“Event of Default” means the occurrence of any one or more of the following events:(i) a default or event of default occurs under the terms of any promissory note, loan agreement,surety agreement, guaranty, or other instrument or agreement evidencing or securing, or obtained bySecured Party with respect to, all or any portion of the Obligations; or (ii) any representation orwarranty made by the Debtor in this Agreement is determined by the Secured Party to be false ormisleading in any material respect; or (iii) the Debtor fails to perform or observe any term,covenant, condition, or agreement to be performed or observed by the Debtor under this Agreement.2. Reserve Account. The Debtor shall establish a Reserve Account (Account#3111609578) with the Secured Party and, prior to the Borrower’s request to the Secured Party foran advance of any proceeds of the Loan, the Debtor shall deposit immediately available cash fundsin an amount equal to or greater than the amount of the advance requested by the Borrower.Notwithstanding anything contained herein to the contrary, the Debtor shall at all times cause thebalance held in the Reserve Account to be equal or greater than the outstanding amount of the Loan,plus One Hundred Thousand Dollars ($100,000.00). The Debtor acknowledges and agrees that, in theevent that any principal and/or interest due and payable in connection with the Loan is not paid byBorrower when due, the Secured Party shall be immediately permitted to withdraw amounts from theReserve Account in full or partial satisfaction of the amounts due from Borrower without furthernotice to, or direction from, Debtor. The Debtor acknowledges and agrees that the Secured Partyshall have no obligation to advance any proceeds of the Loan unless and until amounts equal orgreater to the amount of such proceeds have been deposited in immediately available funds in theReserve Account and are otherwise available for withdraw (i.e., are not subject to any hold).Notwithstanding the foregoing or anything contained herein to the contrary, the Debtoracknowledges and agrees that, so long as any of the Obligations remain outstanding, it shall not bepermitted to make any withdrawal from the Reserve Account without the prior written consent of theSecured Party, which consent may be withheld in the sole discretion of the Secured Party. TheDebtor confirms that this Agreement shall constitute an “authenticated record” and that thearrangements established under this Agreement shall constitute “control” of the Collateral ascontemplated by Section 9-104 of the Uniform Commercial Code.3. Security Interest. In order to secure the due and punctual payment andperformance of the Obligations, the Debtor grants to the Secured Party a continuing securityinterest in, a general lien upon, and a right of set-off against the Collateral. The securityinterests, liens, and rights of set-off granted to the Secured Party are granted as security onlyand shall not subject the Secured Party to, or transfer or in any way affect or modify, anyobligation or liability of the Debtor with respect to any of the Collateral or any transactionwhich gave rise to the Collateral.4. Future Advances. The Obligations secured by the Collateral include all advancesmade at any time to or for the benefit of the Debtor or the Borrower in connection with the Loanand/or the Surety Agreement, whether obligatory or discretionary, including without limitation, anycosts, expenses, court costs and attorneys’ fees incurred in the collection of the Obligations orthe collection, disposition or preservation of the Collateral, and any advances made for thepayment of taxes on the Collateral, or for the establishment, maintenance or enforcement of theSecured Party’s security interest in the Collateral.
 
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5. Further Assurances.(A) At any time and from time to time, upon the demand of the Secured Party, the Debtor shall:(1) deliver and pledge to the Secured Party, endorsed or accompanied by such instruments ofassignment and transfer in such form and substance as the Secured Party may request, any and allinstruments, documents, or chattel paper as the Secured Party may specify; and (2) execute,deliver, file, and record any and all notices, statements, instruments, documents, agreements, orother papers (including financial statements) that may be necessary or desirable, or that theSecured Party may request, in order to create, preserve, perfect, or validate any securityinterest, lien, or right of set-off granted pursuant to this Agreement or to enable the SecuredParty to exercise and enforce its rights under this Agreement.(B) The Debtor irrevocably constitutes and appoints the Secured Party (and any of the SecuredParty’s employees or agents designated by the Secured Party) as the Debtor’s true and lawfulattorney with the power to sign and file one or more financing statements under the UniformCommercial Code naming the Debtor as debtor and the Secured Party as secured party and indicatingthe types or describing the items of Collateral. The Secured Party may file a carbon, photographicor other reproduction of this Agreement or any financing statement executed pursuant to thisAgreement, as a financing statement in any jurisdiction. Without the prior written consent of theSecured Party, the Debtor shall not file or authorize or permit to be filed in any jurisdiction anysuch financing or similar statement in which the Secured Party is not named as the only securedparty.(C) The Secured Party’s rights with respect to the Collateral shall include, but not belimited to, the right to (1) direct disposition of funds in the Reserve Account, (2) withdraw anyamounts from the Reserve Account, or (3) draw upon or otherwise exercise any authority or powerswith respect to the Reserve Account.3. Representations and Warranties. The Debtor represents and warrants to the SecuredParty that:(A) This Agreement has been duly executed and delivered and constitutes the legal, valid, andbinding obligation of the Debtor, enforceable against the Debtor in accordance with their terms.(B) This Agreement does not and will not violate any provision of law or of the charter orbylaws or other organizational documents of the Debtor, or any other agreement or instrument towhich the Debtor is a party or by which any of its assets or properties may be bound or affected.(C) No consent or approval of any governmental or judicial authority, or of any other publicauthority, is necessary for the execution, delivery, and performance of this Agreement.(D) The Debtor is and will be the owner of the Collateral, free from any adverse lien,security interest, encumbrance, or claim of any nature (except in favor of the SecuredParty). This Agreement, together with any necessary filing of financing statements, grantsand provides to the Secured Party a security interest in, and control of, the Collateral.
 
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4. Covenants. The Debtor covenants and agrees with the Secured Party that:(A) The Debtor shall defend the Collateral against all claims and demands of all persons atany time claiming any interest in the Collateral.(B) The Debtor shall provide the Secured Party with prompt written notice of any change inthe chief executive office of the Debtor or the office where the Debtor maintains books and recordspertaining to the Collateral, all such notices to be received by the Secured Party at least thirty(30) days prior to any such change.(C) The Debtor shall pay any and all taxes, assessments and governmental charges upon theCollateral on the date such taxes, assessments, and governmental charges are due and payable,except to the extent that such taxes, assessments and charges are contested in good faith by theDebtor and adequate reserves are maintained for the same.(D) The Debtor shall immediately notify the Secured Party of: (i) any material adverse changein its operations, property, or condition, financial or otherwise; (ii) the occurrence of an Eventof Default under this Agreement; (iii) any seizure of or levy upon the Collateral or any otherclaims of third parties to or against the Collateral; and (iv) the institution of any litigation,governmental investigation or administrative proceedings against or affecting the Debtor or theCollateral.(E) The Debtor shall not sell or otherwise assign, transfer or dispose of theCollateral or any interest in the Collateral, voluntarily or involuntarily, by operation of law orotherwise, other than in the ordinary course of business.(F) The Debtor shall keep the Collateral free from any lien, security interest, orencumbrance except in favor of the Secured Party.5. Rights of Secured Party. The Debtor further covenants and agrees with the SecuredParty that:(A) In the event of loss relating to the Collateral, the Secured Party, at its option, may(i) retain and apply all or any part of the insurance proceeds to reduce, in such order and amountsas the Secured Party may elect, the unpaid balance of the Obligations, or (ii) disburse all or anypart of the insurance proceeds to or for the benefit of the Debtor for the purpose of repairing orreplacing the Collateral after receiving proof satisfactory to the Secured Party of such repair orreplacement, in either case without waiving or impairing the Obligations or any other provision ofthis Agreement. The Debtor assigns to the Secured Party any return or unearned premiums which maybe due upon cancellation of any insurance policies for any reason whatsoever and directs theinsurers to pay to the Secured Party any amounts so due, and the Debtor appoints the Secured Partyits attorney-in-fact to endorse any draft or check which maybe payable to Debtor in order tocollect any return or unearned premiums or the proceeds of such insurance.
 
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(B) In the event the Debtor fails to pay any federal, state or local taxes,assessments or other governmental charges or claims, the Secured Party, at its election and withoutnotice or demand to the Debtor, shall have the right, but not the obligation, to make any paymentor expenditure with the right of subrogation, and to take any action which the Debtor should havetaken or which the Secured Party deems advisable in order to protect its security interest in theCollateral or its rights under this Agreement, and may appear in any action or proceeding withrespect to any of the foregoing and retain counsel, without prejudice to any of the Secured Party’srights or remedies available under this Agreement or at law or in equity or otherwise. All suchsums, as well as costs and expenses, advanced by the Secured Party shall be secured by thisAgreement, and shall bear interest at the highest rate payable on any of the Obligations, from thedate of payment by the Secured Party until paid in full by the Debtor.(C) The Secured Party may, at any time and from time to time, and regardless of whether anEvent of Default has occurred or is continuing:(1) in the name of the Debtor or the Secured Party (as the Secured Party in its solediscretion may determine) demand, collect, receive, and receipt for, compound, compromise, settleand give acquittance for, and prosecute and discontinue or dismiss, with or without prejudice, anysuits or proceedings respecting any of the Collateral; and(2) take any action which the Secured Party may deem necessary or desirable in order torealize on any of the Collateral, and the Debtor irrevocably appoints the Secured Party itsattorney-in-fact with full power of substitution for all or any such acts or purposes.6. Remedies Upon Default.(A) Upon the occurrence of an Event of Default, the Secured Party may, at its election,declare all or any portion of the Obligations immediately due and payable, and the Secured Partymay exercise any one or more of the following remedies, without notice or demand to the Debtor,except as expressly required under this Agreement or under any applicable provision of law whichcannot be waived prior to default:(1) exercise a right of set-off against the Reserve Account; and(2) exercise all or any of the rights and remedies of a secured party under the UniformCommercial Code or as creditor under any other applicable provision of law.(B) Except to the extent limited by any applicable provision of law which cannot be waivedprior to default, the Secured Party shall not be liable to any person whatsoever, for, or inconnection with, the exercise, method of exercise, delay or failure to exercise any of the remediesprovided for in this Agreement, and the Debtor shall indemnify, and agrees to hold harmless andwaives and releases the Secured Party from any and all claims, liabilities, actions, costs, suits,demands, damages or losses whatsoever occurring on account of or in connection with such exercise,method of exercise, delay or failure to exercise.(C) The proceeds of any Collateral received by the Secured Party at any time before or afteran Event of Default, whether from a sale or other disposition of Collateral or otherwise, or theCollateral itself, may be applied to the payment in full or in part of such part of the Obligationsand in such order and manner as the Secured Party may elect. The Debtor, to the extent of itsrights in the Collateral, waives and releases any rights to require the Secured Party to collectany or all of the Obligations from any of the Collateral under any theory of marshalling of assetsor otherwise.
 
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7. Right of Set-Off. In furtherance and not in limitation of any provisions containedin this Agreement, and in addition to the grant of security interest in the Collateral, the Debtoragrees that any and all deposits or other sums held by the Secured Party on behalf of the Debtorshall at all times constitute security for the Obligations and the Secured Party may exercise anyright of set-off against such deposits or other sums as may accrue or exist under applicable law.8. Miscellaneous.(A) No course of dealing between the Debtor and the Secured Party, nor any failure or delay inexercising any right, power, or privilege of the Secured Party under this Agreement, shall operateas a waiver thereof or of any other right, power or privilege. No single or partial exercise ofany right, power or privilege under this Agreement, or any abandonment or discontinuance of suchexercise, shall preclude any other or further exercise of any such right, power or privilege or theexercise of any other right, power or privilege.(B) The rights and remedies provided in this Agreement are cumulative and are in addition to,and not exclusive of, the rights and remedies provided by law or equity, by virtue of statute orotherwise (including, without limitation, the rights and remedies of a secured party under theUniform Commercial Code of Pennsylvania).(C) This Agreement shall be construed and enforced in accordance with and governed by thesubstantive laws in effect in the Commonwealth of Pennsylvania, without regard to principles ofconflicts of law. Unless the context otherwise requires, all terms used in this Agreement whichare defined in the Uniform Commercial Code of Pennsylvania shall have the meanings stated therein.(D) This Agreement shall be binding upon the Debtor, and the Debtor’s successors and assigns,and shall operate for the benefit of the Secured Party, and the Secured Party’s successors andassigns.(E) The headings in this Agreement are for convenience of reference only and should not limitor otherwise affect the meaning of this Agreement.(F) No amendment of any provision of this Agreement shall be effective unless it is in writingand signed by the Secured Party, and no waiver of any provision of this Agreement and no consent toany departure by the Debtor therefrom shall be effective unless it is in writing and signed by theSecured Party, and then such waiver or consent shall be effective only in the specific instance andfor the specific purpose for which given.(G) THE DEBTOR SUBMITS AND CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATEDWITHIN THE COMMONWEALTH OF PENNSYLVANIA IN ANY AND ALL ACTIONS AND PROCEEDINGS: (1) ARISING UNDEROR PURSUANT TO THIS AGREEMENT OR ANY AGREEMENT, DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION WITHOR RELATING TO THE OBLIGATIONS AND (2) IN ANY WAY ARISING OUT OF OR RELATED TO THE OBLIGATIONS.(H) THE DEBTOR IRREVOCABLY WAIVES A JURY TRIAL AND ANY RIGHT TO A JURY TRIAL IN ANY ACTIONS ORPROCEEDINGS: (1) ARISING UNDER OR PURSUANT TO THIS AGREEMENT OR ANY AGREEMENT, DOCUMENT ORINSTRUMENT EXECUTED IN CONNECTION WITH OR RELATING TO THE OBLIGATIONS AND (2) IN ANY WAY ARISINGOUT OF OR RELATED TO THE OBLIGATIONS, AND THE DEBTOR AGREES THAT ANY SUCH ACTION OR PROCEEDING MAYBE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
 
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IN WITNESS WHEREOF, the Debtor has duly executed this Agreement as of the day and year firstabove written.                 UNILIFE CORPORATION             Attest: /s/ J. Christopher Naftzger   By: /s/ R. Richard Wieland               Name: J. Christopher Naftzger     Name: R. Richard Wieland    Title:   Secretary     Title:   Executive Vice President and CFO  (CORPORATE SEAL)
 
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