Exhibit 10.2


 


THIS WARRANT AND THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES
LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR, SUBJECT TO SECTION 11 HEREOF, AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR ANY APPLICABLE STATE SECURITIES LAWS.


 


WARRANT AGREEMENT


 


To Purchase Shares of the Common Stock of


 


PHASERX, INC.


 


Dated as of June 7, 2016 (the “Effective
Date”)


 


WHEREAS, PhaseRx, Inc., a Delaware corporation
(the “Company”), has entered into a Loan and Security Agreement of even date herewith (as amended and in effect
from time to time, the “Loan Agreement”) with Hercules Capital, Inc., a Maryland corporation, in its capacity
as administrative agent, Hercules Technology III, L.P., a Delaware limited partnership (the “Warrantholder”)
and the other lender parties thereto;


 


WHEREAS, pursuant to the Loan Agreement
and as additional consideration to the Warrantholder for, among other things, its agreements in the Loan Agreement, the Company
has agreed to issue to the Warrantholder this Warrant Agreement, evidencing the right to purchase shares of the Company’s
Common Stock (this “Warrant”, “Warrant Agreement”, or this “Agreement”);


 


NOW, THEREFORE, in consideration of
the Warrantholder having executed and delivered the Loan Agreement and provided the financial accommodations contemplated therein,
and in consideration of the mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows:


 


SECTION 1.          GRANT
OF THE RIGHT TO PURCHASE COMMON STOCK. 


 


(a)          For
value received, the Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to
the conditions hereinafter set forth, to subscribe for and purchase, from the Company, up to the number of fully paid and non-assessable
shares of Common Stock (as defined below) as determined pursuant to Section 1(b) below, at a purchase price per share equal to
the Exercise Price (as defined below). The number and Exercise Price of such shares are subject to adjustment as provided in Section
8. As used herein, the following terms shall have the following meanings:


 


“Act” means
the Securities Act of 1933, as amended.


 


“Charter” means
the Company’s Certificate of Incorporation or other constitutional document, as may be amended and in effect from time to
time.


 


“Common Stock”
means the Company’s common stock, $0.001 par value per share, as presently constituted under the Charter, and any class and/or
series of Company capital stock for or into which such common stock may be converted or exchanged in a reorganization, recapitalization
or similar transaction.


 



     


     


    

 


“Exercise Price”
means (i) with respect to the Initial Shares (as defined below), $5.00, and (ii) with respect to the Additional Shares (as defined
below), the volume-weighted average daily price for a share of Common Stock reported on the principal exchange on which the Common
Stock is then traded for the thirty (30) consecutive trading days ending on the trading day immediately preceding the date on which
this Warrant becomes exercisable for the Additional Shares (if at all); in each case subject to adjustment from time to time in
accordance with the provisions of this Warrant.


 


“Liquid Sale”
means the closing of a Merger Event in which the consideration received by the Company and/or its stockholders, as applicable,
consists solely of cash and/or Marketable Securities.


 


“Marketable Securities”
in connection with a Merger Event means securities meeting all of the following requirements: (i) the issuer thereof is then subject
to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange
Act; (ii) the class and series of shares or other security of the issuer that would be received by the Warrantholder in connection
with the Merger Event were the Warrantholder to exercise this Warrant on or prior to the closing thereof is then traded on a national
securities exchange or over-the-counter market, and (iii) following the closing of such Merger Event, Warrantholder would not be
restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Warrantholder
in such Merger Event were Warrantholder to exercise this Warrant in full on or prior to the closing of such Merger Event, except
to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, and (y)
does not extend beyond six (6) months from the closing of such Merger Event.


 


“Merger Event”
means any of the following: (i) a sale, lease or other transfer of all or substantially all assets of the Company, (ii) any merger
or consolidation involving the Company in which the Company is not the surviving entity or in which the outstanding shares of the
Company’s capital stock are otherwise converted into or exchanged for shares of capital stock or other securities or property
of another entity, or (iii) any sale by holders of the outstanding voting equity securities of the Company in a single transaction
or series of related transactions of shares constituting a majority of the outstanding combined voting power of the Company.


 


"Purchase Price"
means, with respect to any exercise of this Warrant, an amount equal to the then-effective Exercise Price multiplied by the number
of shares of Common Stock as to which this Warrant is then exercised.


 


(b)          Number
of Shares.        This Warrant shall be exercisable for up to such number
of shares of Common Stock as shall equal (i) $315,000, divided by (ii) the Exercise Price for the Initial Shares (as defined below),
subject to adjustment from time to time in accordance with the provisions of this Warrant (the “Initial Shares”);
provided, that, in addition to and not in lieu of the Initial Shares, on such date (if any) as a Term Loan Advance (as defined
in the Loan Agreement) shall first be made to the Company in the Draw Period (as defined in the Loan Agreement) in any amount,
this Warrant automatically shall become exercisable for such number of additional shares of Common Stock (the “Additional
Shares”) as shall equal (i) $105,000, divided by (ii) the Exercise Price for such Additional Shares as determined in
accordance with the definition of “Exercise Price” set forth in Section 1(a) above, subject to further adjustment thereafter
from time to time in accordance with the provisions of this Warrant.


  



    	 	2	 



     


    




 


SECTION 2.          TERM
OF THE AGREEMENT. 


 


The term of this Agreement and the right
to purchase Common Stock as granted herein shall commence on the Effective Date and, subject to Section 8(a) below, shall be exercisable
for a period ending upon the fifth (5th) anniversary of the Effective Date.


 


SECTION 3.          EXERCISE
OF THE PURCHASE RIGHTS. 


 


(a)          Exercise.
The purchase rights set forth in this Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from
time to time, prior to the expiration of the term set forth in Section 2, by tendering to the Company at its principal office a
notice of exercise in the form attached hereto as Exhibit I (the “Notice of Exercise”), duly completed
and executed. Promptly upon receipt of the Notice of Exercise and the payment of the Purchase Price in accordance with the terms
set forth below, and in no event later than three business (3) days thereafter, the Company or its transfer agent shall, at the
direction of the Warrantholder, either (i) issue to the Warrantholder a certificate for the number of shares of Common Stock purchased,
or (ii) credit the same to the Warrantholder no later than the third (3rd) trading day following the Company’s
receipt of the Notice of Exercise, and shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II
(the “Acknowledgment of Exercise”) indicating the number of shares which remain subject to future purchases
under this Warrant, if any.


 


The Purchase Price may be paid at the
Warrantholder’s election either (i) by cash or check, or (ii) by surrender of all or a portion of the Warrant for shares
of Common Stock to be exercised under this Agreement and, if applicable, an amended Agreement setting forth the remaining number
of shares purchasable hereunder, as determined below (“Net Issuance”). If the Warrantholder elects the Net Issuance
method, the Company will issue shares of Common Stock in accordance with the following formula:


 


X = Y(A-B)


   A


 


		Where:	X =   the number of shares
of Common Stock to be issued to the Warrantholder.



 


Y =   the number of shares
of Common Stock requested to be exercised under this Agreement.


 


A =   the then-current fair
market value of one (1) share of Common Stock at the time of exercise.


 


B =   the then-effective Exercise Price.


 


For purposes of the above calculation, the
current fair market value of shares of Common Stock shall mean with respect to each share of Common Stock:


 


(i)          at
all times when the Common Stock shall be traded on a national securities exchange, inter-dealer quotation system or over-the-counter
bulletin board service, the average of the closing prices over a five (5) day period ending three days before the day the current
fair market value of the securities is being determined;


  



    	 	3	 



     


    




 


(ii)         if
the exercise is in connection with a Merger Event, the fair market value of a share of Common Stock shall be deemed to be the per
share value received by the holders of the outstanding shares of Common Stock pursuant to such Merger Event as determined in accordance
with the definitive transaction documents executed among the parties in connection therewith; or


 


(iii)        in
cases other than as described in the foregoing clauses (i) and (ii), the current fair market value of a share of Common Stock shall
be determined in good faith by the Company’s Board of Directors.


 


Upon partial exercise by either cash
or, upon request by the Warrantholder and surrender of all or a portion of this Warrant, Net Issuance, prior to the expiration
or earlier termination hereof, the Company shall promptly issue an amended Agreement representing the remaining number of shares
purchasable hereunder. All other terms and conditions of such amended Agreement shall be identical to those contained herein, including,
but not limited to the Effective Date hereof.


 


(b)          Exercise
Prior to Expiration. To the extent this Warrant is not previously exercised as to all shares subject hereto, and if the then-current
fair market value of one share of Common Stock is greater than the Exercise Price then in effect, or, in the case of a Liquid Sale,
where the value per share of Common Stock (as determined as of the closing of such Liquid Sale in accordance with the definitive
agreements executed by the parties in connection with such Merger Event) to be paid to the holders thereof is greater than the
Exercise Price then in effect, this Agreement shall be deemed automatically exercised on a Net Issuance basis pursuant to Section
3(a) (even if not surrendered) as of immediately before its expiration determined in accordance with Section 2. For purposes of
such automatic exercise, the fair market value of one share of Common Stock upon such expiration shall be determined pursuant to
Section 3(a). To the extent this Warrant or any portion hereof is deemed automatically exercised pursuant to this Section 3(b),
the Company agrees to promptly notify the Warrantholder of the number of shares of Common Stock if any, the Warrantholder is to
receive by reason of such automatic exercise, and to issue a certificate to Warrantholder evidencing such shares.


 


SECTION 4.          RESERVATION
OF SHARES. 


 


During the term of this Agreement, the
Company will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise
of the rights to purchase Common Stock as provided for herein.


 


SECTION 5.          NO
FRACTIONAL SHARES OR SCRIP. 


 


No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Agreement, but in lieu of such fractional shares the Company shall
make a cash payment therefor upon the basis of the Exercise Price then in effect.


 


SECTION 6.          NO
RIGHTS AS STOCKHOLDER.


 


Without limitation of any provision
hereof, Warrantholder agrees that this Agreement does not entitle the Warrantholder to any voting rights or other rights as a stockholder
of the Company prior to the exercise of any of the purchase rights set forth in this Agreement.


 



    	 	4	 



     


    

 


SECTION 7.          WARRANTHOLDER
REGISTRY. 


 


The Company shall maintain a registry
showing the name and address of the registered holder of this Agreement. Warrantholder's initial address, for purposes of such
registry, is set forth in Section 12(g) below. Warrantholder may change such address by giving written notice of such changed address
to the Company.


 


SECTION 8.          ADJUSTMENT
RIGHTS. 


 


The Exercise Price and the number of
shares of Common Stock purchasable hereunder are subject to adjustment from time to time, as follows:


 


(a)          Merger
Event. In connection with a Merger Event that is a Liquid Sale, this Warrant shall, on and after the closing thereof, automatically
and without further action on the part of any party or other person, represent the right to receive the consideration payable on
or in respect of all shares of Common Stock that are issuable hereunder as of immediately prior to the closing of such Merger Event
less the Purchase Price for all such shares of Common Stock (such consideration to include both the consideration payable at the
closing of such Merger Event and all deferred consideration payable thereafter, if any, including, but not limited to, payments
of amounts deposited at such closing into escrow and payments in the nature of earn-outs, milestone payments or other performance-based
payments), and such Merger Event consideration shall be paid to Warrantholder as and when it is paid to the holders of the outstanding
shares of Common Stock. In connection with a Merger Event that is not a Liquid Sale, the Company shall cause the successor or surviving
entity to assume this Warrant and the obligations of the Company hereunder on the closing thereof, and thereafter this Warrant
shall be exercisable for the same number and type of securities or other property as the Warrantholder would have received in consideration
for the shares of Common Stock issuable hereunder had it exercised this Warrant in full as of immediately prior to such closing,
at an aggregate Exercise Price no greater than the aggregate Exercise Price in effect as of immediately prior to such closing,
and subject to further adjustment from time to time in accordance with the provisions of this Warrant. The provisions of this Section
8(a) shall similarly apply to successive Merger Events.


 


(b)          Reclassification
of Shares. Except for Merger Events subject to Section 8(a), if the Company at any time shall, by combination, reclassification,
exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Agreement
exist into the same or a different number of securities of any other class or classes of securities, this Agreement shall thereafter
represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with
respect to the securities which were subject to the purchase rights under this Agreement immediately prior to such combination,
reclassification, exchange, subdivision or other change. The provisions of this Section 8(b) shall similarly apply to successive
combination, reclassification, exchange, subdivision or other change.


 


(c)          Subdivision
or Combination of Shares. If the Company at any time shall combine or subdivide its Common Stock, (i) in the case of a subdivision,
the Exercise Price shall be proportionately decreased and the number of shares for which this Warrant is exercisable shall be proportionately
increased, or (ii) in the case of a combination, the Exercise Price shall be proportionately increased and the number of shares
for which this Warrant is exercisable shall be proportionately decreased.


 


(d)          Stock
Dividends. If the Company at any time while this Agreement is outstanding and unexpired shall:


 



    	 	5	 



     


    

 


(i)          pay
a dividend with respect to the outstanding shares of Common Stock payable in additional shares of Common Stock, then the Exercise
Price shall be adjusted, from and after the date of determination of stockholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Exercise Price in effect immediately prior to such date of determination by a fraction
(A) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or
distribution, and (B) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after
such dividend or distribution, and the number of shares of Common Stock for which this Warrant is exercisable shall be proportionately
increased; or


 


(ii)         make
any other dividend or distribution on or with respect to Common Stock, except any dividend or distribution (A) in cash, or (B)
specifically provided for in any other clause of this Section 8, then, in each such case, provision shall be made by the Company
such that the Warrantholder shall receive upon exercise or conversion of this Warrant a proportionate share of any such distribution
as though it were the holder of the Common Stock (or other stock for which the Common Stock is convertible) as of the record date
fixed for the determination of the stockholders of the Company entitled to receive such distribution.


 


(e) Notice of Certain Events. If: (i)
the Company shall declare any dividend or distribution upon its outstanding Common Stock, payable in stock, cash, property or other
securities (provided that Warrantholder in its capacity as lender under the Loan Agreement consents to such dividend); (ii) the
Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or
other rights; (iii) there shall be any Merger Event; or (iv) there shall be any voluntary dissolution, liquidation or winding up
of the Company; then, in connection with each such event, the Company shall give the Warrantholder notice thereof at the same time
and in the same manner as it gives notice thereof to the holders of outstanding Common Stock.


 


SECTION 9.          REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE COMPANY.


 


(a)   Reservation
of Common Stock. The Company covenants and agrees that all shares of Common Stock, if any, that may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and non-assessable.
The Company further covenants and agrees that the Company will, at all times during the term hereof, have authorized and reserved,
free from preemptive rights, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented
by this Warrant. If at any time during the term hereof the number of authorized but unissued shares of Common Stock shall not be
sufficient to permit exercise of this Warrant in full, the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes.


 


(b)   Due
Authority. The execution and delivery by the Company of this Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the shares of Common Stock, have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement: (1) does not violate the Company's Charter or current
bylaws; (2) does not contravene any law or governmental rule, regulation or order applicable to it; and (3) except as could not
reasonably be expected to have a Material Adverse Effect (as defined in the Loan Agreement), does not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract or other instrument to which it is a party or by
which it is bound. This Agreement constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors’ rights generally (including, without limitation, fraudulent conveyance laws) and by general principles of equity,
regardless of whether considered in a proceeding in equity or at law.


 



    	 	6	 



     


    

 


(c)   Consents
and Approvals. No consent or approval of, giving of notice to, registration with, or taking of any other action in respect
of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance
by the Company of its obligations under this Agreement, except for the filing of notices pursuant to Regulation D under the Act
and any filing required by applicable state securities law, which filings will be effective by the time required thereby.


 


(d)   [Intentionally
Omitted].


 


(e)   [Intentionally
Omitted].


 


(f)   Exempt
Transaction. Subject to the accuracy of the Warrantholder's representations in Section 10, the issuance of the Common Stock
upon exercise of this Agreement will constitute a transaction exempt from (i) the registration requirements of Section 5 of the
Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws.


 


(g)   [Intentionally Omitted].


  


(h)   Information
Rights. At all times (if any) prior to the earlier to occur of (x) the date on which all shares of Common Stock issued on exercise
of this Warrant have been sold, or (y) the expiration or earlier termination of this Warrant, when the Company shall not be required
to file reports pursuant to Section 13 or 15(d) of the Exchange Act or shall not have timely filed all such required reports, Warrantholder
shall be entitled to the information rights contained in Section 7.1(b) – (f) of the Loan Agreement, and in any such event
Section 7.1(b) – (f) of the Loan Agreement is hereby incorporated into this Agreement by this reference as though fully set
forth herein, provided, however, that the Company shall not be required to deliver a Compliance Certificate once all Indebtedness
(as defined in the Loan Agreement) owed by the Company to Warrantholder has been repaid.


 


(i)   Rule
144 Compliance.         The Company shall, at all times prior to the earlier to occur
of (x) the date of sale or other disposition by Warrantholder of this Warrant or all shares of Common Stock issued on exercise
of this Warrant, (y) the registration pursuant to subsection (g) above of the shares issued on exercise of this Warrant, or (z)
the expiration or earlier termination of this Warrant if the Warrant has not been exercised in full or in part on such date, use
all commercially reasonable efforts to timely file all reports required under the 1934 Act and otherwise timely take all actions
necessary to permit the Warrantholder to sell or otherwise dispose of this Warrant and the shares of Common Stock issued on exercise
hereof pursuant to Rule 144 promulgated under the Act as amended and in effect from time to time, provided that the foregoing
shall not apply in the event of a Merger Event following which the successor or surviving entity is not subject to the reporting
requirements of the 1934 Act. If the Warrantholder proposes to sell Common Stock issuable upon the exercise of this Agreement
in compliance with Rule 144, then, upon Warrantholder’s written request to the Company, the Company shall furnish to the
Warrantholder, within five (5) business days after receipt of such request, a written statement confirming the Company’s
compliance with the filing and other requirements of such Rule.


 



    	 	7	 



     


    

 


SECTION 10.         REPRESENTATIONS
AND COVENANTS OF THE WARRANTHOLDER. 


 


This Agreement has been entered into
by the Company in reliance upon the following representations and covenants of the Warrantholder:


 


(a)   Investment
Purpose. This Warrant and the shares issued on exercise hereof will be acquired for investment and not with a view to the sale
or distribution of any part thereof in violation of applicable federal and state securities laws, and the Warrantholder has no
present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption.


 


(b)   Private
Issue. The Warrantholder understands (i) that the Common Stock issuable upon exercise of this Agreement is not, as of the Effective
Date, registered under the Act or qualified under applicable state securities laws, and (ii) that the Company's reliance on exemption
from such registration is predicated on the representations set forth in this Section 10.


 


(c)   Financial
Risk. The Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment, and has the ability to bear the economic risks of its investment.


 


(d)   Accredited
Investor. Warrantholder is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under
the Act, as presently in effect (“Regulation D”).


 


(e)   No
Short Sales.         Warrantholder has not at any time on or prior to the
Effective Date engaged in any short sales or equivalent transactions in the Common Stock. Warrantholder agrees that at all times
from and after the Effective Date and on or before the expiration or earlier termination of this Warrant, it shall not engage in
any short sales or equivalent transactions in the Common Stock.


 


SECTION 11.         TRANSFERS.


 


Subject to compliance with applicable
federal and state securities laws, this Agreement and all rights hereunder are transferable, in whole or in part, without charge
to the holder hereof (except for transfer taxes) upon surrender of this Agreement properly endorsed. Each taker and holder of this
Agreement, by taking or holding the same, consents and agrees that this Agreement, when endorsed in blank, shall be deemed negotiable,
and that the holder hereof, when this Agreement shall have been so endorsed and its transfer recorded on the Company’s books,
shall be treated by the Company and all other persons dealing with this Agreement as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Agreement. The transfer of this Agreement shall be recorded
on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the
"Transfer Notice"), at its principal offices and the payment to the Company of all transfer taxes and other governmental
charges imposed on such transfer. Until the Company receives such Transfer Notice, the Company may treat the registered owner hereof
as the owner for all purposes. Notwithstanding anything herein or in any legend to the contrary, the Company shall not require
an opinion of counsel in connection with any sale, assignment or other transfer by Warrantholder of this Warrant (or any portion
hereof or any interest herein) or of any shares of Common Stock issued upon any exercise hereof to an affiliate (as defined in
Regulation D) of Warrantholder, provided that such affiliate is an “accredited investor” as defined in Regulation D.


 



    	 	8	 



     


    

  


SECTION 12.         MISCELLANEOUS.



 


(a)   Effective
Date. The provisions of this Agreement shall be construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Agreement shall be binding upon any successors or assigns of the Company.


 


(b)   Remedies.
In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in
equity and/or by action at law, including but not limited to an action for damages as a result of any such default, and/or an action
for specific performance for any default where Warrantholder will not have an adequate remedy at law and where damages will not
be readily ascertainable.


 


(c)   No
Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid
the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of
the Warrantholder against impairment.


 


(d)   Additional
Documents. The Company agrees to supply such other documents as the Warrantholder may from time to time reasonably request.


 


(e)   Attorneys’
Fees. In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing
party shall be entitled to its reasonable attorneys’ fees and expenses and all costs of proceedings incurred in enforcing
this Agreement. For the purposes of this Section 12(e), reasonable attorneys’ fees shall include without limitation fees
incurred in connection with the following: (i) contempt proceedings; (ii) discovery; (iii) any motion, proceeding or other activity
of any kind in connection with an insolvency proceeding; (iv) garnishment, levy, and debtor and third party examinations; and (v)
post-judgment motions and proceedings of any kind, including without limitation any activity taken to collect or enforce any judgment.


 


(f)   Severability.
In the event any one or more of the provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable,
the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced
by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying
the invalid, illegal or unenforceable provision.


 


(g)   Notices.
Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication
that is required, contemplated, or permitted under this Agreement or with respect to the subject matter hereof shall be in writing,
and shall be deemed to have been validly served, given, delivered, and received upon the earlier of: (a) personal delivery
to the party to be notified, (b) when sent by confirmed telex, electronic transmission or facsimile if sent during normal
business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt, and shall be addressed to the party to be notified
as follows:


  



    	 	9	 



     


    

 


If to Warrantholder:


 


Hercules Technology
III, L.P.


Legal Department


Attention: Chief Legal Officer and Bryan Jadot


400 Hamilton Avenue, Suite 310


Palo Alto, CA 94301


Facsimile: 650-473-9194


Telephone: 650-289-3060


 


If to the Company:


 


PHASERX, INC.


Attention: Chief Financial Officer


410 West Harrison Street, Suite 300


Seattle, WA 98119


Facsimile:


Telephone:


 


or to such other address as each party may
designate for itself by like notice.


 


(h)   Entire
Agreement; Amendments. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of
the subject matter hereof, and supersedes and replaces in their entirety any prior proposals, term sheets, letters, negotiations
or other documents or agreements, whether written or oral, with respect to the subject matter hereof. None of the terms of this
Agreement may be amended except by an instrument executed by each of the parties hereto.


 


(i)   Headings.
The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of
this Agreement or any provisions hereof.


 


(j)   Advice
of Counsel. Each of the parties represents to each other party hereto that it has discussed (or had an opportunity to discuss)
with its counsel this Agreement and, specifically, the provisions of Sections 12(n), 12(o), 12(p), 12(q) and 12(r).


 


(k)   No
Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the
parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.


 


(l)   No
Waiver. No omission or delay by Warrantholder at any time to enforce any right or remedy reserved to it, or to require performance
of any of the terms, covenants or provisions hereof by the Company at any time designated, shall be a waiver of any such right
or remedy to which Warrantholder is entitled, nor shall it in any way affect the right of Warrantholder to enforce such provisions
thereafter.


 


(m)   Survival.
All agreements, representations and warranties contained in this Agreement or in any document delivered pursuant hereto shall be
for the benefit of Warrantholder and shall survive the execution and delivery of this in accordance with their terms.


 


(n)   Governing
Law. This Agreement has been negotiated and delivered to Warrantholder in the State of California, and shall be deemed to have
been accepted by Warrantholder in the State of California. Delivery of Common Stock to Warrantholder by the Company under this
Agreement is due in the State of California. This Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other
jurisdiction.


 



    	 	10	 



     


    

  


(o)   Consent
to Jurisdiction and Venue. All judicial proceedings arising in or under or related to this Agreement may be brought in any
state or federal court of competent jurisdiction located in the State of California. By execution and delivery of this Agreement,
each party hereto generally and unconditionally: (a) consents to personal jurisdiction in Santa Clara County, State of California;
(b) waives any objection as to jurisdiction or venue in Santa Clara County, State of California; (c) agrees not to assert any defense
based on lack of jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. Service of process on any party hereto in any action arising out of or relating to this
Agreement shall be effective if given in accordance with the requirements for notice set forth in Section 12(g), and shall be deemed
effective and received as set forth in Section 12(g). Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of either party to bring proceedings in the courts of any other jurisdiction.


 


(p)   Mutual
Waiver of Jury Trial. Because disputes arising in connection with complex financial transactions are most quickly and economically
resolved by an experienced and expert person and the parties wish applicable state and federal laws to apply (rather than arbitration
rules), the parties desire that their disputes arising under or in connection with this Warrant be resolved by a judge applying
such applicable laws. EACH OF THE COMPANY AND WARRANTHOLDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE
OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY
THE COMPANY AGAINST WARRANTHOLDER OR ITS ASSIGNEE OR BY WARRANTHOLDER OR ITS ASSIGNEE AGAINST THE COMPANY RELATING TO THIS WARRANT.
This waiver extends to all such Claims, including Claims that involve persons or entities other the Company and Warrantholder;
Claims that arise out of or are in any way connected to the relationship between the Company and Warrantholder; and any Claims
for damages, breach of contract, specific performance, or any equitable or legal relief of any kind, arising out of this Agreement.


 


(q)   Arbitration.
If the Mutual Waiver of Jury Trial set forth in Section 12(p) is ineffective or unenforceable, the parties agree that all Claims
shall be submitted to binding arbitration in accordance with the commercial arbitration rules of JAMS (the “Rules”),
such arbitration to occur before one arbitrator, which arbitrator shall be a retired California state judge or a retired Federal
court judge. Such proceeding shall be conducted in Santa Clara County, State of California, with California rules of evidence and
discovery applicable to such arbitration. The decision of the arbitrator shall be binding on the parties, and shall be final and
nonappealable to the maximum extent permitted by law. Any judgment rendered by the arbitrator may be entered in a court of competent
jurisdiction and enforced by the prevailing party as a final judgment of such court.


 


(r)   Pre-arbitration
Relief. In the event Claims are to be resolved by arbitration, either party may seek from a court of competent jurisdiction
identified in Section 12(o), any prejudgment order, writ or other relief and have such prejudgment order, writ or other relief
enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise subject to resolution by binding
arbitration.


 


(s)   Counterparts.
This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts (including
by facsimile or electronic delivery (PDF), and by different parties hereto in separate counterparts, each of which when so delivered
shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument.


 



    	 	11	 



     


    

 


(t)   Specific
Performance. The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to Warrantholder
by reason of the Company’s failure to perform any of the obligations under this Agreement and agree that the terms of this
Agreement shall be specifically enforceable by Warrantholder. If Warrantholder institutes any action or proceeding to specifically
enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense
therein that Warrantholder has an adequate remedy at law, and such person shall not offer in any such action or proceeding the
claim or defense that such remedy at law exists.


 


(u)   Lost,
Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed. Any such
new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated
or destroyed Warrant shall be at any time enforceable by anyone.


 


(v)   Legends.
To the extent required by applicable laws, this Warrant and the shares of Common Stock issuable hereunder (and the securities issuable,
directly or indirectly, upon conversion of such shares of Common Stock, if any) may be imprinted with a restricted securities legend
in substantially the following form:


 


THIS SECURITY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR PURSUANT TO RULE 144 OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.


  


[Remainder of Page Intentionally Left Blank]


 




    	 	12	 



     


    


 


IN WITNESS WHEREOF, the parties hereto have
caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date.


  


	COMPANY:	PHASERX, INC.
	 	 	 
	 	By:	/s/ Robert Overell
	 	Name:	Dr. Robert Overell 
	 	Title:	CEO


  


	WARRANTHOLDER:	HERCULES TECHNOLOGY III, L.P.,
	 	a Delaware limited partnership
	 	 	 
	 	By: Hercules Technology SBIC Management, LLC,
	 	its General Partner
	 	 	 
	 	By: Hercules Capital, Inc.,
	 	its Manager	 
	 	 	 
	 	By:	/s/ Ben Bang
	 	Name:	Ben Bang
	 	Title:	Assistant General Counsel


 




    	 	13	 



     


    


 


EXHIBIT I


 


NOTICE OF EXERCISE


 


		To:	[____________________________]



 


		(1)	The undersigned Warrantholder hereby elects to purchase
[_______] shares of the Common Stock of [_________________], pursuant to the terms of the Agreement dated the [___] day of [______,
_____] (the "Agreement") between [_________________] and the Warrantholder, and tenders herewith payment of the Purchase
Price in full, together with all applicable transfer taxes, if any. [NET ISSUANCE: elects pursuant
to Section 3(a) of the Agreement to effect a Net Issuance.]



 


		(2)	Please issue a certificate or certificates representing
said shares of Common Stock in the name of the undersigned or in such other name as is specified below.



 


	 	 
	 	(Name)
	 	 
	 	 
	 	(Address)


 


	WARRANTHOLDER:	HERCULES TECHNOLOGY III, L.P.,
	 	a Delaware limited partnership
	 	 	 
	 	By: Hercules Technology SBIC Management, LLC,
	 	its General Partner
	 	 	 
	 	By: Hercules Capital, Inc.,
	 	its Manager
	 	 	 
	 	By: 	 
	 	Name:	 
	 	Title:	 


 




    	 	14	 



     


    


 


EXHIBIT II


 


		1.	ACKNOWLEDGMENT OF EXERCISE



 


The undersigned [____________________________________], hereby
acknowledge receipt of the "Notice of Exercise" from Hercules Technology III, L.P. to purchase [____] shares of the Common
Stock of [_________________], pursuant to the terms of the Agreement, and further acknowledges that [______] shares remain subject
to purchase under the terms of the Agreement.


 


	COMPANY:	[_________________]
	 	 	 
	 	By:	 
	 	 	 
	 	Title:	 
	 	 	 
	 	Date:	 



 



    	 	15	 



     


    

 


EXHIBIT III


 


TRANSFER NOTICE


 


(To transfer or assign the foregoing Agreement execute this
form and supply required information. Do not use this form to purchase shares.)


 


FOR VALUE RECEIVED, the foregoing Agreement and all rights evidenced
thereby are hereby transferred and assigned to


 


	 	 
	(Please Print)	 	 
	 	 	 
	whose address is	 	 
	 	 	 
	 	 	 
	 	 	 
	 	Dated:	 	 
	 	 	 	 
	 	 	 	 
	 	Holder's Signature:	 	 
	 	 	 	 
	 	Holder's Address:	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	Signature Guaranteed:	 	 




 


NOTE:  The signature to this Transfer
Notice must correspond with the name as it appears on the face of the Agreement, without alteration or enlargement or any change
whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence
of authority to assign the foregoing Agreement.




 



    	 	16