Document:

Exhibit 10.19

 

INCENTIVE STOCK OPTION AGREEMENT

 

PHASERX, INC.

2016 LONG-TERM INCENTIVE PLAN

 

1.          Grant
of Option. Pursuant to the PhaseRx, Inc. 2016 Long-Term Incentive Plan (the “Plan”), as adopted by
PhaseRx, Inc., a Delaware corporation (the “Company”), the Company grants to

 

_________________________

(the “Participant”)

 

who is an Employee of the Company, an option
(the “Option” or “Stock Option”) to purchase a total of _________________
(____________) full shares of Common Stock of the Company (the “Optioned Shares”) at an “Option
Price” equal to $_________ per share (being the Fair Market Value per share of the Common Stock on the Date of Grant
or 110% of such Fair Market Value, in the case of a ten percent (10%) or more stockholder as provided in Section 422 of the Code),
in the amounts, during the periods and upon the terms and conditions set forth in this Incentive Stock Option Agreement (the “Agreement”).

 

The “Date
of Grant” of this Stock Option is ______________ 20____. The “Option Period” shall
commence on the Date of Grant and shall expire on the date immediately preceding the tenth (10th) anniversary of the
Date of Grant (or the date immediately preceding the fifth (5th) anniversary of the Date of Grant, in the case of a
ten percent (10%) or more stockholder as provided in Section 422 of the Code) unless terminated earlier in accordance with Section
4 below. The Stock Option is intended to be an Incentive Stock Option.

 

2.          Subject
to Plan. The Stock Option and its exercise are subject to the terms and conditions of the Plan, and the terms of the Plan shall
control to the extent not otherwise inconsistent with the provisions of this Agreement. The capitalized terms used herein that
are defined in the Plan shall have the same meanings assigned to them in the Plan. The Stock Option is subject to any rules promulgated
pursuant to the Plan by the Board or the Committee and communicated to the Participant in writing. In addition, if the Plan previously
has not been approved by the Company’s stockholders, the Stock Option is granted subject to such stockholder approval.

 

3.          Vesting;
Time of Exercise. Except as specifically provided in this Agreement and subject to certain restrictions and conditions set
forth in the Plan, the Optioned Shares shall be vested and the Stock Option shall be exercisable as follows:

 

a.           One
forty-eighth (1/48) of the total Optioned Shares shall vest on the one-month anniversary of the Date of Grant, provided the Participant
is employed by the Company or a Subsidiary on that date.

 

b.           An
additional one forty-eighth (1/48) of the total Optioned Shares shall vest on each monthly anniversary of the Date of Grant thereafter,
provided the Participant is employed by the Company or a Subsidiary on that date.

 

In the event that (i) a Change in Control
occurs, and (ii) this Agreement is not assumed by the surviving corporation or its parent, or the surviving corporation or its
parent does not substitute its own option for this Stock Option, then immediately prior to the effective date of such Change in
Control, the total Optioned Shares not previously vested shall thereupon immediately become vested and this Stock Option shall
become fully exercisable, if not previously so exercisable.

 

    	 	 	 

     

    

  

4.          Term;
Forfeiture.

 

a.           Except
as otherwise provided in this Agreement, to the extent the unexercised portion of the Stock Option relates to Optioned Shares which
are not vested on the date of the Participant’s Termination of Service, the Stock Option will be terminated on that date.
The unexercised portion of the Stock Option that relates to Optioned Shares which are vested will terminate at the first of the
following to occur:

 

i.            5
p.m. on the date the Option Period terminates;

 

ii.         5
p.m. on the date which is twelve (12) months following the date of the Participant’s Termination of Service due to death
or Total and Permanent Disability;

 

iii.         immediately
upon the Participant’s Termination of Service by the Company for Cause (as defined herein);

 

iv.         5
p.m. on the date which is three (3) months following the date of the Participant’s Termination of Service for any reason
not otherwise specified in this Section 4.a.; and

 

v.           5
p.m. on the date the Company causes any portion of the Stock Option to be forfeited pursuant to Section 7 hereof.

 

b.           For
purposes of this Agreement, “Cause” means the Participant’s Termination of Service by the Company
because of: (i) the Participant’s conviction of, or plea of nolo contendere to, a felony or crime involving moral turpitude;
(ii) the Participant’s personal dishonesty, incompetence, willful misconduct, willful violation of any law, rule or regulation
(other than minor traffic violations or similar offenses) or breach of fiduciary duty which involves personal profit; (iii) the
Participant’s commission of material mismanagement in the conduct of the Participant’s duties as assigned to him or
her by the Board or the Participant’s supervising officer or officers of the Company or any Subsidiary; (iv) the Participant’s
willful failure to execute or comply with the policy of the Company or any of its Subsidiaries or the Participant’s stated
duties as established by the Board or the Participant’s supervising officer or officers of the Company or any Subsidiary
or the Participant’s intentional failure to perform the Participant’s stated duties; or (v) substance abuse or addiction
on the part of the Participant. Notwithstanding the foregoing, in the case of any Participant who has entered into an employment
agreement with the Company or any Subsidiary that contains the definition of “cause” (or any similar definition), then
during the term of such employment agreement the definition contained in such employment agreement shall be the applicable definition
of “cause” under the Agreement as to such Participant if such employment agreement expressly so provides.

 

5.          Who
May Exercise. Subject to the terms and conditions set forth in Sections 3 and 4 above, during the lifetime of the Participant,
the Stock Option may be exercised only by the Participant, or by the Participant’s guardian or personal or legal representative.
If the Participant’s Termination of Service is due to his death prior to the dates specified in Section 4.a. hereof,
and the Participant has not exercised the Stock Option as to the maximum number of vested Optioned Shares as set forth in Section 3
hereof as of the date of death, the following persons may exercise the exercisable portion of the Stock Option on behalf of the
Participant at any time prior to the earliest of the dates specified in Section 4.a. hereof: the personal representative
of his estate, or the person who acquired the right to exercise the Stock Option by bequest or inheritance or by reason of the
death of the Participant; provided that the Stock Option shall remain subject to the other terms of this Agreement, the Plan, and
Applicable Laws, rules, and regulations.

 

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6.          No
Fractional Shares. The Stock Option may be exercised only with respect to full shares, and no fractional share of stock shall
be issued.

 

7.          Manner
of Exercise. Subject to such administrative regulations as the Committee may from time to time adopt, the Stock Option may
be exercised by the delivery of written notice to the Committee (the “Exercise Notice”) setting forth
the number of shares of Common Stock with respect to which the Stock Option is to be exercised, the date of exercise thereof (the
“Exercise Date”), and whether the Optioned Shares to be exercised will be considered as deemed granted
under an Incentive Stock Option as provided in Section 11. On the Exercise Date, the Participant shall deliver to the Company
consideration with a value equal to the total Option Price of the shares to be purchased, payable as follows: (a) cash, check,
bank draft, or money order payable to the order of the Company, (b) if the Company, in its sole discretion, so consents in writing,
Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the
Exercise Date, (c) if the Company, in its sole discretion, so consents in writing, by delivery (including by FAX) to the Company
or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant
to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise
of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (d) in any other form of valid consideration that is acceptable to the
Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as consideration for the exercise of
a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option equal to the number of shares of
Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock
so tendered.

 

Upon payment of all
amounts due from the Participant, the Company shall cause the Common Stock then being purchased to be registered in the Participant’s
name (or the person exercising the Participant’s Stock Option in the event of his death), but shall not issue certificates
for such Common Stock unless the Participant or such other person requests delivery of certificates for such Common Stock in accordance
with Section 8.3(c) of the Plan. The obligation of the Company to register shares of Common Stock shall, however, be subject to
the condition that, if at any time the Company shall determine in its discretion that the listing, registration, or qualification
of the Stock Option or the Common Stock upon any securities exchange or inter-dealer quotation system or under any state or federal
law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the
Stock Option or the issuance or purchase of shares of Common Stock thereunder, then the Stock Option may not be exercised in whole
or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of
any conditions not reasonably acceptable to the Committee.

 

If the Participant
fails to pay for any of the Optioned Shares specified in such notice within three (3) business days of the date in the Exercise
Notice or fails to accept delivery thereof, then the Exercise Notice shall be null and void and the Company will have no obligation
to deliver any shares of Common Stock to the Participant in connection with such Exercise Notice.

 

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8.           Nonassignability.
The Stock Option is not assignable or transferable by the Participant except by will or by the laws of descent and distribution.

 

9.           Rights
as Stockholder. The Participant will have no rights as a stockholder with respect to any of the Optioned Shares until the registration
of such shares in the Participant’s name. The Optioned Shares shall be subject to the terms and conditions of this Agreement.
Except as otherwise provided in Section 10 hereof, no adjustment shall be made for dividends or other rights for which
the record date is prior to the issuance of such certificate or certificates. The Participant, by his or her execution of this
Agreement, agrees to execute any documents requested by the Company in connection with the issuance of the shares of Common Stock.

 

10.         Adjustment
of Number of Optioned Shares and Related Matters. The number of shares of Common Stock covered by the Stock Option, and the
Option Prices thereof, shall be subject to adjustment in accordance with Articles 11 – 13 of the Plan.

 

11.         Incentive
Stock Option. Subject to the provisions of the Plan, the Stock Option is intended to be an Incentive Stock Option. To the extent
the number of Optioned Shares exceeds the limit set forth in Section 6.3 of the Plan, such Optioned Shares shall be deemed
granted pursuant to a Nonqualified Stock Option. Unless otherwise indicated by the Participant in the notice of exercise pursuant
to Section 7, upon any exercise of this Stock Option, the number of exercised Optioned Shares that shall be deemed to be
exercised pursuant to an Incentive Stock Option shall equal the total number of Optioned Shares so exercised multiplied by a fraction,
(i) the numerator of which is the number of unexercised Optioned Shares that could then be exercised pursuant to an Incentive Stock
Option, and (ii) the denominator of which is the then total number of unexercised Optioned Shares.

 

12.         Disqualifying
Disposition. In the event that Common Stock acquired upon exercise of this Stock Option is disposed of by the Participant in
a “Disqualifying Disposition,” such Participant shall notify the Company in writing within thirty (30) days after such
disposition of the date and terms of such disposition. For purposes hereof, “Disqualifying Disposition”
shall mean a disposition of Common Stock that is acquired upon the exercise of this Stock Option (and that is not deemed granted
pursuant to a Nonqualified Stock Option under Section 11) prior to the expiration of either two (2) years from the Date
of Grant of this Stock Option or one (1) year from the transfer of shares to the Participant pursuant to the exercise of the Stock
Option.

 

13.         Voting.
The Participant, as record holder of some or all of the Optioned Shares following exercise of this Stock Option, has the exclusive
right to vote, or consent with respect to, such Optioned Shares until such time as the Optioned Shares are transferred in accordance
with this Agreement; provided, however, that this Section shall not create any voting right where the holders of
such Optioned Shares otherwise have no such right.

 

14.         Specific
Performance. The parties acknowledge that remedies at law will be inadequate remedies for breach of this Agreement and consequently
agree that this Agreement shall be enforceable by specific performance. The remedy of specific performance shall be cumulative
of all of the rights and remedies at law or in equity of the parties under this Agreement.

 

15.         Participant’s
Representations. Notwithstanding any of the provisions hereof, the Participant hereby agrees that he will not exercise the
Stock Option granted hereby, and that the Company will not be obligated to issue any shares to the Participant hereunder, if the
exercise thereof or the issuance of such shares shall constitute a violation by the Participant or the Company of any provision
of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final, binding,
and conclusive. The obligations of the Company and the rights of the Participant are subject to all Applicable Laws, rules, and
regulations. The Participant agrees and covenants not to sue any Person other than the Company over any Claims.

 

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16.         Investment
Representation. Unless the shares of Common Stock are issued to the Participant in a transaction registered under applicable
federal and state securities laws, by his execution hereof, the Participant represents and warrants to the Company that all Common
Stock which may be purchased hereunder will be acquired by the Participant for investment purposes for his own account and not
with any intent for resale or distribution in violation of federal or state securities laws. Unless the Common Stock is issued
to him in a transaction registered under the applicable federal and state securities laws, all certificates issued with respect
to the Common Stock shall bear an appropriate restrictive investment legend and shall be held indefinitely, unless they are subsequently
registered under the applicable federal and state securities laws or the Participant obtains an opinion of counsel, in form and
substance satisfactory to the Company and its counsel, that such registration is not required.

 

17.         Participant’s
Acknowledgments. The Participant acknowledges that a copy of the Plan has been made available for his or her review by the
Company, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Stock Option
subject to all the terms and provisions thereof. The Participant hereby agrees to accept as binding, conclusive, and final all
decisions or interpretations of the Committee or the Board, as appropriate, upon any questions arising under the Plan or this Agreement.

 

18.         Law
Governing. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware
(excluding any conflict of laws rule or principle of Delaware law that might refer the governance, construction, or interpretation
of this Agreement to the laws of another state).

 

19.         No
Right to Continue Employment. Nothing herein shall be construed to confer upon the Participant the right to continue in the
employment of the Company or interfere with or restrict in any way the right of the Company to discharge the Participant at any
time (subject to any contract rights of the Participant).

 

20.         Legal
Construction. In the event that any one or more of the terms, provisions, or agreements that are contained in this Agreement
shall be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect for any reason, the
invalid, illegal, or unenforceable term, provision, or agreement shall not affect any other term, provision, or agreement that
is contained in this Agreement and this Agreement shall be construed in all respects as if the invalid, illegal, or unenforceable
term, provision, or agreement had never been contained herein.

 

21.         Covenants
and Agreements as Independent Agreements. Each of the covenants and agreements that is set forth in this Agreement shall be
construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause
of action of the Participant against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense
to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement.

 

22.         Entire
Agreement. This Agreement together with the Plan supersede any and all other prior understandings and agreements, either oral
or in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between
the parties with respect to the said subject matter. All prior negotiations and agreements between the parties with respect to
the subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are
not embodied in this Agreement or the Plan and that any agreement, statement or promise that is not contained in this Agreement
or the Plan shall not be valid or binding or of any force or effect.

 

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23.         Parties
Bound. The terms, provisions, and agreements that are contained in this Agreement shall apply to, be binding upon, and inure
to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, and permitted successors
and assigns, subject to the limitation on assignment expressly set forth herein.

 

24.         Modification.
No change or modification of this Agreement shall be valid or binding upon the parties unless the change or modification is in
writing and signed by the parties. Notwithstanding the preceding sentence, the Company may amend the Plan to the extent permitted
by the Plan.

 

25.         Headings.
The headings that are used in this Agreement are used for reference and convenience purposes only and do not constitute substantive
matters to be considered in construing the terms and provisions of this Agreement.

 

26.         Gender
and Number. Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in
the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.

 

27.         Notice.
Any notice required or permitted to be delivered hereunder shall be deemed to be delivered only when actually received by the Company
or by the Participant, as the case may be, at the addresses set forth below, or at such other addresses as they have theretofore
specified by written notice delivered in accordance herewith:

 

		a.	Notice to the Company shall be addressed and delivered
as follows:

 

PhaseRx, Inc.

410 W. Harrison Street,
Suite 300

Seattle, WA 98119

Attn:__________________________

Facsimile:______________________

 

		b.	Notice to the Participant shall be addressed and delivered as set forth on the signature page.

 

28.         Tax
Requirements. The Participant is hereby advised to consult immediately with his or her own tax advisor regarding the tax consequences
of this Agreement. The Company or, if applicable, any Subsidiary (for purposes of this Section 28, the term “Company”
shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form
in connection with the Plan, any federal, state, local, or other taxes required by law to be withheld in connection with this Award.
The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to
pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income
arising with respect to this Award. Such payments shall be required to be made when requested by the Company and may be required
to be made prior to the delivery of any certificate representing shares of Common Stock. Such payment may be made by (i) the delivery
of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required
tax withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery
by the exercising Participant to the Company of shares of Common Stock, which shares so delivered have an aggregate Fair Market
Value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment;
(iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to
be delivered upon the exercise of the Stock Option, which shares so withheld have an aggregate Fair Market Value that equals (but
does not exceed) the required tax withholding payment; or (iv) any combination of (i), (ii), or (iii). The Company may, in its
sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant.

 

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29.         Clawback.
The Participant acknowledges and agrees that any compensation paid to the Participant by the Company, pursuant to this Agreement
or otherwise, shall be subject to recovery by the Company in accordance with the Company’s clawback policy applicable to
employees of the Company, if any, as amended from time to time.

 

* * * * * * * *

 

[Remainder of Page Intentionally Left
Blank

Signature Page Follows.]

 

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IN WITNESS WHEREOF,
the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant, to evidence his consent
and approval of all the terms hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof.

 

	 	PHASERX:	 
	 	 	 
	 	 	 
	 	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 
	 	 
	 	PARTICIPANT:
	 	 
	 	 
	 	Signature
	 	 	 
	 	Name:	 
	 	Address:	 
	 	 	 

 

    	 	8Exhibit 10.32

 

SUBORDINATION AGREEMENT

 

THIS SUBORDINATION
AGREEMENT is entered into effective as of December 21, 2015, among the parties identified on Schedule A hereto (the “Subordinated
Lender”), PhaseRx, Inc., a Delaware corporation (the “Borrower”), and Titan Multi-Strategy
Fund I, LTD., in its capacity as a Senior Lender (as defined below) and in its capacity as representative for itself and for the
other Senior Lenders (the “Representative”), the parties identified on Schedule B hereto (together
with the Representative, are collectively referred to herein as the “Senior Lenders”).

 

RECITALS

 

A.           The Borrower
desires to execute and deliver to each of the Senior Lenders instruments memorializing senior secured instruments or debt obligations
dated at or about the date hereof, in an aggregate original principal amount of up to $4,000,000 (such instruments, which may include
promissory notes, together with any promissory notes or other securities issued in exchange or substitution therefor or replacement
thereof, and as any of the same may be amended, supplemented, restated or modified and in effect from time to time, the “Notes”).
The Notes will be issued pursuant to that certain Loan and Security Agreement dated at or about the date hereof (as the same may
be otherwise dated, redated, amended, restated, supplemented or otherwise modified, the “LSA”), by and
among the Borrower and the Senior Lenders, and pursuant to which the Senior Lenders will make certain loans (the “Loans”)
to the Borrower.

 

B.           The execution
and delivery of this Agreement is a condition precedent to the Senior Lenders making the Loans.

 

ACCORDINGLY, for valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the Subordinated Lender, the Borrower, the Representative
and the Senior Lenders agree as follows:

 

1.           Unless otherwise
defined herein, or the context hereof otherwise requires, each term defined in the Notes is used in this Agreement with the same
meaning. As used herein, the following terms have the meanings indicated:

 

“Senior Debt”
means, whether now or hereafter arising, the obligations of the Borrower to any Senior Lender, including, without limitation,
all indebtedness, obligations, and liabilities arising under or related to any Note, the LSA and the other Facility Documents
(as defined in the LSA), including, without limitation, interest accruing after the commencement of any bankruptcy, insolvency
or similar proceeding with respect to the Borrower, whether or not a claim for such post-commencement interest is allowed.

 

“Subordinated
Debt” means all indebtedness, liabilities, and obligations of the Borrower, now existing or hereafter arising, to
the Subordinated Lender, including, but not limited to: (i) all indebtedness of the Borrower payable to the order of the Subordinated
Lender as further described on Schedule A annexed hereto, and (ii) any and all other obligations owing by the Borrower now
or hereafter to the Subordinated Lender.

 

2.           The payment of
any and all Subordinated Debt is hereby expressly subordinated to all Senior Debt to the extent and in the manner set forth in
this Agreement.

 

3.           Except as expressly
set forth herein, the Subordinated Lender shall not accelerate, demand, sue for, commence any collection or enforcement action
or proceeding, take, receive, accept, or retain any payment or distribution of any character, whether in cash, securities, or other
property, in respect of the principal of, premium on, or interest on, the Subordinated Debt until all Senior Debt is indefeasibly
paid in full or satisfied pursuant to the terms of the Notes.

 

    	 	 	 

     

    

 

4.           Notwithstanding
any provision of the Subordinated Debt to the contrary and in addition to any other limitations set forth herein or therein, no
payment (whether made in cash, securities or other property or by set-off) of principal, interest or any other amount due with
respect to the Subordinated Debt shall be made or received, and the Subordinated Lender shall not exercise any right of set-off
or recoupment with respect to any Subordinated Debt, until all of the Senior Debt is indefeasibly paid in full or satisfied pursuant
to the terms of the Notes.

 

5.           In the event
any payment or distribution of any character, whether in cash, securities, or other property, is received by the Subordinated Lender
in contravention of the terms of this Agreement, and before all Senior Debt shall have been paid in full or satisfied pursuant
to the terms of the Notes, such payment or distribution shall be held by the Subordinated Lender, as trustee of an express trust,
in trust for the benefit of, and shall be paid over or delivered and transferred to the Representative for the benefit of the Senior
Lenders for application to all Senior Debt remaining unpaid until such Senior Debt shall have been paid in full or satisfied pursuant
to the terms of the Notes. The Subordinated Lender hereby assigns to the Representative, for the benefit of the Senior Lenders,
all its rights to any such payments or distributions, which the Representative, for the benefit of the Senior Lenders, may exercise
in any Senior Lender’s name or in the name of the Subordinated Lender, and agrees to execute such instruments as may be required
by the Representative to enable the Senior Lenders to enforce such claims. Any payments or distributions received in excess of
the amount sufficient to pay all Senior Debt in full shall be returned by the Senior Lenders pro rata to the Subordinated Lender.

 

6.           Each Senior Lender
may, at any time and from time to time, without the consent of or notice to the Subordinated Lender, without incurring responsibility
to the Subordinated Lender, and without impairing or releasing any of such Senior Lender’s rights, or any of the obligations
of the Subordinated Lender hereunder, (a) change the amount, manner, place, or terms of payment, or change or extend the time
of payment of or renew or alter all or any part of the Senior Debt or amend, modify, supplement, or restate, any of the Facility
Documents in any manner whatsoever; (b) sell, exchange, release, or otherwise deal with all or any part of any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever securing, all or any part of the Senior Debt; (c) release
any Person liable in any manner for the payment or collection of all or any part of the Senior Debt; (d) exercise or refrain
from exercising any rights against the Borrower; and (e) apply any sums, by whomsoever paid or however realized, to the Senior
Debt.

 

7.           The Subordinated
Debt shall at no time be secured by any security interest in or lien on any property; any security interests and liens now or hereafter
held by the Subordinated Lender in any collateral for the Subordinated Debt shall be released in their entirety, and, to the extent
not released, shall be junior and subordinate to any security interests and liens now or hereafter held by the Senior Lenders in
the same collateral. So long as the Senior Debt shall remain unpaid, the Representative on behalf of, and for the benefit of, the
Senior Lenders, may at all times in its sole discretion exercise any and all powers and rights which it now has or may hereafter
acquire with respect to any of the collateral securing the Senior Debt or any guaranties thereof, all without the necessity of
obtaining any consent or approval of the Subordinated Lender.

 

8.           In the event
of the institution of and in connection with any proceeding against the Borrower or any guarantor of the Senior Debt pursuant to
any insolvency, bankruptcy, receivership, custodianship, liquidation, reorganization, assignment for the benefit of creditors or
other proceeding for the liquidation, dissolution or other winding up of the Borrower or any subsidiary thereof, or any of their
respective properties, and unless or until the Senior Debt is indefeasibly paid in full or otherwise satisfied pursuant to the
terms of the Notes:

 

    	 	- 2 -	 

     

    

 

(a)           all Senior
Debt shall first be paid in full before any payment or distribution of any character, whether in cash, securities, or other property,
shall be made in respect of the principal of, premium on, or interest on the Subordinated Debt;

 

(b)           any payment
or distribution of any character, whether in cash, securities, or other property, which would otherwise (but for the terms hereof)
be payable or deliverable in respect of the principal of, premium on, or interest on the Subordinated Debt, shall be paid or delivered
directly to the Representative on behalf of, and for the benefit of, the Senior Lenders, and the Subordinated Lender irrevocably
authorizes, empowers, and directs all receivers, trustees, liquidators, conservators, and others having authority to effect all
such payments and deliveries;

 

(c)           the Representative,
may, as attorney-in-fact for the Subordinated Lender, take such action on behalf of the Subordinated Lender for the benefit of
the Senior Lenders, and each Subordinated Lender hereby appoints the Representative as its attorney-in-fact, to demand, sue for,
collect, and receive any and all such moneys, dividends, or other assets and give acquittance therefor and to file any claim, proof
of claim, or other instrument of similar character and to take such other proceedings in the name of the Subordinated Lenders as
the Representative may deem necessary or advisable for the benefit of the Senior Lenders in connection with the enforcement of
this Agreement; and

 

(d)           The Subordinated
Lender shall execute and deliver to the Representative, on behalf of the Senior Lenders, all such further instruments confirming
the authorization referred to in the foregoing clauses (b) and (c) and all such proofs of claim, assignments of claim, and other
instruments and shall take all such other actions as may be reasonably requested by the Representative in order to enable the Representative
to enforce all rights of the Senior Lenders hereunder and all claims of the Senior Lenders upon or in respect of the Subordinated
Debt, and failing execution of such instruments or taking of such actions by the Subordinated Lender, the Representative is hereby
authorized and empowered to execute and perform the same on behalf of the Subordinated Lender.

 

9.           The Subordinated
Lender represents and warrants, as applicable, that it is duly organized, validly existing, and in good standing and has the power
and authority under applicable law and under its organizational documents to enter into this Agreement; all actions necessary or
appropriate for its execution and performance of this Agreement have been taken and upon its execution, this Agreement will constitute
its valid and binding obligation enforceable in accordance with its terms; and the making and performance of this Agreement will
not violate any law or organizational documents, or result in any violation of or constitute a default under any agreement by which
it or any of its property is bound.

 

10.           This Agreement
is a continuing agreement of subordination and any Senior Lender may continue to make loans to or otherwise accept the obligations
of the Borrower in reliance hereon, without notice to the Subordinated Lender.

 

11.           While this Agreement
remains in effect, the Subordinated Lender covenants and agrees that it will not (a) modify or amend or permit modification or
amendment of the terms and conditions of the Subordinated Debt, without obtaining the prior written consent of the Representative,
or (b) grant or permit the granting of any security interest to secure the Subordinated Debt. The Subordinated Lender represents
and warrants to each Senior Lender that as of the date hereof the Borrower has not granted any security interest to secure the
Subordinated Debt.

 

    	 	- 3 -	 

     

    

 

12.           No amendment,
waiver, or discharge to or under this Agreement is valid unless it is in writing and is signed by the party against whom
it is sought to be enforced. The Subordinated Lender hereby waives all notices with respect to the subject matter hereof, including,
but not limited to, notice of acceptance of this Agreement, of the making of loans or advances to the Borrower or any extensions,
renewals, or modifications thereof, releases of collateral security or guarantors or other indulgences of any character, or of
the occurrence or declaration of any default or the taking of any collection or enforcement action. This Agreement shall be
governed by and construed according to the Laws of the State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any action, suit or proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of the LSA or this Agreement,
then, in addition to the obligations of Borrower, the prevailing party in such action, suit or proceeding shall be reimbursed by
the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.

 

13.           This Agreement
inures to the benefit of each Senior Lender, and its respective successors and assigns, and the rights under this Agreement may
be assigned in accordance with the terms of the Note, the LSA and the other Facility Documents in whole or in part in connection
with any partial or complete assignment or transfer of the Senior Debt. This Agreement binds the Subordinated Lender and its successors
and assigns, and the Subordinated Lender will advise each future holder of all or any part of the Subordinated Debt that the Subordinated
Debt is subordinated to the Senior Debt in the manner and to the extent set forth in this Agreement.

 

14.           This Agreement
may be executed in a number of identical counterparts, each of which is deemed an original for all purposes and all of which constitute,
collectively, one agreement; but, in making proof of this Agreement, it is not necessary to produce or account for more than one
counterpart.

 

15.           Subject to the
provisions of this Agreement (including, without limitation, Section 3 of this Agreement) and the rights of the Senior Lenders
hereunder, nothing herein contained shall impair the obligation of the Borrower, which is absolute and unconditional, to pay the
Subordinated Debt as and when the same shall become due and payable in accordance with the terms thereof.

 

16.           EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER FACILITY DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

17.           THIS AGREEMENT,
THE NOTE, THE LSA AND THE OTHER FACILITY DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.

 

    	 	- 4 -	 

     

    

 

18.           The Subordinated
Lender shall not sell, assign, dispose of or otherwise transfer all or any portion of the Subordinated Debt (a) without giving
prior written notice of such action to the Representative and, (b) unless prior to the consummation of any such action, the transferee
thereof shall execute and deliver to the Representative for the benefit of the Senior Lenders a joinder to this Agreement, or an
agreement substantially identical to this Agreement and acceptable to the Representative, in either case providing for the continued
subordination and forbearance of the Subordinated Debt to the Senior Debt as provided herein and for the continued effectiveness
of all of the rights of the Senior Lenders arising under this Agreement. In the event of a permitted sale, assignment, disposition
or other transfer, the Subordinated Lender engaging in such sale, assignment, disposition or other transfer, prior to the consummation
of any such action, shall cause the transferee thereof to execute and deliver to the Representative for the benefit of the Senior
Lenders a joinder to this Agreement, or an agreement substantially identical to this Agreement and acceptable to the Representative,
in either case providing for the continued subordination and forbearance of the Subordinated Debt to the Senior Debt as provided
herein and for the continued effectiveness of all of the rights of the Senior Lenders arising under this Agreement. Notwithstanding
the failure to execute or deliver any such agreement, the subordination effected hereby shall survive any sale, assignment, disposition
or other transfer of all or any portion of the Subordinated Debt, and the terms of this Agreement shall be binding upon the successors
and assigns of the Subordinated Lender.

 

19.           All notices,
demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt
requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, email, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery, email receipt or delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:

 

	If to the Subordinated Lender:	 	To the addresses identified on Schedule A hereto
	 	 	 
	If to any the Borrower:	 	
        PhaseRx, Inc.

        410 W. Harrison Street, Suite 300

        Seattle, Washington 98119

        Attn: Robert Overell, CEO

        Email: robert@phaserx.com

 

    	 	- 5 -	 

     

    

 

	with a copy by personal delivery, fax or email only, to:	 	
        Haynes and Boone, LLP

        30 Rockefeller Plaza, 26th Floor

        New York, NY 10112

        Attn: Rick Werner, Esq.

        Fax: (212) 884-8234

        Email: Rick.Werner@haynesboone.com

	 	 	 
	If to Representative:	 	
        Titan Multi-Strategy Fund I, LTD.

        4263 NW 61st Lane

        Boca Raton, Fl 33496

        Fax: 561-241-4749

        Email: jonathanhonig@aol.com

	 	 	 
	With a copy by personal delivery, fax or email only, to:	 	
        Grushko & Mittman, P.C.

        515 Rockaway Avenue

        Valley Stream, New York 11581

        Attn: Edward M. Grushko, Esq.

        Fax: (212) 697-3575

        Email: counslers@aol.com

	 	 	 
	If to Senior Lenders:	 	To the addresses identified on Schedule B hereto
	 	 	 
	With a copy by personal delivery, fax or email only, to:	 	
        Grushko & Mittman, P.C.

        515 Rockaway Avenue

        Valley Stream, New York 11581

        Attn: Edward M. Grushko, Esq.

        Fax: (212) 697-3575

        Email: counslers@aol.com

 

20.           (a) Each Senior
Lender hereby (i) appoints Titan Multi-Strategy Fund I, LTD. as the Representative under this Agreement and (ii) authorizes
the Representative (and its officers, directors, employees and agents) to take such action on such Senior Lender’s behalf
in accordance with the terms hereof. The Representative shall not have, by reason hereof or any other Facility Document,
a fiduciary relationship in respect of any other Senior Lender. Neither the Representative nor any of its officers, directors,
employees and agents shall have any liability to any other Senior Lender for any action taken or omitted to be taken
in connection hereof except to the extent caused by its own gross negligence or willful misconduct, and each other Senior
Lender agrees to defend, protect, indemnify and hold harmless the Representative and all of its officers, directors,
employees and agents (collectively, the “Indemnitees”) from and against any losses, damages, liabilities,
obligations, penalties, actions, judgments, suits, fees, costs and expenses (including, without limitation, reasonable attorneys’
fees, costs and expenses) incurred by such Indemnitee, whether direct, indirect or consequential, arising from or in connection
with the performance by such Indemnitee of the duties and obligations of the Representative pursuant hereto or any other
Facility Document. Except as expressly set forth herein, the Representative shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the holders of at least a majority in principal amount of the Notes then outstanding, and
such instructions shall be binding upon all  of the Senior Lenders; provided, however, that the Representative shall
not be required to take any action which, in the reasonable opinion of the Representative, exposes the Representative to liability
or which is contrary to this Agreement or any other Facility Document or applicable law.

 

    	 	- 6 -	 

     

    

 

(b)           The
Representative shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person
(as defined in the LSA), and with respect to all matters pertaining to this Agreement or any other Facility Document and
its duties hereunder, upon advice of counsel selected by it.

 

(c)           The
Representative may resign from the performance of all its functions and duties hereunder by giving at least ten (10) business
days’ prior written notice to the Subordinated Lender and each other Senior Lender. Such resignation shall
take effect upon the acceptance by a successor representative of appointment as provided below. Upon any such notice of resignation,
the holders of a majority of the outstanding principal under the Notes shall appoint a successor representative. Upon the acceptance
of the appointment as the successor representative, such successor representative shall succeed to and become vested with all
the rights, powers, privileges and duties of the retiring representative, and the retiring representative shall be discharged
from its duties and obligations under this Agreement. After any representative's resignation hereunder, the provisions of this
Section 20(c) (including the indemnification of all of the Senior Lenders who are not serving in the capacity of a representative)
shall inure to its benefit. If a successor representative shall not have been so appointed within said ten (10) business day period,
the retiring representative, shall then appoint a successor representative who shall serve until such time, if any, as the holders
of a majority of the outstanding principal under the Notes appoint a successor representative as provided above.

 

[Signature Pages
Follow]

 

    	 	- 7 -	 

     

    

 

IN WITNESS WHEREOF, the undersigned
have executed and delivered this Subordination Agreement as of the date first written above.

 

	 	REPRESENTATIVE:
	 	 
	 	Titan Multi-Strategy Fund I, LTD.
	 	 	 
	 	By:	/s/ Jonathan Honig
	 	 	Name: Jonathan Honig
	 	 	Title: Manager
	 	 	 
	 	BORROWER:
	 	 
	 	PHASERX, INC.
	 	 	 
	 	By:	/s/Robert Overell
	 	 	Name: Robert Overell
	 	 	Title: President and CEO

 

[SIGNATURE PAGE TO THE SUBORDINATION AGREEMENT]

 

    	 	 	 

     

    

 

[SIGNATURE PAGE OF SENIOR LENDERS TO SUBORDINATION
AGREEMENT]

 

Name of Senior Lender: Titan Multi-Strategy
Fun I, LTD

 

Signature of Authorized Signatory of
Senior Lender: /s/Jonathan Honig

 

Name of Authorized Signatory: Jonathan Honig

 

Title of Authorized Signatory: Manager

 

Email Address of Authorized Signatory: jonathanhonig@aol.com

 

Facsimile Number of Authorized Signatory:
561-241-4749

 

State of Residence of Senior Lender: FL

 

Address for Notice to Senior Lender: 4263
NW, 61st Lane, Boca Raton, FL 33496

 

    	 	 	 

     

    

 

[SIGNATURE PAGE OF SUBORDINATED LENDER TO
SUBORDINATION AGREEMENT]

 

Name of Subordinated Lender:

 

5AM Ventures II, LP

 

By: 5AM Partners II LLC

Its: General Partner

 

	Signature of Authorized Signatory of Subordinated Lender:	/s/John D. Diekman

 

Name of Authorized Signatory: John D. Diekman

 

Title of Authorized Signatory: Managing
Member

 

Email Address of Authorized Signatory: john@5amventures.com

 

    	 	 	 

     

    

 

[SIGNATURE PAGE OF SUBORDINATED LENDER TO
SUBORDINATION AGREEMENT]

 

Name of Subordinated Lender:

 

5AM Co-Investors II, LP 

 

By: 5AM Partners II LLC

Its: General Partner

 

	Signature of Authorized Signatory of Subordinated Lender:	/s/John D. Diekman

 

Name of Authorized Signatory: John D. Diekman

 

Title of Authorized Signatory: Managing
Member

 

Email Address of Authorized Signatory: john@5amventures.com

 

    	 	 	 

     

    

 

[SIGNATURE PAGE OF SUBORDINATED LENDER TO
SUBORDINATION AGREEMENT]

 

Name of Subordinated Lender:

 

ARCH Venture Fund VII, L.P.

 

By: ARCH Venture Partners VII, L.P.

its General Partner

 

By: ARCH Venture Partners VII, LLC

its General Partner

 

	Signature of Authorized Signatory of Subordinated Lender:	/s/Robert Nelson

 

Name of Authorized Signatory: Robert Nelson

 

Title of Authorized Signatory: Managing
Director

 

Email Address of Authorized Signatory: rn@archventure.com

 

    	 	 	 

     

    

 

[SIGNATURE PAGE OF SUBORDINATED LENDER TO
SUBORDINATION AGREEMENT]

 

Name of Subordinated Lender:

 

Versant Side Fund III, L.P.

 

By: Versant Ventures III, LLC

Its: General Partner

 

	Signature of Authorized Signatory of Subordinated Lender:	/s/Brian Atwood

 

Name of Authorized Signatory: Brian Atwood

 

Title of Authorized Signatory: Managing
Director

 

Email Address of Authorized Signatory:
brian@versantventures.com

 

    	 	 	 

     

    

 

[SIGNATURE PAGE OF SUBORDINATED LENDER TO
SUBORDINATION AGREEMENT]

 

Name of Subordinated Lender:

 

Versant Venture Capital III, L.P.

 

By: Versant Ventures III, LLC

Its: General Partner

 

	Signature of Authorized Signatory of Subordinated Lender:	/s/Brian Atwood

 

Name of Authorized Signatory: Brian Atwood

 

Title of Authorized Signatory: Managing
Director

 

Email Address of Authorized Signatory: brian@versantventures.com

 

    	 	 	 

     

    

 

[SIGNATURE PAGE OF SUBORDINATED LENDER TO
SUBORDINATION AGREEMENT]

 

Name of Subordinated Lender:

 

Alexandria Equities, LLC,

a Delaware limited liabilitiy company

 

By: Alexandria Real Estate Equities, Inc.,

a Maryland corporation, managing
member

 

	Signature of Authorized Signatory of Subordinated Lender:	/s/Jennifer Banks

 

Name of Authorized Signatory: Jennifer Banks

 

Title of Authorized Signatory: EVP, General
Counsel

 

Email Address of Authorized Signatory: investements@are.com

 

    	 	 	 

     

    

 

SCHEDULE A

 

SUBORDINATED LENDERS

 

	ARCH Venture Fund VII, L.P.
	8725 West Higgins Road
	Suite 290
	Chicago, IL 60631
	 
	Alexandria Equities, LLC
	385 E. Colorado Blvd.
	Suite 299
	Pasadena, CA 91101
	 
	Versant Venture Capital III, L.P.
	One Sansome Street
	Suite 3630
	San Francisco, CA 94104
	 
	Versant Side Fund III, L.P.
	One Sansome Street
	Suite 3630
	San Francisco, CA 94104
	 
	5AM Ventures II, LP
	2200 Sand Hill Road
	Suite 110
	Menlo Park, CA 94025
	 
	5AM Co-Investors II, LP
	2200 Sand Hill Road
	Suite 110
	Menlo Park, CA 94025

 

    	 	 	 

     

    

 

SCHEDULE B

 

SENIOR LENDERS

 

	Riding the Bull, LLC	 	$	1,050,000	 
	Alpha Capital Anstalt	 	$	500,000	 
	Titan Multi-Strategy Fund I, Ltd. 	 	$	500,000	 
	Chesed Found Ltd.	 	$	400,000	 
	Fame Associates	 	$	250,000	 
	H & M Machine Co.	 	$	250,000	 
	Kuykendall Associates, LLC Retirement Trust	 	$	250,000	 
	Muller, Israel	 	$	150,000	 
	Robert S. Colman Trust UDT 3/13/85	 	$	150,000	 
	Hoch, Joseph	 	$	100,000	 
	Point Capital, Inc.	 	$	100,000	 
	Belsky, Mordechai	 	$	100,000	 
	2004 Leon Scharf Irrevocable Trust Corp	 	$	50,000	 
	Mizrachi, Max	 	$	50,000	 
	Richardson, Erick	 	$	44,000	 
	Gross, Chaim	 	$	30,000	 
	Arjang, Jacob Maziar	 	$	26,000	 
	Total	 	$	4,000,000

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