Exhibit 10.2 Security Agreement


    
      

    

                                                                                            Exhibit
      10.2

     

    
 

    SECURITY
      AGREEMENT

    


    This
      Security Agreement (this “Agreement”), dated as of March 20, 2006, is by and
      between SIGA Technologies, Inc., a Delaware corporation with an address at
      420
      Lexington Avenue, Suite 408, New York, New York 10170 (the “Debtor”), and
      PharmAthene, Inc., a Delaware corporation with an address at 175 Admiral
      Cochrane Drive, Suite 101, Annapolis, Maryland 21401 (the
“Holder”).

    


    WITNESSETH

     

    A. The
      Holder has agreed to purchase certain notes (“Notes”) from the Debtor under the
      terms and conditions set forth in that certain Note Purchase Agreement between
      the Holder and the Debtor of even date herewith (the “Purchase
      Agreement”).

     

    B. It
      is a
      condition to the effectiveness of the Purchase Agreement that the Debtor provide
      a security interest to the Holder in certain of its assets under the terms
      and
      conditions of this Agreement to secure its obligations thereunder.

     

    NOW,
      THEREFORE, in consideration of the premises and the mutual covenants and
      agreements contained herein, the parties hereto agree as follows:

     

    SECTION
      I

    DEFINITIONS
      AND OTHER PROVISIONS

     

    1.01 Certain
      Defined Terms

     

    The
      following terms have the following meanings:

     

    “Accounts”
means
      all rights to the payment of money for goods sold or leased or for services
      rendered by the Debtor whether in form of accounts receivable, contract rights,
      chattel paper, instruments, notes, bills, acceptances, general intangibles
      and
      other forms of obligations relating to such rights, together with any property
      evidencing or relating to such rights, including, without limitation, all books,
      records, invoices, magnetic tapes, processing software, processing contracts
      (such as contracts for computer time and services) and any other rights or
      property of the Debtor that is an “account” within the meaning of the
      UCC.

     

    “Chattel
      Paper”
means
      all chattel paper, as that term is defined in the UCC, including without
      limitation any writings which evidence both a monetary obligation and a security
      interest in or a lease of specific goods.

     

    “Collateral”
means
      all tangible and intangible personal property of Debtor including without
      limitation all Accounts, Chattel Paper, Commercial Tort Claims, Deposit
      Accounts, Documents, Equipment, General Intangibles, Instruments, Inventory,
      Investment Property, Intellectual Property and Letters of Credit whether
      presently owned or hereafter acquired together with all supporting obligations
      with respect thereto and all Proceeds thereof, provided, however, that the
      Collateral shall not include the property that is subject to the security
      interest granted in the GE Capital Loan Agreement, which property is listed
      on
      Schedule A hereto and provided further that the Collateral shall not include
      those Material License

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Agreement
      rights that are listed on Schedule 1.01(b), in which the grant to the Holder
      of
      a security interest in those Material License Agreements would result in a
      breach of the terms thereof.

     

    “Commercial
      Tort Claims”
means
      tort claims of the Debtor arising from time to time including the commercial
      tort claims listed on Schedule B.

     

    “Deposit
      Accounts”
means
      all demand, time, savings, passbook or like accounts maintained with a bank,
      savings and loan association, credit union or like organization including an
      account evidenced by a certificate of deposit.

     

    “Documents”
means
      all documents, as that term is defined in the UCC, including but not limited
      to
      documents of title (as that term is defined in the UCC) and any and all receipts
      of the kind described in Article 7 of the UCC.

     

    “Equipment”
means
      all machinery, apparatus, equipment, fittings and other tangible personal
      property (other than Inventory) of every kind and description owned by the
      Debtor, whether or not affixed to realty, including without limitation, all
      motor vehicles, trucks, trailers, handling and delivery equipment, cranes,
      hoisting equipment, fixtures, office machines and furniture, together with
      all
      accessions, replacements, rights under any manufacturer’s warranties relating to
      the foregoing and any other rights or property of the Debtor that is equipment
      within the meaning of the UCC.

     

    “GAAP”
means
      generally accepted accounting principles in the United States of America in
      effect from time to time.

     

    “GE
      Capital Agreement”
means
      the Master Security Agreement between General Electric Capital Corporation
      and
      Debtor, dated as of April 29, 2005.

     

    “General
      Intangibles”
means
      all general intangibles, as that term is defined in the UCC, including, without
      limitation, all choses in action, causes in action, designs, plans, goodwill,
      all intellectual property and tax refunds.

     

    “Governmental
      Authority”
means
      any nation or government, any state or other political subdivision thereof
      and
      any entity exercising executive, legislative, judicial, regulatory or
      administrative functions of or pertaining to government.

     

    “Instruments”
means
      instruments, as that term is defined in the UCC, including without limitation
      bills of exchange, notes and all negotiable instruments, all certificated
      securities, all certificates of deposit and any other writing which evidences
      a
      right to payment of money and is a type which is in the ordinary course of
      business transferred by delivery with any necessary endorsement or
      assignment.

     

    “Intellectual
      Property”
means
      each patent, patent application, copyright registration or application
      therefore, mask work registration or application therefore, and trademark,
      trademark application, trade name, service mark and domain name registration
      or
      application therefore owned by the Corporation, licensed by the Corporation
      or
      otherwise used by the Corporation, whether presently owned or hereafter
      acquired, including, without limitation,

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    those
      listed on Schedule 1.01(a) and Schedule 1.01(b) attached hereto, all proceeds
      thereof, all rights corresponding thereto and all reissues, divisions,
      continuations, renewals, extensions and continuations-in-part thereof, and
      the
      recordings and applications therefore.

     

    “Inventory”
means
      all goods intended for sale or lease by the Debtor, of every nature, kind and
      description wherever located, including without limitation raw materials, goods,
      work in process and finished goods and all goods returned or reclaimed from
      customers, together with any other rights or property of the Debtor that is
      inventory within the meaning of the UCC.

     

    “Investment
      Property”
means
      (i) all securities, or securities certificates or uncertificated securities
      representing the securities, (ii) security entitlements, (iii) securities
      accounts, (iv) commodity contracts, or (v) commodity accounts.

     

    “Letters
      of Credit”
means
      all letters of credit including, but not limited to, any written undertaking
      to
      pay money conditioned upon the presentation of specified documents and advances
      of letters of credit, and including all letters of credit rights as defined
      in
      the UCC.

     

    “Liens”
means
      any mortgage, pledge, hypothecation, assignment, deposit arrangement,
      encumbrance, lien (statutory or other), or preference, priority or other
      security agreement or preferential arrangement of any kind or nature whatsoever
      (including, without limitation, the filing of any financing statement under
      the
      UCC or comparable law of any jurisdiction in respect of any of the
      foregoing).

     

    “Noteholders”
means
      at any time and from time to time, the holders of the Notes issued under the
      Purchase Agreement, their successor, transferees and assigns.

     

    “Permitted
      Liens”
means:
      ”: (i) Liens set forth on Schedule C, (ii) Liens currently existing as of the
      date of this Agreement under the GE Capital Agreement, (iii) Liens in favor
      of
      the Holder, (iii) Liens for taxes, fees, assessments or other government charges
      or levies, either not delinquent or being contested in good faith by appropriate
      proceedings; provided that adequate reserves with respect to such taxes, fees,
      assessments or other government charges or levies which are being contested
      are
      maintained on the books of the Debtor, in conformity with GAAP, (v) pledges
      or
      deposits in connection with workers’ compensation, unemployment insurance and
      other social security legislation, (vi) purchase money Liens not relating to
      any
      obligations in excess of $20,000 (A) on assets acquired or held by Debtor
      incurred for financing the acquisition of such assets, or (B) existing on such
      asset when acquired; provided
      that
      such Liens are in each case confined to the property and improvements and the
      proceeds of such assets, and (vii) leases or subleases and non-exclusive
      licenses or sublicenses, not representing obligations of the Debtor in excess
      of
      $50,000 per year, granted in the ordinary course of the Debtor’s business.


     

    “Proceeds”
means
      all proceeds as that term is defined in the UCC including without limitation
      whatever is received upon the use, lease, sale, exchange, collection, any other
      utilization of any disposition of any property whether or not in cash, all
      rental or lease payments, accounts, chattel paper, instruments, documents,
      general intangibles, equipment, inventory,

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    substitutions,
      additions, accessions, replacements, products and renewals of, for, or to such
      property and all insurance therefore.

     

    “Purchase
      Agreement”
has
      the
      meaning assigned in the Recitals to this Agreement.

     

    “Requirement
      of Law”
as
      to
      any person, the Certificate of Incorporation and By-Laws or other organizational
      or governing documents of such person, and any law, treaty, rule or regulation
      or determination of an arbitrator or a court or other Governmental Authority,
      in
      each case applicable to or binding upon such person or any of its property
      or to
      which such person or any of its material property is subject.

     

    “Secured
      Obligations”
means
      all present and future obligations of the Debtor arising under the Purchase
      Agreement, the Notes issued thereunder, this Agreement and any present or future
      obligations of the Debtor to the Holder or the Noteholders whether direct or
      indirect, joint or several, secured or unsecured, primary or secondary, absolute
      or contingent, which are due or that may become due whether contracted, acquired
      or arising by operation of law including interest accruing during the pendency
      of any bankruptcy, insolvency, receivership or other similar proceeding,
      regardless of whether allowed or allowable in such proceeding.

     

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

     

    1.02 Other
      Definitional Provisions

     

    a. As
      used
      herein and in any certificate or other document made or delivered pursuant
      hereto or thereto, accounting terms not defined in Subsection 1.01 shall have
      the respective meanings given to them under GAAP.

     

    b. The
      words
“hereof”, “herein” and “hereunder” and words of similar import when used in this
      Agreement shall refer to this Agreement as a whole and not to any particular
      provision of this Agreement, and section, subsection schedule and exhibit
      references are to this agreement unless otherwise specified. The meaning of
      defined terms shall be equally applicable to the singular and plural forms
      of
      the defined terms.

     

    SECTION
      II

    SECURITY
      INTERESTS

     

    2.01 Grant
      of Security Interest

     

    The
      Debtor hereby grants to the Holder, a first lien on and a security interest
      in
      the Collateral to secure the prompt and complete payment and performance when
      due (whether at the stated maturity, by acceleration or otherwise) of the
      Secured Obligations.

     

    2.02 Failure
      to Perform Agreements

     

    If
      the
      Debtor fails to perform or comply with any of its agreements contained herein
      or
      in the Purchase Agreement then the Holder may, on behalf of the Debtor and
      on
      five (5)
      days
      advance written notice to the Debtor, perform or comply, or otherwise cause
      performance or compliance with such agreement in order to provide for protection
      of the value of the Collateral. Debtor shall reimburse the Holder for all
      amounts expended in connection with such payment, performance or compliance,
      together with interest thereon at a rate equal to a rate per annum equal to
      3%
      per annum, such interest to be calculated from the date of such advance to
      the
      date of repayment thereof, shall be payable by the Debtor to the Holder ten
      (10)
      business days following demand for payment by the Holder.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    2.03 Holder’s
      Appointment as Attorney-in-Fact

     

    Subject
      to the agreement of the Holder in the last sentence of this Section 2.03 and
      only to exercise the following rights during the existence of an Event of
      Default the Debtor, hereby irrevocably constitutes and appoints the Holder
      and
      any officer or agent thereof, with full power of substitution, as its true
      and
      lawful attorney-in-fact with full irrevocable power and authority in the place
      and stead of the Debtor and in the name of the Debtor or in its own name, from
      time to time in the Holder’s discretion, for the purpose of carrying out the
      terms of this Agreement, to take any and all appropriate action and to execute
      any and all documents and instruments which may be necessary or desirable to
      accomplish the purposes of this Agreement, and, without limiting the generality
      of the foregoing, the Debtor hereby gives the Holder the power and right, on
      behalf of the Debtor without notice to or assent by the Debtor, to do the
      following:

     

    a. to
      take
      possession of and endorse and collect any checks, drafts, notes, acceptances
      or
      other instruments for the payment of moneys due under any Collateral and to
      file
      any claim or to take any other action or proceeding in any court of law or
      equity or otherwise deemed appropriate by the Holder for the purpose of
      collecting any and all such moneys due under any Collateral whenever
      payable;

     

    b. to
      pay or
      discharge taxes and Liens levied or placed on or threatened against the
      Collateral, to effect any repairs or any insurance called for by the terms
      of
      this Agreement and to pay all or any part of the premiums therefore and the
      costs thereof;

     

    c. to
      direct
      any party liable for any payment under any of the Collateral to make payment
      of
      any and all moneys due or to become due thereunder directly to the
      Holder;

     

    d. to
      ask or
      demand for, or collect, receive payment of and receipt for, any and all moneys,
      claims and other amounts due or to become due at any time in respect of or
      arising out of any Collateral;

     

    e. to
      sign
      and endorse any invoices, freight or express bills, bills of lading, storage
      or
      warehouse receipts, drafts against debtors, assignments, verifications, notices
      and other documents in connection with any of the Collateral;

     

    f. to
      commence and prosecute any suits, actions or proceedings at law or in equity
      in
      any court of competent jurisdiction to collect the Collateral or any portion
      thereof and to enforce any other right in respect of any
      Collateral;

     

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    g.
      to
      defend any suit, action or proceeding brought against the Debtor with respect
      to
      any Collateral;

     

    h. to
      settle, compromise or adjust any suit, action or proceeding described above
      and,
      in connection therewith, to give such discharges or releases as the Holder
      may
      deem appropriate;

     

    i. generally,
      to sell, transfer, pledge and make any agreement with respect to or otherwise
      deal with any of the Collateral as fully and completely as though the Holder
      were the absolute owner thereof for all purposes, and to do, at the Holder’s
      option and the Debtor’s expense, at any time, or from time to time, all acts and
      things which the Holder deems necessary to protect, preserve or realize upon
      the
      Collateral and the Security Interests thereon in order to effect the intent
      of
      this Agreement, all as fully and effectively as the Debtor might do;
      and

     

    j. in
      connection with the sale of Collateral provided for herein, execute any
      endorsements, assignments or other instruments of conveyance or transfer with
      respect to the Collateral.

     

    This
      power of attorney is a power coupled with an interest and shall be irrevocable
      during the existence of an Event of Default and shall be automatically revoked
      without any action on the part of the Debtor once the Event of Default giving
      rise to such power of attorney has been cured. The powers conferred on the
      Holder hereunder are solely to protect the Holder’s interest in the Collateral
      and shall not impose any duty upon the Holder to exercise any such powers.
      The
      Holder shall be accountable only for amounts that it actually receives as a
      result of the exercise of such powers, and neither it nor any of its officers,
      directors, employees or agents shall be responsible to the Debtor for any act
      or
      failure to act hereunder, except for its own gross negligence or willful
      misconduct. The Holder shall only exercise the foregoing power of attorney
      during the existence of an Event of Default; provided that any person relying
      on
      the authority of the Holder under this power of attorney may rely exclusively
      upon the representation of the Holder as to its authority hereunder and with
      respect to the Holder’s right to exercise the powers granted above, shall not be
      under any obligation to determine whether an Event of Default exists at the
      time
      the Holder attempts to exercise the powers granted above, and may disregard
      any
      claim by the Debtor to the contrary. If the Holder transfers the Notes or any
      portion thereof to any other parties, the Holder will provide for appropriate
      considerations such that any action of the Holder may be taken either by a
      majority in interest of the Holders or by a collateral agent to be appointed
      by
      the Holder or Holders.

     

    SECTION
      III

    REPRESENTATIONS
      AND WARRANTIES

     

    3.01 Power
      and Authority

     

    The
      Debtor has the power and authority to execute and deliver, to perform its
      obligations under, this Agreement, and to grant the security interest in and
      lien on the Collateral pursuant to, this Agreement. The Debtor has taken all
      necessary action to authorize the execution,
      delivery and performance of this Agreement, and the grant of the security
      interest in the Collateral pursuant to this Agreement.

     

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    3.02
      Title; No Other Liens

     

    Except
      for Permitted Liens and as otherwise listed on Schedule D, the Debtor owns
      each
      item of Collateral free and clear of any and all Liens or claims of others.
      No
      security agreement, financing statement or other public notice with respect
      to
      all or any part of the Collateral is on file or of record in any public office
      except as may have been filed in favor of the Holder, the holders of Permitted
      Liens or as reflected on such schedule.

     

    3.03 Perfected
      First Security Interest

     

    To
      the
      extent that perfection may be accomplished by filing a UCC financing statement
      the security interests granted herein will, upon such filing, constitute a
      first
      priority perfected security interest in the Collateral in favor of the Holder
      enforceable against all creditors of the Debtor except the holders of Permitted
      Liens.

     

    3.04 Intellectual
      Property.

     

    All
      the
      Intellectual Property, if any, owned or licensed by the Debtor, used by the
      Debtor or in which the Debtor may have an interest and is material to the
      business of the Debtor is listed on Schedule 1.01(a)
      and
      Schedule 1.01(b).
      Each
      item of Intellectual Property owned by or licensed to the Debtor or in which
      the
      Debtor has a right is (i) valid, subsisting, existing, unexpired, enforceable
      and has not been abandoned, (ii) not the subject of any holding, decision or
      judgment by any Governmental Authority which would limit, cancel or question
      its
      validity, (iii) not the subject of any action or proceeding (A) seeking to
      limit, cancel or question its validity, or (B) which, if adversely determined,
      would have a material adverse effect on its value, and (iv) to the knowledge
      of
      the Debtor, the use of the Intellectual Property does not infringe upon the
      rights of any Person. The Debtor owns all rights to all patents relating to
      SIGA
      246, as defined in the Purchase Agreement. None
      of
      the aspects of the use by the Debtor of SIGA 246 are subject to any license
      or
      license agreement from any third party, or, to the extent that it would
      adversely affect the rights of Holder hereunder, to any third party.


     

    SECTION
      IV

    COVENANTS

     

    4.01 Further
      Documentation; Financing Statements

     

    At
      any
      time and from time to time, upon the written request of the Holder, and at
      the
      sole expense of the Debtor, the Debtor will promptly and duly execute and
      deliver such further instruments and documents and take such further action
      as
      the Holder may reasonably request for the purpose of obtaining or preserving
      the
      full benefits of this Agreement and of the rights and powers herein granted,
      including, without limitation, any financing or continuation statements under
      the law of any jurisdiction with respect to the Liens created hereby or any
      Patent Assignment of Security Interest or Trademark Collateral Assignment with
      the United States Patent and Trademark Office with respect tot the Intellectual
      Property. The Debtor hereby authorizes the Holder to file any such financing
      or
      continuation statement without the signature of the Debtor to the extent
      permitted by applicable law. The Debtor authorizes the Holder to execute and
      file, in the name of the Debtor or otherwise, UCC-1 financing statements which
      the Holder in its sole discretion may deem necessary or appropriate to further
      perfect its security interest in the Collateral. The Debtor agrees and
      authorizes that a carbon, photographic or other reproduction of this Agreement
      may be used as a financing statement for filing in any
      jurisdiction.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    4.02 Intellectual
      Property.

     

    a. Upon
      request of the Holder, the Debtor shall execute and deliver any and all
      agreements, instruments, documents, and papers as the Holder may request to
      evidence the Holder’s security interests in any patent, trademark or copyright
      and any goodwill, know-how, trade secrets
      and
      general intangibles of the Debtor relating thereto or represented thereby.
      The
      agreements evidencing the Holder's security interest in such patents, trademark
      or copyrights will contain terms reasonably satisfactory to the
      Holder.

     

    b. The
      Debtor shall, consistent with its past practices, take whatever action is
      necessary to protect its rights in any patents, trademarks or copyrights. The
      Debtor (either itself or through licensees) will take all commercially
      reasonable steps to not allow any third party to infringe on any of its patents,
      trademarks or copyrights.

     

    4.03 Maintenance

     

    Subject
      to Section 4.07 herein, the Debtor will keep and maintain at its own cost and
      expense reasonably satisfactory and complete records of the Collateral,
      including, without limitation, a record of all payments received and all credits
      granted with respect to the Accounts. The Debtor will maintain each item of
      Equipment in good operating condition, ordinary wear and tear excepted, and
      will
      provide all maintenance, service and repairs necessary for such
      purpose.

     

    4.04 Compliance
      with Laws, etc.

     

    The
      Debtor will comply in all material respects with all Requirements of Law
      applicable to the Collateral or any part thereof or to the operation of the
      Debtor’s business.

     

    4.05 Payment
      of Obligations

     

    The
      Debtor will pay promptly when due all taxes, assessments and governmental
      charges or levies imposed upon the Collateral or in respect of its income or
      profits therefrom, as well as all claims of any kind (including, without
      limitation, claims for labor, materials and supplies) against or with respect
      to
      the Collateral, except that no such charge need be paid if (a) the validity
      thereof is being contested in good faith by appropriate proceedings, (b) such
      proceedings do not involve any material danger of the sale, forfeiture or loss
      of any of the Collateral or any interest therein, and (c) such charge is
      adequately reserved against on the Debtor’s books in accordance with
      GAAP.

     

    4.06 Limitation
      on Liens

     

    The
      Debtor will not create, incur or permit to exist, will defend the Collateral
      against, and will take such other action as is reasonably necessary to remove,
      any Lien or claim on or to the Collateral other than Permitted Liens, and will
      defend the right, title and interest of the Holder in and to any of the
      Collateral against the claims and demands of all persons other than the holders
      of Permitted Liens.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    4.07 Limitations
      on Disposition of Collateral

     

    The
      Debtor will not sell, transfer, lease or otherwise dispose of any of the
      Collateral, except for (a) collection of Accounts in the ordinary course of
      business, (b) sales of Inventory in the ordinary course of business, or (c)
      sales of Equipment which is obsolete and/or not of material value.

     

    4.08 Limitations
      on Modifications to Accounts

     

    The
      Debtor will not (a) amend, modify, terminate or waive any provision of any
      agreement giving rise to an Account in any manner which could reasonably be
      expected to materially adversely affect the value of the Collateral as a whole,
      (b) fail to exercise promptly and diligently material rights giving rise to
      Accounts (other than any right of termination), or (c) fail to deliver to the
      Holder a copy of each material demand, notice or document received by it
      relating in any way to any agreement giving rise to an Account that could
      reasonably be expected to materially adversely affect the value of the
      Collateral as a whole.

     

    4.09 Limitations
      on Discounts, Compromises, Extensions of Accounts

     

    Other
      than in the ordinary course of business, the Debtor will not grant any extension
      of time of payment of any of the Accounts, compromise, compound or settle the
      same for less than the full amount thereof, release, wholly or partially, any
      person liable for the payment thereof, or allow any credit or discount
      whatsoever thereon.

     

    4.10 Insurance

     

    a. The
      Debtor will maintain, with financially sound and reputable companies insurance
      policies (i) insuring any tangible Collateral against loss by fire, explosion,
      theft and such other casualties as are usually insured against in the same
      general area by companies engaged in the same or similar business, and (ii)
      insuring the Debtor and the Holder against liability for personal injury and
      property damage relating to the Collateral.

     

    b. Subject
      to the prior rights of any other holders of Permitted Liens and the other
      holders of any capital leases or purchase money liens and only during the
      existence of an Event of Default, in the event the Collateral is impaired:
      (i)
      the Debtor hereby authorizes and directs payment directly and solely to the
      Holder of any proceeds of any such policy of insurance; (ii) the Holder is
      hereby authorized to adjust and compromise any loss under any such policies
      and
      to collect and receive all such proceeds; (iii) the Holder is hereby authorized
      to execute and endorse in the Debtor’s name all proofs of loss, drafts, checks
      and other documents necessary to accomplish such collection and any person
      making payment to the Holder is hereby relieved from obligation to see to the
      application of the sums so paid.

     

    c. After
      deduction from any proceeds of any such insurance of all costs and expenses
      incurred by the Holder in collection and handling of such proceeds, the net
      proceeds may be applied, at the Holder's option, either toward replacing or
      restoring the Collateral or as a credit against the Secured Obligations, whether
      matured or unmatured.

     

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    4.11 Further
      Identification of Collateral

     

    The
      Debtor will furnish to the Holder from time to time statements and schedules
      but
      no more than twice annually further identifying and describing the Collateral
      and such other reports in connection with the Collateral as the Holder may
      reasonably request, all in reasonable detail.

     

    4.12 Notices

     

    The
      Debtor will advise the Holder promptly, in reasonable detail (a) of any Lien
      (other than Liens created hereby, Permitted Liens, and any other Liens permitted
      to exist on the Collateral under the Purchase Agreement) on, or claim asserted
      against, any of the Collateral in excess of $25,000; and (b) of the occurrence
      of any other event which could reasonably be expected to have a material adverse
      effect on the aggregate value of the Collateral or on the Liens created
      hereunder.

     

    4.13 Changes
      in Locations, Name, etc.

     

    The
      Debtor will not (a) change the location of its chief executive office/chief
      place of business from that specified in this Agreement or remove its books
      and
      records from the location specified in this Agreement, (b) permit any of the
      Inventory to be kept at a location other than those listed in this Agreement,
      or
      (c) change its name, identity or structure to such an extent that any financing
      statement filed by the Holder in connection with this Agreement would become
      seriously misleading, unless it shall have given the Holder at least 5 days
      prior written notice thereof.

     

    4.14 Commercial
      Tort Claims

     

    The
      Debtor shall notify the Holder of any Commercial Tort Claim that may arise
      from
      time to time and execute documents, including a supplementary security agreement
      and additional financing statements as the Holder may reasonably request so
      that
      the Holder is at all times the holder of a perfected security interest (to
      the
      extent that such security interest can be perfected by filing a UCC Statement)
      in such claims.

     

    SECTION
      V

     

    EVENT
      OF DEFAULT AND REMEDIES

     

    5.01 Events
      of Default

     

    An
“Event
      of Default” under the terms of the Purchase Agreement shall constitute an “Event
      of Default” under this Agreement.

     

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    5.02
      General

     

    During
      the existence of an Event of Default, the Holder may exercise, in addition
      to
      all other rights and remedies granted in this Agreement and in any other
      instrument or agreement securing, evidencing or relating to the obligations
      of
      the Debtor, all rights and remedies of a secured party upon default under the
      UCC.

     

    5.03 With
      respect to Accounts and General Intangibles

     

    During
      the existence of an Event of Default:

     

    a. if
      the
      Holder shall so request, the Debtor shall forthwith do one or more of the
      following: (i) legend, in form and manner acceptable to the Holder, its books,
      records and documents evidencing or pertaining to its Accounts and General
      Intangibles with an appropriate reference to the fact that such Collateral
      has
      been assigned to the Holder and that the Holder has a security interest therein
      and notify any person with an obligation with respect to such Collateral of
      the
      Holder’s security interest therein, (ii) account for and transmit to the Holder,
      in the same form as received, all proceeds of collection of such Collateral
      received by the Debtor and, until so transmitted, hold the same in trust for
      the
      Holder and not commingle such proceeds with any other of its funds, (iii)
      deliver, at its own expense, any or all books, record or other documents
      relating to such Collateral to the Holder at a place designated by the Holder,
      and (iv) notify the obligors on such Collateral that the Accounts and General
      Intangibles of the Debtor have been assigned to the Holder and that payments
      in
      respect thereof shall be made directly to the Holder.

     

    b. the
      Holder, without notice to, or assent by, the Debtor and in the name of the
      Debtor or its own name, or otherwise, may (but need not) (i) notify the obligors
      of any of the Debtor’s Accounts or General Intangibles to make payments thereon
      directly to the Holder; (ii) ask for, demand, collect, receive, compound and
      give acquittance for such Collateral or any part thereof; (iii) extend the
      time
      of payment for such Collateral or compromise or settle any such Collateral
      for
      cash, credit or otherwise, and upon any terms and conditions; (iv) endorse
      the
      name of the Debtor on any check, draft or other order or instrument for the
      payment of moneys payable to the Debtor which has been issued in respect of
      such
      Collateral; (v) file any claims and commence, maintain or discontinue any
      action, suits or other proceedings deemed by the Holder necessary or advisable
      for the purpose of collecting or enforcing payment of any such Collateral;
      (vi)
      at the Holder’s sole discretion make test verifications of such Collateral or
      any portion thereof; (vii) execute any instrument and do any and all other
      things necessary and proper to protect and preserve and realize upon such
      Collateral and other rights contemplated hereby; and (viii) without obligation
      to resort to other security, at any time and from time to time, sell, re-sell,
      assign and deliver all or any of such Collateral, in one or more parcels at
      the
      same or different times, and all right, title and interest, claim and demand
      therein and any right of redemption thereof, at public or private sale, for
      cash, upon credit or for future delivery and at such price or prices and on
      such
      terms as the Holder may determine, with the proceeds thereof to be applied
      in
      the manner provided herein.

     

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    The
      Debtor hereby agrees that the Holder may exercise the rights and remedies
      provided herein and that the exercise of such rights and remedies by the Holder,
      including, without limitation, the sale of Accounts or General Intangibles,
      may
      be accomplished without demand, advertisement or notice (except as required
      by
      law) all of which (to the extent permitted by law) are hereby expressly waived.
      If any notice of a proposed sale or other disposition of such Collateral shall
      be required by law, such notice shall be deemed reasonable and proper if given
      at least 10 days before such sale or other disposition. The Holder shall not
      be
      obligated to make any sale regardless of notice of sale having been given.
      The
      Holder may adjourn any public or private sale from time to time by announcement
      at the time and place fixed therefore, and such sale may, without further
      notice, be made at the time and place to which it was so adjourned. The Holder
      shall not be obligated to take any action authorized by this section, but in
      the
      event that the Holder elects to take any such action, it shall not be
      responsible to the Debtor except for its willful misconduct.

     

    5.04 As
      to Inventory and Equipment

     

    During
      the existence of an Event of Default:

     

    a. upon
      notice to such effect, the Debtor shall deliver, at Debtor’s own expense, any or
      all Inventory and Equipment to the Holder at a place designated by the
      Holder;

     

    b. take
      possession of any or all Inventory and Equipment and, for that purpose, enter,
      with the aid and assistance of any person or persons, any premises where the
      Collateral, or any part thereof, is, or may be, placed or assembled, and remove
      any of the same;

     

    c. execute
      any instrument and do all other things necessary and proper to protect and
      preserve and realize upon such Collateral and other rights contemplated hereby;
      and

     

    d. without
      obligation to resort to other security, at any time and from time to time,
      sell,
      assign and deliver at the same or different times, all right, title, interest
      or
      claim of the Debtor in such Collateral, and any right of redemption thereof,
      at
      public or private sale, in one or more parcels, for cash, upon credit or for
      future delivery, and at such price or prices and on such terms as the Holder
      may
      determine.

     

    The
      Debtor hereby agrees that the exercise by the Holder of the rights and remedies
      under this section, including, without limitation, sale of Inventory or
      Equipment may be accomplished without demand, advertisement or notice (except
      as
      required by law), all of which (to the extent permitted by law) are hereby
      expressly waived. If any notice of a proposed sale or other disposition shall
      be
      required by law, such notice shall be deemed reasonable and proper if given
      at
      least 10 days before such sale or other disposition. The Holder shall not be
      obligated to make any sale regardless of notice of sale having been given.
      The
      Holder may adjourn any public or private sale from time to time by announcement
      at the time and place fixed therefore, and such sale may, without further
      notice, be made at the time and place to which it was so adjourned.


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    The
      Holder may offer any Inventory or Equipment for sale in its then present
      condition and has no duty to repair or clean the Collateral prior to sale and
      the failure to make such repairs or clean the Collateral shall not effect the
      commercial reasonableness of the sale. The Holder may disclaim all warranties
      including warranties of title, possession, quiet enjoyment, merchantability,
      fitness for a particular and any such disclaimer shall not effect the commercial
      reasonableness of the sale. The Holder shall not be obligated to take any of
      the
      action authorized by this section, but in the event that the Holder elects
      to
      take any such action, it shall not be responsible to the Debtor except for
      its
      willful misconduct.

     

    5.05 As
      to Instruments, Chattel Paper and Investment Property

     

    During
      the existence of an Event of Default, subject to the prior rights of any other
      holders of Permitted Liens:

     

    a. if
      the
      Holder shall so request, the Debtor shall forthwith do one or more of the
      following: (i) legend, in form and manner acceptable to the Holder, the Debtor’s
      books, records and documents evidencing or pertaining to any Instruments,
      Chattel Paper or Investment Property with an appropriate reference to the fact
      that such assets have been assigned to the Holder and that the Holder has a
      security interest therein and notify any person with an obligation with respect
      to such Collateral of the Holder’s security interest therein, (ii) account for
      and transmit to the Holder, in the same form as received, all proceeds of
      collection of such Collateral received by it and, until so transmitted, to
      hold
      the same in trust for the Holder and not commingle such proceeds with any other
      of its funds, (iii) deliver, at its own expense, any or all books, records
      or
      other documents relating to such Collateral to the Holder at a place designated
      by the Holder, and (iv) notify the obligors on such Collateral that such assets
      have been assigned to the Holder and that payments in respect thereof shall
      be
      made directly to the Holder.

     

    b. the
      Holder, without notice to, or assent by, the Debtor and in the name of the
      Debtor or its own name, or otherwise, may (but need not) (i) notify the obligors
      of any of the Debtor’s Instruments, Chattel Paper or Investment Property to make
      payments thereon directly to the Holder; (ii) ask for, demand, collect, receive,
      compound and give acceptance for the such Collateral or any part thereof; (iii)
      extend the time of payment for such Collateral or compromise or settle any
      such
      Collateral for cash, credit or otherwise, and upon any terms and conditions;
      (iv) endorse the name of the Debtor on any check, draft or other order or
      instrument for the payment of moneys payable to the Debtor which has been issued
      in respect of such Collateral; (v) file any claims and commence, maintain or
      discontinue any action, suits or other proceedings deemed by the Holder
      necessary or advisable for the purpose of collecting or enforcing payment of
      any
      such Collateral; (vi) at the Holder’s sole discretion make test verifications of
      such Collateral or any portion thereof; (vii) execute any instrument and do
      any
      and all other things necessary and proper to protect and preserve and realize
      upon such Collateral and other rights contemplated hereby; and (viii) without
      obligation to resort to other security, at any time and from time to time,
      sell,
      re-sell, assign and deliver all or any such Collateral, in one or more parcels
      at the same or different times, and all right, title and interest, claim and
      demand therein and any right of redemption thereof, at public or private sale,
      for cash, upon credit or for future delivery and at such price or prices and
      on
      such terms as the Holder may determine, with the proceeds thereof to be applied
      in the manner provided herein.

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

     

    The
      Debtor hereby agrees that the Holder may sell such Collateral or any part
      thereof at public or private sale or at any broker's board or on any securities
      exchange, for cash, upon credit or for future delivery, and at such price or
      prices as the Holder may deem satisfactory. The Holder may be the purchaser
      of
      any or all of the Collateral so sold at any public sale. The Debtor covenants
      and agrees that it will execute and deliver such documents and take such other
      action as the Holder deems necessary or advisable in order that any such sale
      may be made in compliance with law. Upon any such sale the Holder shall have
      the
      right to deliver, assign and transfer to the purchaser thereof the Collateral
      so
      sold. Each purchaser at any such sale shall hold the Collateral so sold
      absolutely and free from any claim or right of whatsoever kind, including any
      equity or right of redemption of the Debtor which may be waived, and the Debtor,
      to the extent permitted by law, hereby specifically waives all rights of
      redemption, stay or appraisal which it has or may have under any law now
      existing or hereafter adopted. The Debtor further acknowledges that the Holder
      may deem it impracticable to effect a public sale of any part of the securities
      included in the Collateral, and therefore authorizes the Holder in connection
      with any such private sale, if the Holder deems it advisable to do so, (i)
      to
      restrict the prospective bidders on or purchasers of any of the Collateral
      to a
      limited number of sophisticated investors who will represent and agree that
      they
      are purchasing for their own account for investment and not with a view to
      the
      distribution or sale of any of such securities, (ii) to cause to be placed
      on
      certificates for any or all of the Collateral or on any other securities pledged
      hereunder a legend to the effect that such security has not been registered
      under the Securities Act of 1933 and may not be disposed of in violation of
      the
      provision of said Act, and (iii) to impose such other limitations or conditions
      in connection with any such sale as the Holder deems necessary or advisable
      in
      order to comply with said Act or any other law. The notice (if any) of such
      sale
      shall (1) in case of a public sale, state the time and place fixed for such
      sale, (2) in case of sale at a broker's board or on a securities exchange,
      state
      the board or exchange at which such sale is to be made and the day on which
      the
      Collateral, or the portion thereof so being sold, will first be offered for
      sale
      at such board or exchange, and (3) in the case of a private sale, state the
      day
      after which such sale may be consummated. Any such public sale shall be held
      at
      such time or times within ordinary business hours and at such place or places
      as
      the Holder may fix in the notice of such sale. At any such sale, the Collateral
      may be sold in one lot as an entirety or in separate parcels, as the Holder
      may
      determine. The Holder shall not be obligated to make any such sale pursuant
      to
      any such notice. The Holder may, without notice or publication, adjourn any
      public or private sale or cause the same to be adjourned from time to time
      by
      announcement at the time and place fixed for the sale, and such sale may be
      made
      at any time or place to which the same may be so adjourned. In case of any
      sale
      of all or any part of the Collateral on credit or for future delivery, the
      Collateral so sold may be retained by the Holder until the selling price is
      paid
      by the purchaser thereof, but the Holder shall not incur any liability in case
      of the failure of such purchaser to take up and pay for the Collateral so sold
      and, in case of any such failure, such Collateral may again be sold upon like
      notice.

    


    5.06 Application
      of Proceeds; Deficiency

     

    a. The
      Holder shall apply the net proceeds of any such collection, realization or
      sale,
      after deducting all reasonable costs and expenses of every kind incurred
      thereinor
      incidental to the care or safekeeping of any of the Collateral or in any way
      relating to the Collateral or the rights of the Holder hereunder, including,
      without limitation, reasonable attorneys’ fees and disbursements, to the payment
      in whole or in part of the Secured Obligations pro rata in proportion to the
      amounts owed to each of the holders, and only after such application and after
      the payment by the Holder of any other amount required by any provision of
      law,
      need the Holder account for the surplus, if any, to the
      Debtor.

     

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    b. The
      Debtor shall remain liable for any deficiency if the proceeds of any sale or
      other disposition of the Collateral are insufficient to pay the Secured
      Obligations and the reasonable fees and disbursements of any attorneys employed
      by the Holder to collect such deficiency.

     

    SECTION
      VI

    MISCELLANEOUS

     

    6.01 Limitations
      on Rights and Obligations

     

    Notwithstanding
      any of the terms of this Agreement to the contrary, each of the rights of the
      Holder and the obligations of the Debtor are subject to the rights of the
      holders of Permitted Liens described herein.

     

    6.02 Amendments
      and Waivers

     

    The
      Debtor and the Holder may, from time to time, enter into written waivers,
      amendments, supplements or modifications hereto for the purpose of adding any
      provision to this Agreement or enter into written instruments waiving any of
      the
      requirements of this Agreement or any Event of Default and its consequences.
      In
      the case of any waiver, the Debtor shall be restored to its former positions
      and
      rights hereunder and any Event of Default waived shall be deemed to be cured
      and
      not existing; but no such waiver shall extend to any subsequent or other Event
      of Default, or impair any right consequent thereon.

     

    6.03 Notices

     

    Unless
      this Agreement specifically provides otherwise, all notices and communications
      under this Agreement shall be provided in accordance with the provisions of
      the
      Purchase Agreement.

     

    6.04 No
      Waiver; Cumulative Remedies

     

    No
      failure to exercise or delay in exercising, on the part of the Holder, any
      right, remedy, power or privilege hereunder shall operate as a waiver thereof;
      nor shall any single or partial exercise of any right, remedy, power or
      privilege hereunder preclude any other or further exercise thereof or the
      exercise of any other right, remedy, power or privilege. The rights, remedies,
      powers and privileges herein provided to the Holder are cumulative and not
      exclusive of any rights, remedies, powers and privileges provided to the Holder
      by law. In accordance with this section, the Holder may exercise its rights,
      remedies, powers or privileges hereunder in any order it deems
      appropriate.

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    6.05
      Termination; Filing of Termination Statement;
      Indemnification

     

    This
      Agreement, any and all security interests and any and all rights and powers
      granted to the Holder under this Agreement shall automatically terminate and
      be
      of no further force and effect upon the earlier of the Maturity Date (as defined
      in the Purchase Agreement), unless an Event of Default is in existence on that
      date and then only until such Event of Default has been cured (the “Termination
      Date”). The Holder hereby irrevocably constitutes and appoints Debtor and any
      officer or agent thereof, with full power of substitution, as its true and
      lawful attorney-in-fact with full irrevocable power and authority in place
      and
      stead of the Holder and in the name of the Holder or in its own name,
      immediately upon the Termination Date, for the exclusive purpose of filing
      (a) a
      Termination Statement on Form UCC 3 (or any successor form) and (b) any other
      documents necessary or desirable to evidence the termination of any and all
      security interests held by the Holder. The Debtor agrees to pay, and to hold
      the
      Holder harmless from, any and all liabilities, costs and expenses (including,
      without limitation, reasonable legal fees and expenses) (a) with respect to,
      or
      resulting from, any delay in paying, any and all excise, sales or other taxes
      which may be payable or determined to be payable with respect to any of the
      Collateral, except in connection with any costs resulting from the gross
      negligence or willful misconduct of the Holder, or (b) with respect to, or
      resulting from, any delay in complying with any Requirement of Law applicable
      to
      any of the Collateral, except in connection with any costs resulting from the
      gross negligence or willful misconduct of the Holder. In any suit, proceeding
      or
      action brought by the Holder under any Account for any sum owing thereunder,
      or
      to enforce any provisions of any Account, the Debtor will save, indemnify and
      keep the Holder harmless from and against all expense, loss or damage suffered
      by reason of any defense, set-off, counterclaim, recoupment or reduction or
      liability whatsoever of the account debtor or obligor thereunder, arising out
      of
      a breach by the Debtor of any obligation thereunder or arising out of any other
      agreement, indebtedness or liability at any time owing to or in favor or such
      account debtor or obligor or its successors.

     

    6.06 Governing
      Law

     

    This
      Agreement shall be governed by, and construed and interpreted in accordance
      with
      the law of the State of New York.

     

    6.07 Section
      Headings

     

    The
      section headings herein are intended for convenience only and shall be ignored
      in construing this Agreement.

     

    6.08 Entire
      Agreement

     

    All
      understandings and agreements heretofore made or exchanged between the Debtor
      and the Holder with respect to the subject matter hereof are merged into this
      Agreement, which fully, completely, and integrally expresses the understanding
      of the Debtor and the Holder concerning the subject matter hereof.

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    6.09
      Severability

     

    If
      any
      provision hereof is invalid or unenforceable in any jurisdiction, then, to
      the
      fullest extent permitted by law, (a) the other provisions hereof shall remain
      in
      full force and effect in such jurisdiction and shall be liberally construed
      in
      order to carry out the intentions of the parties hereto as nearly as may be
      possible; and (b) the invalidity or enforceability of any provision hereof
      in
      any jurisdiction shall not affect the validity or enforceability of such
      provision in any other jurisdiction.

     

    6.10 WAIVER
      OF TRIAL BY JURY

     

    THE
      DEBTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
      ACTION OR PROCEEDING RELATED TO THIS AGREEMENT.

     

    6.11 NOTWITHSTANDING
      ANY PROVISION HEREOF TO THE CONTRARY, THE HOLDER ACKNOWLEDGES THAT ALL RIGHTS,
      INTERESTS AND REMEDIES ARE SUBORDINATE TO GE CAPITAL AS FURTHER PROVIDED IN
      THE
      SUBORDINATION AGREEMENT.

     

    [signature
      page follows]

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this agreement to be executed
      by
      their respective officers thereunto duly authorized, as of the date first above
      written.

     

    
      	
                                                      THE
                DEBTOR

               

                                                      SIGA
                TECHNOLOGIES, INC.

            
	
               

               

                                                      By: /s/
                Thomas
                Konatich                                    
                    

            
	
                                                         Thomas
                Konatich

                                                         Chief
                Financial Officer

            
	 
	
                                                      THE
                HOLDER:

               

                                                      PHARMATHENE,
                INC.

               

               

            
	
                                                      By: /s/
                David P.
                Wright                                  
                    

            
	
                                                      David
                P. Wright, President and

                                                      Chief
                Executive Officer