	
              
      Name:
      Mikhail Filimonov
	 	Title: Chairman
      and Chief Executive Officer




    



    
      
        
           

        

        
        

      

      
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    SCHEDULE I

    


    Filings Required to Perfect
Security Interest

    


    1. Secretary
of State of the State of Delaware

    


    2. Department
of State of the State of New York

    



    
      
        
           

        

        
        

      

      
        I-1

        
          

        

      

      
        
        

        
          


        

      

    



    SCHEDULE II

    


    Location of Records
Concerning Accounts

    


    


    eMagin
Corporation

    10500 NE
8th Street,
Suite 1400

    Bellevue,
WA. 98004


    
      
        
           

        

        
        

      

      
        II-2

        
          

        

      

      
        
        

        
          


        

      

    



    SCHEDULE III

    


    Inventory
Locations

    


    eMagin
Corporation

    2070
Route 52

    Hopewell
Junction, NY 12533

    


    eMagin
Corporation 

    10500 NE
8th Street,
Suite 1400

    Bellevue,
WA. 98004

    Asteria Manufacturing and
Brimal Holding (same address):

    


    Wisma
AIC

    Lot
3

    Persiaran
Kemajuan

    Seksyen
16

    40200
Shah Alam

    Selangor
Darul Ehsan

    Malaysia

    



    
      
        
           

        

        
        

      

      
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    SCHEDULE IV

    


    The Collateral
Agent

    


    1. Appointment. The
Holders (all capitalized terms used in this Schedule IV and
not  otherwise  defined shall have the respective meanings provided
in  the  Security agreement to which this Schedule IV is
attached (the “Agreement”)), by their acceptance of the benefits of the
Agreement, hereby irrevocably designate Alexandra Global Master Fund Ltd., as
Collateral Agent, to act as specified herein and in the Agreement. Each Buyer
hereby irrevocably authorizes, and each other Holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, the Collateral
Agent to take such action on its behalf under the provisions of the Agreement
and any other instruments and agreements referred to herein or therein and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Collateral Agent by the terms
hereof and thereof and such other powers as are reasonably incidental thereto.
The Collateral Agent may perform any of its duties hereunder by or through its
agents or employees.

    


    2. Nature of
Duties. The
Collateral Agent shall have no duties or responsibilities except those expressly
set forth in the Agreement. Neither the Collateral Agent nor any of its
officers, directors, employees or agents shall be liable for any action taken or
omitted by it as such under the Agreement or hereunder or in connection herewith
or therewith, unless caused by its or their gross negligence or willful
misconduct. The duties of the Collateral Agent shall be mechanical and
administrative in nature; the Collateral Agent shall not have by reason of the
Agreement or any other Transaction Document a fiduciary relationship in respect
of any Holder; and nothing in the Agreement, expressed or implied, is intended
to or shall be so construed as to impose upon the Collateral Agent any
obligations in respect of the Agreement except as expressly set forth herein.
The Collateral Agent shall not take any material action or exercise any material
right or power pursuant to Section 5, 6 or 7 of this Agreement without the
authorization or direction of the Majority Holders; provided,
however, that if
the Collateral Agent determines that it is unable to contact the Majority
Holders for purposes of seeking such authorization or direction or time will not
permit the Collateral Agent to so contact the Majority Holders prior to such
time as detriment may occur to the rights of the Collateral Agent or the Holders
from any failure of the Collateral Agent to act or exercise such right, then in
any such case the Collateral Agent may take such action or exercise such right
without specific authorization or direction from the Majority
Holders.

    


    The
Collateral Agent shall not be liable for any act it may do or omit to do while
acting in good faith and in the exercise of its own best judgment. Any act done
or omitted by the Collateral Agent on the advice of its own attorneys shall be
deemed conclusively to have been done or omitted in good faith. The Collateral
Agent shall have the right at any time to consult with counsel on any question
arising under the Agreement. The Collateral Agent shall incur no liability for
any delay reasonably required to obtain the advice of counsel.

    


    3. Lack of Reliance on the Collateral
Agent.
Independently and without reliance upon the Collateral Agent, each Holder, to
the extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Grantor
and its subsidiaries in connection with the making and the continuance of the
Obligations and the taking or not taking of any action in connection therewith,
and (ii) its own appraisal of the creditworthiness of the Grantor and its
subsidiaries, and the Collateral Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Holder with any credit
or other information with respect thereto, whether coming into its possession
before any Obligation arises or the purchase of any Note, or at any time or
times thereafter. The Collateral Agent shall not be responsible to any Holder
for any recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of the
Agreement or the financial condition of the Grantor or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of the Agreement, or the financial condition of the
Grantor, or the existence or possible existence of any Event of
Default.

    


    
      
        
        

      

      
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    4. Certain Rights of the Collateral
Agent.  No
Holder shall have the right to cause the Collateral Agent to take any action
with respect to the Collateral, with only the Majority Holders having the right
to direct the Collateral Agent to take any such action. If the Collateral Agent
shall request instructions from the Majority Holders with respect to any act or
action (including failure to act) in connection with the Agreement, the
Collateral Agent shall be entitled to refrain from such act or taking such
action unless and until it shall have received instructions from the Majority
Holders, and to the extent requested, appropriate indemnification in respect of
actions to be taken by the Collateral Agent; and the Collateral Agent shall not
incur liability to any person by reason of so refraining. Without limiting the
foregoing, no Holder shall have any right of action whatsoever against the
Collateral Agent as a result of the Collateral Agent acting or refraining from
acting hereunder in accordance with the instructions of the Majority Holders or
as otherwise specifically provided in the Agreement.

    


    5. Reliance. The
Collateral Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, statement, certificate,
telex, teletype or telecopier message, cablegram, radiogram, order or other
document or telephone message signed, sent or made by the proper person or
entity, and, with respect to all legal matters pertaining to the Agreement and
its duties thereunder, upon advice of counsel selected by it.

    


    6. Limitation of Holder
Liability.  The
Holders shall not be liable for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Collateral Agent in performing its duties hereunder or under the
Agreement, or in any way relating to or arising out of the
Agreement.

    


    7. The Collateral Agent in its
Individual Capacity.  The
Collateral Agent and its affiliates may lend money to, purchase, sell and trade
in securities of and generally engage in any kind of business with the Grantor
or any affiliate or subsidiary of the Grantor as if it were not performing the
duties specified herein, otherwise without having to account for the same to the
Holders; provided,
however, that the
Collateral Agent on behalf of itself and such affiliates, hereby waives any
claim, right or lien against the Collateral in any way arising from or relating
to any such loan, securities transaction or business with the Grantor.


    


    
      
        
        

      

      
        IV-2

        
          

        

      

      
        
        

      

    

    8. Holders. The
Collateral Agent may deem and treat the holder of record of any Note as the
owner thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof, as the case may be, shall have been filed with
the Collateral Agent. Any request, authority or consent of any person or entity
who, at the time of making such request or giving such authority or consent, is
the holder of record of any Note shall be conclusive and binding on any
subsequent holder, transferee or assignee, as the case may be, of such Note or
of any Note(s) issued in exchange therefor.

    


    9. Resignation by the Collateral
Agent.  (a) The
Collateral Agent may resign from the performance of all its functions and duties
under the Agreement at any time by giving 60 days' prior written notice (as
provided in the Agreement) to the Grantor and the Holders. Such resignation
shall take effect upon the appointment of a successor Collateral Agent pursuant
to clauses (b) and (c) below.

    


    (b) Upon any
such notice of resignation, the Majority Holders shall appoint a successor
Collateral Agent hereunder.

    


    (c) If a
successor Collateral Agent shall not have been so appointed within said 60-day
period, the Collateral Agent shall then appoint a successor Collateral Agent who
shall serve as Collateral Agent hereunder or thereunder until such time, if any,
as the Majority Holders appoint a successor Collateral Agent as provided above.
If a successor Collateral Agent has not been appointed within such 60-day
period, the Collateral Agent may petition any court of competent jurisdiction or
may interplead the Grantor and Holders in a proceeding for the appointment of a
successor Collateral Agent, and all fees, including but not limited to
extraordinary fees associated with the filing of interpleader, and expenses
associated therewith shall be payable by the Grantor.

    


    (d) The fees
of any successor Collateral Agent for its services as such shall be payable by
the Grantor.

     

     

    IV-3