SECURITY AGREEMENT

 

This SECURITY AGREEMENT (this “Agreement”), dated as of November 22, 2017, among
Marina Biotech, Inc., a Delaware corporation (the “Company”), IthenaPharma,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Company
(“Ithena”), Cequent Pharmaceuticals, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company (“CPI”), and MDRNA Research, Inc., a
Delaware corporation and a wholly-owned subsidiary of the Company (“Research”
and, collectively with the Company, Ithena and CPI, the “Grantors” and each,
individually, a “Grantor”), and River Charitable Remainder Unit Trust, FBO Isaac
Blech, July 20, 1987, Isaac Blech Trustee (the “Purchaser”) under that certain
Note Purchase Agreement dated as of the date hereof between the Company and the
Purchaser (as it may be amended, restated, supplemented, replaced or otherwise
modified from time to time, the “Purchase Agreement).

 

W I T N E S S E T H:

 

WHEREAS, the Company and the Purchaser are parties to the Purchase Agreement,
and

 

WHEREAS, pursuant to the terms and conditions of the Purchase Agreement, the
Purchaser has agreed to extend a loan to the Grantors through the purchase of
one or more notes repayment of which is evidenced by the Note issued pursuant to
the Purchase Agreement, and

 

WHEREAS, in order to induce the Purchaser to enter into the Purchase Agreement
and the other Transaction Documents, the Grantors have agreed to execute and
deliver to the Purchaser this Agreement and to grant the Purchaser a continuing
security interest in and to the Collateral in order to secure the prompt and
complete payment, observance and performance of, among other things, the Secured
Obligations, and

 

NOW, THEREFORE, for and in consideration of the recitals made above and other
good and valuable consideration, the receipt, sufficiency and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:

 

1. Defined Terms. All capitalized terms used herein (including in the preamble
and recitals hereof) without definition shall have the meanings ascribed thereto
in the Note, or if not expressly defined in the Note, then in the Purchase
Agreement. Any terms used in this Agreement that are defined in the Code
(whether or not capitalized) shall be construed and defined as set forth in the
Code unless otherwise defined herein or in the Note or the Purchase Agreement;
provided, however, that if the Code is used to define any term used herein and
if such term is defined differently in different Articles of the Code, the
definition of such term contained in Article 9 of the Code shall govern. In
addition to those terms defined elsewhere in this Agreement, as used in this
Agreement, the following terms shall have the following meanings:

 

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(a) “Account” means an account as that term is defined in the Code.

 

(b) “Account Debtor” means an account debtor (as that term is defined in the
Code).

 

(c) “Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy,” as now and hereafter in effect, or any successor statute.

 

(d) “Books” means books and records (including each Grantor’s Records
indicating, summarizing, or evidencing such Grantor’s assets (including the
Collateral) or liabilities, each Grantor’s Records relating to such Grantor’s
business operations or financial condition, and each Grantor’s goods or General
Intangibles related to such information).

 

(e) “Chattel Paper” means chattel paper (as that term is defined in the Code)
and includes tangible chattel paper and electronic chattel paper.

 

(f) “Closing Date” has the meaning specified therefor in the Purchase Agreement.

 

(g) “Code” means the New York Uniform Commercial Code, as in effect from time to
time; provided, however, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, priority, or
remedies with respect to the Purchaser’s Liens on any Collateral is governed by
the Uniform Commercial Code as enacted and in effect in a jurisdiction other
than the State of New York, the term “Code” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for purposes of
the provisions thereof relating to such attachment, perfection, priority, or
remedies.

 

(h) “Collateral” has the meaning specified therefor in Section 2; provided,
however, that “Collateral” shall not include any Excluded Property; and
provided, further, that if and when any property shall cease to be Excluded
Property, such property shall be deemed at all times from and after the date
hereof to constitute Collateral.

 

(i) “Commercial Tort Claims” means commercial tort claims (as that term is
defined in the Code), and includes those commercial tort claims listed on
Schedule 8 attached hereto.

 

(j) “Company” and “Companies” shall mean the Grantors.

 

(k) “Copyrights” means copyrights and copyright registrations, and also includes
(i) the copyright registrations and applications listed on Schedule 2 attached
hereto and made a part hereof (as the same may be amended or modified from time
to time), (ii) all extensions or renewals thereof, (iii) all income, royalties,
damage awards and payments now and hereafter due or payable under and with
respect thereto, including payments under all licenses entered into in
connection therewith and damages and payments for past or future infringements
thereof, (iv) the right to sue for past, present and future infringements
thereof, and (v) all of each Grantor’s rights corresponding thereto throughout
the world.

 

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(l) “Deposit Account” means a deposit account (as that term is defined in the
Code).

 

(m) “Equipment” means equipment (as that term is defined in the Code).

 

(n) “Excluded Property” means, collectively, (i) any permit, lease, license,
contract, instrument or other agreement held by any Grantor that prohibits or
requires the consent of any Person other than the Grantors which consent has not
been obtained as a condition to the creation by such Grantor of a Lien thereon,
or any permit, lease, license, contract or other agreement held by any Grantor
to the extent that any applicable law, treaty, rule, or regulation or any change
in the interpretation or application thereof by any Governmental Authority
applicable thereto prohibits the creation of a Lien thereon, but only, in each
case, to the extent, and for so long as, such prohibition is not terminated or
rendered unenforceable or otherwise deemed ineffective by the Code, (ii) any
“intent to use” Trademark applications for which a statement of use has not been
filed (but only until such statement is filed), and (iii) Equipment owned by any
Grantor that is subject to a purchase money Lien or capital lease (in each case,
to the extent permitted under the Purchase Agreement) if the contract or other
agreement in which such Lien is granted (or in the documentation providing for
such capital lease) prohibits or requires the consent of any Person which
consent has not been obtained other than the Grantors as a condition to the
creation of any other Lien on such Equipment; provided, however, Excluded
Property shall not include any Collateral described in subsection (i) and (iii)
of this subsection (n) to the extent that any such consent or lapse, as
applicable, (x) has not been waived or (y) would be rendered ineffective
pursuant to Sections 9-406, 9-408, 9-409 of the Code or other applicable
provisions of the Code of any relevant jurisdiction or any other applicable law
(including the Bankruptcy Code, when applicable) or principles of equity;
provided, that immediately upon the ineffectiveness, lapse, termination or
waiver of any such provision, the Collateral shall include, and each such
Grantor shall be deemed to have granted a security interest in, all such right,
title and interest as if such provision had never been in effect. “Excluded
Property” shall not include any Proceeds, substitutions or replacements of
Excluded Property (unless such Proceeds, substitutions or replacements would
constitute Excluded Property). It is hereby understood, agreed and acknowledged
that the patents covering the Company’s DiLA2 delivery system (with respect to
which the Company has entered into a binding term sheet for the sale of the
Company’s assets relating thereto), and the patents covering the Company’s
Smarticles delivery technology (which patents were sold to Novosom Verwaltungs
GmbH in September 2017, and which are no longer owned by the Company), are
Excluded Property, and thus are not included in the Collateral.

 

(o) “Event of Default” has the meaning specified therefor in the Purchase
Agreement.

 

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(p) “General Intangibles” means general intangibles (as that term is defined in
the Code).

 

(q) “Governmental Authority” means any federal, state, local, or other
governmental or administrative body, instrumentality, board, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.

 

(r) “Grantor” and “Grantors” have the meanings specified therefor in the
recitals to this Agreement.

 

(s) “Insolvency Proceeding” means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other state or
federal bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with creditors,
or proceedings seeking reorganization, arrangement of other similar relief.

 

(t) “Intellectual Property” means Patents, Copyrights, Trademarks, the goodwill
associated with such Trademarks, trade secrets and confidential and proprietary
customer lists, and Intellectual Property Licenses.

 

(u) “Intellectual Property Collateral” means Grantors’ Patents, Trademarks and
Copyrights, now owned or hereafter accrued, and all goodwill of the business
connected with the use of, and symbolized by, such Trademarks.

 

(v) “Intellectual Property Licenses” means rights under or interests in any
Patent, Trademark, Copyright or other Intellectual Property, including software
license agreements with any other party (other than commercial off the shelf
software), whether the applicable Grantor is a licensee or licensor under any
such license agreement, including the license agreements listed on Schedule 3
attached hereto and made a part hereof.

 

(w) “Intellectual Property Security Agreement” means the Intellectual Property
Security Agreement among Grantors and Agent, for the benefit of the Purchaser,
dated the date hereof.

 

(x) “Inventory” means inventory (as that term is defined in the Code).

 

(y) “Investment Related Property” means investment property (as that term is
defined in the Code).

 

(z) “Negotiable Collateral” means letters of credit, letter-of-credit rights,
instruments, promissory notes, drafts, and documents.

 

(aa) “Note” has the meaning specified therefor in the Purchase Agreement.

 

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(bb) “Obligations” means all of the liabilities and obligations (primary,
secondary, direct, contingent, sole, joint or several) due or to become due, or
that are now or may be hereafter contracted or acquired, or owing, of any
Grantor to the Purchaser under this Agreement, the other Transaction Documents,
and any other instruments, agreements or other documents executed and/or
delivered in connection herewith or therewith, in each case, whether now or
hereafter existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from the Purchaser as a preference,
fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time. Without
limiting the generality of the foregoing, the term “Obligations” shall include,
without limitation: (i) principal of, and interest on, the Note and the loans
extended pursuant thereto; (ii) any and all other fees, legal fees and other
expenses, indemnities, costs, obligations and liabilities of the Grantors from
time to time under or in connection with this Agreement, the other Transaction
Documents, and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith; and (iii) all amounts in
respect of the foregoing that would be payable but for the fact that the
obligations to pay such amounts are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving any
Grantor.

 

(cc) “Organizational Documents” means, with respect to each Grantor, the
documents by which such Grantor was organized (such as a certificate of
incorporation, certificate of limited partnership or articles of organization,
and including, without limitation, any certificates of designation for preferred
stock or other forms of preferred equity) and which relate to the internal
governance of such Grantor (such as bylaws, a partnership agreement or an
operating, limited liability or members agreement).

 

(dd) “Patents” means (i) the patents and patent applications listed on Schedule
4 attached hereto and made a part hereof (as the same may be amended or modified
from time to time), (ii) all divisions, continuations, continuations-in-part,
reissues and extensions thereof, (iii) all income, royalties, damage awards and
payments now and hereafter due or payable under and with respect thereto,
including payments under all licenses entered into in connection therewith and
damages and payments for past or future infringements thereof, (iv) the right to
sue for past, present and future infringements thereof, and (v) all of each
Grantor’s rights corresponding thereto throughout the world.

 

(ee) “Permitted Encumbrances” means (a) liens in favor of the Purchaser to
secure the Secured Obligations, (b) liens (i) with respect to the payment of
taxes, assessments or other governmental charges or (ii) of suppliers, carriers,
materialmen, warehousemen, workmen or mechanics and other similar liens, in each
case imposed by law and arising in the ordinary course of business, and securing
amounts that are not yet due or that are being contested in good faith by
appropriate proceedings diligently conducted and with respect to which adequate
reserves or other appropriate provisions are maintained on the books of the
applicable Grantor in accordance with GAAP and which do not involve, in the
reasonable judgment of the Purchaser, any risk of the sale, forfeiture or loss
of any of the Collateral, (c) liens existing on the date hereof and set forth on
Schedule 9 hereto, (d) liens securing purchase money indebtedness, provided that
(i) such liens exist prior to the acquisition of, or attach substantially
simultaneous with, or within 30 days after the, acquisition, repair, improvement
or construction of, such property financed by such indebtedness and (ii) such
liens do not extend to any property of a Grantor other than the property (and
proceeds thereof) acquired or built, or the improvements or repairs, financed by
such indebtedness, and (e) licenses entered into in the ordinary course of
business.

 

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(ff) “Person” has the meaning specified therefor in the Purchase Agreement.

 

(gg) “Proceeds” has the meaning specified therefor in Section 2.

 

(hh) “Purchase Agreement” has the meaning specified therefor in the recitals to
this Agreement.

 

(ii) “Records” means information that is inscribed on a tangible medium or which
is stored in an electronic or other medium and is retrievable in perceivable
form.

 

(jj) “Security Interest” has the meaning specified therefor in Section 2.

 

(kk) “Secured Obligations” means each and all of the following: (a) each and all
of the present and future obligations of Grantors now existing or hereafter
arising from this Agreement or the other Transaction Documents, and (b) all
Obligations of the Grantors, including, in the case of each of clauses (a) and
(b), reasonable attorneys fees and expenses and any interest, fees, or expenses
that accrue after the filing of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any Insolvency
Proceeding.

 

(ll) “Secured Party’s Liens” means the Liens granted by the Grantors to Secured
Parties under the Transaction Documents.

 

(mm) “Securities Account” means a securities account (as that term is defined in
the Code).

 

(nn) “Stock” means all shares, options, warrants, interests, participations, or
other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting, including common stock, preferred stock, or any other
“equity security” (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Commission under the Exchange Act).

 

(oo) “Supporting Obligations” means supporting obligations (as such term is
defined in the Code).

 

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(pp) “Trademarks” means trademarks, trade names, trademark applications, service
marks, service mark applications, and also includes (i) the registered or
applied for trade names, trademarks, trademark applications, service marks, and
service mark applications listed on Schedule 5 attached hereto and made a part
hereof (as the same may be amended or modified from time to time), (ii) all
renewals thereof, (iii) all income, royalties, damage awards and payments now
and hereafter due or payable under and with respect thereto, including payments
under all licenses entered into in connection therewith and damages and payments
for past or future (A) infringements and dilutions thereof and (B) injury to the
goodwill associated therewith, (iv) the right to sue for past, present and
future (A) infringements and dilutions thereof and (B) injury to the goodwill
associated therewith, (v) the goodwill of each Grantor’s business symbolized by
the foregoing or connected therewith, and (vi) all of each Grantor’s rights
corresponding thereto throughout the world.

 

(qq) “Transaction Documents” means this Agreement, the Purchase Agreement, the
Note and the Intellectual Property Security Agreement.

 

(rr) “URL” means “uniform resource locator,” an internet web address.

 

2. Guaranty and Grant of Security. (A) Each Grantor, in consideration of the
mutual benefits obtained thereby and for other valuable consideration hereby
acknowledged, hereby unconditionally guarantees for the benefit of the Purchaser
the prompt payment and performance of each and all of the Secured Obligations of
the other, without setoff or counterclaim each of which are hereby waived.

 

(B) Each Grantor hereby unconditionally grants, assigns, and pledges to the
Purchaser to secure the Secured Obligations a continuing security interest
(herein referred to as the “Security Interest”) in all such Grantor’s right,
title and interest in and to the following, whether now owned or hereafter
acquired or arising and wherever located (the “Collateral”):

 

  (a) all of such Grantor’s Accounts;         (b) all of such Grantor’s Books;  
      (c) all of such Grantor’s Chattel Paper;         (d) all of such Grantor’s
Deposit Accounts;         (e) all of such Grantor’s Equipment and fixtures;    
    (f) all of such Grantor’s General Intangibles, including the Intellectual
Property Collateral;         (g) all of such Grantor’s Inventory;

 

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  (h) all of such Grantor’s Investment Related Property;         (i) all of such
Grantor’s Negotiable Collateral;         (j) all of such Grantor’s rights in
respect of Supporting Obligations;         (k) all of such Grantor’s Commercial
Tort Claims;

 

(l) all of such Grantor’s money, cash equivalents, or other assets of each such
Grantor that now or hereafter come into the possession, custody, or control of
the Purchaser;

 

(m) all of the proceeds and products, whether tangible or intangible, of any of
the foregoing, including proceeds of insurance or Commercial Tort Claims
covering or relating to any or all of the foregoing, and any and all Accounts,
Books, Chattel Paper, Deposit Accounts, Equipment, General Intangibles,
Inventory, Investment Related Property, Negotiable Collateral, Supporting
Obligations, money, or other tangible or intangible property resulting from the
sale, lease, license, exchange, collection, or other disposition of any of the
foregoing, the proceeds of any award in condemnation with respect to any of the
foregoing, any rebates or refunds, whether for taxes or otherwise, and all
proceeds of any such proceeds, or any portion thereof or interest therein, and
the proceeds thereof, and all proceeds of any loss of, damage to, or destruction
of the above, whether insured or not insured, and, to the extent not otherwise
included, any indemnity, warranty, or guaranty payable by reason of loss or
damage to, or otherwise with respect to any of the foregoing (the “Proceeds”).
Without limiting the generality of the foregoing, the term “Proceeds” includes
whatever is receivable or received when Investment Related Property or proceeds
are sold, exchanged, collected, or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes proceeds of any indemnity
or guaranty payable to any Grantor or the Purchaser from time to time with
respect to any of the Investment Related Property.

 

3. Security for Obligations. This Agreement and the Security Interest created
hereby secures the Secured Obligations, whether now existing or arising
hereafter. Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts which constitute part of the Secured
Obligations and would be owed by Grantors, or any of them, to the Purchaser but
for the fact that they are unenforceable or not allowable due to the existence
of an Insolvency Proceeding involving any Grantor.

 

4. Grantors Remain Liable; Third Party Licensees. (A) Anything herein to the
contrary notwithstanding, (a) each of the Grantors shall remain liable under the
contracts and agreements included in the Collateral to perform all of the duties
and obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by the Purchaser of any of the rights hereunder shall
not release any Grantor from any of its duties or obligations under such
contracts and agreements included in the Collateral, and (c) the Purchaser shall
not have any obligation or liability under such contracts and agreements
included in the Collateral by reason of this Agreement, nor shall the Purchaser
be obligated to perform any of the obligations or duties of any Grantors
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder. Until an Event of Default shall occur and be continuing,
except as otherwise provided in this Agreement or the other Transaction
Documents, Grantors shall have the right to possession and enjoyment of the
Collateral for the purpose of conducting the ordinary course of their respective
businesses, subject to and upon the terms hereof and of the other Transaction
Documents.

 

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(B) The Purchaser acknowledges and agrees that the security interest arising
hereunder in any Intellectual Property licensed by a Grantor to a third party in
an arms-length transaction shall be subject to the rights of such third party
licensee, whether such arms-length transaction is now existing or is entered
into following the execution and delivery of this Agreement. Upon the request of
a Grantor, the Purchaser shall provide an estoppel to such third party licensee
with respect to the foregoing. The Purchaser hereby acknowledges that no
security interest or right is granted by any Grantor in property to the extent
that such property, including Intellectual Property, is not owned by said
Grantor.

 

5. Representations and Warranties. As of the Closing, each Grantor hereby
represents and warrants as follows:

 

(a) The exact legal name, jurisdiction of incorporation, organization or
formation, organizational identification number, if any, and chief executive
office of each of the Grantors is set forth on Schedule 1 attached hereto. No
Grantor has trade names except as set forth on Schedule 1 attached hereto.

 

(b) Schedule 6 attached hereto sets forth all Real Property owned or leased by
Grantors as of the Closing Date.

 

(c) As of the Closing Date, no Grantor has any interest in, or title to, any
registered Copyrights, material Intellectual Property Licenses or Trademarks
except as set forth on Schedules 2, 3 and 5, respectively, attached hereto. This
Agreement is effective to create a valid and continuing Lien on such Copyrights,
Intellectual Property Licenses, Patents and Trademarks and, upon filing of the
Intellectual Property Security Agreement with the United States Copyright Office
and filing of the Intellectual Property Security Agreement with the United
States Patent and Trademark Office, and the filing of appropriate financing
statements in the jurisdictions listed on Schedule 7 hereto, all action
necessary or desirable to protect and perfect the Security Interest in the
United States in and to each Grantor’s Patents, Trademarks, Copyrights or
Intellectual Property Licenses constituting Collateral has been taken and such
perfected Security Interest is enforceable as such as against any and all
creditors of and purchasers from any Grantor, except as enforcement may be
limited by equitable principles or by bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium or similar laws relating to or limiting
creditors’ rights generally. No Grantor has any interest in any Copyright that
is necessary in connection with the operation of such Grantor’s business, except
for those Copyrights identified on Schedule 2 attached hereto which have been
registered with the United States Copyright Office.

 

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(d) Each Grantor has the requisite corporate, partnership, limited liability
company or other power and authority to enter into this Agreement and otherwise
to carry out its obligations hereunder. The execution, delivery and performance
by each Grantor of this Agreement have been duly authorized by all necessary
action on the part of such Grantor and no further action is required by such
Grantor. This Agreement has been duly executed by each Grantor. This Agreement
constitutes the legal, valid and binding obligation of each Grantor, enforceable
against such Grantor in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization and similar
laws of general application relating to or affecting the rights and remedies of
creditors and by general principles of equity.

 

(e) No written claim has been received by any Grantor that any Collateral or any
Grantor’s use of any Collateral violates the rights of any third party that has
not been resolved to the satisfaction of such Grantor. There has been no adverse
decision to any Grantor’s claim of ownership rights in or exclusive rights to
use the Collateral in any jurisdiction or to such Grantor’s right to keep and
maintain such Collateral in full force and effect, and there is no proceeding
involving said rights pending or, to the knowledge of such Grantor, threatened
before any court, judicial body, administrative or regulatory agency, arbitrator
or other governmental authority.

 

(f) Each Grantor shall at all times maintain its books of account and records
relating to the Collateral at its principal place of business (except when
temporarily kept at the offices of its attorneys or accountants) and may not
relocate such books of account and records or tangible Collateral unless it
delivers to the Purchaser at least thirty (30) days prior to such relocation (i)
written notice of such relocation and the new location thereof (which must be
within the United States) and (ii) evidence that appropriate financing
statements under the Code and other necessary documents have been filed and
recorded and other steps have been taken to perfect the Security Interests to
create in favor of the Purchaser, subject to Permitted Encumbrances, a valid,
perfected and continuing perfected first priority lien in the Collateral.

 

(g) The execution, delivery and performance of this Agreement by each Grantor
does not (i) violate any of the provisions of the Organizational Documents of
any Grantor or any judgment, decree, order or award of any court, governmental
body or arbitrator or any applicable law, rule or regulation applicable to any
Grantor or (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing such Grantor’s debt or otherwise) or other
understanding to which any Grantor is a party or by which any property or asset
of any Grantor is bound or affected, except in all cases, for such conflicts,
defaults, terminations, amendments, acceleration, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect.
If any, all required consents (including, without limitation, from stockholders
or creditors of the Grantor) necessary for the Grantor to enter into and perform
its obligations hereunder have been obtained.

 

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(h) This Agreement creates a valid security interest in the Collateral of each
of Grantors, to the extent a security interest therein can be created under the
Code, securing the payment of the Secured Obligations. Except to the extent a
security interest in the Collateral cannot be perfected by the filing of a
financing statement under the Code, all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly taken or
will have been taken upon the filing of financing statements listing each
applicable Grantor, as a debtor, and the Purchaser, as secured party, in the
jurisdictions listed next to such Grantor’s name on Schedule 6 attached hereto.
Upon the making of such filings, the Purchaser shall have, subject to Permitted
Encumbrances, a first priority perfected security interest in the Collateral of
each Grantor to the extent such security interest can be perfected by the filing
of a financing statement. All action by any Grantor necessary to protect and
perfect such security interest on each item of Collateral has been duly taken
(to the extent such action is required under this Agreement).

 

(i) No consent, approval, authorization, or other order or other action by, and
no notice to or filing with, any Governmental Authority or any other Person is
required (i) for the grant of a Security Interest by such Grantor in and to the
Collateral pursuant to this Agreement or for the execution, delivery, or
performance of this Agreement, except those consents, approvals, authorizations
or other actions, the failure of which to obtain could not reasonably be
expected to cause a material adverse effect to such Grantor, or (ii) for the
exercise by the Purchaser of the voting or other rights provided for in this
Agreement or any other Transaction Document with respect to the Investment
Related Property or the remedies in respect of the Collateral pursuant to this
Agreement or any other Transaction Document, except as may be required in
connection with such disposition of Investment Related Property by laws
affecting the offering and sale of securities generally.

 

6. Covenants. Each Grantor, jointly and severally, covenants and agrees with
Purchaser for the benefit of the Purchaser that from and after the date of this
Agreement and until the date of termination of this Agreement in accordance with
the terms hereof :

 

(a) Possession of Collateral. In the event that any Collateral, including
Proceeds, is evidenced by or consists of Negotiable Collateral, Investment
Related Property, or Chattel Paper, with a value, individually or in the
aggregate, in excess of Twenty-Five Thousand Dollars ($25,000), and if and to
the extent that perfection or priority of the Purchaser’s Security Interest is
dependent on or enhanced by possession, the applicable Grantor, promptly (and in
any event within one (1) Business Day) upon the request of the Purchaser, shall
execute such other documents and instruments as shall be reasonably requested by
the Purchaser or, if applicable, endorse and deliver physical possession of such
Collateral to the Purchaser or its representative, together with, if applicable,
such undated powers endorsed in blank as shall be reasonably requested by the
Purchaser;

 

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(b) Chattel Paper.

 

(i) In the event that the Grantors acquire electronic Chattel Paper with a
value, individually or in the aggregate, in excess of Twenty-Five Thousand
Dollars ($25,000), the applicable Grantor shall promptly (and in any event
within two (2) Business Days) notify the Purchaser thereof, and upon the request
of the Purchaser, take all steps reasonably necessary to grant the Purchaser
control of all such electronic Chattel Paper in accordance with the Code and all
“transferable records” as that term is defined in Section 16 of the Uniform
Electronic Transaction Act and Section 201 of the federal Electronic Signatures
in Global and National Commerce Act as in effect in any relevant jurisdiction;

 

(ii) If any Grantor retains possession of any Chattel Paper or instruments
(which retention of possession shall be subject to the extent permitted hereby
and by the Purchase Agreement), promptly upon the request of the Purchaser, such
Chattel Paper and instruments shall be marked with the following legend: “This
writing and the obligations evidenced or secured hereby are subject to the
Security Interest of River Charitable Remainder Unit Trust, FBO Isaac Blech,
July 20, 1987, Isaac Blech Trustee”;

 

(c) Letter-of-Credit Rights. Each Grantor that is or becomes the beneficiary of
a letter of credit with a face value in excess of Twenty-Five Thousand Dollars
($25,000) shall promptly (and in any event within two (2) Business Days after
becoming a beneficiary), notify the Purchaser thereof and, thereafter, upon the
request by the Purchaser, except with respect to documentary letters of credit
received by a Grantor from customers in the ordinary course of business if no
Event of Default has occurred and is continuing, take such actions the Purchaser
may reasonably request to grant the Purchaser control thereof;

 

(d) Commercial Tort Claims. Each Grantor shall promptly (and in any event within
two (2) Business Days of receipt thereof), notify the Purchaser in writing upon
becoming a plaintiff in respect of, or otherwise obtaining a Commercial Tort
Claim after the date hereof and, upon request of the Purchaser, promptly amend
Schedule 8 to this Agreement to describe such after-acquired Commercial Tort
Claim in a manner that reasonably identifies such Commercial Tort Claim, and
hereby authorizes the filing of additional financing statements or amendments to
existing financing statements describing such Commercial Tort Claims, and agrees
to do such other acts or things deemed necessary or desirable by Agent to give
the Purchaser, subject to Permitted Encumbrances, a first priority perfected
security interest in any such Commercial Tort Claim;

 

(e) Government Contracts. If any Account or Chattel Paper, individually or in
the aggregate with a value in excess of Twenty-Five Thousand Dollars ($25,000),
arises out of a contract or contracts with the United States of America or any
department, agency, or instrumentality thereof, Grantors shall promptly (and in
any event within two (2) Business Days of the creation thereof) notify the
Purchaser thereof in writing and execute any instruments or take any steps
reasonably required by the Purchaser, to the extent permitted under, and in
accordance with, applicable law, in order that all moneys due or to become due
under such contract or contracts shall be assigned to the Purchaser, and shall
provide written notice thereof under the Assignment of Claims Act or other
applicable law;

 

 12 

 

 

(f) Intellectual Property.

 

(i) Upon request of the Purchaser, in order to facilitate filings with the
United States Patent and Trademark Office and the United States Copyright
Office, each Grantor shall execute and deliver to the Purchaser one or more
Intellectual Property Security Agreements in form and substance reasonably
satisfactory to further evidence the Purchaser’s Liens on such Grantor’s
Patents, Trademarks, or Copyrights, and the General Intangibles of such Grantor
relating thereto or represented thereby;

 

(ii) Each Grantor shall have the duty, to the extent necessary or economically
desirable in the operation of its business, (A) to promptly sue for
infringement, misappropriation, or dilution and to recover any and all awarded
damages for such infringement, misappropriation, or dilution, (B) to prosecute
diligently any trademark application or service mark application that is part of
such Grantor’s Trademarks pending as of the date hereof or hereafter until the
termination of this Agreement, (C) to prosecute diligently any patent
application that is part of such Grantor’s Patents pending as of the date hereof
or hereafter until the termination of this Agreement, and (D) to take all
reasonable and necessary action to preserve and maintain all of such Grantor’s
Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights
therein, including the filing of applications for renewal, affidavits of use,
affidavits of noncontestability and opposition and interference and cancellation
proceedings. Each Grantor shall promptly file an application with the United
States Copyright Office for any Copyright that has not been registered with the
United States Copyright Office if such Copyright is necessary or economically
desirable in the operation of such Grantor’s business. Any expenses incurred in
connection with the foregoing shall be borne by the appropriate Grantor. Each
Grantor further agrees not to abandon any Trademark, Patent, Copyright, or
Intellectual Property License that is necessary or economically desirable in the
operation of such Grantor’s business; provided, however that any such Copyright
shall then be deemed to be included on Schedule 2 hereof;

 

(iii) Grantors acknowledge and agree that the Purchaser shall have no duties
with respect to the Trademarks, Patents, Copyrights, or Intellectual Property
Licenses. Without limiting the generality of this Section 6(f), Grantors
acknowledge and agree that the Purchaser shall not be under any obligation to
take any steps necessary to preserve rights in the Trademarks, Patents,
Copyrights, or Intellectual Property Licenses against any other Person, but the
Purchaser may do so at its option from and after the occurrence and during the
continuance of an Event of Default, and all expenses incurred in connection
therewith (including reasonable fees and expenses of attorneys and other
professionals) shall be for the sole account of the Company and shall be
chargeable to the Company;

 

 13 

 

 

(iv) In no event shall any Grantor, either itself or through any agent,
employee, licensee, or designee, file an application for the registration of any
Patent, Trademark, or Copyright with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency
without giving the Purchaser prompt (and in any event within ten (10) Business
Days) written notice thereof. Promptly upon any such filing, each Grantor shall
comply with Section 6(f)(i) hereof;

 

(g) Investment Related Property.

 

(i) If any Grantor shall receive or become entitled to receive any Investment
Related Property after the Closing Date, it shall promptly (and in any event
within five (5) Business Days of receipt thereof) take all actions necessary to
cause such Investment Related Property to become Collateral hereunder and
subject to a lien and security interest in favor of the Purchaser;

 

(ii) Upon the occurrence and during the continuance of an Event of Default, all
sums of money and property paid or distributed in respect of the Investment
Related Property which are received by any Grantor shall be held by the Grantors
in trust for the benefit of the Purchaser segregated from such Grantor’s other
property, and such Grantor shall deliver it forthwith to the Purchaser in the
exact form received;

 

(iii) Each Grantor shall promptly deliver to the Purchaser a copy of each notice
or other communication received by it in respect of any Investment Related
Property;

 

(iv) Each Grantor agrees that it will cooperate with the Purchaser in obtaining
all necessary approvals and making all necessary filings under federal, state,
local, or foreign law in connection with the Security Interest on the Investment
Related Property or any sale or transfer thereof;

 

(h) Transfers and Other Liens. Except as otherwise expressly permitted hereby or
by the Purchase Agreement, Grantors shall not (i) sell, assign (by operation of
law or otherwise) or otherwise dispose of, or grant any option with respect to,
any of the Collateral, or (ii) create or permit to exist any Lien upon or with
respect to any of the Collateral of any of Grantors, except for Permitted
Encumbrances. The inclusion of Proceeds in the Collateral shall not be deemed to
constitute the Purchaser’s consent to any sale or other disposition of any of
the Collateral except as expressly permitted in this Agreement or the other
Transaction Documents;

 

(i) Insurance. The Grantors shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral, including Collateral
hereafter acquired, against loss or damage of the kinds and in the amounts
customarily insured against by entities of established reputation having similar
properties similarly situated and in such amounts as are customarily carried
under similar circumstances by other such entities and otherwise as is prudent
for entities engaged in similar businesses but in any event sufficient to cover
the full replacement cost thereof (it being agreed that the insurance policies
and amounts maintained by Grantors as of the Closing Date are satisfactory). The
Grantors shall cause each insurance policy issued in connection herewith to
provide, and the insurer issuing such policy to certify to the Purchaser that
(a) the Purchaser will be named as loss payee and additional insured under each
such insurance policy; (b) if such insurance be proposed to be cancelled or
materially changed for any reason whatsoever, such insurer will promptly notify
the Purchaser and such cancellation or change shall not be effective as to the
Purchaser for at least thirty (30) days after receipt by the Purchaser of such
notice, unless the effect of such change is to extend or increase coverage under
the policy; and (c) the Purchaser will have the right (but no obligation) at its
election to remedy any default in the payment of premiums within thirty (30)
days of notice from the insurer of such default. If no Event of Default exists
and if the proceeds arising out of any claim or series of related claims do not
exceed $100,000, loss payments in each instance will be available to the
Grantors and applied by the Grantors to the repair and/or replacement of
property with respect to which the loss was incurred. If no Event of Default
exists and such proceeds exceed $100,000, and in any event after an Event of
Default occurs, all proceeds then or thereafter in existence shall be paid to
the Purchaser (for application to the Obligations) and, if received by any
Grantor, shall be held in trust for the Purchaser and promptly paid over to the
Purchaser (for application to the Obligations) unless otherwise directed in
writing by the Purchaser.

 

 14 

 

 

(j) Copies. The Grantors shall deliver copies of such policies or the related
certificates evidencing that the Purchaser is listed as loss payee on property
insurance and as additional insured on liability insurance within 10 days of
closing and at the time any new policy of insurance is issued.

 

(k) Permitted Encumbrances. The Grantors shall not prepay or amend any
obligations secured by the Permitted Encumbrances without the prior written
consent of the Purchaser.

 

7. Relation to Other Security Documents. The provisions of this Agreement shall
be read and construed with the other Transaction Documents referred to below in
the manner so indicated.

 

(a) Purchase Agreement. In the event of any conflict between any provision in
this Agreement and a provision in the Purchase Agreement, such provision of the
Purchase Agreement shall control.

 

(b) Note. In the event of any conflict between any provision in this Agreement
and a provision in the Note, such provision of the Note shall control.

 

(c) Intellectual Property Security Agreements. The provisions of any executed
Intellectual Property Security Agreements are supplemental to the provisions of
this Agreement, and nothing contained in the Intellectual Property Security
Agreements shall limit any of the rights or remedies of the Purchaser hereunder.

 

 15 

 

 

8. Further Assurances.

 

(a) Each Grantor agrees that from time to time, at its own expense, such Grantor
will promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or that the Purchaser may
reasonably request, in order to perfect and protect the Security Interest
granted or purported to be granted hereby or to enable the Purchaser to exercise
and enforce its rights and remedies hereunder with respect to any of the
Collateral.

 

(b) Subject to Section 8(c), each Grantor authorizes the filing by the Purchaser
of financing or continuation statements, or amendments thereto, and such Grantor
will execute and deliver to the Purchaser such other instruments or notices, as
may be necessary or as the Purchaser may reasonably request, in order to perfect
and preserve the Security Interest granted or purported to be granted hereby.

 

(c) Each Grantor authorizes the Purchaser at any time and from time to time to
file, transmit, or communicate, as applicable, financing statements and
amendments (i) describing the Collateral as “all personal property of debtor” or
“all assets of debtor” or words of similar effect, (ii) describing the
Collateral as being of equal or lesser scope or with greater detail, or (iii)
that contain any information required by part 5 of Article 9 of the Code for the
sufficiency or filing office acceptance.

 

(d) Each Grantor acknowledges that it is not authorized to file any financing
statement or amendment or termination statement with respect to any financing
statement filed in connection with this Agreement without the prior written
consent of the Purchaser, subject to such Grantor’s rights under Section
9-509(d)(2) of the Code.

 

9. Right to Perform Contracts, Exercise Rights, etc. Upon the occurrence and
during the continuance of an Event of Default, the Purchaser (or its designee)
(a) may proceed to perform any and all of the obligations of any Grantor
contained in any contract, lease, or other agreement and exercise any and all
rights of any Grantor therein contained as fully as such Grantor itself could,
(b) shall have the right to use any Grantor’s rights under Intellectual Property
Licenses in connection with the enforcement of the Purchaser’s rights hereunder,
including the right to prepare for sale and sell any and all Inventory and
Equipment now or hereafter owned by any Grantor and now or hereafter covered by
such licenses, but only to the extent permitted by such licenses or the
licensors thereunder or applicable law, and (c) shall have the right to request
that any Stock that is pledged hereunder be registered in the name of the
Purchaser or any of its nominees.

 

10. Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the
Purchaser its attorney-in-fact, with full authority in the place and stead of
such Grantor and in the name of such Grantor or otherwise, at such time as an
Event of Default has occurred and is continuing under the Note, to take any
action and to execute any instrument which the Purchaser may reasonably deem
necessary or advisable to accomplish the purposes of this Agreement, including:

 

 16 

 

 

(a) to ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in connection
with the Accounts or any Supporting Obligations in connection therewith or any
other Collateral of such Grantor;

 

(b) to receive and open all mail addressed to such Grantor and to notify postal
authorities to change the address for the delivery of mail to such Grantor to
that of the Purchaser;

 

(c) to receive, indorse, and collect any drafts or other instruments, documents,
Negotiable Collateral or Chattel Paper;

 

(d) to file any claims or take any action or institute any proceedings which the
Purchaser may deem necessary or desirable for the collection of any of the
Collateral of such Grantor or otherwise to enforce the rights of the Purchaser
with respect to any of the Collateral;

 

(e) to repair, alter, or supply goods, if any, necessary to fulfill in whole or
in part the purchase order of any Person obligated to such Grantor in respect of
any Account of such Grantor;

 

(f) to use any labels, Patents, Trademarks, trade names, URLs, domain names,
industrial designs, Copyrights, advertising matter or other industrial or
intellectual property rights, in advertising for sale and selling Inventory and
other Collateral and to collect any amounts due under Accounts, contracts or
Negotiable Collateral of such Grantor; and

 

(g) the Purchaser shall have the right, but shall not be obligated, to bring
suit in its own name to enforce the Trademarks, Patents, Copyrights and
Intellectual Property Licenses and, if the Purchaser shall commence any such
suit, the appropriate Grantor shall, at the request of the Purchaser, do any and
all lawful acts and execute any and all proper documents reasonably required by
the Purchaser in aid of such enforcement.

 

To the extent permitted by law, each Grantor hereby ratifies all that such
attorney-in-fact shall lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and shall be irrevocable until
this Agreement is terminated.

 

11. Purchaser May Perform. If any of Grantors fails to perform any agreement
contained herein, the Purchaser may perform, or cause performance of, such
agreement, and the reasonable out-of-pocket expenses of the Purchaser incurred
in connection therewith shall be payable severally by Grantors.

 

12. Collection of Accounts, General Intangibles and Negotiable Collateral. At
any time upon the occurrence and during the continuance of an Event of Default,
the Purchaser or its designee may notify Account Debtors of any Grantor that the
Accounts, General Intangibles, Chattel Paper or Negotiable Collateral have been
assigned to the Purchaser or that the Purchaser has a security interest therein,
and (b) collect the Accounts, General Intangibles and Negotiable Collateral
directly, and any collection costs and expenses shall constitute part of such
Grantor’s Secured Obligations under the Transaction Documents.

 

 17 

 

 

13. Remedies. Upon the occurrence and during the continuance of an Event of
Default:

 

(a) The Purchaser may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein, in the other Transaction
Documents, or otherwise available to it, all the rights and remedies of a
secured party on default under the Code or any other applicable law. Without
limiting the generality of the foregoing, each Grantor expressly agrees that, in
any such event, the Purchaser without demand of performance or other demand,
advertisement or notice of any kind (except a notice specified below of time and
place of public or private sale) to or upon any of Grantors or any other Person
(all and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the Code or any other applicable law),
may take immediate possession of all or any portion of the Collateral and (i)
require Grantors to, and each Grantor hereby agrees that it will at its own
expense and upon request of the Purchaser forthwith, assemble all or part of the
Collateral as directed by the Purchaser and make it available to the Purchaser
at one or more locations where such Grantor regularly maintains Inventory, and
(ii) without notice except as specified below, sell or otherwise dispose of the
Collateral or any part thereof in one or more parcels at public or private sale
or other disposition, at any of the Purchaser’s offices or elsewhere, for cash,
on credit, and upon such other terms as the Purchaser may deem commercially
reasonable. Without limiting the generality of the foregoing, the Purchaser may
disclaim any and all representations and warranties in connection with any such
sale or other disposition. Each Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten (10) days notice to any of Grantors
of the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification and specifically
such notice shall constitute a reasonable “authenticated notification of
disposition” within the meaning of Section 9-611 of the Code. The Purchaser
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Purchaser may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned.

 

(b) The Purchaser is hereby granted a license or other right to use, without
liability for royalties or any other charge, each Grantor’s labels, Patents,
Copyrights, rights of use of any name, trade secrets, trade names, Trademarks,
service marks and advertising matter, URLs, domain names, industrial designs,
other industrial or intellectual property or any property of a similar nature,
whether owned by any of Grantors or with respect to which any of Grantors have
rights under license, sublicense, or other agreements, (but only to the extent
(i) such license, sublicense or agreement does not prohibit such use by the
Purchaser and (ii) such Grantor will not be in default under such license,
sublicense or other agreement as a result of such use by the Purchaser) as it
pertains to the Collateral, in preparing for sale, advertising for sale and
selling any Collateral, and each Grantor’s rights under all licenses and all
franchise agreements shall inure to the benefit of the Purchaser.

 

 18 

 

 

(c) Any cash held by the Purchaser as Collateral and all cash proceeds received
by the Purchaser in respect of any sale of, collection from, or other
realization in any manner upon all or any part of the Collateral shall be
applied against the Secured Obligations in the order set forth as follows:

 

FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys’ fees) of each of the
Purchaser in connection with enforcing its rights under this Agreement and the
other Transaction Documents; SECOND, to the payment of all accrued and unpaid
fees and interest to the Purchaser on the Note; THIRD to the payment of the
outstanding principal amount of the Note; and FOURTH to the payment of the
surplus, if any, to whoever may be lawfully entitled to receive such surplus.

 

In the event the proceeds of Collateral are insufficient to satisfy all of the
Secured Obligations in full, each Grantor shall remain jointly and severally
liable for any such deficiency.

 

(d) Each Grantor hereby acknowledges that the Secured Obligations arose out of a
commercial transaction.

 

14. Remedies Cumulative. Each right, power, and remedy of the Purchaser as
provided for in this Agreement or in the other Transaction Documents or now or
hereafter existing at law or in equity or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power,
or remedy provided for in this Agreement or in the other Transaction Documents
or now or hereafter existing at law or in equity or by statute or otherwise, and
the exercise or beginning of the exercise by the Purchaser of any one or more of
such rights, powers, or remedies shall not preclude the simultaneous or later
exercise by the Purchaser of any or all such other rights, powers, or remedies.

 

15. Marshaling. The Purchaser shall not be required to marshal any present or
future collateral security (including but not limited to the Collateral) for, or
other assurances of payment of, the Secured Obligations or any of them or to
resort to such collateral security or other assurances of payment in any
particular order, and all of its rights and remedies hereunder and in respect of
such collateral security and other assurances of payment shall be cumulative and
in addition to all other rights and remedies, however existing or arising. To
the extent that it lawfully may, each Grantor hereby agrees that it will not
invoke any law relating to the marshaling of collateral which might cause delay
in or impede the enforcement of the Purchaser’s rights and remedies under this
Agreement or under any other instrument creating or evidencing any of the
Secured Obligations or under which any of the Secured Obligations is outstanding
or by which any of the Secured Obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, each Grantor hereby
irrevocably waives the benefits of all such laws.

 

 19 

 

 

16. Indemnity and Expenses.

 

(a) Each Grantor agrees to indemnify the Purchaser from and against all claims,
lawsuits and liabilities (including reasonable attorneys’ fees) growing out of
or resulting from this Agreement (including enforcement of this Agreement) or
any other Transaction Document to which such Grantor is a party, except claims,
losses or liabilities resulting from the gross negligence or willful misconduct
of the party seeking indemnification as determined by a final non-appealable
order of a court of competent jurisdiction, and subject to any other express
limitations set forth in the Transaction Documents. This provision shall survive
the termination of this Agreement and the repayment of the Secured Obligations.

 

(b) Grantors, jointly and severally, shall, upon demand, pay to the Purchaser
all the fees, costs, charges and expenses which the Purchaser may reasonably
incur in connection with (i) the custody, preservation, use or operation of, or,
upon an Event of Default, the sale of, collection from, or other realization
upon, any of the Collateral in accordance with this Agreement and the other
Transaction Documents, (ii) the exercise or enforcement of any of the rights of
the Purchaser hereunder or (iii) the failure by any of Grantors to perform or
observe any of the provisions hereof.

 

17. Merger, Amendments; Etc. THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No waiver
of any provision of this Agreement, and no consent to any departure by any of
Grantors herefrom, shall in any event be effective unless the same shall be in
writing and signed by the Purchaser, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No amendment of any provision of this Agreement shall be effective unless
the same shall be in writing and signed by the Purchaser and each of Grantors to
which such amendment applies.

 

18. Addresses for Notices. All notices and other communications provided for
hereunder shall be given in the form and manner and delivered to the Purchaser
at its address specified in the Purchase Agreement, and to any of the Grantors
at their respective addresses specified in the Purchase Agreement, as
applicable, or, as to any party, at such other address as shall be designated by
such party in a written notice to the other party.

 

 20 

 

 

19. Continuing Security Interest: Assignments under Credit Agreement. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the Obligations have been
indefeasibly paid in full or otherwise terminated in accordance with the
provisions of the Note and the Purchase Agreement, (b) be binding upon each of
Grantors, and their respective successors and assigns, and (c) inure to the
benefit of, and be enforceable by, the Purchaser, and its successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), the Purchaser may, in accordance with the provisions of the Note and the
Purchase Agreement, assign or otherwise transfer all or any portion of its
rights and obligations under the Note and the Purchase Agreement to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to the Purchaser herein or otherwise without
prior notice or consent to the Grantors. Upon indefeasible payment in full or
other termination of the Obligations in accordance with the provisions of the
Note and the Purchase Agreement, the Security Interest granted hereby shall
automatically terminate and all rights to the Collateral shall automatically
revert to Grantors or any other Person entitled thereto. At such time, upon the
Grantors reasonable request, the Purchaser shall authorize the filing of
appropriate termination statements to terminate such Security Interests and
shall execute and deliver all further instruments and documents, and take all
further action, that may be necessary or that the Grantors may reasonably
request, in order to effectuate the foregoing termination of such Security
Interests. No transfer or renewal, extension, assignment, or termination of this
Agreement, any other Transaction Document, or any other instrument or document
executed and delivered by any Grantor to the Purchaser nor any additional loans
made by the Purchaser to the Grantors, or any of them, nor the taking of further
security, nor the retaking or re-delivery of the Collateral to Grantors, or any
of them, by the Purchaser, shall release any of Grantors from any obligation,
except a release or discharge executed in writing by the Purchaser in accordance
with the provisions of the Note and the Purchase Agreement. The Purchaser shall
not by any act, delay, omission or otherwise, be deemed to have waived any of
its rights or remedies hereunder, unless such waiver is in writing and signed by
the Purchaser and then only to the extent therein set forth. A waiver by the
Purchaser of any right or remedy on any occasion shall not be construed as a bar
to the exercise of any such right or remedy which the Purchaser would otherwise
have had on any other occasion.

 

20. Governing Law.

 

(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER TRANSACTION DOCUMENT IN RESPECT OF
SUCH OTHER TRANSACTION DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO
WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

 

 21 

 

 

(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS SHALL BE TRIED AND LITIGATED
ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS
LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE PURCHASER
ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. PURCHASER AND EACH GRANTOR WAIVE, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 21(b).

 

(c) TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, PURCHASER AND EACH
GRANTOR HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. PURCHASER AND EACH
GRANTOR REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

21. Miscellaneous.

 

(a) This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile or other electronic
method of transmission shall be equally as effective as delivery of an original
executed counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by telefacsimile or other electronic method of
transmission also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement. The
foregoing shall apply to each other Transaction Document mutatis mutandis.

 

(b) Any provision of this Agreement which is prohibited or unenforceable shall
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof in that jurisdiction or affecting
the validity or enforceability of such provision in any other jurisdiction.

 

(c) Headings used in this Agreement are for convenience only and shall not be
used in connection with the interpretation of any provision hereof.

 

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(d) The pronouns used herein shall include, when appropriate, either gender and
both singular and plural, and the grammatical construction of sentences shall
conform thereto.

 

(e) Unless the context of this Agreement or any other Transaction Document
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the terms “includes” and
“including” are not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
or any other Transaction Document refer to this Agreement or such other
Transaction Document, as the case may be, as a whole and not to any particular
provision of this Agreement or such other Transaction Document, as the case may
be. Section, subsection, clause, schedule, and exhibit references herein are to
this Agreement unless otherwise specified. Any reference in this Agreement or in
any other Transaction Document to any agreement, instrument, or document shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein or in the other
Transaction Documents). Any reference herein to the satisfaction or repayment in
full of the Obligations shall mean the repayment in full in cash (or cash
collateralization in accordance with the terms hereof) of all Obligations other
than unasserted contingent indemnification Obligations. Any reference herein to
any Person shall be construed to include such Person’s successors and assigns.
Any requirement of a writing contained herein shall be satisfied by the
transmission of a Record and any Record so transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement
by and through their duly authorized officers, as of the day and year first
above written:

 

  MARINA BIOTECH, INC.         By: /s/ Vuong Trieu   Name: Vuong Trieu   Title:
Executive Chairman         ITHENA PHARMACEUTICALS, INC.         By: /s/ Vuong
Trieu   Name: Vuong Trieu   Title: CFO         CEQUENT PHARMACEUTICALS, INC.    
    By: /s/ Vuong Trieu   Name: Vuong Trieu   Title: President         MDRNA
RESEARCH, INC.         By: /s/ Vuong Trieu   Name: Vuong Trieu   Title:
President         RIVER CHARITABLE REMAINDER UNIT   TRUST, F/B/O ISAAC BLECH,
JULY 20, 1987,   ISAAC BLECH TRUSTEE         By: /s/ Isaac Blech   Name: Isaac
Blech   Title: Trustee

 

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