Exhibit 10.42


                          [FORM OF SECURITY AGREEMENT]







                    COLLATERAL ACCOUNT AND SECURITY AGREEMENT

                           DATED AS OF MARCH 22, 1999

                                      AMONG

                            IGEN INTERNATIONAL, INC.

                           THE PURCHASERS PARTY HERETO

                             BANKERS TRUST COMPANY,
                               AS COLLATERAL AGENT

                                       AND

                             BANKERS TRUST COMPANY,
                               AS DEPOSITARY BANK




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                                TABLE OF CONTENTS
                                                                                                   PAGE
<S>     <C>                                                                                          <C>
SECTION 1. DEFINITIONS                                                                               1
         SECTION 1.1. CAPITALIZED TERMS                                                              1
                      -----------------
         Section 1.2. Uniform Commercial Code; Interpretation                                        3

SECTION 2. COLLATERAL AGENT                                                                          4
           ---------- -----
         SECTION 2.1. APPOINTMENT AND DUTIES OF THE COLLATERAL AGENT                                 4
                      ----------------------------------------------
         SECTION 2.2. RIGHTS OF COLLATERAL AGENT                                                     4
                      --------------------------
         SECTION 2.3. INDEMNIFICATION AND FEES OF THE COLLATERAL AGENT                               6
                      ------------------------------------------------
         SECTION 2.4. RESIGNATION OR REMOVAL OF THE COLLATERAL AGENT                                 7
                      ----------------------------------------------
         SECTION 2.5. SUCCESSOR COLLATERAL AGENT                                                     8
                      --------------------------
         SECTION 2.6. CONSENTS UNDER COLLATERAL DOCUMENTS                                            8
                      -----------------------------------
         SECTION 2.7. DEPOSITARY BANK                                                                8
                      ---------------
SECTION 3. THE ACCOUNTS                                                                              8
           ------------
         SECTION 3.1. DEPOSITARY BANK; MAINTENANCE OF ACCOUNTS; LIMITED COMPANY
                      RIGHTS                                                                         8
         SECTION 3.2. ESTABLISHMENT OF ACCOUNTS                                                      9
                      -------------------------
SECTION 4. DEPOSITS INTO ACCOUNTS                                                                   10
           ----------------------
         SECTION 4.1. DEPOSIT OF ROYALTY PAYMENTS. ETC.                                             10
                      ---------------------------------
         SECTION 4.2. NOTICE OF DEPOSITS TO COLLATERAL AGENT                                        10
                      --------------------------------------
         SECTION 4.3. INITIAL DEPOSIT INTO RESERVE ACCOUNT                                          10
                      ------------------------------------
SECTION 5. DISBURSEMENTS PROM ACCOUNTS                                                              10
           ---------------------------
         SECTION 5.1. DISBURSEMENTS FROM THE COLLECTION ACCOUNT                                     10
                      -----------------------------------------
         SECTION 5.2. DISBURSEMENTS FROM THE RESERVE ACCOUNT                                        11
                      --------------------------------------
         SECTION 5.3. TRANSFERS WHEN AN EVENT OF DEFAULT IS CONTINUING                              11
                      ------------------------------------------------
         SECTION 5.4. DISPOSITION OF ACCOUNTS UPON PAYMENT OF SECURED OBLIGATIONS                   11
                      -----------------------------------------------------------

SECTION 6. PERMITTED INVESTMENTS                                                                    11
           ---------------------

SECTION 7. COLLATERAL                                                                               12
           ----------

SECTION 8. FURTHER ASSURANCES REMEDIES                                                              12
           ---------------------------
         SECTION 8.1. DELIVERY AND OTHER PERFECTION                                                 12
                      -----------------------------
         SECTION 8.2. OTHER FINANCING STATEMENTS AND LIENS                                          13
                      ------------------------------------
         SECTION 8.3. PRESERVATION OF RIGHTS                                                        13
                      ----------------------
         SECTION 8.4. SPECIAL PROVISIONS RELATING TO LICENSE AGREEMENT                              13
                      ------------------------------------------------
         SECTION 8.5. EVENTS OF DEFAULT, ETC.                                                       14
                      -----------------------
         SECTION 8.6. REMOVALS, ETC                                                                 15
                      -------------
         SECTION 8.7. PRIVATE SALE                                                                  15
                      ------------
         SECTION 8.8.  ATTORNEY-IN-FACT                                                             15
                       ----------------
         SECTION 8.9.  PERFECTION                                                                   15
                       ----------
         SECTION 8.10. TERMINATION OF SECURITY INTEREST                                             16
                       --------------------------------
         SECTION 8.11. EXPENSES                                                                     16
                       --------
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<S>     <C>                                                                                         <C>

         SECTION 8.12. FURTHER ASSURANCES                                                           16
                       -------------------

SECTION 9. APPLICATION OF PROCEEDS                                                                  16
           -----------------------

SECTION 10. ADDITIONAL SECURED INDEBTEDNESS                                                         17
            -------------------------------

SECTION 11. MISCELLANEOUS                                                                           17
            -------------
         SECTION 11.1. NO WAIVER                                                                    17
                       ---------
         SECTION 11.2. SEVERABILITY                                                                 18
                       ------------
         SECTION 11.3. SUCCESSORS AND ASSIGNS                                                       18
                       ----------------------
         SECTION 11.4. COUNTERPARTS                                                                 18
                       ------------
         SECTION 11.5. AMENDMENT WAIVER, ETC                                                        18
                       ---------------------
         SECTION 11.6. HEADINGS                                                                     18
                       --------
         SECTION 11.7. NOTICES                                                                      18
                       -------
         SECTION 11.8. REINSTATEMENT                                                                18
                       -------------
         SECTION 11.9. TERMINATION                                                                  19
                       -----------
         SECTION 11.10. NO THIRD PARTY BENEFICIARIES                                                19
                        ----------------------------
         SECTION 11.11. GOVERNING LAW                                                               19
                        -------------

ANNEX A           FORM OF WITHDRAWAL REQUEST

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                    COLLATERAL ACCOUNT AND SECURITY AGREEMENT


                  COLLATERAL ACCOUNT AND SECURITY AGREEMENT dated as of March
22, 1999 among IGEN INTERNATIONAL, INC., a corporation duly organized and
validly existing under the laws of the State of Delaware (the "Company"); the
institutions named on the signature pages hereof under the caption "PURCHASERS";
Bankers Trust Company, acting in its capacity as collateral agent for the
Secured Parties (in such capacity, together with its successors and permitted
assigns, the "Collateral Agent") and Bankers Trust Company, acting in its
capacity as depositary bank for the Secured Parties (in such capacity, together
with its successors and permitted assigns, the "Depositary Bank") in each case
as herein provided.

                  The Company has authorized the issuance of $30,000,000
aggregate principal amount of its 8.50% Senior Secured Notes due 2006 pursuant
to the separate Note Purchase Agreements (collectively, as amended, restated,
modified or supplemented and in effect from time to time, the "Note Purchase
Agreement"), each dated as of March 22, 1999, with each of the purchasers named
on Schedule A thereto.

                   The parties hereto desire to enter into this Agreement to set
forth their mutual understanding with respect to the appointment of the
Collateral Agent and various matters with respect to the Accounts and the
Collateral (each as defined below).

                  NOW, THEREFORE, to induce the Purchasers to enter into the
Note Purchase Agreement and to purchase the Notes to be purchased by each such
Purchaser, and for and in consideration of the premises and of the covenants
herein contained, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto intending to be
legally bound, covenant and agree as follows:

                  SECTION 1. DEFINITIONS.
                             -----------

                  Section 1.1. Capitalized Terms. Capitalized terms used herein
                               -----------------
and not defined herein shall have the meanings assigned thereto in the Note
Purchase Agreement, whether specifically set forth therein or by reference to
another document. In addition, as used herein the following terms shall have the
following respective meanings (all terms defined in this Section 1.1 and in the
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):

     "Accounts" has the meaning set forth in Section 3.2(a).
      --------

     "BMG Litigation" means the litigation between the Company and BMG described
      --------------
under the heading  "BOEHRINGER  MANNHEIM  ("ROCHE")  in Note 3 to the  Company's
financial statements for the fiscal quarter ended December 31, 1998.

     "Collateral" has the meaning set forth in Section 7.
      ----------

     "Collateral Agent" is defined in the preamble hereto.
      ----------------

     "Collateral   Documents"   means  this  Agreement  and  all  UCC  financing
      ----------------------
statements
<PAGE>


required  by this  Agreement  to be  filed  with  respect  to the  Liens on
personal property of the Company created pursuant hereto.

     "Collection  Account" means the  securities  account  entitled  "Collection
      -------------------
Account"  maintained  by and in  the  name  of the  Collateral  Agent  with  its
Corporate Trust Department at the Depositary Bank in New York, New York.

     "Company" is defined in the preamble hereto.
      -------

     "Depositary Bank" is defined in the preamble hereto.
      ---------------

     "Funds" means, collectively,  all Permitted Investments and all other items
      -----
of property (whether investment property, financial asset, security,  instrument
or cash) deposited in or credited to either Account.

     "Noteholder" means the holder or holders from time to time of the Notes.
      ----------

     "Note Purchase Agreement" is defined in the preamble hereto.
      -----------------------

     "Permitted Investments" means:
      ---------------------

     (a) direct  obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such  obligations  are backed by the full faith and
credit of the United States of America),  in each case maturing  within one year
from the date of acquisition thereof;

     (b) investments in commercial  paper maturing within 270 days from the date
of  acquisition  thereof and having,  at such date of  acquisition,  the highest
credit rating  obtainable  from  Standard & Poor's  Rating Group,  a division of
McGraw-Hill, Inc. ("S&P"), or from Moody's Investors Service, Inc. ("Moody's");

     (c) investments in certificates of deposit,  banker's  acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued or
guaranteed  by or placed  with,  and money  market  deposit  accounts  issued or
offered by, any domestic  office of any commercial bank organized under the laws
of the United  States of America or any State  thereof  which (i) has a combined
capital and surplus and undivided profits of not less than $500,000,000 and (ii)
whose  long-term  unsecured debt  obligations  (or the long-term  unsecured debt
obligations of the bank holding  company owning all of the capital stock of such
bank)  shall have been given one of the  highest  three  ratings by at least one
credit  rating agency of  recognized  national  standing in the United States of
America;

     (d) fully collateralized repurchase agreements with a term of not more than
30 days for  securities  described  in clause (a) above and entered  into with a
financial institution satisfying the criteria described in clause (c) above; and



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     (e) money market mutual funds (including money market funds or money market
mutual funds for which the Collateral Agent in its individual capacity or any of
its  Affiliates  is investment  manager or advisor or from which the  Collateral
Agent in its individual  capacity or any of its  Affiliates  charges or collects
fees and expenses for services  rendered)  which are rated by S&P and Moody's at
the time at which the  investment is made in one of its three highest  long-term
rating categories.

     "Required  Reserve  Balance"  means,  as of any date (a) prior to the first
      --------------------------
Note  Payment  Date,  $600,000,  (b) on or after the first Note Payment Date but
prior to the second Note Payment Date, $800,000, (c) on or after the second Note
Payment Date but prior to the third Note  Payment  Date,  $1,000,000,  (d) on or
after the third Note  Payment  Date but prior to the fourth Note  Payment  Date,
$1,200,000,  (e) on or after the fourth Note Payment Date but prior to the fifth
Note Payment Date,  $1,400,000,  (f) on or after the fifth Note Payment Date but
prior to the sixth Note Payment Date,  $1,700,000  and (g) on or after the sixth
Note Payment Date,  an amount equal to the aggregate  amount of (1) all payments
of principal of, interest on and Make-Whole Amount, if any, payable with respect
to, the Notes and (2) all other amounts  payable to the Collateral  Agent or any
Secured  Party with respect to the Secured  Obligations,  in the case of both of
the  foregoing  clauses  (1)  and  (2),  which  are due and  owing  on the  next
succeeding Note Payment Date.

     "Reserve  Account" means the securities  account entitled `Reserve Account"
      ----------------
maintained by and in the name of the Collateral  Agent with its Corporate  Trust
Department at the Depositary Bank in New York, New York.

     "Reserve  Account  Balance"  means  on any  date  an  amount  equal  to the
      -------------------------
collected  credit balance of Funds held in or credited to the Reserve Account on
such date.

     "Secured   Obligations"  means  (a)  the  principal  of,  interest  on  and
      ---------------------
Make-Whole  Amount, if any, payable with respect to, the Notes and (b) all other
amounts  from time to time  payable to the  Collateral  Agent or any  Noteholder
under the Note Purchase Agreement or any other Financing Document.

     "Secured Parties" means,  collectively,  the Noteholders and the Collateral
      ---------------
Agent and their respective successors and assigns.

     "UCC" means the Uniform Commercial Code of the State of New York.
      ---

     "Withdrawal  Request" means a request  substantially in the form of Annex A
      -------------------
hereto.

     Section 1.2. Uniform Commercial Code; Interpretation.  All terms defined in
                  ---------------------------------------
the UCC shall  have the  respective  meanings  given to those  terms in the UCC,
except  where the  context  otherwise  requires.  Unless the  context  otherwise
requires,  any  reference  in this  Agreement to any  agreement  shall mean such
agreement  and all  schedules,  exhibits  and  attachments  thereto as  amended,
supplemented, modified or replaced. Unless otherwise stated,


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any  reference  in this  Agreement  to any Person  shall  include its  permitted
successors and assigns.

     SECTION 2. COLLATERAL AGENT.
                -----------------

     Section   2.1.   Appointment   and   Duties   of  the   Collateral   Agent.
                      ---------------------------------------------------------

     (a) Each  Noteholder on the date hereof,  and each other Secured Party from
time to time by its  acceptance  of the  security  interests  granted  under the
Collateral  Documents,  hereby  designates and appoints Bankers Trust Company to
act on its behalf as the Collateral  Agent under the Collateral  Documents,  and
hereby  authorizes  the  Collateral  Agent to execute,  deliver and perform,  on
behalf of each of the Secured  Parties,  each  Collateral  Document to which the
Collateral  Agent is or is  intended  to be a party and to take such  actions on
behalf of the Secured Parties under the provisions of such Collateral  Documents
and to exercise such powers and perform such duties as are  expressly  delegated
to the Collateral Agent by the terms of each Collateral Document,  together with
such other powers as are  reasonably  incidental  thereto.  Notwithstanding  any
provision to the contrary elsewhere in any Collateral  Document,  the Collateral
Agent shall not have any duties or responsibilities,  except those expressly set
forth herein and in the Collateral Documents, or any fiduciary relationship with
any Secured Party, and no implied covenants, functions or responsibilities shall
be read into any Collateral  Document or otherwise  exist against the Collateral
Agent.

     (b) The  Collateral  Agent will forward to each  Secured  Party at its last
address on the records of the  Collateral  Agent  promptly  after the Collateral
Agent's receipt  thereof (and will use its reasonable  efforts to forward within
two  Business  Days of the  receipt) a copy of each  document  furnished  to the
Collateral  Agent  under  any  Financing  Document  (including  each  Withdrawal
Request).

     (c) The  Collateral  Agent shall  deliver to the  Company and each  Secured
Party,  within  five  Business  Days  after  the  end  of  each  calendar  month
(commencing  with the calendar  month in which the first  deposit is made to the
Collection Account), a report in reasonable detail setting forth with respect to
each Account all  deposits to and  disbursements  from such Account  during such
calendar  month,  including the date on which made,  and the balances of and any
investments in such Account as of the end of such calendar month. The Collateral
Agent shall provide any additional  information or reports  relating to any such
Account and the transactions  therein reasonably  requested in writing from time
to time by the Company or any Secured Party.

     (d) The  Collateral  Agent hereby  waives any Lien it may now have,  or may
subsequently  acquire, in or on any Collateral other than the security interests
granted  under the  Collateral  Documents,  any  right to apply  the  Collateral
against  claims  other  than  claims of the  Secured  Parties  in respect of the
security  interests granted under this Agreement and any right to set off claims
against such  Collateral  other than claims of the Secured Parties in respect of
such security interests.

     Section 2.2. Rights of Collateral Agent.
                  --------------------------

     (a) The Collateral Agent may execute any of its duties under this Agreement
by or through agents or  attorneys-in-fact,  provided that the Collateral  Agent
shall be liable for any



<PAGE>



willful misconduct or gross negligence on the part of any such agents or
attorneys-in-fact (other than any such agents or attorneys-in-fact retained by
the Collateral Agent at the direction of, or with the prior approval of, the
Required Holders).

     (b)  Neither  the  Collateral  Agent  nor any of its  officers,  directors,
employees,  agents,  attorneys-in-fact or affiliates shall be (i) liable for any
action  lawfully taken or omitted to be taken by it under or in connection  with
this  Agreement  (except  for  its  own  gross  negligence  or its  own  willful
misconduct),  (ii)  responsible in any manner to any of the Secured  Parties for
any recitals,  statements,  representations or warranties made by the Company or
any other party (other than the Collateral Agent) or any representative  thereof
contained in the Financing Documents or in any certificate, report, statement or
other  document  referred to or provided  for in, or received by the  Collateral
Agent under or in  connection  with,  any  Financing  Document or for the value,
validity,  effectiveness,  genuineness,  enforceability  or  sufficiency  of any
Financing  Document or for any failure of the Company or any other party  (other
than the Collateral Agent) to perform their respective  obligations  thereunder,
(iii)  responsible or liable in any manner  whatever for soliciting any finds or
for  the  sufficiency,  correctness,  genuineness  or  validity  of  any  funds,
securities or other amounts  deposited with or held by it or (iv) liable for the
selection of Permitted  Investments or for investment  losses incurred  thereon.
The Collateral  Agent shall have no liability in respect of losses incurred as a
result  of the  liquidation  of any  Permitted  Investment  prior to its  stated
maturity  or the  failure of the Company to provide  timely  written  investment
direction.

     (c) The Collateral Agent shall be entitled to conclusively  rely, and shall
be fully protected in relying, upon any writing,  resolution,  notice,  consent,
certificate,  affidavit,  letter, telecopy,  statement,  order or other document
reasonably  believed by it to be genuine  and  correct and to have been  signed,
sent or made by the proper  person or entity and upon advice and  statements  of
legal counsel,  independent accountants and other experts reasonably selected by
the Collateral  Agent. In connection  with any request of the Required  Holders,
the Collateral Agent shall be fully protected in relying on a certificate of any
Secured Party,  reasonably  believed by the Collateral  Agent to be signed by an
authorized  representative  of such  Secured  Party,  setting  forth the Secured
Obligations held by such Secured Party as of the date of such certificate, which
certificate  shall  state  that  the  person  signing  such  certificate  is  an
authorized  representative  of such Secured  Party and shall state  specifically
which  provision of this  Agreement  pursuant to which the  Collateral  Agent is
being  directed to act. The Collateral  Agent shall be entitled to  conclusively
rely,  and  shall  be  fully  protected  in  relying,  in  good  faith  on  such
certificate.  The  Collateral  Agent  shall be fully  justified  in  failing  or
refusing to take any action under this  Agreement (i) if such action  would,  in
the reasonable  opinion of the Collateral Agent, be contrary to law or the terms
of this Agreement,  (ii) if such action is not specifically provided for in this
Agreement,  or it shall not have received any such advice or  concurrence of the
Required  Holders as it deems  appropriate  or (iii) if, in connection  with the
taking of any such action that would  constitute  an exercise of remedies  under
this  Agreement or the Note Purchase  Agreement or is pursuant to a direction or
request of the Required Holders  described in 2.2(e) hereof,  it shall not first
be indemnified to its reasonable satisfaction by the Secured Parties against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Collateral Agent




<PAGE>


shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement in accordance with a request of the Required Holders, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Secured Parties.

     (d) If, with respect to a proposed action to be taken by it, the Collateral
Agent  shall  reasonably  conclude  in good  faith that the  provisions  of this
Agreement relating to the functions or responsibilities or discretionary  powers
of the Collateral Agent are or may be ambiguous or inconsistent,  the Collateral
Agent shall notify the Secured Parties,  identifying the proposed action and the
provisions  that it considers are or may be ambiguous or  inconsistent,  and may
decline  either to perform such function or  responsibility  or to exercise such
discretionary  power  unless it has  received  the written  confirmation  of the
Required Holders that the Required Holders concur in the circumstances  that the
action proposed to be taken by the Collateral Agent is consistent with the terms
of this Agreement or is otherwise  appropriate.  The  Collateral  Agent shall be
fully protected in acting or refraining from acting upon the confirmation of the
Required Holders in this respect,  and such  confirmation  shall be binding upon
the Collateral Agent and the other Secured Parties.

     (e) The Collateral Agent shall not be deemed to have knowledge or notice of
the occurrence of any Event of Default unless and until the Collateral Agent has
actual knowledge  thereof or has received a written notice or a certificate from
a Secured  Party or the Company  stating that an Event of Default has  occurred.
The  Collateral  Agent shall have no obligation  after  receiving such notice or
certificate  to inquire  whether an Event of Default  has in fact  occurred  and
shall be  entitled  to rely  conclusively,  and shall be fully  protected  in so
relying,  on any notice or  certificate  so furnished to it. No provision of any
Financing  Document shall require the Collateral Agent to expend or risk its own
funds or otherwise  incur any financial  liability in the  performance of any of
its duties  thereunder or in the exercise of any of its rights or powers,  if it
shall have  reasonable  grounds for  believing  that  repayment of such funds or
adequate  indemnity against such risk or liability is not reasonably  assured to
it. In the event that the  Collateral  Agent  obtains  actual  knowledge  of, or
receives  such a  notice  of,  the  occurrence  of any  Event  of  Default,  the
Collateral  Agent  shall  give  notice  thereof  to  the  Secured  Parties.  The
Collateral  Agent  shall  take only such  action  with  respect to such Event of
Default as so directed in writing by the Required Holders.

     Section   2.3.   Indemnification   and  Fees  of  the   Collateral   Agent.
                      ---------------------------------------------------------

     (a) The Company shall  indemnify the  Collateral  Agent and its  directors,
officers,  employees  and agents from and  against  any and all claims,  losses,
liabilities,  obligations,  actions,  judgments, suits, damages, costs, expenses
and disbursements (including,  without limitation, the reasonable fees, expenses
and  disbursements  of counsel) of any kind or nature  whatsoever tat may at any
time be incurred  by the  Collateral  Agent  (hereinafter  the  "Indemnification
Amount")  growing out of or  resulting  from (i) any  Financing  Document or any
Collateral  Document  (including,  without  limitation,  the  enforcement of any
Financing  Document or any Collateral  Document,  but excluding any such claims,
losses,  liabilities,  obligations,  actions,  judgments, suits, damages, costs,
expenses or disbursements resulting from the Collateral Agent's gross negligence
or willfull  misconduct or resulting  from any action brought by a Secured Party
against the Collateral Agent),  (ii) any refund or adjustment of any amount paid
or payable to the




<PAGE>



Collateral Agent or any Secured Party under or in respect of any Financing
Document or any Collateral, or any interest thereon, which may be ordered or
otherwise required by any Person, except to the extent arising out of the
Collateral Agent's own gross negligence or its own willfull misconduct, (iii)
the establishment of the Accounts, the acceptance of deposits, the purchase or
sale of instruments, investments or securities, the retention of cash and
instruments, investments or securities or the proceeds thereof and any payment,
transfer or other application of cash or instruments, investments or securities
by the Collateral Agent in accordance with the provisions of this Agreement or
the Note Purchase Agreement, or as may arise by reason of any act, omission or
error of the Collateral Agent made in good faith in the conduct of its duties,
except to the extent arising out of the Collateral Agent's own gross negligence
or willful misconduct or (iv) this Agreement except to the extent arising out of
the Collateral Agent's own gross negligence or its own willful misconduct. If
the Company fails to pay on demand the Indemnification Amount, interest will
accrue thereon at the Default Rate from the scheduled date for payment thereof
until the actual date of payment and such interest shall be added to the
Indemnification Amount.

     (b) The Company will pay upon demand to the Collateral  Agent the amount of
any and all reasonable out-of-pocket expenses, including the reasonable fees and
expenses of its counsel  (and any local  counsel) and of any experts and agents,
which the Collateral  Agent may incur in connection with (i) the  administration
of any Financing Document,  (ii) the custody or preservation of, or the sale of,
collection  from, or other  realization  upon, any of the Collateral,  (iii) the
exercise or enforcement  (whether  through  negotiations,  legal  proceedings or
otherwise) of any of the rights of the Collateral  Agent or the Secured  Parties
under any Financing  Document or any Collateral  Document or (iv) the failure by
the  Company or any other  person or entity to  perform  or  observe  any of the
provisions of any Financing Document.

     (c) The Company agrees to pay to the Collateral Agent an annual  collateral
agency  fee in  advance,  as  agreed  upon in  writing  by the  Company  and the
Collateral  Agent, on each  anniversary of the date of Closing  occurring during
the period  commencing on the date of Closing to and including the date on which
the Secured  Obligations  are paid in full (or on such other dates as  otherwise
agreed by the Company and the Collateral Agent).

     (d) The  provisions of this Section 2.3 shall survive  termination  of this
Agreement and the resignation or removal of the Collateral Agent.

     Section 2.4. Resignation or Removal of the Collateral Agent. The Collateral
                  ----------------------------------------------
Agent may resign upon not less than 30 days' prior written notice to the Secured
Parties and the Company and may be removed at any time with or without  cause by
the Required  Holders,  with any such resignation or removal to become effective
only upon the  appointment  of a successor  Collateral  Agent under this Section
2.4. If the  Collateral  Agent shall  resign or be  removed,  then the  Required
Holders shall (and if no such successor shall have been appointed within 60 days
of the Collateral  Agent's  resignation or removal,  the Collateral Agent may or
may petition a court of competent jurisdiction to) appoint a successor agent for
the Secured Parties,  which successor agent shall (i) be a bank or trust company
that has an office in New York,  New York and that has a  combined  capital  and
surplus of at least  $500,000,000  and (ii) unless a Default or Event of Default
has occurred and is continuing, be reasonably



<PAGE>


acceptable to the Company, whereupon such successor agent shall succeed to the
rights, powers and duties of the "Collateral Agent" and the term "Collateral
Agent" shall mean such successor agent effective upon its appointment, and the
former Collateral Agent's rights, powers and duties as Collateral Agent shall be
terminated, without any other or further act or deed on the part of such former
Collateral Agent (except that the Collateral Agent resigning or being removed
shall deliver all Collateral then in its possession to the successor Collateral
Agent) or any of the other Secured Parties. After any retiring Collateral
Agent's resignation or removal hereunder, the provisions of this Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was the Collateral Agent.

     Section 2.5.  Successor  Collateral  Agent.  Any corporation into which the
                   ----------------------------
Collateral   Agent  may  be  merged  or  converted  or  with  which  it  may  be
consolidated,  or any  corporation  resulting  from any  merger,  conversion  or
consolidation to which the Collateral Agent shall be a party, or any corporation
succeeding to the business of the Collateral Agent shall be the successor of the
Collateral Agent hereunder,  provided that corporation satisfies the eligibility
requirements  specified in clause (i) of Section 2.4,  without the  execution or
filing of any paper with any party  hereto or any further act on the part of any
of the parties  hereto  except where an  instrument of transfer or assignment is
required  by law to effect  such  succession,  anything  herein to the  contrary
notwithstanding.

     Section 2.6. Consents Under Collateral Documents. Without the prior written
                  -----------------------------------
consent of the Required  Holders,  the Collateral  Agent will not consent to any
amendment,  restatement,  modification,  supplement  or waiver  under any of the
Collateral  Documents,  provided that, without the prior consent of each Secured
Party, the Collateral Agent shall not (except as provided  herein),  (i) consent
to the release of any Collateral or otherwise terminate any Lien hereunder, (ii)
agree to  additional  obligations  being  secured  by such Lien  (other  than as
contemplated by Section 10 hereof) or (iii) alter the relative priorities of the
obligations entitled to the benefits of the Liens created hereunder, except that
no  such  consent  shall  be  required,  and  the  Collateral  Agent  is  hereby
authorized,  to consent to the release of any Lien covering property that is the
subject of either a disposition of property permitted hereunder or a disposition
to which the Required Holders have consented.

     Section 2.7.  Depositary Bank. The Depositary Bank shall be entitled to the
                   ---------------
same rights,  privileges and  immunities as the  Collateral  Agent in connection
with its duties and obligations hereunder.

     SECTION 3. THE ACCOUNTS.
                ------------

     Section 3.1.  Depositary  Bank;  Maintenance of Accounts;  Limited  Company
                   -------------------------------------------------------------
                   Rights.
                   ------

     (a)  Depositary  Bank.  For all purposes of this  Agreement,  any reference
          ----------------
herein to an  application  or disposition of Funds held in or credited to either
Account by the  Collateral  Agent shall be deemed to refer to an  application or
disposition  of such Funds by the  Depositary  Bank,  and the  Collateral  Agent
agrees  that it will  cause the  Depositary  Bank to make all  applications  and
dispositions of Funds held in or credited to either Account at such times and



<PAGE>


in such amounts as is required by the terms of this Agreement.

     (b) Acceptance of Payment on Maintenance of Accounts.  The Collateral Agent
         ------------------------------------------------
hereby agrees to cause to be accepted by the Depositary  Bank and the Depositary
Bank  hereby  agrees  to  accept  all  Funds to be  delivered  to or held by the
Collateral  Agent  pursuant to the terms of this  Agreement.  The Company  shall
maintain the Accounts at the Depositary  Bank during the term of this Agreement.
The Collateral Agent and the Depositary Bank hereby agree that the Funds held in
or credited to the Accounts  shall be treated as "financial  assets" (as defined
in Section 8-102(a)(9) of the UCC).

     (c) Limited Company  Rights.  The Company shall not have any rights against
         -----------------------
or to Funds held in or credited to the Accounts,  as third party  beneficiary or
otherwise,  except the right to receive monies held in the Accounts as permitted
by Paragraph  Three of Section 5.1 or to direct the  investment of Funds held in
or  credited  to the  Accounts as  permitted  by Section 6. Except as  expressly
provided  in  this  Agreement,  in no  event  shall  any  Permitted  Investments
deposited  in or  credited  to any  Account  be  registered  in the  name of the
Company,  payable  to the order of the  Company  or  specially  indorsed  to the
Company except to the extent that the foregoing have been specially  indorsed to
the Collateral Agent or in blank.

     (d)  Entitlement  Orders.  The  Depositary  Bank shall  comply  solely with
          -------------------
"entitlement  orders"  (within  the meaning of Section  8-102(a)(8)  of the UCC)
relating to any financial  asset held in any Account  without further consent by
the Company.  Each of the Company and the Depositary Bank hereby represents that
it has not entered into, and hereby agrees that until the payment in full of the
Secured  Obligations,  it shall not enter  into,  any  agreement  with any other
Person (other than the Collateral  Agent) relating to the Accounts (or any Funds
deposited therein or credited thereto) pursuant to which the Depositary Bank has
agreed or would  agree,  as the case may be, to comply with  entitlement  orders
made by such  Person.  Each  of the  Company  and  the  Depositary  Bank  hereby
represents  that it has not entered into any other agreement with the Company or
any  other  Person  purporting  to  limit or  condition  the  obligation  of the
Collateral Agent or the Depositary Bank to comply with entitlement orders as set
forth in this Section 3.1(d).

     Section 3.2. Establishment of Accounts.
                  -------------------------

     (a) The Collateral Agent will, prior to the date of Closing, establish with
the Depositary Bank the following special,  segregated  securities accounts (the
"Accounts";  each such  Account  being a  "securities  account"  as such term is
defined in Section  8-501(a)  of the UCC)) in the name of the  Collateral  Agent
which shall be maintained at all times until the termination of this Agreement:

     1. the Collection Account; and
     2. the Reserve Account.

     (b) The Depositary Bank represents that the Accounts have been  established
on the books and records of the Corporate  Trust  Department  of the  Depositary
Bank and that each such Account is a "securities account" (as defined in section
8-501(a) of the UCC) in



<PAGE>




respect of which the Depositary Bank is a "securities intermediary" (as defined
in Section 8-102(a)(14) of the UCC) and the Collateral Agent is the "entitlement
holder" (as defined in Section 8-102(a)(7) of the UCC). The Depositary Bank
represents that the "securities intermediary's jurisdiction'"' (within the
meaning of Section 8-110(e) of the UCC) of the Depositary Bank with respect to
the Accounts is the State of New York.

     (c) The account numbers of the Accounts established by, and in the name of,
the Collateral Agent will be notified by the Collateral Agent to the Company and
each Secured Party promptly upon the establishment thereof.

     (d) All Funds from time to time  deposited  in or credited to each  Account
shall be held in the name of the Collateral Agent for the benefit of the Secured
Parties in the custody of the Collateral Agent for the purposes and on the terms
set forth in this  Agreement.  All such  Funds  shall  constitute  a part of the
Collateral and shall not  constitute  payment of any  Indebtedness  or any other
obligation of the Company until applied as hereinafter provided.

     SECTION 4. DEPOSITS INTO ACCOUNTS.
                ----------------------

     Section 4.1.  Deposit of Royalty  Payments,  etc. All (i) Royalty  Payments
                   ----------------------------------
payable to or for the benefit of the Company  under the  License  Agreement  and
(ii) all  other  amounts  specified  in  Sections  7(c)  and 7(d)  shall be paid
directly to, and any such amounts  received by the Company shall be deposited by
the Company with, on the day of receipt of such amounts, the Collateral Agent on
behalf of the Secured Parties for deposit in the Collection Account.

     Section  4.2.  Notice of  Deposits  to  Collateral  Agent.  Promptly  alter
                    ------------------------------------------
obtaining  knowledge  that the  Collateral  Agent will receive funds for deposit
into the Collection Account,  the Company shall notify the Collateral Agent that
the Collateral  Agent will be receiving such funds and the  approximate  date of
such  deposit and will specify the source of such funds.

     Section 4.3. Initial Deposit Into Reserve Account.  On the date of Closing,
                  ------------------------------------
the Company shall cause $600,000 to be deposited into the Reserve Account.

     SECTION 5. DISBURSEMENTS FROM ACCOUNTS.
                ---------------------------

     Section  5.1.  Disbursements  from the  Collection  Account.  On each  Note
                    --------------------------------------------
Payment Date,  the  Collateral  Agent shall  withdraw  Funds from the Collection
Account for application in the following order of priority (such  withdrawals to
be made not later than 11:00 a.m.  (New York time) on such Note Payment Date and
only to the extent Funds are available therefor in the Collection Account):

     First,  the Collateral  Agent shall make pro rata payments of principal of,
     -----
interest on, and the Make-Whole  Amount,  if any, owing in respect of, the Notes
and all other Secured Obligations then due and owing;

     Second,  if the Reserve Account  Balance is less than the Required  Reserve
     ------
Balance as of such Note Payment Date, the Collateral Agent shall transfer to the
Reserve Account an amount of Funds equal to such deficiency; and
<PAGE>

     Third, if (x) no Default or Event of Default has occurred and is continuing
     -----
and (y) the Royalty  Payment  Coverage Ratio is equal to or greater than 1.25 to
1.00 as of the end of the fiscal quarter of the Company ending on or immediately
preceding  such Note Payment Date (as  certified  in the  applicable  Withdrawal
Request), the Collateral Agent shall transfer the balance, if any, of Funds held
in or credited to the Collection Account to the Company.

Not later than two Business Days prior to each Note Payment Date, the Company
shall provide the Collateral Agent with a Withdrawal Request specifying the
information needed to enable the Collateral Agent to calculate the amount of
Funds to be withdrawn from the Collection Account and applied in accordance with
this Section 5.1. Notwithstanding anything in this Section 5.1 to the contrary,
if the Company fails to deliver a Withdrawal Request for the transfer of funds
under this Section 5.1, the Collateral Agent is authorized upon the written
instructions of the Required

Holders to make withdrawals from the Collection Account for application in
accordance with Paragraphs First, and Second above.

     Section 5.2. Disbursements from the Reserve Account.
                  --------------------------------------

     (a) On each Note Payment Date, if the aggregate amount of Funds transferred
by the Collateral  Agent pursuant to Paragraph First of Section 5.1 on such Note
Payment Date is less than the aggregate amount of principal of, interest on, and
Make-Whole  Amount,  if any,  payable  in  respect  of,  the Notes and all other
Secured  Obligations due and owing as of such Note Payment Date (prior to giving
effect to such  transfer),  the  Collateral  Agent shall withdraw Funds from the
Reserve Account (such withdrawals to be made not later than 11:00 a.m. (New York
time) on such Note  Payment  Date and only to the  extent  funds  are  available
therefor) in an amount equal to such deficiency and shall transfer such Funds to
the applicable Secured Parties.

     (b) On each Note Payment  Date,  in the event (after  giving  effect to the
transfers  referred to above) the Reserve  Account  Balance exceeds the Required
Reserve  Balance,  the collateral  Agent shall withdraw from the Reserve Account
and deposit in the Collection Account the amount of Funds equal to such excess.

     Section 5.3. Transfers When an Event of Default is Continuing. Upon receipt
                  ------------------------------------------------
by the Collateral  Agent of written notice that an Event of Default has occurred
and is continuing,  the Collateral  Agent shall make transfers from the Accounts
in accordance with Section 9.

     Section 5.4.  Disposition of Accounts Upon Payment of Secured  Obligations.
                   ------------------------------------------------------------
Upon  final  indefeasible  payment  in  full  of the  Secured  Obligations,  the
Collateral Agent shall hold all Funds held in or credited to the Accounts to the
order of the Company or as otherwise required by applicable law.

     SECTION 6.  PERMITTED  INVESTMENTS.  Upon the request of the  Company,  the
                 ----------------------
Collateral  Agent  shall  invest and  reinvest  any Funds held in or credited to
either  Account from time to time in Permitted  Investments as instructed by the
Company;  provided,  that (a) if the Company fails to so instruct the Collateral
Agent or upon the occurrence and


<PAGE>


continuance of an Event of Default, the Collateral Agent shall invest and
reinvest such Funds in Permitted Investments of the type described in clause (e)
of the definition of such term or as otherwise directed by the Required Holders
and (b) the maturity of any Permitted Investment shall not exceed 270 days (or,
in the case of any Permitted Investment held in or credited to the Collection
Account, the maturity thereof shall not extend beyond the Business Day
immediately preceding the Note Payment Date next succeeding the date of
acquisition thereof). Earnings on Permitted Investments held in or credited to
each Account shall be deposited in such Account for application as provided for
herein. All such investments and reinvestments shall be held in the name, and
shall be under the sole dominion and control, of the Collateral Agent. All Funds
held in or credited to either Account that are invested in a Permitted
Investment are deemed to be held in such Account for all purposes of this
Agreement. The Collateral Agent shall have no liability for any loss in
investment of Funds held in or credited to either Account invested in Permitted
Investments.

     SECTION 7.  COLLATERAL.  As collateral  security for the prompt  payment in
                 ----------
full when due (whether at stated maturity,  by acceleration or otherwise) of the
Secured  Obligations,  now existing or  hereafter  arising,  the Company  hereby
pledges,  hypothecates,  assigns,  and transfers to the Collateral Agent for the
equal and  ratable  benefit of the  Secured  Parties,  and hereby  grants to the
Collateral  Agent for the equal and  ratable  benefit of the  Secured  Parties a
security interest in, all of the Company's right,  title and interest in, to and
under the  following  property,  whether now owned by the  Company or  hereafter
acquired  and  whether now  existing or  hereafter  coming  into  existence  and
wherever located (all being collectively referred to herein as "Collateral"):

          (a) each Account and all Funds held in or credited to each thereof;

          (b) all cash, investments and securities at any time on deposit in any
     Account,  including  all income or gain  earned  thereon  and any  proceeds
     thereof;

          (c) all  Royalty  Payments  and all  rights of the  Company to receive
     moneys due and to become due under or  pursuant  to the  License  Agreement
     with respect thereto;

          (d) the proceeds of any  judgments,  settlements  or other payments in
     connection with the BMG Litigation or any other litigation,  arbitration or
     other legal proceeding relating to the Royalty Payments; and

          (e) without  limiting the provisions of the preceding  clauses of this
     Section 7, all proceeds, products, accessions,  benefits, substitutions and
     replacements of and to any of the property of the Company  described in the
     preceding clauses of this Section 7.

     SECTION 8. FURTHER ASSURANCES; REMEDIES. In furtherance of the grant of the
                ----------------------------
pledge and security  interest  pursuant to Section 7, the Company  hereby agrees
with each Secured Party as follows:

     Section 8.1. Delivery and Other Perfection. The Company shall:
                  ------------------------------------------------

          (a) give, execute,  deliver,  file and record any financing statement,
     notice,
<PAGE>



         instrument, document, agreement or other papers that may be necessary
         or desirable (in the judgment of the Collateral Agent) to create,
         preserve, perfect or validate the security interest granted pursuant
         hereto or to enable the Collateral Agent to exercise and enforce its
         rights hereunder with respect to such pledge and security interest;

               (b) keep full and  accurate  books and  records  relating  to the
          Collateral, and stamp or otherwise mark such books and records in such
          manner as the  Collateral  Agent may  reasonably  require  in order to
          reflect the security interests granted by this Agreement; and

               (c)  permit   representatives   of  the  Collateral  Agent,  upon
          reasonable  notice,  at any time during normal  business  hours to (i)
          inspect and make  abstracts  from its books and records  pertaining to
          the Collateral and (ii) be present at the Company's  place of business
          to receive copies of all  communications  and remittances  relating to
          the  Collateral,  and forward copies of any notices or  communications
          received by the Company  with respect to the  Collateral,  all in such
          manner as the Collateral Agent may reasonably require.

     Section 8.2. Other  Financing  Statements and Liens.  The Company shall not
                  --------------------------------------
file or suffer  to be on file,  or  authorize  or permit to be filed or to be on
file, in any  jurisdiction,  any  financing  statement or like  instrument  with
respect to the Collateral in which the Collateral Agent is not named as the sole
secured party for the benefit of the Secured Parties.

     Section 8.3.  Preservation  of Rights.  The  Collateral  Agent shall not be
                   -----------------------
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.

     Section   8.4.   Special   Provisions   Relating   to  License   Agreement.
                      ---------------------------------------------------------

     (a) Anything  herein to the  contrary  notwithstanding,  the Company  shall
remain  liable to perform  all of its duties and  obligations  under the License
Agreement  and in  respect  of the  Collateral  to the  same  extent  as if this
Agreement had not been  executed.  The exercise by the  Collateral  Agent or any
other  Secured  Party of any of the  rights  and  remedies  hereunder  shall not
release  the  Company  from any of its duties or  obligations  under the License
Agreement or in respect of the Collateral.  Neither the Collateral Agent nor any
of the other Secured  Parties shall have any  obligation or liability  under the
License  Agreement or otherwise in respect of the  Collateral  by reason of this
Agreement  or be obligated  to perform any of the  obligations  or duties of the
Company under the License Agreement or otherwise in respect of the Collateral or
to take any  action to collect  or  enforce  any claim for  payment or any other
right assigned hereunder.

     (b) The Company will at all times maintain  instructions with BMG directing
BMG to make all Royalty Payments directly to the Collection Account.

     (c) If the Company fails to perform any  agreement  contained  herein,  the
Collateral Agent may, with reasonable notice to the Company,  itself perform, or
cause the  performance of, such  agreement,  and the reasonable  expenses of the
Collateral  Agent  incurred  in  connection  therewith  shall be  payable by the
Company and shall be Secured  Obligations to the Collateral  Agent secured under
Section 7.




<PAGE>



     Section  8.5.  Events of Default,  Etc.  During the period  during which an
                    ------------------------------------------------------------
Event of Default shall have occurred and be continuing:
------------------------------------------------------

          (i) the  Collateral  Agent  may  make  any  reasonable  compromise  or
     settlement  deemed  desirable with respect to any of the Collateral and may
     extend  the time of  payment,  arrange  for  payment  in  installments,  or
     otherwise reasonably modify the terms of any of the Collateral;

          (ii) the  Collateral  Agent shall have all of the rights and  remedies
     with respect to the Collateral of a secured party under the UCC (whether or
     not the UCC is in effect in the jurisdiction  where the rights and remedies
     are  asserted) and such  additional  rights and remedies to which a secured
     party is entitled  under the laws in effect in any  jurisdiction  where any
     rights  and  remedies  hereunder  may  be  asserted,   including,   without
     limitation,  the right to the maximum extent  permitted by law, to exercise
     all voting,  consensual  and other  powers of ownership  pertaining  to the
     Collateral  as if the  Collateral  Agent were the sole and  absolute  owner
     thereof,  (and  the  Company  agrees  to take  all  such  action  as may be
     appropriate to give effect to such right);

          (iii)  the  Collateral  Agent  may,  in its name or in the name of the
     Company or  otherwise,  demand,  sue for,  collect or receive  any money or
     property at any time payable or receivable on account of or in exchange for
     any of the Collateral, but shall be under no obligation to do so;

          (iv) the Collateral  Agent may, upon 10 Business Days' prior notice to
     the Company of the time and place,  with respect to the  Collateral  or any
     part  thereof  which  shall  then be or  shall  thereafter  come  into  the
     possession,  custody or control of the Collateral  Agent, the other Secured
     Parties or any of their respective agents, sell, lease, assign or otherwise
     dispose of all or any part of such  Collateral,  at such place or places as
     the  Collateral  Agent deems best, and for cash or for credit or for future
     delivery  (without  thereby assuming any credit risk), at public or private
     sale,  without  demand of  performance or notice of intention to effect any
     such  disposition or of the time or place thereof (except such notice as is
     required  above or by  applicable  statute and cannot be  waived),  and the
     Collateral  Agent or any  other  Secured  Party or  anyone  else may be the
     purchaser, lessee, assignee or recipient of any or all of the Collateral so
     disposed of at any public sale (or, to the extent  permitted by law, at any
     private sale) and thereafter hold the same absolutely,  free from any claim
     or right of  whatsoever  kind,  including any right or equity of redemption
     (statutory or otherwise), of the Company, any such demand, notice and right
     or equity being hereby  expressly  waived and released;  and the Collateral
     Agent may,  without  notice or  publication,  adjourn any public or private
     sale or cause the same to be adjourned from time to time by announcement at
     the time and place  fixed  for the  sale,  and such sale may be made at any
     time or place to which the sale may be so adjourned; and

          (v) The  Collateral  Agent's  and any Secured  Party's  sole duty with
     respect  to the  custody,  safekeeping  and  physical  preservation  of the
     Collateral in its possession,  under Section 9-207 of the UCC or otherwise,
     shall be to deal with it in the same

<PAGE>




     manner  as the  Collateral  Agent or such  Secured  Party  deals  with
     similar  property for its own account.  None of the Collateral Agent or the
     Secured Parties, nor their respective directors,  officers,  employees,  or
     agents,  shall be liable to the Company  for failure to demand,  collect or
     realize upon any of the Collateral or for any delay in doing so or shall be
     under any obligation to sell or otherwise  dispose of any of the Collateral
     upon the  request of the  Company or any other  Person or to take any other
     action  whatsoever  with regard to the  Collateral  or any part thereof The
     rights of the Collateral Agent and the Secured Parties  hereunder shall not
     be  conditioned or contingent  upon the pursuit by the Collateral  Agent or
     any Secured Party of any right or remedy against the Company or against any
     other Person which may be or become liable in respect of all or any part of
     the Secured  Obligations  or against  any  collateral  security  therefore,
     guarantee thereof or right of offset with respect thereto.

The  proceeds of each  collection  or other  disposition  under this Section 8.5
shall be applied in accordance with Section 9.

     Section 8.6.  Removals,  Etc. Without at least 30 days' prior notice to the
                   --------------
Collateral  Agent,  the Company shall not (a) maintain any of its Records at any
office or maintain  its  principal  place of business at any place other than at
the address  specified  in Section  5.21 of the Note  Purchase  Agreement or (b)
change its name, or the name under which it does  business,  from the name shown
on the signature pages hereto.

     Section 8.7.  Private  Sale.  The  Collateral  Agent and the other  Secured
                   -------------
Parties,  respectively,  shall incur no liability as a result of the sale of the
Collateral,  or any part thereof,  at any private sale, pursuant to Section 8.5,
conducted in a  commercially  reasonable  manner.  The Company hereby waives any
claims against the Collateral Agent or any other Secured Party arising by reason
of the fact that the price at which the  Collateral may have been sold at such a
private sale was less than the price which might have been  obtained at a public
sale or was less than the aggregate amount of the Secured  Obligations,  even if
the  Collateral  Agent  accepts the first offer  received and does not offer the
Collateral to more than one offeree.

     Section  8.8.  Attorney-in-Fact.  Without  limiting  any  rights  or powers
                    ----------------
granted by this Agreement to the Collateral  Agent while no Event of Default has
occurred and is continuing,  upon the  occurrence and during the  continuance of
any  Event  of  Default   the   Collateral   Agent  is  hereby   appointed   the
attorney-in-fact  of the Company for the purpose of carrying out the  provisions
of this Section 8 and taking any action and executing any instruments  which the
Collateral  Agent may  reasonably  deem necessary or advisable to accomplish the
purposes  hereof,  which  appointment as  attorney-in-fact  is  irrevocable  and
coupled with an interest.  Without limiting the generality of the foregoing,  so
long as the  Collateral  Agent  shall be entitled  under this  Section 8 to make
collections in respect of the  Collateral,  the Collateral  Agent shall have the
right and power, with reasonable notice to the Company, to receive,  endorse and
collect all checks made  payable to the order of the  Company  representing  any
dividend, payment or other distribution in respect of the Collateral or any part
thereof and to give full discharge for the same.

     Section 8.9.  Perfection.  Prior to or concurrently  with the execution and
                   ----------
                   delivery.


of this Agreement, the Company shall deliver to the Collateral Agent in form for
filing such financing statements and other documents in such offices as the
Collateral Agent may reasonably request to perfect the security interests
granted by Section 3 of this Agreement. The Company hereby authorizes the
Collateral Agent to file one or more financing or continuation statements, and
amendments thereto, relating to all or any part of the Collateral without the
signature of the Company where permitted by law.

                  Section 8.10. Termination of Security Interest. When all
                                --------------------------------
Secured Obligations shall have been finally and indefeasibly paid in full, the
security interest created by this Agreement shall terminate and the Collateral
Agent shall forthwith cause to be assigned, transferred and delivered, against
receipt but without any recourse, warranty or representation whatsoever, any
remaining Collateral and money received in respect thereof, to or on the order
of the Company.

     Section 8.11. Expenses. The Company agrees to reimburse each of the Secured
                   --------
Parties  and the  Collateral  Agent for all costs and  expenses  of the  Secured
Parties and the Collateral Agent (including,  without  limitation,  the fees and
expenses of legal  counsel) in connection  with (a) any Event of Default and any
enforcement or collection  proceeding  resulting  therefore  including,  without
limitation,  all  manner  of  participation  in or  other  involvement  with (i)
performance  by the  Collateral  Agent of any  obligation  that the  Company has
failed  or  refused  to  perform,  (ii)  bankruptcy,  insolvency,  receivership,
foreclosure,  winding up or liquidation proceedings,  or any actual or attempted
sale,  or any  exchange,  enforcement,  collection,  compromise or settlement in
respect  of any of the  Collateral,  and for  the  care  of the  Collateral  and
defending  or  asserting  rights and claims of the  Collateral  Agent in respect
thereof,  by  litigation or otherwise,  including  expenses of insurance,  (iii)
judicial  or  regulatory  proceedings,  (iv)  workout,  restructuring  or  other
negotiations  or  proceedings  (whether  or not the  workout,  restructuring  or
transaction contemplated thereby is consummated) and (v) enforcement proceedings
hereunder in respect of the Collateral  and (b) the  enforcement of this Section
8.11, and all such costs and expenses shall be Secured  Obligations  entitled to
the benefits of the collateral security provided pursuant to Section 7.

     Section 8.12.  Further  Assurances.  The Company agrees that,  from time to
                    -------------------
time upon the request of the  Collateral  Agent,  the Company  will  execute and
deliver  such  further  documents  and do such  other  acts  and  things  as the
Collateral  Agent  may  reasonably  request  in order  fully to  effectuate  the
purposes of this Agreement.

     SECTION 9. APPLICATION OF PROCEEDS.  After an Event of Default has occurred
                -----------------------
and is continuing,  except as otherwise  expressly provided herein, the proceeds
of any  collection,  sale  or  other  realization  of all  or  any  part  of the
Collateral  pursuant  to any  Collateral  Document,  and  any  Funds  held in or
credited to the Accounts and cash at the time held by the Collateral Agent under
this  Section  9 shall be  distributed  by the  Collateral  Agent  at the  times
specified in the following order of priority:

          First,  to the Collateral  Agent in an amount equal to (a) the cost of
          -----
     any  indemnity  to be  provided to the  Collateral  Agent in respect of the
     enforcement of any of the rights of the  Collateral  Agent or other Secured
     Parties under the Collateral Documents and (b) the fees and expenses of the
     Collateral Agent then due and owing;


<PAGE>




          Second,  to the  Secured  Parties  in an amount  equal to the fees and
          ------
     expenses  (including  counsel fees and expenses) of the Secured  Parties in
     respect  of the  enforcement  of any of the rights of the  Secured  Parties
     under the Financing Documents to the extent permitted by such documents;

          Third, to the Noteholders in an amount equal to the unpaid interest on
          -----
     the Notes,  whether or not then due and owing  and,  in case such  proceeds
     shall be  insufficient  to pay in full such  interest,  then to the payment
     thereof ratably (without  priority of any one over any other) in proportion
     to the unpaid amounts thereof on the relevant date;

          Fourth,  to the Noteholders in an amount equal to the unpaid principal
          ------
     of the Notes  whether or not then due and owing and, in case such  proceeds
     shall be insufficient  to pay in full such  principal,  then to the payment
     thereof ratably (without  priority of any one over any other) in proportion
     to the unpaid amounts thereof on the relevant date;

          Fifth,  to the Secured Parties in an amount equal to all other Secured
          -----
     Obligations due such Secured Parties under the Financing  Documents and, in
     case  such  proceeds  shall be  insufficient  to pay in full  such  Secured
     Obligations,  then to the payment thereof ratably (without  priority of any
     one over any  other) in  proportion  to the unpaid  amounts  thereof on the
     relevant date; and

          Sixth, after payment in full of all Secured  Obligations,  any surplus
          -----
     then  remaining  shall be  transferred  to the Company or its successors or
     assigns, or to whomever may be lawfully entitled to receive the same, or as
     a court of competent jurisdiction may direct.

     As used in this  Section  9,  "proceeds"  of  Collateral  shall  mean cash,
securities and other property  realized in respect of, and distributions in kind
of,  Collateral,  including any such amounts received under any  reorganization,
liquidation, or adjustment of debt of the Company.

     SECTION 10. ADDITIONAL  SECURED  INDEBTEDNESS.  If the Company shall at any
                 ---------------------------------
time desire to incur any additional Secured  Indebtedness in compliance with the
provisions  of Section 10.6 of the Note  Purchase  Agreement,  the Company shall
give  `written  notice  thereof to the  Collateral  Agent and the other  Secured
Parties,  and any such notice shall include  calculations  in reasonable  detail
demonstrating  that the incurrence of such Indebtedness (on the proposed date of
issuance  thereof) will comply with the requirements of Section 10.6 of the Note
Purchase  Agreement.  Upon receipt of any such notice,  the Collateral Agent and
the  Secured  Parties  agree to execute  and deliver  such  further  instruments
(including an amendment to this  Agreement) and do such other acts and things as
may be  reasonably  required  to cause the Lien  created  by this  Agreement  to
equally and  ratably  secure the  obligations  of the Company in respect of such
additional Secured Indebtedness.

     SECTION 11. MISCELLANEOUS.
                 -------------

     Section 11.1. No Waiver.  No failure on the part of the Collateral Agent to
                   ---------
exercise,  no course of dealing and no delay in exercising  any right,  power or
remedy under this  Agreement  shall operate as a waiver thereof and no single or
partial exercise of any right, power



<PAGE>



or remedy under this Agreement shall preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The remedies
provided herein are cumulative and not exclusive of any remedies provided by
law.

     Section  11.2.  Severability.  Any  provision  of  this  Agreement  that 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 (to the fun extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.

     Section 11.3.  Successors and Assigns.  This Agreement shall bind and inure
                    ----------------------
to the benefit of and be  enforceable by the Company,  the Collateral  Agent and
the other Secured Parties and their respective  permitted successors and assigns
hereunder and, in addition,  shall inure to the benefit of and be enforceable by
all Secured Parties from time to time; provided, however, that the Company shall
not assign or transfer  its rights or  obligations  hereunder  without the prior
written consent of the Required Holders.

     Section 11.4. Counterparts. This Agreement may be executed in any number of
                   ------------
counterparts, each of which shall be an original but all of which together shall
constitute one  instrument.  Each  counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.

     Section  11.5.  Amendment,  Waiver,  Etc.  No  amendment  or  waiver of any
                     ------------------------
provision  of this  Agreement  shall be  effective  unless  the same shall be in
writing  and  signed by the  Collateral  Agent,  the  Required  Holders  and the
Company,  and any such waiver or consent shall be effective only in the specific
instance  and for the  specific  purpose for which given  (provided  that (i) no
amendment,  modification or waiver shall,  unless by an instrument signed by all
of the Secured Parties or by the Collateral Agent acting with the consent of all
of the Secured  Parties,  amend or waive  Sections  2.3, 5 or 9 or this  Section
11.5).

     Section  11.6.  Headings.  The table of contents  and  captions and section
                     --------
headings  appearing  herein are included solely for convenience of reference and
are  not  intended  to  affect  the  interpretation  of any  provision  of  this
Agreement.

     Section  11.7.  Notices.  All  notices,  requests,   consents  and  demands
                     -------
hereunder  shall be in writing  and  telecopied  or  delivered  to the  intended
recipient at its "Address for Notices"  specified  pursuant to Section 18 of the
Note Purchase  Agreement or, if to the Collateral  Agent or the Depositary Bank,
at the "Address for Notices"  specified  below its name on the  signature  pages
hereof or, as to any party, at such other address as shall be designated by such
party in a notice to each other party,  and in any case, shall be deemed to have
been given at the times specified in said Section 18.

     Section 11.8. Reinstatement.  This Agreement and any Lien created hereunder
                   -------------
shall  automatically  be reinstated if and to the extent that for any reason any
payment by or on behalf of the Company in respect of the Secured  Obligations is
rescinded  or must  otherwise  be restored by any  Secured  Party,  whether as a
result of any proceedings in bankruptcy or



<PAGE>


reorganization or otherwise, and the Company shall indemnify the Collateral
Agent and each other Secured Party on demand for all reasonable costs and
expenses (including, without limitation, reasonable fees and expenses of
counsel) incurred by the Collateral Agent or such other Secured Party in
connection with such rescission or restoration.

     Section 11.9.  Termination.  This Agreement  shall remain in full force and
                    -----------
effect until all Secured  Obligations  shall have been finally and  indefeasibly
paid in full.  The  provisions of Section 2.3 shall survive any  termination  of
this Agreement.

     Section 11.10. NO THIRD PARTY BENEFICIARIES.  The agreements of the parties
                    ----------------------------
hereto are solely for the benefit of the Company,  the Collateral  Agent and the
Secured  Parties,  and no  Person  (other  than the  Secured  Parties  and their
successors and permitted assigns hereunder) shall have any rights hereunder.

     Section  11.11.  GOVERNING  LAW.  This  agreement  shall be governed by and
                      --------------
construed in accordance with the law of the State of New York (excluding  choice
of law principles of the law of such State that would require the application of
the law of jurisdiction other than such State).




<PAGE>



     IN WITNESS WHEREOF, the Company,  each Purchaser,  the Collateral Agent and
the Depositary Bank have caused this Agreement to be duly executed by their duly
authorized officers all as of the date first above written.

              IGEN INTERNATIONAL, INC.


              By: /s/ George V. Migausky
              --------------------------
              Title: Chief Financial Officer

              BANKERS TRUST COMPANY,
              as Collateral Agent



              By: /s/Lou Bodi
              ---------------
              Name: Louis Bodi
              Title: Vice President


              Address for Notices:

              Bankers Trust Company
              Corporate Trust & Agency Services
              Four Albany Street
              10th Floor
              New York, New York 10006
              Telephone No.: 212-250-6137
              Facsimile No.: 212-250-6439
              Attention:  Structured Finance

              BANKERS TRUST COMPANY,
              as Depositary Bank


             By: /s/Louis Bodi
             -----------------
             Name: Louis Bodi
             Title: Vice President

             Address for Notices:

             Bankers Trust Company
             Corporate Trust & Agency Services
             Four Albany Street
             10th Floor
             New York, New York 10006
             Telephone No.: 212-250-6137
             Facsimile No.: 212-250-6439
             Attention:   Structured Finance




<PAGE>
                       PURCHASERS
                       ----------

              JOHN HANCOCK MUTUAL LIFE INSURANCE
              COMPANY

              By: /s/Stephen Blewitt
              ----------------------
              Title: Senior Investment Advisor




              JOHN HANCOCK VARIABLE LIFE
              INSURANCE COMPANY

              By: /s/Stephen Blewitt
              ----------------------
              Title: Senior Investment Advisor


              INVESTORS PARTNER LIFE INSURANCE

              By: /s/Stephen Blewitt
              ----------------------
              Title: Senior Investment Advisor




              LUCENT TECHNOLOGIES INC. MASTER
              PENSION

              By: /s/Stephen Blewitt
              ----------------------
              Title: Senior Investment Advisor