Exhibit 10.3

EXECUTION COPY

Portions of this Exhibit were omitted and filed separately with the Secretary of
the Commission pursuant to an application for confidential treatment filed with
the Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.
Such omissions are designated as ***.

PLEDGE AND SECURITY AGREEMENT

This PLEDGE AND SECURITY AGREEMENT, dated as of September 30, 2008 (this
“Agreement”), is entered into by and among Unigene Laboratories, Inc.
(“Principal Borrower”), Victory Park Management, LLC (“Victory Park”), as the
collateral agent (the “Collateral Agent”), the holders of the Notes (the
“Holders”), the holders of the Shares (the “Lenders” and together with Victory
Park and the Holders, the “Secured Parties”) and each Person which becomes a
party hereto pursuant to the joinder provisions of Section 20 hereof
(hereinafter Principal Borrower and such other Persons are collectively referred
to as the “Obligors” or individually referred to as an “Obligor”).

WHEREAS:

A. Pursuant to that certain Financing Agreement entered into by and among the
Obligors and the Secured Parties dated as of even date herewith (as modified,
amended, extended, restated, amended and restated or supplemented from time to
time, the “Financing Agreement”) the Holders have agreed to purchase those
certain Senior Secured Notes issued by the Obligors to the Holders due
September 30, 2011 (or other date as set forth therein) in the original
aggregate principal amount of $15,000,000 (as the same may be amended from time
to time, the “Initial Notes”) and may purchase additional Senior Secured Notes
issued by the Obligors to the Holders in the original aggregate principal amount
of up to $5,000,000 (together with the Initial Notes, the “Notes”), from the
Obligors.

B. Pursuant to the Financing Agreement, the Lenders have agreed to purchase
1,125,000 shares of common stock, par value $0.01 per share, of Principal
Borrower (the “Initial Shares”), and may purchase up to 375,000 additional
shares of common stock, par value $0.01 per share, of Principal Borrower
(together with the Initial Shares, the “Shares”), from Principal Borrower.

D. Pursuant to that certain Registration Rights Agreement entered into by and
among Principal Borrower and the Lenders dated as of even date herewith (as
modified, amended, extended, restated, amended and restated or supplemented from
time to time, the “Registration Rights Agreement”), Principal Borrower has
agreed to provide the Lenders with certain registration rights with respect to
the Shares.

E. In order to secure the payment of Principal Borrower under the Notes and as
an inducement to the Holders to purchase the Notes, and in order to secure the
performance of Principal Borrower under the Registration Rights Agreement and as
an inducement to the Lenders to purchase the Shares, Principal Borrower has
agreed to enter into this Agreement for the benefit of the Secured Parties.

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NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings set forth in this Section 1. Terms used but not otherwise
defined in this Agreement that are defined in the UCC shall have the respective
meanings given such terms in the UCC (and if such terms are defined in more than
one article of the UCC, such terms shall have the meaning given in Article 9
thereof), and capitalized terms not otherwise defined herein shall have the
meaning given to them in the Financing Agreement or the Notes, as applicable.

(a) “Collateral” means the following property of the Obligors, whether presently
owned or existing or hereafter acquired or coming into existence and wherever
located, and all additions and accessions thereto and all substitutions and
replacements thereof, and all proceeds, products and accounts thereof,
including, without limitation, all proceeds from the sale or transfer thereof
and of insurance covering the same and of any tort claims in connection
therewith:

(i) all Accounts, Deposit Accounts, Instruments, Documents, Chattel Paper
(whether Tangible Chattel Paper or Electronic Chattel Paper), Goods (including
Inventory, Equipment, Fixtures and Motor Vehicles), Money, Payment Intangibles,
Software, customer lists and other General Intangibles and all Letter-of-Credit
Rights;

(ii) the shares of common stock and preferred stock, or partnership, membership
and other ownership interests, now or hereafter owned by the Obligors (other
than any ownership interests owned by the Obligors in Unigene U.K. Limited)
(collectively, the “Pledged Equity”), provided, however that the foregoing shall
not include shares of common stock, preferred stock or other ownership interests
of a Controlled Foreign Corporation that exceeds 66% of the total combined
voting power of all classes of such stock or other ownership interest entitled
to vote and all certificates evidencing the same, together with, in each case,
all shares, securities, monies or property representing a dividend on any of the
Pledged Equity, or representing a distribution or return of capital upon or in
respect of the Pledged Equity, or resulting from a split up, revision,
reclassification or other like change of the Pledged Equity or otherwise
received in exchange therefor, and any subscription warrants, rights or options
issued to the holders of, or otherwise in respect of, the Pledged Equity (the
Pledged Equity, together with all other certificates, shares, securities,
properties, ownership interests, or moneys, dividends, distributions, returns of
capital subscription, warrants, rights or options as may from time to time be
pledged hereunder pursuant to this clause being herein collectively called the
“Equity Collateral”);

(iii) all Investment Property, Financial Assets and Securities Accounts not
covered by the foregoing clauses (i) and (ii);

(iv) all Intellectual Property;

(v) all commercial tort claims now or hereafter described on Schedule C hereto;

 

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(vi) all other tangible and intangible property of the Obligors, including all
books, correspondence, credit files, records, invoices, tapes, cards, computer
runs and other papers and documents in the possession or under the control of
the Obligors or any computer bureau or service company from time to time acting
for the Obligors; and

(vii) all Proceeds and products in whatever form of all or any part of the other
Collateral, including all rents, profits, income and benefits and all proceeds
of insurance and all condemnation awards and all other compensation for any
event of loss with respect to all or any part of the other Collateral (together
with all rights to recover and proceed with respect to the same), and all
accessions to, substitutions for and replacements of all or any part of the
other Collateral.

(b) “Controlled Account” means the bank accounts (including, without limitation,
all Deposit Accounts and Securities Accounts) of the Obligors, including without
limitation those set forth on Schedule F hereto, but excluding any accounts used
exclusively to fund payroll or any accounts with an average monthly balance of
less than $10,000.

(c) “Controlled Foreign Corporation” shall mean a “controlled foreign
corporation” as defined in the United States Internal Revenue Code of 1986, as
amended from time to time.

(d) “Copyright Licenses” shall mean any and all agreements, licenses and
covenants to which an Obligor is a party providing for the granting of any right
in or to Copyrights or otherwise providing for a covenant not to sue with
respect to a Copyright (whether such Obligor is licensee or licensor
thereunder).

(e) “Copyrights” shall mean all United States and foreign copyrights owned by an
Obligor (including community designs), including but not limited to copyrights
in software (if any) and all rights in and to databases, and all Mask Works (as
defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or
unregistered, moral rights, reversionary interests, termination rights, and,
with respect to any and all of the foregoing: (i) all registrations and
applications therefor, (ii) all extensions and renewals thereof, (iii) all
rights corresponding thereto throughout the world, (iv) all rights to sue for
past, present and future infringements thereof and (v) all Proceeds of the
foregoing, including, without limitation, licenses, royalties, income, payments,
claims, damages and proceeds of suit.

(f) “Event of Default” shall have the meaning ascribed in the Financing
Agreement.

(g) “Intellectual Property” shall mean, collectively, the Copyrights, the
Copyright Licenses, the Patents, the Patent Licenses, the Trade Secrets, the
Trade Secret Licenses, the Trademarks and the Trademark Licenses.

(h) “Obligations” shall have the meaning ascribed in the Financing Agreement.

 

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(i) “Patent Licenses” means all agreements, licenses and covenants to which an
Obligor is a party providing for the granting of any right in or to Patents or
otherwise providing for a covenant not to sue with respect to a Patent (whether
such Obligor is licensee or licensor thereunder).

(j) “Patents” shall mean all United States and foreign patents and certificates
of invention, or similar industrial property rights, and applications for any of
the foregoing owned by an Obligor, including, but not limited to: (i) all
registrations and applications therefor, (ii) all reissues, divisions,
continuations, continuations-in-part, extensions, renewals, and reexaminations
thereof, (iii) all rights corresponding thereto throughout the world, (iv) all
inventions and improvements described therein, (v) all rights to sue for past,
present and future infringements thereof, (vi) all licenses, claims, damages,
and proceeds of suit arising therefrom, and (vii) all Proceeds of the foregoing,
including, without limitation, licenses, royalties, income, payments, claims,
damages, and proceeds of suit.

(k) “Permitted Liens” shall have the meaning ascribed in the Financing Agreement
(excluding clause (i) of the definition thereof).

(l) “Requirements of Laws” means any U.S. federal, state and local, and any
non-U.S. laws, statutes, regulations, rules, codes or ordinances enacted,
adopted, issued or promulgated by any Governmental Authority and applicable to
an Obligor.

(m) “Trade Secret Licenses” shall mean any and all agreements to which an
Obligor is a party providing for the granting of any right in or to Trade
Secrets (whether such Obligor is licensee or licensor thereunder).

(n) “Trade Secrets” shall mean all trade secrets and all other confidential or
proprietary information and know-how owned by an Obligor whether or not such
Trade Secret has been reduced to a writing or other tangible form, including all
documents and things embodying, incorporating, or referring in any way to such
Trade Secret, including but not limited to: (i) the right to sue for past,
present and future misappropriation or other violation of any Trade Secret, and
(ii) all proceeds of the foregoing, including, without limitation, licenses,
royalties, income, payments, claims, damages, and Proceeds of suit.

(o) “Trademark Licenses” means any and all agreements, licenses and covenants to
which an Obligor is a party providing for the granting of any right in or to
Trademarks or otherwise providing for a covenant not to sue or permitting
co-existence with respect to a Trademark (whether such Obligor is licensee or
licensor thereunder).

(p) “Trademarks” means United States and foreign trademarks, trade names,
corporate names, company names, business names, fictitious business names,
Internet domain names, service marks, certification marks, collective marks,
logos, other source or business identifiers, designs and general intangibles of
a like nature owned by an Obligor, all registrations and applications for any of
the foregoing including, but not limited to: (i) all registrations and
applications therefor, (ii) all extensions or renewals of any of the foregoing,
(iii) all of the goodwill of the business connected with the use of and
symbolized by the foregoing, (iv) the right to sue for past, present and future
infringement or dilution of any of the foregoing or for any injury to goodwill,
and (v) all Proceeds of the foregoing, including, without limitation, licenses,
royalties, income, payments, claims, damages, and proceeds of suit.

 

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(q) “Unasserted Contingent Obligations” means Obligations for taxes, costs,
indemnifications, reimbursements, damages and other liabilities (excluding
Obligations (i) in respect of the principal of, and interest and premium (if
any) on, and fees and expenses relating to, any Obligation and (ii) owing under
the Registration Rights Agreement) in respect of which no assertion of liability
(whether oral or written) and no claim or demand for payment (whether oral or
written) has been made (and, in the case of Obligations for indemnification, no
notice for indemnification has been issued by the indemnitee) at such time.

2. GRANT OF SECURITY INTEREST. As an inducement for the Secured Parties to
purchase the Notes and the Shares and to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the
Obligations, each Obligor hereby unconditionally and irrevocably pledges, grants
and hypothecates to the Collateral Agent for the benefit of the Secured Parties
a continuing security interest in and to, a lien upon and a right of set-off
against all of their respective right, title and interest of whatsoever kind and
nature in and to the Collateral (the “Security Interest”).

3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE OBLIGOR. Each
Obligor represents and warrants to, and covenants and agrees with, the
Collateral Agent for the benefit of the Secured Parties as follows:

(a) Such Obligor has the requisite corporate power and authority to enter into
this Agreement and otherwise to carry out its obligations hereunder. The
execution, delivery and performance by such Obligor of this Agreement and the
filings contemplated therein have been duly authorized by all necessary action
on the part of such Obligor and no further action is required by such Obligor.

(b) Such Obligor has no place of business or offices where its books of account
and records are kept (other than temporarily at the offices of its attorneys or
accountants) or places where Collateral is stored or located, except as set
forth on Schedule A attached hereto.

(c) Such Obligor is the sole owner of the Collateral (except for non-exclusive
licenses granted by such Obligor in the ordinary course of business), and,
except for the Permitted Liens and liens in favor of the Secured Parties, such
Collateral is free and clear of any liens, security interests, encumbrances,
rights or claims, and such Obligor is fully authorized to grant the Security
Interest in and to pledge the Collateral. There is not on file in any
governmental or regulatory authority, agency or recording office an effective
financing statement, security agreement, license or transfer or any notice of
any of the foregoing (other than those filed in favor of the Secured Parties)
covering or affecting any of the Collateral except for the Permitted Liens and
liens in favor of the Secured Parties. So long as this Agreement shall be in
effect, such Obligor shall not execute and shall not knowingly permit to be on
file in any such office or agency any such financing statement or other document
or instrument (except to the extent filed or recorded in favor of the Secured
Parties pursuant to the terms of this Agreement and except those arising from
the Permitted Liens).

 

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(d) No part of the Intellectual Property constituting Collateral has been judged
invalid or unenforceable. Except as disclosed in the Schedules to the Loan
Agreement, no written claim has been received that any Intellectual Property or
such Obligor’s use of any Collateral violates the intellectual property rights
of any third party. There has been no adverse decision to such Obligor’s claim
of ownership rights in or rights to use the Collateral in any jurisdiction or to
such Obligor’s right to keep and maintain such Collateral in full force and
effect, and, except as disclosed in the Schedules to the Loan Agreement, there
is no proceeding pending or threatened before any court, judicial body,
administrative or regulatory agency, arbitrator or other governmental authority
contesting or challenging the validity, scope or enforceability of, or an
Obligor’s ownership of or right to use such Collateral.

(e) Such Obligor shall at all times maintain its books of account and records
relating to the Collateral at its principal place of business and its Collateral
at the locations set forth on Schedule A attached hereto and may not relocate
such books of account and records or tangible Collateral unless it delivers to
the Collateral Agent at least 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
UCC and other necessary documents have been filed and recorded and other steps
have been taken to perfect the Security Interest to create in favor of each of
the Secured Parties a valid, perfected and continuing perfected first priority
(except for the Permitted Liens) Lien in the Collateral.

(f) This Agreement creates in favor of the Secured Parties a valid security
interest in the Collateral securing the payment and performance of the
Obligations and, upon making the filings described in clause (g) below with
respect to Collateral that may be perfected by such filing and upon the timely
effecting of actions required by applicable law to perfect security interests in
other Collateral which actions shall be taken by such Obligor (including,
without limitation, the transfer of possession of original certificated
securities together with appropriate transfer instruments and the delivery of
deposit account control agreements), a perfected first priority (except for the
Permitted Liens) Lien in such Collateral.

(g) Such Obligor hereby authorizes each of the Secured Parties to file one or
more financing statements under the UCC, with respect to the Security Interest
with the filing and recording agencies in any jurisdiction deemed necessary or
desirable in the sole and absolute discretion of the Collateral Agent, and to
file the Intellectual Property Security Agreements with the U.S. Patent and
Trademark Office or the U.S. Copyright Office as appropriate. Without limiting
the foregoing, each Obligor authorizes the Collateral Agent to file the UCC
financing statement naming such Obligor as debtor set forth on Exhibit B hereto.

(h) The execution, delivery and performance of this Agreement by such Obligor
does not 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 material agreement, credit facility, debt
or other instrument (evidencing such Obligor’s debt or otherwise) to which such
Obligor is a party or by which any property or asset of such Obligor is bound or
affected. No consent (including, without limitation, any consent from any holder
of stock or other type of ownership interest, any creditors, or any Governmental
Authority that currently regulates the business of such Obligor) is required for
such Obligor to enter into and perform its obligations hereunder.

 

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(i) Such Obligor shall at all times maintain the Liens and Security Interest
provided for hereunder as valid and perfected first priority (except for
Permitted Liens) Liens and Security Interests in the Collateral in favor of the
Secured Parties until this Agreement and the Security Interest hereunder shall
be terminated pursuant to Section 13 hereof. Such Obligor hereby agrees to
defend the same against any and all persons except for the Secured Parties. Such
Obligor shall safeguard and protect all Collateral for the account of the
Secured Parties; provided that an Obligor may, upon 60 days’ prior written
notice to the Collateral Agent, permit to lapse, or become abandoned, cancelled
or expired, items of Intellectual Property (other than items of Intellectual
Property relating to any project or development that has progressed into or
beyond phase one) that an Obligor determines, in the exercise of its reasonable
business judgment, have no material value to the business of such Obligor. Each
Obligor irrevocably authorizes the Secured Parties at any time and from time to
time to file in any filing office in any jurisdiction any initial financing
statement or amendment thereto that indicates the collateral as “all assets” or
“all personal property” of such Obligor or words of similar effect. Such Obligor
will pay the cost of filing the same in all public offices wherever filing is,
or is deemed by the Secured Parties to be, necessary or desirable to effect the
rights and obligations provided for herein. Without limiting the generality of
the foregoing, such Obligor shall pay all fees, taxes and other amounts
necessary to maintain the Collateral and the Security Interest hereunder, and
such Obligor shall obtain and furnish to the Secured Parties from time to time,
upon demand, such releases and/or subordinations of claims and liens which may
be required to maintain the priority of the Security Interest hereunder.

(j) Except for the Permitted Liens and as expressly permitted under the
Financing Agreement, such Obligor will not transfer, pledge, hypothecate,
encumber, license, sell or otherwise dispose of any of the Collateral without
the prior written consent of the Collateral Agent.

(k) Such Obligor shall keep and preserve its Equipment, Inventory and other
tangible Collateral in good condition, repair and order, and shall not operate
or locate any such Collateral (or cause to be operated or located) in any area
excluded from insurance coverage or otherwise prohibited by any applicable
Requirement of Law.

(l) Such Obligor shall, within three (3) Business Days of obtaining knowledge
thereof, advise the Secured Parties promptly, in sufficient detail, of any
substantial change in the Collateral, and of the occurrence of any event which
would have a Material Adverse Effect on the value of the Collateral or on the
Secured Parties’ Lien thereon.

(m) Such Obligor shall promptly execute and deliver to the Secured Parties such
further deeds, mortgages, fixture filings, assignments, security agreements,
financing statements or other instruments, documents, certificates and
assurances and take such further action as any Secured Party may from time to
time request and may in its sole discretion deem necessary to perfect, protect
or enforce its security interest in the Collateral or any additional collateral,
including, without limitation, the execution and delivery of separate mortgages
and fixture filings, which shall be satisfactory to the Secured Parties in their
sole discretion for real or personal property interest.

 

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(n) Such Obligor shall permit the Secured Parties and their representatives and
agents to inspect the Collateral and to make copies of records pertaining to the
Collateral in accordance with the terms of the Financing Agreement.

(o) Such Obligor shall take all steps reasonably necessary to diligently pursue
and seek to preserve, enforce and collect any rights, claims, causes of action
and accounts receivable in respect of the Collateral.

(p) Such Obligor shall within three (3) Business Days notify the Secured Parties
in sufficient detail upon becoming aware of any attachment, garnishment,
execution or other legal process levied against any Collateral and of any other
information received by such Obligor that may materially affect the value of the
Collateral, the Security Interest or the rights and remedies of the Secured
Parties hereunder.

(q) All information heretofore, herein or hereafter supplied to the Secured
Parties by or on behalf of such Obligor with respect to the Collateral is
accurate and complete in all material respects as of the date furnished.

(r) Such Obligor shall, and shall cause its Subsidiaries to, at all times
preserve and keep in full force and effect their respective valid existence and
good standing and any rights, permits, licenses and franchises material to their
businesses.

(s) Such Obligor will not change its name, corporate structure, or identity, or
add any new fictitious name unless it provides at least thirty (30) Business
Days prior written notice to the Collateral Agent of such change and, at the
time of such written notification, such Obligor provides any financing
statements or fixture filings necessary to perfect and continue perfected the
perfected first priority (except for Permitted Liens) Security Interest granted
and evidenced by the Security Documents.

(t) Such Obligor may not consign any of its Inventory or sell any of its
Inventory on bill and hold, sale or return, sale on approval, or other
conditional terms of sale without the consent of the Collateral Agent, which
shall not be unreasonably withheld.

(u) Such Obligor may not relocate its chief executive office to a new location
without providing thirty (30) days prior written notification thereof to the
Secured Parties and so long as, at the time of such written notification, such
Obligor provides any financing statements or fixture filings necessary to
perfect and continue perfected the perfected first priority (except for
Permitted Liens ) Security Interest granted and evidenced by the Security
Documents.

(v) Such Obligor’s exact legal name and jurisdiction of organization is set
forth in the introduction paragraph of this Agreement.

 

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(w) With respect to the Pledged Companies (as set forth in Schedule D):

(i) The Obligors shall deliver, or cause to be delivered, all certificates or
instruments representing or evidencing the Pledged Equity of the Pledged
Companies to the Collateral Agent, which shall be in suitable form for transfer
by delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Collateral
Agent, and each Obligor agrees to execute and deliver, or cause to be executed
and delivered, to the Collateral Agent with respect to each Pledged Company a
Consent, in the form attached hereto as Exhibit A-1, and a Pledge Instruction,
in the form attached hereto as Exhibit A-2 and by this reference each made a
part hereof. The Collateral Agent shall have the right, at any time in its
discretion and without notice to any Obligor, after the occurrence of any Event
of Default, to transfer to or to register in the name of the Collateral Agent or
any of its nominees any or all of such Pledged Equity with respect to such
Pledged Companies. The Collateral Agent shall also have the right at any time,
in connection with exercising its rights hereunder, to exchange certificates or
instruments, if any, representing or evidencing such Pledged Equity for
certificates or instruments of smaller or larger denominations provided that the
aggregate number of interests on such certificates or instruments issued in
exchange thereof shall not exceed the number of interests pledged by the
Obligors in the Pledged Companies;

(ii) in addition, all other steps necessary or advisable under any applicable
law to be taken in order to perfect the first priority (except for Permitted
Liens ) Security Interest granted free from adverse claims hereunder shall be
taken by or on behalf of each Obligor, including without limitation, any
notation on any certificate or instrument representing the Pledged Equity of the
Pledged Companies and any notation on any share register or similar document or
Instrument;

(iii) upon the proper filing of UCC financing statements, which have been
delivered to the Collateral Agent for filing with the Secretary of State of the
jurisdiction of such Obligor’s organization or formation, and/or upon delivery
to the Collateral Agent of certificates representing the Pledged Equity of the
Pledged Companies and the taking of any other steps that may be required in
accordance with this Section 3(w) or otherwise, the pledge of Pledged Equity of
the Pledged Companies pursuant to this Agreement creates a valid and perfected
first priority (except for Permitted Liens) Security Interest free from adverse
claims in the Equity Collateral in respect of the Pledged Companies securing the
payment of the Obligations for the benefit of the Collateral Agent and the
Secured Parties; and

(iv) Schedules D and Schedule E to this Agreement with respect to the Pledged
Companies are true and correct and complete; and without limiting the generality
of the foregoing, the Pledged Equity set forth opposite such Obligor’s name on
Schedule E hereto, constitutes, as of the date hereof, the number of the issued
and outstanding equity interests of each Pledged Company indicated on Schedule D
hereto, the percentage of each Pledged Company indicated on Schedule E hereto
and the Pledged Equity constitutes all of the Equity Interests of any such
Pledged Company owned by such Obligor.

(x) (i) So long as no Event of Default shall have occurred and be continuing,
each applicable Obligor shall be entitled to exercise any and all voting and
other rights pertaining to the Pledged Companies, as applicable, or any part
thereof for any purpose not

 

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inconsistent with the terms of this Agreement and the Transaction Documents;
provided, however, that such Obligor shall not exercise or shall refrain from
exercising any such right if such action or inaction could reasonably be
expected to have a Material Adverse Effect on the value of the Pledged Companies
or any part thereof or be inconsistent with or violate any provisions of this
Agreement and the Transaction Documents.

(ii) So long as no Event of Default shall have occurred and be continuing, each
applicable Obligor shall be entitled to receive all dividends, distributions and
payments paid from time to time in respect of the Collateral, Equity Collateral
and Pledged Companies to the extent permitted by the Transaction Documents.

(iii) So long as an Event of Default has occurred and is continuing, any and all
(A) dividends and other distributions paid or payable in cash in respect of any
Equity Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in-surplus, and (B) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Equity Collateral, shall be in each case
forthwith delivered to the Collateral Agent, to hold and shall, if received by
an Obligor, be received in trust for the benefit of the Collateral Agent and the
Secured Parties, be segregated from the other property or funds of such Obligor,
and be forthwith delivered to the Collateral Agent in the same form as so
received (with any necessary endorsement).

(iv) The Collateral Agent shall execute and deliver (or cause to be executed and
delivered) to the applicable Obligor all such proxies and other Instruments as
such Obligor may reasonably request for the purpose of enabling such Obligor to
exercise the voting and other rights which it is entitled to exercise pursuant
to Section 3(x)(i) above.

(v) All dividends or other distributions which are received by an Obligor
contrary to the provisions of this Section 3(x) shall be received in trust for
the benefit of the Collateral Agent and the Secured Parties, shall be segregated
from other funds of such Obligor and shall be forthwith paid over to the
Collateral Agent in the same form as so received (with any necessary
endorsement).

(vi) Subject to the provisions of Section 4 hereof, upon the occurrence of an
Event of Default, (A) all voting and other rights of an Obligor to exercise the
rights which it would otherwise be entitled to exercise pursuant to
Section 3(x)(i) shall cease, and all such rights shall thereupon (unless
expressly waived by the Collateral Agent) become vested in the Collateral Agent
for the benefit of itself and the Secured Parties, which shall (unless expressly
waived by the Collateral Agent) thereupon have the sole right to exercise such
rights in accordance with Article 5 hereof, and (B) all cash dividends or other
distributions payable in respect of the Pledged Companies shall be paid to the
Collateral Agent, for the benefit of itself and the Secured Parties and such
Obligor’s right to receive such cash payments pursuant to Sections 3(x)(ii) and
3(x)(iii) hereof shall immediately cease.

(y) Schedule F attached hereto correctly sets forth all Controlled Accounts of
each Obligor as of the date hereof. Each Controlled Account is governed by an
account control agreement, in form and substance satisfactory to the Collateral
Agent. Each Obligor agrees that (i) upon the creation of a new Controlled
Account, it will promptly enter into an account control

 

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agreement for such Controlled Account in form and substance satisfactory to the
Collateral Agent, and (ii) no proceeds of any Accounts will be deposited in or
at any time transferred to any Controlled Account other than a Controlled
Account governed by an account control agreement in form and substance
satisfactory to the Collateral Agent.

(z) Except as set forth on Schedule G attached hereto, Obligor owns no motor
vehicles for which a certificate of title has been issued or for which a
certificate of title is required by law and upon acquiring any such motor
vehicle each Obligor shall, at the request of the Collateral Agent, cause the
Collateral Agent to be noted as the first lienholder on the certificate of
title.

(aa) With respect to any Intellectual Property hereafter owned or acquired which
is registered or for which registration is sought, such Obligor shall promptly
(in any event, within 30 days of Obligor acquiring such Intellectual Property)
file, in appropriate form for recordation, an Intellectual Property Security
Agreement covering such Intellectual Property with the U.S. Patent and Trademark
Office or the U.S. Copyright Office, as applicable; provided that, the foreign
equivalents of such filings shall be required only to the extent requested by
Collateral Agent.

(bb) Any default in the observance or performance by such Obligor of any
covenant, condition or agreement contained herein shall constitute an Event of
Default to the extent provided in the Financing Agreement.

4. DUTY TO HOLD IN TRUST. Upon the occurrence of any Event of Default, the
Obligors shall, upon receipt of any revenue, income or other sums subject to the
Security Interest, whether payable pursuant to the Financing Agreement, the
Notes or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the same in trust
for the Collateral Agent on behalf of the Secured Parties and shall forthwith
endorse and transfer any such sums or instruments, or both, to the Collateral
Agent on behalf of the Secured Parties (pro rata in accordance with the then
outstanding principal amount of Notes held by each) for application to the
satisfaction of the Obligations.

5. RIGHTS AND REMEDIES UPON DEFAULT. Upon the occurrence of any Event of
Default, each Secured Party shall have the right to exercise all of the remedies
conferred hereunder and under the Financing Agreement and the Notes, at law and
in equity, and each Secured Party shall have all the rights and remedies of a
secured party under the UCC. Without limitation, each Secured Party shall also
have the following rights and powers:

(a) The Collateral Agent shall have the right to take possession of the
Collateral and, for that purpose, enter (with respect to leased premises, to the
extent permitted by the owner thereof), with the aid and assistance of any
person, any premises where the Collateral, or any part thereof, is or may be
placed and remove the same, and the Obligors shall assemble the Collateral and
make it available to the Collateral Agent at places which the Collateral Agent
shall reasonably select, whether at the Obligors’ premises or elsewhere, and
make available to the Collateral Agent, without rent paid by the Collateral
Agent, all of the Obligors’ respective premises and facilities for the purpose
of the Collateral Agent taking possession of, removing or putting the Collateral
in saleable or disposable form.

 

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(b) The Collateral Agent shall have the right to operate the business of the
Obligors using the Collateral and shall have the right to assign, sell, lease or
otherwise dispose of and deliver all or any part of the Collateral, at public or
private sale or otherwise, either with or without special conditions or
stipulations, for cash or on credit or for future delivery, in such parcel or
parcels and at such time or times and at such place or places, and upon such
terms and conditions as the Collateral Agent may deem commercially reasonable
and in accordance with all applicable laws, all without (except as shall be
required by applicable statute and cannot be waived) advertisement or demand
upon or notice to the Obligors or right of redemption of the Obligors, which are
hereby expressly waived. Upon each such sale, lease, assignment or other
transfer of Collateral, the Collateral Agent may, unless prohibited by
applicable law which cannot be waived, purchase all or any part of the
Collateral being sold, free from and discharged of all trusts, claims, right of
redemption and equities of the Obligors, which are hereby waived and released.

(c) Each of the Obligors agrees that, upon the occurrence of an Event of
Default, Collateral Agent shall have the absolute right to seek the immediate
appointment of a receiver for all or any portion of the Collateral and/or any
other real or personal property of the Obligors given as security for the
payment and performance of the Obligors’ obligations under this Agreement, the
Notes, the Financing Agreement and the other Transaction Documents. Such right
to the appointment of a receiver for the assets of the Obligors shall exist
regardless of the value of the security for the amounts due under the Notes or
secured hereby or of the solvency of any party bound for the payment of such
indebtedness. Obligors hereby irrevocably consent to such appointment and, upon
the occurrence of an Event of Default under Section 10.1(c) or Section 10.1(d)
of the Financing Agreement, waive notice of any application thereof, and agree
that such appointment may be made by Collateral Agent on an ex parte basis.

6. PLEDGED EQUITY. Each Obligor recognizes that, by reason of certain
prohibitions contained in the 1933 Act and applicable state securities laws, the
Collateral Agent may be compelled, with respect to any sale of all or any part
of the Equity Collateral conducted without prior registration or qualification
of such Equity Collateral under the 1933 Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire the
Equity Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. Each Obligor acknowledges that any such
private sale may be at prices and on terms less favorable than those obtainable
through a public sale without such restrictions (including a public offering
made pursuant to a registration statement under the 1933 Act) and,
notwithstanding such circumstances, each Obligor agrees that any such private
sale shall be deemed to have been made in a commercially reasonable manner and
that the Collateral Agent shall have no obligation to engage in public sales and
no obligation to delay the sale of any Equity Collateral for the period of time
necessary to permit the issuer thereof to register it for a form of public sale
requiring registration under the 1933 Act or under applicable state securities
laws, even if such issuer would, or should, agree to so register it. If the
Collateral Agent determines to exercise its right to sell any or all of the
Equity Collateral, upon written request, each Obligor shall and shall cause each
issuer of any Equity Collateral to be sold hereunder, each partnership and each
limited liability company from time to time to furnish to the Collateral Agent
all such information as the Collateral Agent may request in order to determine
the number and nature of interest, shares or other instruments included in the
Equity Collateral which may be sold by the Collateral Agent in exempt
transactions under the 1933 Act and the rules and regulations of the SEC
thereunder, as the same are from time to time in effect.

 

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7. GRANT OF INTELLECTUAL PROPERTY LICENSE. For the purpose of enabling the
Collateral Agent, during the continuance of an Event of Default, to exercise
rights and remedies under Sections 5 and 8 hereof at such time as the Collateral
Agent shall be lawfully entitled to exercise such rights and remedies, and for
no other purpose, each Obligor hereby (a) grants to the Collateral Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to such Obligor) to use, license or
sublicense any of the Intellectual Property now owned or hereafter acquired by
such Obligor, wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout hereof,
subject, in the case of Trademarks, to sufficient rights to quality control and
inspection in favor of such Obligor to avoid the risk of invalidation of said
Trademarks, and (b) irrevocably agrees that the Collateral Agent may sell any of
such Obligor’s Inventory directly to any person, including without limitation
persons who have previously purchased such Obligor’s Inventory from such Obligor
and in connection with any such sale or other enforcement of the Collateral
owned by or licensed to such Obligor and any Inventory that is covered by any
Copyright owned by or licensed to such Obligor, the Collateral Agent may finish
any work in process and affix any Trademark owned by or licensed to such Obligor
and sell such Inventory as provided herein.

8. INTELLECTUAL PROPERTY.

(a) Anything contained herein to the contrary notwithstanding, in addition to
the other rights and remedies provided herein, upon the occurrence and during
the continuation of an Event of Default:

(i) the Collateral Agent shall have the right (but not the obligation) to bring
suit or otherwise commence any action or proceeding in the name of any Obligor,
the Collateral Agent or otherwise, in the Collateral Agent’s sole discretion, to
enforce any Intellectual Property, in which event such Obligor shall, at the
request of the Collateral Agent, do any and all lawful acts and execute any and
all documents required by the Collateral Agent in aid of such enforcement and
such Obligor shall promptly, upon demand, reimburse and indemnify the Collateral
Agent as provided in Section 10 hereof in connection with the exercise of its
rights under this Section, and, to the extent that the Collateral Agent shall
elect not to bring suit to enforce any Intellectual Property as provided in this
Section, each Obligor agrees to use commercially reasonable measures, whether by
action, suit, proceeding or otherwise, to prevent the infringement or other
violation of any of such Obligor’s rights in the Intellectual Property by others
and for that purpose agrees to diligently maintain any action, suit or
proceeding against any Person so infringing as shall be necessary to prevent
such infringement or violation;

(ii) upon written demand from the Collateral Agent, each Obligor shall grant,
assign, convey or otherwise transfer to the Collateral Agent or such Collateral
Agent’s designee all of such Obligor’s right, title and interest in and to the
Intellectual Property to the extent such grant, conveyance or assignment is
permitted under the terms of any applicable licenses and shall execute and
deliver to the Collateral Agent such documents as are reasonably necessary or
appropriate to carry out the intent and purposes of this Agreement;

 

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(iii) each Obligor agrees that such an assignment and/or recording shall be
applied to reduce the Obligations outstanding only to the extent that the
Collateral Agent (or any Secured Party) receives cash proceeds in respect of the
sale of, or other realization upon (including any license proceeds under), the
Intellectual Property;

(iv) within five (5) Business Days after written notice from the Collateral
Agent, each Obligor shall make available to the Collateral Agent, to the extent
within such Obligor’s power and authority, such personnel in such Obligor’s
employ on the date of such Event of Default as the Collateral Agent may
reasonably designate, by name, title or job responsibility, to permit such
Obligor to continue, directly or indirectly, to produce, advertise and sell the
products and services sold or delivered by such Obligor under or in connection
with the Trademarks and Trademark Licenses, such persons to be available to
perform their prior functions on the Collateral Agent’s behalf and to be
compensated by the Collateral Agent at such Obligor’s actual cost, consistent
with the salary and benefit structure applicable to each as of the date of such
Event of Default; and

(v) the Collateral Agent shall have the right to notify, or upon its written
request require each Obligor to notify, any obligors of an Obligor with respect
to amounts due or to become due to such Obligor in respect of the Intellectual
Property, of the existence of the security interest created herein, to direct
such obligors to make payment of all such amounts directly to the Collateral
Agent, and, upon such notification and at the expense of such Obligor, to
enforce collection of any such amounts and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as such
Obligor might have done; provided that:

(1) all amounts and proceeds (including checks and other instruments) received
by Obligor in respect of amounts due to such Obligor in respect of the
Collateral or any portion thereof shall be received in trust for the benefit of
the Collateral Agent hereunder, shall be segregated from other funds of such
Obligor, and shall be forthwith paid over or delivered to the Collateral Agent
in the same form as so received (with any necessary endorsement) to be held as
cash Collateral and applied as provided by Section 9 hereof; and

(2) Obligor shall not adjust, settle or compromise the amount or payment of any
such amount or release wholly or partly any obligor with respect thereto or
allow any credit or discount thereon.

(b) If (i) an Event of Default shall have occurred and, by reason of cure,
waiver, modification, amendment or otherwise, no longer be continuing, (ii) no
other Event of Default shall have occurred and be continuing, (iii) an
assignment or other transfer to the Collateral Agent of any rights, title and
interests in and to the Intellectual Property shall have been previously made
and shall have become absolute and effective, and (iv) the Obligations shall not
have become immediately due and payable, then upon the written request of any
Obligor, the Collateral Agent shall promptly execute and deliver to such
Obligor, at such Obligor’s sole cost and expense, such assignments or other
transfer as may be reasonably

 

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necessary to reassign to such Obligor any such rights, title and interests as
may have been assigned to the Collateral Agent as aforesaid, subject to any
disposition thereof that may have been made by the Collateral Agent; provided,
after giving effect to such reassignment, the Collateral Agent’s security
interest granted pursuant hereto, as well as all other rights and remedies of
the Collateral Agent granted hereunder, shall continue to be in full force and
effect; and provided further, the rights, title and interests so reassigned
shall be free and clear of any other Liens granted by or on behalf of the
Collateral Agent and the Secured Parties.

9. APPLICATIONS OF PROCEEDS. The proceeds of any sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, second, to the attorneys’
fees and expenses incurred by the Collateral Agent in enforcing its rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations to each Secured Party,
and to the payment of any other amounts required by applicable law, after which
the Secured Parties shall pay to the Obligor any surplus proceeds. If, upon the
sale, license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Parties are legally
entitled, the Obligors will be liable for the deficiency, together with interest
thereon, at the Default Rate, and the reasonable fees of any attorneys employed
by the Collateral Agent to collect such deficiency. To the extent permitted by
applicable law, each Obligor waives all claims, damages and demands against the
Secured Parties arising out of the repossession, removal, retention or sale of
the Collateral, unless due to the gross negligence or willful misconduct of the
Collateral Agent. All proceeds hereof or payments under any of the Transaction
Documents shall apply to the Secured Parties on a pro-rata basis, in accordance
with the principal amount of the Notes outstanding at the time of such payment.

10. COSTS AND EXPENSES. The Obligors agree to pay all reasonable out-of-pocket
fees, costs and expenses incurred in connection with any filing required
hereunder, including without limitation, any financing statements pursuant to
the UCC, continuation statements, partial releases and/or termination statements
related thereto or any expenses of any searches reasonably required by any
Secured Party. The Obligors shall also pay all other claims and charges which in
the reasonable opinion of the Collateral Agent might prejudice, imperil or
otherwise affect the Collateral or the Security Interest therein. The Obligors
will also, upon demand, pay to the Collateral Agent the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which the Collateral Agent may incur in
connection with (i) the enforcement of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral or (iii) the exercise or enforcement of any of the rights of
the Secured Parties under the Transaction Documents. Until so paid, any fees
payable hereunder shall be added to the principal amount of the Notes and shall
bear interest at the Default Rate.

11. RESPONSIBILITY FOR COLLATERAL. The Obligors assume all liabilities and
responsibility in connection with all Collateral, and the Obligations shall in
no way be affected or diminished by reason of the loss, destruction, damage or
theft of any of the Collateral or its unavailability for any reason.

 

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12. SECURITY INTEREST ABSOLUTE. All rights of each Secured Party and all
Obligations of the Obligors hereunder shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Notes, the other Transaction Documents or any other agreement entered into
in connection with the foregoing, or any portion hereof or thereof; (b) any
change in the time, manner or place of payment or performance of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from this Agreement, the Notes, the other
Transaction Documents or any other agreement entered into in connection with the
foregoing; (c) any exchange, release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other
collateral for, or any guaranty, or any other security, for all or any of the
Obligations; (d) any action by the Collateral Agent to obtain, adjust, settle
and cancel in its sole discretion any insurance claims or matters made or
arising in connection with the Collateral; or (e) any other circumstance which
might otherwise constitute any legal or equitable defense available to the
Obligors, or a discharge of all or any part of the Security Interest granted
hereby. Until the Obligations shall have been paid and performed in full, the
rights of each Secured Party shall continue even if the Obligations are barred
for any reason, including, without limitation, the running of the statute of
limitations or bankruptcy. Each Obligor expressly waives presentment, protest,
notice of protest, demand, notice of nonpayment and demand for performance. In
the event that at any time any transfer of any Collateral or any payment
received by any Secured Party hereunder shall be deemed by final order of a
court of competent jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United States, or
shall be deemed to be otherwise due to any party other than any Secured Party,
then, in any such event, the Obligors’ obligations hereunder shall survive
cancellation of this Agreement, and shall not be discharged or satisfied by any
prior payment thereof and/or cancellation of this Agreement, but shall remain a
valid and binding obligation enforceable in accordance with the terms and
provisions hereof. Each Obligor waives all right to require a Secured Party to
proceed against any other person or to apply any Collateral which such Secured
Party may hold at any time, or to marshal assets, or to pursue any other remedy.
Each Obligor waives any defense arising by reason of the application of the
statute of limitations to any obligation secured hereby.

13. TERM OF AGREEMENT. This Agreement and the Security Interest shall terminate
on the date on which all payments under the Financing Agreement and the Notes
have been made in full or have been satisfied and all other Obligations (except
for Unasserted Contingent Obligations) have been paid, performed or discharged
in full. Upon such termination, the Collateral Agent, at the request and at the
expense of the Obligors, will join in executing any termination statement with
respect to any financing statement executed and filed pursuant to this
Agreement.

14. POWER OF ATTORNEY, FURTHER ASSURANCES.

(a) Each Obligor authorizes the Collateral Agent, and does hereby make,
constitute and appoint the Collateral Agent and its respective officers, agents,
successors or assigns with full power of substitution, as such Obligor’s true
and lawful attorney-in-fact, with power, in the name of the Collateral Agent or
such Obligor, after the occurrence of an Event of Default, (i) to endorse any
note, checks, drafts, money orders or other instruments of payment

 

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(including payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the Secured Party,
(ii) to sign and endorse any financing statement pursuant to the UCC or any
invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts against Obligors, assignments, verifications and notices in connection
with accounts, and other documents relating to the Collateral, (iii) to pay or
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral, (iv) to demand,
collect, receipt for, compromise, settle and sue for monies due in respect of
the Collateral and (v) generally, to do, at the option of the Collateral Agent,
and at the expense of such Obligor, at any time, or from time to time, all acts
and things, including without limitation, to sell, transfer, lease, license,
pledge, make any agreement with respect to or otherwise deal with the
Collateral, which the Collateral Agent deems reasonably necessary to protect,
preserve and realize upon the Collateral and the Security Interest granted
herein in order to effect the intent of this Agreement, the Financing Agreement
and the Notes all as fully and effectually as such Obligor might or could do;
and such Obligor hereby ratifies all that said attorney shall lawfully do or
cause to be done by virtue hereof. This power of attorney is coupled with an
interest and shall be irrevocable for the term of this Agreement and thereafter
as long as any of the Obligations shall be outstanding.

(b) On a continuing basis, each Obligor will make, execute, acknowledge,
deliver, file and record, as the case may be, with the proper filing and
recording agencies in any jurisdiction, including, without limitation, the
jurisdictions indicated on Schedule B attached hereto, all such instruments, and
take all such action as may reasonably be deemed necessary or advisable, or as
reasonably requested by the Collateral Agent, to perfect the Security Interest
granted hereunder and otherwise to carry out the intent and purposes of this
Agreement, or for assuring and confirming to the Collateral Agent the grant or
perfection of a perfected first priority security interest in all the Collateral
under the UCC (except for the Permitted Liens).

(c) Each Obligor hereby irrevocably appoints the Collateral Agent as such
Obligor’s attorney-in-fact, with full authority in the place and stead of such
Obligor and in the name of such Obligor, from time to time in the Collateral
Agent’s discretion, to file, in its sole discretion, one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of such Obligor where permitted by law.

15. NOTICES. All notices, requests, demands and other communications hereunder
shall be subject to the notice provision of the Financing Agreement.

16. OTHER SECURITY. To the extent that the Obligations are now or hereafter
secured by property other than the Collateral or by the guarantee, endorsement
or property of any other person, firm, corporation or other entity, then the
Collateral Agent shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any Secured Party’s rights and
remedies hereunder.

17. LICENSED COLLATERAL. Notwithstanding any other provision contained herein or
any of the other Transaction Documents, upon the occurrence of an Event of
Default, each Obligor hereby agrees that with respect to any part of the
Collateral which may require the

 

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consent of any third party or third parties in order for such Obligor to
transfer and/or convey its interest in and to such Collateral to the Collateral
Agent, as may be required in accordance herewith, such Obligor agrees to and
shall use commercially reasonable efforts to obtain such consents or approvals
in as expedient manner as practicable.

18. AGENCY.

(a) Appointment. The Secured Parties by their acceptance of the benefits of this
Agreement, hereby designate Victory Park as the Collateral Agent to act as
specified herein. Each Secured Party shall be deemed irrevocably to authorize
the Collateral Agent to take such action on its behalf under the provisions of
the Agreement and any other Transaction Document and to exercise such powers and
to perform such duties hereunder and thereunder as are specifically delegated to
or required of the Collateral Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Collateral Agent may
perform any of its duties hereunder by or through its agents or employees.

(b) Nature of Duties. The Collateral Agent shall have no duties or
responsibilities except those expressly set forth herein. Neither the Collateral
Agent nor any of its partners, members, shareholders, officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such hereunder or in connection herewith or be responsible for the consequence
of any oversight or error of judgment or answerable for any loss, unless caused
solely by its or their gross negligence or willful misconduct as determined by a
final judgment (not subject to further appeal) of a court of competent
jurisdiction. The duties of the Collateral Agent shall be mechanical and
administrative in nature; the Collateral Agent shall not have by reason of this
Agreement or any other Transaction Document a fiduciary relationship in respect
of any Obligor or any Secured Party; and nothing in this Agreement or any other
Transaction Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Collateral Agent any obligations in respect of
this Agreement or any other Transaction Document except as expressly set forth
herein and therein.

(c) Lack of Reliance on the Collateral Agent. Independently and without reliance
upon the Collateral Agent, each Secured Party, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of Principal Borrower and
its subsidiaries in connection with such Secured Party’s investment in Principal
Borrower, the creation and continuance of the Obligations, the transactions
contemplated by the Transaction Documents, and the taking or not taking of any
action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Obligors and their subsidiaries, and of the value of the
Collateral from time to time, and the Collateral Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any
time or times thereafter. The Collateral Agent shall not be responsible to any
Obligor or any Secured Party for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith other than representations made by the
Collateral Agent related to its status as an accredited investor under federal
and state securities laws, or for the execution, effectiveness, genuineness,
validity, enforceability, perfection, collectibility,

 

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priority or sufficiency of the Agreement or any other Transaction Document, or
for the financial condition of any Obligor or the value of any of the
Collateral, or be required to make any inquiry concerning either the performance
or observance of any of the terms, provisions or conditions of the Agreement or
any other Transaction Document, or the financial condition of the Obligors, or
the value of any of the Collateral, or the existence or possible existence of
any default or Event of Default under this Agreement, the Financing Agreement,
the Notes or any of the other Transaction Documents.

(d) Certain Rights of the Collateral Agent. Subject to this Agreement, the
Collateral Agent shall have the right to take any action with respect to the
Collateral, on behalf of all of the Secured Parties. To the extent practical,
the Collateral Agent shall request instructions from the Secured Parties with
respect to any material act or action (including failure to act) in connection
with the Agreement or any other Transaction Document, and shall be entitled to
act or refrain from acting in accordance with the instructions of Secured
Parties that are the Required Holders; if such instructions are not provided
despite the Collateral Agent’s request therefor, the Collateral Agent shall be
entitled to refrain from such act or taking such action, and if such action is
taken, shall be entitled to appropriate indemnification from the Secured Parties
in respect of actions to be taken by the Collateral Agent; and the Collateral
Agent shall not incur liability to any person or entity by reason of so
refraining. Without limiting the foregoing, (i) no Secured Party shall have any
right of action whatsoever against the Collateral Agent as a result of the
Collateral Agent acting or refraining from acting hereunder in accordance with
the terms of the Agreement or any other Transaction Document, and the Obligors
shall have no right to question or challenge the authority of, or the
instructions given to, the Collateral Agent pursuant to the foregoing and
(ii) the Collateral Agent shall not be required to take any action which the
Collateral Agent believes (A) could reasonably be expected to expose it to
personal liability or (B) is contrary to this Agreement, the Transaction
Documents or applicable law.

(e) Reliance. The Collateral Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by the proper person
or entity, and, with respect to all legal matters pertaining to the Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
other experts selected by it. Anything to the contrary notwithstanding, the
Collateral Agent shall have no obligation whatsoever to any Secured Party to
assure that the Collateral exists or is owned by the Obligors or is cared for,
protected or insured or that the liens granted pursuant to the Agreement have
been properly or sufficiently or lawfully created, perfected, or enforced or are
entitled to any particular priority.

(f) Indemnification. To the extent that the Collateral Agent is not reimbursed
and indemnified by the Obligors, the Secured Parties will jointly and severally
reimburse and indemnify the Collateral Agent, in proportion to principal
outstanding amounts of the Notes held at such time, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Collateral Agent in performing
its

 

19

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duties hereunder or under the Agreement or any other Transaction Document, or in
any way relating to or arising out of the Agreement or any other Transaction
Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted solely from the
Collateral Agent’s own gross negligence or willful misconduct. Prior to taking
any action hereunder as Collateral Agent, the Collateral Agent may require each
Secured Party to deposit with it sufficient sums as it determines in good faith
is necessary to protect the Collateral Agent for costs and expenses associated
with taking such action.

(g) Resignation by the Collateral Agent.

(i) The Collateral Agent may resign from the performance of all its functions
and duties under the Agreement and the other Transaction Documents at any time
by giving 30 days’ prior written notice (as provided in this Agreement) to the
Obligors and the Secured Parties. Such resignation shall take effect upon the
appointment of a successor Collateral Agent pursuant to clauses (ii) and
(iii) below.

(ii) Upon any such notice of resignation, the Secured Parties, acting by the
Required Holders, shall appoint a successor Collateral Agent hereunder.

(iii) If a successor Collateral Agent shall not have been so appointed within
said thirty (30) day notice period, the Collateral Agent shall then appoint a
successor Collateral Agent who shall serve as Collateral Agent until such time,
if any, as the Secured Parties appoint a successor Collateral Agent as provided
above. If a successor Collateral Agent has not been appointed within such thirty
(30) day notice period, the Collateral Agent may petition any court of competent
jurisdiction or may interplead the Secured Parties in a proceeding for the
appointment of a successor Collateral Agent, and all fees, including, but not
limited to, extraordinary fees associated with the filing of interpleader and
expenses associated therewith, shall be payable by the Secured Parties on demand
and shall not be part of the Obligations or otherwise be reimbursable by the
Obligors hereunder or under the Transaction Documents.

(iv) Upon the acceptance of any appointment as Collateral Agent hereunder by a
successor Collateral Agent, such successor Collateral Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Collateral Agent and the retiring Collateral Agent shall be
discharged from its duties and obligations under the Agreement. After any
retiring Collateral Agent’s resignation or removal hereunder as Collateral
Agent, the provisions of the Agreement shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Collateral Agent.

(h) Rights with Respect to Collateral. Each Secured Party agrees with all other
Secured Parties and the Collateral Agent (i) that it shall not, and shall not
attempt to, exercise any rights with respect to its Security Interest in the
Collateral, whether pursuant to any other agreement or otherwise (other than
pursuant to this Agreement), or take or institute any action against the
Collateral Agent or any of the other Secured Parties in respect of the
Collateral or its rights hereunder (other than any such action arising from the
breach of this Agreement) and (ii) that such Secured Party has no other rights
with respect to the Collateral other than as set forth in this Agreement and the
other Transaction Documents.

 

20

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(i) The Collateral Agent in its Individual Capacity. The Collateral Agent and
its Affiliates may purchase notes from, make loans to, issue letters of credit
for the account of, accept deposits from and generally engage in any kind of
lending or other business with any party and its Affiliates as though the
Collateral Agent was not the Collateral Agent hereunder. With respect to any
loans, purchases of notes or issuances of credit, if any, made by the Collateral
Agent in its capacity as a Holder, the Collateral Agent in its capacity as a
Secured Party shall have the same rights and powers under this Agreement and the
other Security Documents as any other Secured Parties and may exercise the same
as though it were not the Collateral Agent, and the terms “Secured Party” or
“Secured Parties” shall include the Collateral Agent in its capacity as a
Secured Party.

19. MISCELLANEOUS.

(a) No course of dealing between the Obligors and any Secured Party, nor any
failure to exercise, nor any delay in exercising, on the part of any Secured
Party, any right, power or privilege hereunder, under the Financing Agreement,
the Notes or the other Transaction Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder or thereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.

(b) All of the rights and remedies of each Secured Party with respect to the
Collateral, whether established hereby, under the Financing Agreement, the Notes
or the other Transaction Documents or by any other agreements, instruments or
documents or by law shall be cumulative and may be exercised singly or
concurrently.

(c) This Agreement, along with the other Transaction Documents, constitutes the
entire agreement of the parties with respect to the subject matter hereof and is
intended to supersede all prior negotiations, understandings and agreements with
respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a written
agreement specifically referring to this Agreement and signed by the parties
hereto.

(d) In the event any provision of this Agreement is held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, unless such
provision is narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.

(e) No waiver of any breach or default or any right under this Agreement shall
be considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent breach or
default or right, whether of the same or similar nature or otherwise.

 

21

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(f) This Agreement shall be binding upon and inure to the benefit of each party
hereto and its successors and assigns.

(g) Each party shall take such further action and execute and deliver such
further documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

(h) This Agreement shall be construed and enforced in accordance with, and all
questions concerning the construction, validity, interpretation and performance
of this Agreement and all disputes arising hereunder shall be governed by, the
laws of the State of Illinois, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Illinois or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of Illinois. The parties hereto (a) agree that any legal
action or proceeding with respect to this Agreement or any other agreement,
document, or other instrument executed in connection herewith or therewith,
shall be brought in any state or federal court located within Chicago, Illinois,
(b) irrevocably waive any objections which either may now or hereafter have to
the venue of any suit, action or proceeding arising out of or relating to the
Security Documents, or any other agreement, document, or other instrument
executed in connection herewith or therewith, brought in the aforementioned
courts, and (c) further irrevocably waive any claim that any such suit, action,
or proceeding brought in any such court has been brought in an inconvenient
forum.

(i) OBLIGORS AND SECURED PARTIES IRREVOCABLY WAIVE THE RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS AGREEMENT,
THE FINANCING AGREEMENT, THE NOTES, OR ANY OTHER TRANSACTION DOCUMENT.

(j) This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

20. JOINDER. In the event a party becomes an Obligor (the “New Obligor”)
pursuant to the Joinder Agreement, upon such execution the New Obligor shall be
bound by all the terms and conditions hereof to the same extent as though such
New Obligor had originally executed this Agreement. The addition of the New
Obligor shall not in any manner affect the obligations of the other Obligors
hereunder. Each Obligor and Secured Party acknowledges that the schedules and
exhibits hereto may be amended or modified in connection with the addition of
any New Obligor to reflect information relating to such New Company.

[Signature Pages Follow]

 

22

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the day and year first above written.

 

OBLIGOR AND PRINCIPAL BORROWER:

UNIGENE LABORATORIES, INC.

By:  

/s/ William P. Levy

Name:   Warren P. Levy Title:   President & Chief Executive Officer

[Pledge and Security Agreement]

--------------------------------------------------------------------------------

COLLATERAL AGENT AND SECURED PARTY:

VICTORY PARK MANAGEMENT, LLC

By:  

/s/ Matthew Ray

Name:   Matthew Ray Title:   Manager

SECURED PARTIES:

VICTORY PARK SPECIAL SITUATIONS MASTER FUND, LTD.

By:  

/s/ Scott R. Zemnick

Name:   Scott R. Zemnick Title:   General Counsel

[Pledge and Security Agreement]

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SCHEDULE A

PRINCIPAL PLACES OF BUSINESS AND OTHER

COLLATERAL LOCATIONS OF OBLIGORS

Unigene Laboratories, Inc.

 

1. Chief Executive Office

81 Fulton Street

Boonton, NJ 07005

 

2. Other Collateral Locations

110 Little Falls Road

Fairfield, NJ 07004

83 Fulton Street

Boonton, NJ 07005

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SCHEDULE B

Recording Jurisdiction

Unigene Laboratories, Inc.—Secretary of State of Delaware

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SCHEDULE C

Commercial Tort Claims

None.

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SCHEDULE D

Pledged Companies

None.

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SCHEDULE E

Pledged Equity

 

Obligor

  

Pledged Company

  

Percent of

Pledged

Interests

  

Certificate No.

of Pledged

Interests

  

Pledged Interests as

% of Total Issued

and Outstanding of

Pledged Company

None.

           

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SCHEDULE F

Controlled Accounts

 

Name and Address of Bank

  

Name of Entity on the Account

   Account Number   Type of Account

Wachovia, 27 Bloomfield Av., North Caldwell,
NJ 07006

   Unigene Laboratories, Inc.    ***   ***

Wachovia, 27 Bloomfield Av., North Caldwell,
NJ 07006

   Unigene Laboratories, Inc.    ***   ***

Wachovia, 27 Bloomfield Av., North Caldwell,
NJ 07006

   Unigene Laboratories, Inc.    ***   ***

Wachovia, 27 Bloomfield Av., North Caldwell,
NJ 07006

   Unigene Laboratories, Inc.    ***   ***

Wachovia, 27 Bloomfield Av., North Caldwell,
NJ 07006

   Unigene Laboratories, Inc.    ***   ***

Merrill Lynch, 717 5th Avenue 7th Floor, New York,
NY 10022

   Unigene Laboratories, Inc.    ***   ***

Merrill Lynch, 717 5th Avenue 7th Floor, New York,
NY 10022

   Unigene Laboratories, Inc.    ***   ***

Merrill Lynch, 717 5th Avenue 7th Floor, New York,
NY 10022

   Unigene Laboratories, Inc.    ***   ***

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SCHEDULE G

Motor Vehicles

None.

--------------------------------------------------------------------------------

EXHIBIT A-1

CONSENT

                    , a                      (the “Pledged Company”), hereby
consents and agrees to cause to be registered on its books and records the
pledge of all of             ’s (“Obligor”) right, title and interest in and to
the Pledged Company (as defined in that certain Security Agreement defined
below). The Pledged Company acknowledges that it is familiar with that certain
Pledge and Security Agreement by and among Unigene Laboratories, Inc., Victory
Park Management, LLC, as Collateral Agent, and the other secured parties party
thereto, dated as of September [    ], 2008 (as modified, amended, extended,
restated, amended and restated or supplemented from time to time, the “Security
Agreement”), and agrees that, without the need for any further consent of any
other person, it will abide by all notices and instructions relating to the
Pledged Company sent by the Collateral Agent. All notices to the Pledged Company
should be sent to its address set forth below. Capitalized terms used herein and
not otherwise defined herein shall have the meanings given to such terms in the
Security Agreement.

The Pledged Company agrees that all amounts which it may from time to time owe
to the Obligor under its organizational documents shall, following written
notice by the Collateral Agent to the Pledged Company that an Event of Default
has occurred and is continuing, be paid, in immediately available funds,
directly to the Collateral Agent without off-set or counterclaim for application
on account of the Obligations. In the event the Collateral Agent duly demands
payment from the Pledged Company pursuant to the foregoing Security Agreement
and the Pledged Company shall fail to make payment thereof within 30 days
thereof, the Pledged Company shall pay the Collateral Agent all costs of
enforcing the Collateral Agent’s rights against the Pledged Company (including
attorney’s and paralegal fees) together with interest at the rate set forth in
Notes on all amounts actually found to be owing to the Collateral Agent from the
date of such demand to the date of payment. Any and all payments made by the
Pledged Company to the Collateral Agent in accordance with the preceding
sentence shall be deemed payments to the Obligor.

[signature page follows]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Pledgor has caused this Pledge Instruction to be duly
signed and delivered as of the date first above written.

 

Pledged Company:

[Pledged Company]

By:  

 

Name:  

 

Title:  

 

 

Address:   [                        ] Attention:  
    [                        ] Tel. No.   [                        ] Fax No.  
[                        ] E-mail:   [                        ] With a copy to:

[                        ]

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EXHIBIT A-2

PLEDGE INSTRUCTION

BY THIS PLEDGE INSTRUCTION, dated                  , 20    ,              (the
“Pledgor”), hereby instructs             , a              [corporation] (the
“Pledged Company”), to register a pledge in favor of Victory Park Management,
LLC, as Collateral Agent (“Collateral Agent”) for itself and the Secured Parties
(under and as defined in that certain Financing Agreement and Notes dated as of
September [    ], 2008), of all of the Pledgor’s, right, title and interest in
and to the Pledged Company, whether now owned or hereafter acquired by the
Pledgor (the “Pledged Interest”).

1. PLEDGE INSTRUCTIONS. The Pledged Company is hereby instructed by the Pledgor
to register all of the Pledgor’s right, title and interest in and to all of the
Pledgor’s interests and/or pledged interests in the Pledged Company as subject
to the Transaction Documents in favor of the Collateral Agent (in accordance
with and subject to that certain Security Agreement, in the form attached hereto
as Annex A) which, upon such registration, shall become the registered pledgee
of the Pledged Interest with all rights incident thereto.

2. INITIAL TRANSACTION STATEMENT. The Pledged Company is further instructed by
the Pledgor to promptly inform the Collateral Agent of the registration of the
pledge by sending the initial transaction statement, in the form attached hereto
as Annex B, to Victory Park Management, LLC, as Collateral Agent, 227 West
Monroe Street, Suite 3900, Chicago, Illinois 60606, Attention: Matthew Ray.

3. WARRANTIES OF THE PLEDGOR. The Pledgor hereby warrants that (i) the Pledgor
is an appropriate person to originate this instruction and (ii) the Pledgor is
entitled to effect the instruction contained herein.

[signature page follows]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Pledgor has caused this Pledge Instruction to be duly
signed and delivered as of the date first above written.

 

Pledgor:

[Pledgor]

By:  

 

Name:  

 

Title:  

 

 

Address:   [                        ] Attention:  
    [                        ] Tel. No.   [                        ] Fax No.  
[                        ] E-mail:   [                        ]

With a copy to:

[                        ]

 

--------------------------------------------------------------------------------

ANNEX B

to

Pledge Instruction

Form of Initial Transaction Statement

Victory Park Management, LLC,

as Collateral Agent,

227 West Monroe Street, Suite 3900

Chicago, Illinois 60606

Attention: Matthew Ray

On                     , 20        , the undersigned,                     , a
             [corporation] (the “Pledged Company”), caused the pledge of 100% of
the interests in the Pledged Company (the “Pledged Interest”) by
                , in favor of Victory Park Management, LLC, as Collateral Agent,
to be registered on the books and records of the Pledged Company. Except for the
terms and conditions contained in the [Bylaws] of the Pledged Company, the
Pledged Company has no Liens, restrictions or adverse claims to which the
Pledged Interest is or may be subject, as of the date hereof.

[Pledged Company]

 

By:  

 

Name:   Title:  

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EXHIBIT B

UCC FINANCING STATEMENTS

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