Document:

Exhibit 10.31

 

Execution Copy

 

 

 

LOAN
AND SECURITY AGREEMENT

 

dated
as of December 21, 2015

 

among

 

PhaseRx,
Inc.

as
Borrower,

 

and

 

the
financial institutions and individuals listed on Annex A, 

as
Lenders 

 

and

 

Titan
Multi-Strategy Fund I, LTD.,

as
Security Agent

 

 

 

     

     

    

 

TABLE OF CONTENTS

 

	 	 	Page
	 	 	 
	ARTICLE I DEFINITIONS
    AND ACCOUNTING TERMS	2
	 	 	 
	SECTION 1.01.	Certain Defined Terms	2
	SECTION 1.02.	Times of Day	6
	SECTION 1.03.	Principles of Construction	7
	 	 	 
	ARTICLE II AMOUNTS
    AND TERMS OF THE ADVANCES	7
	 	 	 
	SECTION 2.01.	The Loan	7
	SECTION 2.02.	Repayment of Loan	7
	SECTION 2.03.	Interest	8
	SECTION 2.04.	Maximum Interest	8
	SECTION 2.05.	Prepayments of Loan	8
	SECTION 2.06.	Evidence of Debt	8
	SECTION 2.07.	Payments and Computations	9
	SECTION 2.08.	Mandatory Prepayments	9
	 	 	 
	ARTICLE III CONDITIONS
    OF LENDING	9
	 	 	 
	SECTION 3.01.	Conditions Precedent	9
	 	 	 
	ARTICLE IV REPRESENTATIONS
    AND WARRANTIES	10
	 	 	 
	SECTION 4.01.	Representations and Warranties	10
	SECTION
    4.02.	Lender Representations and Warranties	13
	 	 	 
	ARTICLE V COVENANTS
    OF BORROWER	13
	 	 	 
	SECTION 5.01.	Affirmative Covenants	13
	SECTION 5.02.	Negative Covenants	15
	 	 	 
	ARTICLE VI SECURITY
    INTEREST	17
	 	 	 
	SECTION 6.01.	Granting of Security Interest	17
	SECTION 6.02.	Proceeds	18
	SECTION 6.03.	Delivery of Certain Collateral	18
	SECTION 6.04.	Authorization to File Financing Statements	18
	 	 	 
	ARTICLE VII EVENTS
    OF DEFAULT	18
	 	 	 
	SECTION 7.01.	Events of Default	18
	SECTION 7.02.	Rights and Remedies	19
	 	 	 
	ARTICLE VIII CONVERSION	21
	 	 	 
	SECTION 8.01.	Conversion of Term Loans	21
	SECTION 8.02.	Conversion Limitation	21

 

    i

     

    

 

	ARTICLE
    IX Indemnification	21
	 	 	 
	SECTION
    9.01.	Indemnification	21
	 	 	 
	ARTICLE
    X MISCELLANEOUS	22
	 	 	 
	SECTION
    10.01.	Amendments	22
	SECTION
    10.02.	Notices;
    Effectiveness; Electronic Communications	22
	SECTION
    10.03.	Waiver	23
	SECTION
    10.04.	Equal
    Treatment of Lenders	23
	SECTION
    10.05.	Costs
    and Expenses	23
	SECTION
    10.06.	Governing
    Law; Submission to Jurisdiction	23
	SECTION
    10.07.	Severability	24
	SECTION
    10.08.	Counterparts;
    Integration; Effectiveness; Electronic Execution	24
	SECTION
    10.09.	Confidentiality	24
	SECTION
    10.10.	Cumulative
    Remedies	25
	SECTION
    10.11.	Wire
    Instructions	25
	SECTION
    10.12.	Construction

	25
	SECTION
    10.13.	Absolute Obligation

	26
	SECTION
    10.14.	Entire Agreement

	26

 

Annex
A Lenders

 

Annex
B Escrow Agreement

 

Annex
C Rights, Responsibilities and Immunities of the Security Agent

 

Annex
D Subordinated Lenders

 

Annex
E Excluded Collateral

 

    ii

     

    

 

This
LOAN AND SECURITY AGREEMENT dated as of December 21, 2015, among PhaseRx, Inc., a Delaware corporation
(“Borrower”) and the financial institutions and individuals listed on Annex A (collectively,
the “Lenders” and each a, “Lender”).

 

For
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

ARTICLE
I

DEFINITIONS
AND ACCOUNTING TERMS

 

SECTION
1.01.         Certain Defined Terms.
As used in this Agreement, the following terms shall have the following meanings:

 

“Affiliate”
means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, “controls”
or is “controlled by” or is “under common control with” the Person specified.

 

“Agreement”
means this Loan and Security Agreement.

 

“Applicable
Rate” means the rate equal to five percent (5%) per annum.

 

“Automatic
Conversion” has the meaning specified in Section 8.01.

 

“Bankruptcy
Code” means the Federal Bankruptcy Code of 1978, Title 11 of the United States Code, as amended from time to time.

 

“Borrower”
has the meaning specified in the preamble hereto.

 

“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States
or any day on which banking institutions in the State of New York are required by law or other governmental action to close.

 

“Closing
Date” means the earliest date on which the conditions precedent set forth in Section 3.01 shall have
been satisfied or waived in accordance with Section 10.01 of this Agreement.

 

“Code”
means the U.S. Internal Revenue Code of 1986.

 

“Collateral”
has the meaning specified in Section 6.01.

 

“Conversion
Shares” means the shares of common stock of Borrower issuable upon an Automatic Conversion pursuant to Section
8.01.

 

“Debt”
means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness
or liabilities in accordance with GAAP, (a) all obligations of such Person for borrowed money; (b) all direct or contingent obligations
of such Person arising under letters of credit, bankers’ acceptances, bank guaranties, surety bonds and similar instruments;
(c) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable
in the ordinary course of business and not past due); (d) indebtedness secured by a Lien on property owned by such Person (including
conditional sales or other title retention agreements, whether or not such indebtedness shall have been assumed by such Person
or is limited in recourse; (e) capital leases and synthetic lease obligations; (f) all obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in respect of any equity interest in such Person or any other Person; and
(g) all Guarantees of such Person in respect of any of the foregoing.

    2

     

    

  

“Debtor
Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, bankruptcy, moratorium,
receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions.

 

“Default”
means any event or condition that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

 

“Default
Premium” has the meaning specified in Section 7.01.

 

“Disposition”
means any sale, transfer, lease, license, contribution or other conveyance (including by way of merger, partnering arrangement
or stock purchase) of all or any portion of Borrower’s assets to any other Person in a single transaction or series of transactions,
directly or indirectly.

 

“Dollars”
and “$” mean the lawful money of the United States.

 

“End
Date” has the meaning specified in Section 5.01(j).

 

“Escrow
Agreement” means the escrow agreement to be employed in connection with the transactions described herein, a copy
of which is annexed hereto as Annex B.

 

“Events
of Default” has the meaning specified in Section 7.01.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded
Collateral” means any Intellectual Property of Borrower that would otherwise be included as Collateral but for the
express terms imposed by a Person other than the Borrower, of any license, contract or other agreement or instrument constituting
or applicable to such Intellectual Property that prohibits the grant to the Security Agent of a security interest in and to such
Intellectual Property or under which the grant to the Security Agent of a security interest in and to such Intellectual Property
would impair the validity or enforceability of such Intellectual Property; provided, however, that any portion of any such Intellectual
property or other right shall cease to constitute Excluded Collateral at the time and to the extent that the grant of a security
interest therein does not result in any of the consequences specified above.

 

“Facility
Documents” means, collectively, this Agreement, Escrow Agreement and each other agreement or instrument executed
or delivered in connection herewith or therewith.

 

“GAAP”
means generally accepted accounting principles in the United States.

 

“Governmental
Authority” means the government of the United States of America or any other nation, or of any political subdivision
thereof.

 

“Guarantee”
means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect
of guaranteeing any Debt or other obligation payable or performable by another Person (the “primary obligor”)
in any manner, whether directly or indirectly, or (b) any Lien on any assets of such Person securing any Debt or other obligation
of any other Person, whether or not such Debt or other obligation is assumed by such Person (or any right, contingent or otherwise,
of any holder of such Debt to obtain any such Lien).

 

    3

     

    

  

“Information”
has the meaning specified in Section 10.09.

 

“Intellectual
Property” means the collective reference to all rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered
and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and applications in the United States Copyright Office, (ii) all
letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof,
and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part
thereof, (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now existing
or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether
in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto, (iv) all trade
secrets arising under the laws of the United States, any other country or any political subdivision thereof, (v) all rights to
obtain any reissues, renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, and (vii) all causes
of action for infringement of the foregoing.

 

“Investment”
means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase
or other acquisition of equity interests of another Person, (b) a loan, advance or capital contribution to, guarantee or assumption
of debt of, or purchase or other acquisition of any other debt or interest in, another Person, or (c) the purchase or other acquisition
(in one transaction or a series of transactions) of assets of another Person that constitute a business unit or all or a substantial
part of the business of, such Person. For purposes of covenant compliance, the amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in the value of such Investment.

 

“Law”
means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations,
ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof
by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative
orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in
each case whether or not having the force of law.

 

“Lenders”
has the meaning specified in the preamble hereto and each of the Lenders, individually, a “Lender.”

 

“Lien”
means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or
nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance
on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

 

    4

     

    

 

“Major
Disposition” means the sale, transfer, lease, license, contribution or other conveyance of all or substantially
all of the assets of Borrower that results in net cash proceeds to Borrower sufficient to and which are actually employed to fully
satisfy all of the Obligations in accordance with Section 2.08.

 

“Material
Adverse Effect” means (a) a material impairment of the ability of Borrower to perform any of its obligations under
any of the Facility Documents, (b) a material adverse effect upon the legality, validity, binding effect or enforceability of
any material provision of any Facility Document, (c) a material adverse change in, or a material adverse effect upon, the business,
properties, liabilities (actual or contingent), or financial condition of Borrower or (d) a material adverse change in, a material
adverse effect upon, or a material impairment of, (i) the priority of the Lenders’ security interest in a material portion
of the Collateral or (ii) the rights, remedies and benefits available to, or conferred upon, the Lenders under any Facility Document
or the Lenders’ ability to foreclose on the Collateral at the times and in the manner contemplated herein.

 

“Maturity
Date” means the date that is one year after the date of this Agreement, subject to acceleration as provided in Article
VII.

 

“Maximum
Lawful Rate” has the meaning specified in Section 2.04.

 

“Necessary
Endorsement” means undated stock powers endorsed in blank or other proper instruments of assignment duly executed
and such other instruments or documents as the Security Agent may reasonably request.

 

“Obligations”
means the Term Loans to, and all debts, liabilities, obligations, covenants, indemnifications, and duties of, Borrower arising
at any time and from time to time, whether matured or unmatured, fixed or contingent, liquidated or unliquidated, under any Facility
Document, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against
Borrower of any proceeding under any Debtor Relief Laws naming Borrower as the debtor in such proceeding, regardless of whether
such interest and fees are allowed claims in such proceeding and including the Prepayment Premium and Default Premium, if applicable.

 

“Organization
Documents” means, as applicable, for any Person, such Person’s articles or certificate of incorporation, by-laws,
memorandum and articles of association, partnership agreement, trust agreement, certificate of limited partnership, articles of
organization, certificate of formation, shareholder agreement, voting trust agreement, operating agreement, subscription agreement,
side letters, if any, limited liability company agreement and/or analogous documents.

 

“Permitted
Debt” has the meaning specified in Section 5.02(a).

 

“Person”
means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.

 

“Prepayment
Premium” means, with respect to a repayment pursuant to Section 2.08, an amount equal to 25% of the
outstanding principal amount of the Term Loans on the date of repayment.

 

    5

     

    

 

“Qualified
Offering” means collectively, (i) a firm commitment underwritten initial public offering of the common stock of
Borrower which results not later than 167 calendar days after the Closing Date in gross proceeds to Borrower of at least $16,900,000
at a pre-Qualified Offering valuation of at least $36,000,000 (exclusive of the Term Loans and their subsequent conversion pursuant
to Article VIII), (ii) contemporaneously with which the Borrower becomes an entity whose common stock is listed on the NYSE MKT,
the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market, (iii) conducted by Laidlaw or another
underwriter acceptable to Borrower and Required Lenders, (iv) in which shareholders of the Borrower as of the date of this Agreement
invest not less than $9,400,000 in the Qualified Offering or on the terms of the Qualified Offering in a concurrent private placement
but are not granted registration rights with respect to the common stock so acquired and, in any case, will be subject to the
underwriters lockup imposed in connection with the Qualified Offering, which lockup shall not be more than 180-days and (v) which
Qualified Offering is consistent with the post Qualified Offering capitalization set forth on Schedule 4.01(i) hereto.

 

“Required
Lenders” means Lenders representing at least 51% of the outstanding principal amount of the Term Loans.

 

“SEC”
means the U.S. Securities and Exchange Commission.

 

“Securities”
means collectively the Term Loans and Conversion Shares.

 

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

 

“Security
Agent” has the meaning specified in the preamble hereto or his replacement.

 

“Subordination
Agreement” means the Subordination Agreement, dated as of the date hereof, among the Borrower, the subordinated
lenders listed on Annex D hereto, and Titan Multi-Strategy Fund I, LTD., as agent for the Lenders.

 

“Subsidiary”
of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority
of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body
(other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially
owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries”
shall refer to a Subsidiary or Subsidiaries of Borrower.

 

“Taxes”
means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments,
fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable
thereto.

 

“Term
Loans” means the term loans made pursuant to Section 2.01(a).

 

“UCC”
means Uniform Commercial Code in effect in the State of New York and any other applicable jurisdiction.

 

SECTION
1.02.         Times of Day. Unless otherwise specified, all references herein
to times of day shall be references to local time in New York City, New York.

 

    6

     

    

 

SECTION
1.03.         Principles of Construction

 

(a)          The
definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. The words “include,”
“includes” and “including” shall be deemed to be followed by the phrase “without limitation.”
Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including
any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set
forth herein or in any other Facility Document), (ii) except to the extent consent of the Required Lenders is required as provided
herein, any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the
words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Facility
Document, shall be construed to refer to such Facility Document in its entirety and not to any particular provision thereof, (iv)
all references in a Facility Document to Articles, Sections, Preliminary Statements, Exhibits and Schedules shall be construed
to refer to Articles and Sections of, and Preliminary Statements, Exhibits and Schedules to, the Facility Document in which such
references appear, and (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending,
replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such
law or regulation as amended, modified or supplemented from time to time.

 

(b)          In
the computation of periods of time from a specified date to a later specified date, the word “from” means “from
and including;” the words “to” and “until” each mean “to but excluding;” and the word
“through” means “to and including.”

 

(c)          Section
headings herein and in the other Facility Documents are included for convenience of reference only and shall not affect the interpretation
of this Agreement or any other Facility Document.

 

(d)          When
used herein the terms Accessions, Account, Certificated Securities, Chattel Paper, Commercial Tort Claim, Commodity Account, Commodity
Contract, Deposit Account, Document, Electronic Chattel Paper, Equipment, General Intangibles, Goods, Instrument, Inventory, Investment
Property, Letter-of-Credit Rights, Payment Intangible, Proceeds, Promissory Notes, Securities Account, Security Entitlement, Supporting
Obligations and Uncertificated Securities have the meaning provided in Article 8 or Article 9, as applicable, of the UCC. Letter
of Credit has the meaning provided in Section 5-102 of the UCC.

 

ARTICLE
II

AMOUNTS
AND TERMS OF THE ADVANCES

 

SECTION
2.01.         The Loan. Subject to the terms and conditions set forth
herein, each Lender, severally and not jointly, agrees to make a loan in Dollars to Borrower in the amount set forth opposite
such Lender’s name on Annex A (the “Term Loans”), by wire transfer in immediately available
funds to the account as set forth in the Escrow Agreement, the terms of which are incorporated herein by this reference or by
surrender of outstanding promissory notes of the Company of not more than $500,000 in principal. The surrender of notes for Term
Loans pursuant to the preceding sentence shall be on a dollar-for-dollar basis. The aggregate original principal amount of the
Term Loans shall be equal to $4,000,000 plus, if applicable, any accrued and unpaid interest on the principal amount of surrendered
promissory notes. Amounts borrowed hereunder and repaid or prepaid may not be reborrowed.

 

SECTION
2.02.         Repayment of Loan. Borrower shall repay to the Lenders on the Maturity
Date the principal amount of the Term Loans outstanding on such date, accrued but unpaid interest thereon and all other outstanding
Obligations unless earlier converted in accordance with Article VIII.

 

    7

     

    

 

SECTION
2.03.         Interest.

 

(a)          Ordinary
Interest. Borrower shall pay interest on the unpaid principal amount of the Term Loans, from the Closing Date until such principal
amount shall be paid in full, at a rate per annum equal to the Applicable Rate. Interest shall be payable in arrears on the Maturity
Date unless earlier converted in accordance with Article VIII hereof. Interest shall be computed on a year of 360
days and actual days elapsed in the period for which interest is payable. Interest (including the default interest set forth below)
shall be due and payable before and after judgment or the commencement of any proceeding under any Debtor Relief Law.

 

(b)          Default
Interest. If any Event of Default shall have occurred, Borrower shall pay interest on the Term Loans at a rate per annum equal
at all times to fifteen percent (15%), from the day of such Event of Default, payable on demand (and in any event in arrears on
the date such amount shall be paid in full).

 

SECTION
2.04.         Maximum Interest.  To the extent it may lawfully do
so, Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts
to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection
with any claim, action or proceeding that may be brought by any Lender in order to enforce any right or remedy under any Facility
Document. Notwithstanding any provision to the contrary contained in any Facility Document, it is expressly agreed and provided
that the total liability of Borrower under the Facility Documents for payments in the nature of interest shall not exceed the
maximum lawful rate authorized under applicable law (the “Maximum Lawful Rate”), and, without limiting the
foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in
the nature of interest that Borrower may be obligated to pay under the Facility Documents exceed such Maximum Lawful Rate. It
is agreed that if the maximum contract rate of interest allowed by law and applicable to the Facility Documents is increased or
decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Lawful Rate applicable to the Facility Documents from the Closing Date thereof forward, unless
such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Lawful
Rate is paid by Borrower to any Lender with respect to indebtedness evidenced by the Facility Documents, such excess shall be
applied by such Lender to the unpaid principal balance of any such indebtedness or be refunded to Borrower, the manner of handling
such excess to be at such Lender’s election.

 

SECTION
2.05.         Prepayments of Loan. Except as set
forth in this Agreement, Borrower may not prepay all or any portion of the outstanding principal amounts of the Term Loans or
the accrued and unpaid interest without the prior written consent of the Required Lenders.

 

SECTION
2.06.         Evidence of Debt.

 

(a)          The
records maintained by the Lenders regarding the Term Loans shall be prima facie evidence of the existence and amounts of the obligations
therein recorded; provided, however, that the failure of the Lenders to maintain such records or any error therein
shall not in any manner affect the obligation of Borrower to repay the Obligations in accordance with their terms.

 

(b)          No
promissory note shall be required to evidence the Term Loans. Upon the request of the Required Lenders, Borrower shall execute
and deliver to each Lender a promissory note, which shall evidence the Term Loans in addition to such records.

 

    8

     

    

  

SECTION
2.07.         Payments and Computations.

 

(a)          Borrower
shall make each payment hereunder not later than 5:00 PM on the day when due in Dollars to the Lenders in immediately available
funds. All payments received by the Lenders after 5:00 PM shall be deemed received on the next succeeding Business Day and any
applicable interest or fee shall continue to accrue. All payments shall be made pro rata among the Lenders based on the outstanding
principal amount of the Term Loans made by each Lender.

 

(b)          Whenever
any payment hereunder would be due on a day other than a Business Day, such payment shall be extended to the next succeeding Business
Day, and such extension of time shall in such case be included in the computation of payment of interest or any fees, as the case
may be.

 

(c)          All
payments (including prepayments and any other amounts received hereunder and payments and amounts received in connection with
the exercise of the Lenders’ rights after an Event of Default) made by or on behalf of Borrower under any Facility Document
shall be applied in the following order: (i) to any expenses and indemnities payable by Borrower to the Lenders; (ii) the Prepayment
Premium and Default Premium, as applicable and without duplication; (iii) to any accrued and unpaid interest and fees due; (iv)
to principal payments on the outstanding Term Loans; and (v) to the extent of any excess, to the payment of all other Obligations.

 

SECTION
2.08.         Mandatory Prepayments.

 

Upon
any Major Disposition by Borrower, Borrower shall, within two (2) Business Days of Borrower’s receipt of the proceeds of
such Major Disposition, satisfy the entire outstanding principal amount of the Term Loans, all accrued and unpaid interest thereon,
and all other components of the Obligations together with the Prepayment Premium.

 

ARTICLE
III

CONDITIONS
OF LENDING

 

SECTION
3.01.         Conditions Precedent

 

(a)          The
obligation of each Lender to make the Term Loans is subject to satisfaction of the following conditions precedent:

 

(i)          Each
Lender shall have received duly executed counterparts of this Agreement and Escrow Agreement.

 

(ii)         Each
other Lender shall have funded the amount set forth opposite each such other Lender’s name on Annex A in accordance
with Section 2.01.

 

(iii)        The
representations and warranties of the Borrower contained herein shall be true and correct in all material respects (in the case
of any representation or warranty not qualified by materiality or Material Adverse Effect) or in all respects (in the case of
any representation or warranty qualified by materiality or Material Adverse Effect) on the date of this Agreement and on the Closing
Date (unless as of a specific date therein in which case they shall be true and correct as of such date).

 

(iv)        There
shall have been no Material Adverse Effect with respect to the Borrower since the date hereof.

 

    9

     

    

 

(v)         Secretary’s
certificate containing (i) copies of the text of the resolutions by which the corporate action on the part of the Borrower necessary
to approve this Agreement and the other documents and the transactions and actions contemplated hereby and thereby, which shall
be accompanied by a certificate of the corporate secretary or assistant corporate secretary of Borrower dated as of the Closing
Date certifying to the Lenders that such resolutions were duly adopted and have not been amended or rescinded, (ii) an incumbency
certificate dated as of the Closing Date executed on behalf of Borrower by its corporate secretary or one of its assistant corporate
secretaries certifying the office of each officer of Borrower executing this Agreement, or any other agreement, certificate or
other instrument executed pursuant hereto, and (iii) copies of (A) the Borrower’s Certificate of Incorporation and bylaws
in effect on the Closing Date, and (B) the certificate evidencing the good standing of Borrower as of a day within five (5) Business
Days prior to the Closing Date.

 

(vi)        The
Security Agent shall have received a form of subordination agreement acceptable to the Borrower and Security Agent executed on
behalf of the Borrower and the subordinated lenders identified on Annex D hereto

 

The
acceptance of the Term Loans shall be deemed to be a representation and warranty by Borrower that the conditions specified in
Section 3.01 have been satisfied on and as of the Closing Date. For the avoidance of doubt, Borrower is not required
to accept any Term Loans unless and until the Escrow Agent has received $4,000,000 or, if any Lender has surrendered a promissory
note to the Company pursuant to Section 2.01, $3,500,000, as payment for the Term Loans, and each Lender has delivered its duly
executed counterpart to this Agreement to the Escrow Agent.

 

(b)          Borrower’s
obligations under this Agreement, and the Lenders’ and Security Agent’s rights and remedies hereunder, including under
Section 2.03, Article V, Article VI, Article VII, and Article VIII, shall
have no force or effect until the Escrow Agent (i) has released $4,000,000 or, if any Lender has surrendered a promissory note
to the Company pursuant to Section 2.01, $3,500,000, to or for the benefit of Borrower, and (ii) has deemed released from escrow
the documents deposited in escrow in connection therewith as set forth in the Escrow Agreement.

 

ARTICLE
IV

REPRESENTATIONS
AND WARRANTIES

 

SECTION
4.01.         Borrower Representations and Warranties. Borrower represents and
warrants to the Lenders that:

 

(a)          Borrower
(i) is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization, (ii) is duly
qualified and in good standing in each other jurisdiction in which the conduct of its business requires it to so qualify or be
licensed and where, in each case, failure so to qualify and be in good standing could have a Material Adverse Effect, and (iii)
has all requisite company power and authority to own or lease and operate its properties and to carry on its business as now conducted
and as proposed to be conducted.

 

(b)          The
execution, delivery and performance by Borrower of this Agreement and the other Facility Documents to which Borrower is a party
(when delivered) and the consummation of the transactions contemplated under the Facility Documents are within its company powers,
have been duly authorized by all necessary company action, and do not and will not (i) contravene Borrower’s Organization
Documents, (ii) contravene any contractual restriction binding on it or require any consent under any agreement or instrument
to which it is a party or by which any of its properties or assets is bound, (iii) result in or require the creation or imposition
of any material Liens upon any property or assets of Borrower, or (iv) violate any Law (including, but not limited to, the Securities
Act and the Exchange Act and the regulations thereunder) or writ, judgment, injunction, determination or award, except, with respect
to clauses (ii) – (iv), such conflicts, contraventions, violations, and Liens that would not reasonably be expected to result
in a Material Adverse Effect.

 

    10

     

    

 

(c)          Except
for any filings to perfect the Security Agent’s security interest in the Collateral and such consents that have been obtained,
no order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption
or waiver by, any Governmental Authority or any other third party, is required to authorize, or is required in connection with,
(i) the execution, delivery and performance by Borrower of any Facility Document, (ii) the creation or perfection of the security
interest in the Collateral granted to the Lenders hereunder or (iii) the legality, validity, binding effect or enforceability
of any Facility Document by the Lenders.

 

(d)          Borrower
is in compliance with the requirements of all Laws and all material orders, writs, injunctions and decrees applicable to it or
to its properties, except in such instances in which (i) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted or (ii) the failure to comply therewith, either individually
or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

(e)          This
Agreement and the other Facility Documents that Borrower is party to are, and will be, legal, valid and binding obligations of
Borrower enforceable against Borrower in accordance with their respective terms. The security interest in the Collateral granted
herein is a valid and binding security interest in the Collateral subject to no other liens or security interests other than Liens
set forth on Schedule 4.01(e) or are otherwise of an immaterial nature.

 

(f)          No
Default or Event of Default has occurred and is continuing.

 

(g)          Borrower
owns all of the Collateral free and clear of Liens, other than Liens set forth on Schedule 4.01(e) or are otherwise of
an immaterial nature.

 

(h)          Borrower
has delivered to the Lenders an unaudited balance sheet, and the related unaudited statements of income or operations and cash
flows for the period ended October 31, 2015. The Financial Statements fairly present in all material respects the financial condition
and operating results of Borrower as of the dates, and for the periods, indicated therein, subject to normal year-end audit adjustments.
Except as set forth in the Financial Statements, Borrower has no material liabilities or obligations, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business subsequent to October 31, 2015; (ii) obligations under
contracts and commitments incurred in the ordinary course of business; which, in all such cases, individually and in the aggregate
would not reasonably be expected to have a Material Adverse Effect.

 

(i)          The
capitalization of Borrower as of the date of this Agreement and the pro forma capitalization of the Borrower giving effect to
the closing of the Qualified Offering (assuming the Borrower raises the minimum of $16,900,000 in the Qualified Offering) and
the issuance of borrower’s securities in connection therewith are set forth on Schedule 4.01(i).

 

(j)          The
Term Loans are duly authorized, and the Conversion Shares, when issued and paid for in accordance with the applicable Facility
Documents upon closing of the Qualified Offering, will be duly authorized and validly issued, fully paid and nonassessable, free
and clear of all Liens imposed by the Borrower other than restriction on transfer arising pursuant to applicable securities laws.

 

    11

     

    

 

(k)          Except
as would not reasonably be expected to have a Material Adverse Effect, Borrower owns or licenses, believes it can license on commercially
reasonable terms or otherwise has the right to use all licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, tradenames, copyrights, copyright applications, authorizations and other intellectual property rights
that are necessary for the operation of its business. Except with respect to intellectual property rights Borrower believes it
can license on commercially reasonable terms or would not reasonably be expected to have a Material Adverse Effect, the use of
the aforementioned intellectual property rights by Borrower does not, to the Borrower’s knowledge, infringe upon or conflict
in any material respect with any federally registered and issued intellectual property owned by any other Person. Except as would
not reasonably be expected to have a Material Adverse Effect, Borrower has not received any communications alleging that Borrower
has violated any Intellectual Property of any other Person.

 

(l)          There
is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Borrower, threatened
against or affecting Borrower, or any of its properties before or by any court, arbitrator, governmental or administrative agency
or regulatory authority (federal, state, county, local or foreign) which (i) adversely affects or challenges the legality, validity
or enforceability of any of the Facility Documents or the Securities or (ii) could, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect.

 

(m)          Except
as set forth on Schedule 4.01(m), none of the officers or directors of the Borrower and, to the knowledge of the Borrower,
none of the employees of the Borrower is presently a party to any transaction with the Borrower (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money
to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of Borrower, any entity
in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder,
member or partner, in each case in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of Borrower, and (iii) other employee benefits, including stock option agreements
under any stock option plan of Borrower.

 

(n)          Except
as set forth on Schedule 4.01(n), no Person has any right to cause the Borrower to effect the registration under the Securities
Act of any securities of the Borrower.

 

(o)          No
registration under the Securities Act is required for the offer and sale of the Term Loans by the Borrower to the Lenders as contemplated
hereby.

 

(p)          As
of the date hereof, all Debt and Liens of the Borrower (other than Debt and Liens that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or are otherwise of an immaterial nature) and the principal terms thereof
are set forth on Schedule 4.01(p). Except as set forth on Schedule 4.01(p), as of the date of this Agreement and
the Closing Date, no Debt or other equity of the Borrower is or will be senior to the Term Loans in right of payment, whether
with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security
interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as
to the property covered thereby).

 

(q)          The
Borrower has no Subsidiaries and does not hold any “securities” as such term is defined in the UCC.

 

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(r)          Except
for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect,
Borrower (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns,
reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has
set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods
to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of Borrower and Borrower knows of no basis for any such claim.

 

(s)          The
foregoing representations and warranties shall survive the Closing.

 

SECTION
4.02.         Lender Representations and Warranties. Each Lender, severally
and not jointly, represents and warrants to Borrower that:

 

(a)          
Such Lender is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act.
Such Lender is acquiring the Securities for investment for its own account and not with a present view towards, or for resale
in connection with, the public sale or distribution of the Securities, except pursuant to sales registered or exempted under the
Securities Act.

 

(b)          Such
Lender understands and acknowledges that the Securities, upon issuance, will be “restricted securities” under the
federal securities laws inasmuch as they are being acquired from Borrower in a transaction not involving a public offering and
that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act
only in certain limited circumstances. In addition, such Lender represents that it is familiar with Rule 144 under the Securities
Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

(c)          Such
Lender acknowledges that it can bear the economic and financial risk of its investment hereunder for an indefinite period, and
has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the
investment in the Securities. Such Lender has had an opportunity to ask questions and receive answers from Borrower regarding
the terms and conditions of the offering of the Securities and the business, properties, prospects and financial condition of
Borrower.

 

ARTICLE
V

COVENANTS
OF BORROWER

 

SECTION
5.01.         Affirmative Covenants. On and after the Closing Date and
so long as any Obligations have not been indefeasibly paid in full or converted pursuant to Article VIII:

 

(a)          Existence
and Conduct of Business. Except in connection with a Major Disposition, Borrower shall preserve renew and maintain in full
force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization. Except in connection
with a Major Disposition in connection with the Qualified Offering, Borrower will conduct its operations in the ordinary course
of business consistent with its past practices.

 

(b)          Use
of Proceeds. Borrower will use the proceeds of the Term Loans for working capital and general corporate purposes in the ordinary
course of business.

 

(c)          Payment
of Obligations. Borrower shall pay and discharge as the same shall become due and payable, all its obligations and liabilities,
including: (i) all material Taxes, assessments, claims and governmental charges or levies imposed upon it or upon its property;
provided, however, that Borrower shall not be required to pay or discharge any such tax, assessment, claim or charge that is being
diligently contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained; (ii) all
material lawful claims which, if unpaid, would become a Lien on its property; and (iii) all material Debt, as and when due and
payable.

 

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(d)          
Inspection Rights. Subject to the entry into of a non-disclosure and confidentiality agreement reasonably acceptable to
Borrower, Borrower shall, at any reasonable time during normal business hours and upon reasonable prior notice, from time to time
permit the Security Agent and its agent and representative (in each case, subject to Section 10.09) to (i) discuss
the affairs, finances, assets and accounts of Borrower with any of Borrower’s officers, directors or other representatives
and independent certified public accountants and (ii) examine and make copies of and abstracts from their records and books of
account, all at the expense of Borrower; provided, however, that so long as no Event of Default has occurred and
is continuing, such examinations shall be limited to no more often than once per each six months; provided, further,
however, in no event shall Borrower be required to provide access to any trade secrets, technical data or other commercially
sensitive information.

 

(e)          Compliance
with Laws. Borrower shall comply with the requirements of all Laws and all orders, writs, injunctions and decrees applicable
to it or to its business or property, except in such instances in which (i) such requirement of Law or order, writ, injunction
or decree is being contested in good faith by appropriate proceedings diligently conducted; or (ii) the failure to comply therewith
would not reasonably be expected to result in a Material Adverse Effect.

 

(f)          Information
Rights. As soon as available, but in any event within thirty (30) days after the end of each fiscal quarter, Borrower shall
deliver to the Security Agent an unaudited balance sheet as at the end of such fiscal quarter, and the related unaudited statements
of income or operations and cash flows for such fiscal quarter. Such financial statements shall be in a form consistent with the
financial statements delivered to the Security Agent prior to the date hereof and need not comply with GAAP.

 

(g)          Security
Interest. Borrower shall at all times maintain the Liens and security interest in the Collateral granted to the Security Agent
hereunder as valid and perfected first priority Liens and security interests in the Collateral in favor of the Security Agent
for the benefit of the Lenders. Borrower hereby agrees to defend the same against the claims of any and all Persons and entities.
Borrower shall safeguard and protect all Collateral for the account of the Lenders.

 

(h)          Further
Assurances. Borrower agrees to execute and/or deliver any additional agreements, documents and instruments, and take such
further actions as may be reasonably requested by the Required Lenders and/or the Security Agent from time to time to carry out
the intent of the Facility Documents. At the request of the Security Agent, Borrower will sign and deliver to the Security Agent
on behalf of the Lenders at any time or from time to time one or more financing statements pursuant to the UCC in form reasonably
satisfactory to the Security Agent and will pay the cost of filing the same in all public offices wherever filing is, or is deemed
by the Security Agent to be, necessary or desirable to effect the rights and obligations provided for herein. Without limiting
the generality of the foregoing, Borrower shall pay all fees, taxes and other amounts necessary to make any filing required hereunder,
including without limitation, any financing statements pursuant to the UCC, continuation statements, partial releases and/or termination
statements related thereto or any expenses of any searches, and to maintain the Collateral and the security interest in the Collateral
granted to the Lenders hereunder, and Borrower shall obtain and furnish to the Security Agent from time to time, upon demand,
such releases and/or subordinations of claims and liens which may be required to maintain the priority of the security interest
in the Collateral granted to the Security Agent hereunder. Borrower shall promptly execute and deliver to the Security Agent such
further deeds, mortgages, assignments, security agreements, or other instruments, documents, certificates and assurances and take
such further action as the Security Agent may from time to time reasonably request to the extent necessary to perfect, protect
or enforce the Security Agent’s security interest in the Collateral. The Security Agent is authorized to make any filings
with any governmental agency it deems appropriate or necessary to perfect or protect the security interest in the Collateral.

 

    14

     

    

 

(i)          Audits.
Not later than February 7, 2016, Borrower shall have delivered complete and accurate consolidated audited financial statements
prepared in accordance with generally accepted accounting principles in the United States for the two annual periods ending December
31, 2013 and December 31, 2014, and any reviewed stub periods, as are required by the SEC in connection with the Qualified Offering,
by a certified PCAOB auditing firm reasonably acceptable to the Required Lenders; it being agreed that Peterson Sullivan LLP is
reasonably acceptable to the Required Lenders.

 

(j)          Qualified
Offering. Borrower will use its reasonable best efforts to consummate the Qualified Offering on or prior to the date that
is 167 calendar days after the date hereof (the “End Date”).

 

(k)          No
Financial Advisors. Borrower acknowledges and agrees that each of the Lenders is acting solely in the capacity of an arm’s
length purchaser with respect to the Facility Documents and the transactions contemplated thereby. Borrower further acknowledges
that no Lender is acting as a financial advisor or fiduciary of Borrower (or in any similar capacity) with respect to the Facility
Documents and the transactions contemplated thereby and any advice given by any Lender or any of their respective representatives
or agents in connection with the Facility Documents and the transactions contemplated thereby is merely incidental to the Lenders’
purchase of the Securities. Borrower further represents to each Lender that Borrower’s decision to enter into this Agreement
and the other Facility Documents has been based solely on the independent evaluation of the transactions contemplated hereby by
Borrower and its representatives.

 

(l)          Registration
Rights. The parties hereto shall enter into a registration rights agreement with respect to the resale of the Conversion Shares
on terms mutually acceptable to Borrower and the Required Lenders within (45) days of the Closing Date. Such registration rights
agreement shall provide that Borrower must cause the registration statement covering the Conversion Shares to be declared effective
by the SEC concurrently with the registration statement for the Qualified Offering, which effectiveness shall be in a condition
precedent to the Automatic Conversion as provided in Section 8.01. In no event shall the Lenders have any piggyback rights with
respect to the Qualified Offering or rights to participate in the underwritten offering contemplated by the Qualified Offering.

 

(m)          Bad
Actor Disqualification Notification. Borrower will notify the Security Agent in writing, prior to the Closing Date of (i)
any Disqualification Event described in Rule 506(d)(1)(i) to (vii) under the Securities Act except for a Disqualification Event
covered by Rule 506(d)(2) or (d)(3) relating to any Issuer Covered Person and (ii) any event that would, with the passage of time,
become a Disqualification Event relating to any Issuer Covered Person. Issuer Covered Person shall mean any officer of Borrower
participating in the offering hereunder, any beneficial owner of 20% or more of Borrower’s outstanding voting equity securities,
calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected
with Borrower in any capacity at the time of sale.

 

SECTION
5.02.         Negative Covenants. So long as any Obligations have not
been indefeasibly paid in full or converted pursuant to Article VIII, without the prior written consent of the Required Lenders:

 

(a)          Additional
Debt. Borrower shall not, directly or indirectly, create, incur or assume any Debt, other than (i) Debt created under the
Facility Documents, (ii) trade payables not more than 120 days past due, (iii) Debt that is outstanding on the date hereof, and
(iv) other Debt not to exceed $100,000 in the aggregate (clauses (i) – (iv) collectively, “Permitted Debt”).

 

    15

     

    

 

(b)          Liens.
Except in connection with a Major Disposition, Borrower shall not, directly or indirectly, create, incur or assume any Lien upon
any Collateral, whether now owned or hereafter acquired, except (i) Liens created under the Facility Documents, (ii) Liens that
would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or are otherwise of an immaterial
nature and (iii) purchase money security interests in property acquired using Permitted Debt.

 

(c)          Mergers,
Etc. Except in connection with a Major Disposition, without the prior consent of the Lenders, Borrower shall not, directly
or indirectly, merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of, whether in one transaction
or in a series of transactions, all or substantially all of the property and assets (whether now owned or hereafter acquired)
of Borrower to any Person.

 

(d)          Investments.
Borrower shall not hold any material Investments except Investments by Borrower outstanding on the date hereof.

 

(e)          Transaction
with Affiliates. Borrower shall not enter into any material transaction of any kind with any Affiliate of Borrower, other
than in the ordinary course of business on fair and reasonable terms substantially as favorable to Borrower as would be obtainable
by Borrower at the time in a comparable arm’s length transaction with a Person other than an Affiliate.

 

(f)          Prepay
Debt. Except in connection with a Major Disposition, Borrower shall not prepay, redeem, purchase, defease or otherwise satisfy
prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Debt
of Borrower.

 

(g)          Change
Name, Status, Jurisdiction, Tradename. Borrower shall not change its name, change its corporate status or jurisdiction, or
use any trade name without delivering written notice to the Lenders at least twenty (20) days prior to the effectiveness of such
change or use.

 

(h)          Disposition
of Assets. Borrower shall not dispose of any interest in any Collateral, except for (i) any Major Disposition in accordance
with Section 2.08, and (ii) any other Disposition that is not a Major Disposition of the Collateral to a third party in an arms-length
transaction on terms fair and reasonable to Borrower as determined by Borrower’s board of directors in its sole discretion.

 

(i)          Capital
Stock. Borrower will not issue any shares of its capital stock or grant or issue any securities convertible into shares of
its capital stock, except for any issuances of capital stock pursuant to (i) Borrower’s equity incentive plan, (ii) any
option or convertible security outstanding on the date hereof, (iii) issuances approved by the Required Lenders, and (iv) any
transaction or agreement with one or more persons, firms or entities designated as a “strategic partner” of the Borrower,
as determined in good faith by the Board of Directors of the Borrower, provided that each such person, firm or entity is, itself
or through its subsidiaries, an operating company in a business synergistic with the business of the Borrower and in which the
Borrower receives benefits in addition to the investment of funds, but shall not include a transaction in which the Borrower is
issuing securities primarily for the purpose of raising capital or to one or more persons or entities whose primary business is
investing in securities; provided that any such issuance of capital stock pursuant to the foregoing clause (iv) shall be
at a price per share equal to the conversion price then in effect for the Borrower’s outstanding shares of Series A Preferred
Stock and shall be attributed to “Existing PhaseRx Shareholders” in the pro forma capitalization of the Borrower set
forth on Schedule 4.01(i).

 

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ARTICLE
VI

SECURITY
INTEREST

 

SECTION
6.01.         Granting of Security Interest. Borrower hereby pledges, assigns
and grants to the Security Agent for the benefit of the Lenders a first priority security interest in and lien on, and a right
of set-off against, the following property and assets, whether now or hereafter existing, owned or acquired by Borrower (collectively,
the “Collateral”) other than Excluded Collateral, to secure the payment and the performance of all the
Obligations:

 

		(a)	Accounts;

 

		(b)	Chattel Paper;

 

		(c)	Commercial Tort Claims;

 

		(d)	Deposit Accounts;

 

		(e)	Documents;

 

		(f)	General Intangibles;

 

		(g)	Goods;

 

		(h)	Inventory;

 

		(i)	Equipment;

 

		(j)	Instruments;

 

		(k)	Intellectual Property;

 

		(l)	Investment Property;

 

		(m)	Letter-of-Credit Rights and
Letters of Credit;

 

		(n)	Reserved;

 

		(o)	Supporting Obligations;

 

(p)          all
books, records, writings, databases, information and other property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this Section 6.01;

 

(q)          all
Accessions to, Proceeds, substitutions and replacements of the foregoing and, to the extent not otherwise included, (i) all payments
under insurance (whether or not the Security Agent is the loss payee thereof) other than directors and officers insurance and
(ii) all tort claims; and

 

(r)          all
other property and rights of every kind and description and interests therein.

 

The
parties hereto agree that, as of the date of this Agreement, the “Excluded Collateral” consists of the Intellectual
Property set forth on Annex E attached hereto.

 

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SECTION
6.02.         Proceeds. Except as permitted to be distributed to Borrower
pursuant to the terms herein, (a) any property received by Borrower, which shall comprise such Accessions to, Proceeds, additions,
substitutes and replacements for, or proceeds of, the Collateral, shall, after the occurrence and during the continuance of an
Event of Default, be held in trust for the Lenders, and (y) any cash proceeds of the Collateral shall, after the occurrence and
during the continuance of an Event of Default, be held in trust for the Lenders.

 

SECTION
6.03.         Authorization to File Financing Statements. Borrower hereby authorizes
the Security Agent to file financing statements or take any other action required to memorialize or perfect the Security Agent’s
security interests in the Collateral, without notice to Borrower, with all appropriate jurisdictions to perfect or protect the
Lenders’ interest or rights under the Facility Documents, including a notice that any disposition of the Collateral, except
to the extent permitted by the terms of this Agreement, by Borrower, or any other Person, shall be deemed to violate the rights
of the Lenders or the Security Agent under the UCC. Security Agent shall provide written notice to Borrower of the filing of any
financing statement promptly after the filing thereof.

 

SECTION
6.04.         Appointment of Security Agent. The Lenders hereby appoint Security
Agent to act as their agent (the “Security Agent”) for purposes of exercising any and all rights and
remedies of the Lenders hereunder. Such appointment shall continue until revoked in writing by the Required Lenders, at which
time the Required Lenders shall appoint a new agent. The Security Agent shall have the rights, responsibilities and immunities
set forth in Annex C hereto.

 

ARTICLE
VII

EVENTS
OF DEFAULT

 

SECTION
7.01.         Events of Default. If any of the following events (“Events
of Default”) shall occur:

 

(a)          Borrower
shall fail to pay when due (i) any of the outstanding principal of the Term Loans, or (ii) accrued interest on the Term Loans
or other amounts or fees owing pursuant to any of the Facility Documents, and, in the case of clause (ii), such failure continues
for three (3) days after the due date; or

 

(b)          Except
for the non-occurrence of the firm commitment underwritten initial public offering component of the Qualified Offering and the
other components of the Qualified Offering contingent on such public offering, Borrower shall fail to perform or observe in any
material respect any term, covenant, or agreement contained in any Facility document and such failure if susceptible to cure shall
continue for ten (10) days after receipt of written notice thereof from the Security Agent or Required Lenders; or

 

(c)          
(i) any Facility Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder
or thereunder, ceases to be in full force and effect; (ii) Borrower contests in any manner the validity or enforceability of any
Facility Document; or (iii) Borrower denies that it has any or further liability or obligation under any Facility Document; or

 

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(d)          
(i) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of
the property of Borrower and is not released, vacated or fully bonded within sixty (60) days after its issue or levy; (ii) Borrower
institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit
of creditors, or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator
or similar officer for it or for all or any material part of its property; (iii) any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer is appointed without the application or consent of Borrower and the appointment continues
undischarged or unstayed for thirty (30) calendar days; (iv) any proceeding under any Debtor Relief Law relating to Borrower or
to all or any material part of its property is instituted without the consent of Borrower and continues undischarged or unstayed
for thirty (30) calendar days, or an order for relief is entered in any such proceeding; or (v) Borrower shall take any action
to authorize any of the actions set forth above in this Section 7.01(d);

 

(e)          except
as otherwise provided or permitted herein, the Lenders cease to have a first priority perfected Lien in a material portion of
the Collateral;

 

(f)          there
is entered against the Borrower (i) one or more final judgments or orders for the payment of money in an aggregate amount exceeding
$100,000 (as to all such judgments or orders), and (A) enforcement proceedings are commenced by any creditor upon such judgment
or order, or (B) there is a period of thirty (30) consecutive days during which a stay of enforcement of such judgment, by reason
of a pending appeal or otherwise, is not in effect; or (ii) any one or more non-monetary final judgments that have, or could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect; or

 

(g)          the
occurrence of an Event of Default with respect to fewer than all of the Lenders;

 

then,
and in any such event, the Required Lenders may declare the Term Loans, all accrued interest thereon, all fees and all other accrued
amounts payable under this Agreement and the other Facility Documents to be forthwith due and payable, whereupon the (i) Term
Loans, (ii) all such interest and fees and (iii) all such other amounts hereunder plus (iv) an additional amount equal to 25%
of the outstanding principal amount of the Term Loans (the “Default Premium”) (the sum of (i) –
(iv), the “Default Amount”) shall become and be forthwith due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by Borrower; provided, however, that upon the occurrence
of any event in Section 7.01(d), the Default Amount shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly waived by Borrower.

 

SECTION
7.02.         Rights and Remedies.

 

(a)          Following
acceleration of the Term Loans pursuant to Section 7.01 after the occurrence of an Event of Default, the Security
Agent may, on behalf of the Lenders, exercise in respect of the Collateral, in addition to other rights and remedies provided
for herein or otherwise available to them, all the rights and remedies of a Secured Party (as defined in Article 9 of the UCC)
on default under the UCC (whether or not the UCC applies to the affected Collateral) and also may:

 

(i)          take
possession of any Collateral not already in the possession of a Lender without demand and without legal process;

 

(ii)         require
Borrower to, and Borrower hereby agrees that it will, at its expense and upon request of the Security Agent forthwith, assemble
all or part of the Collateral as directed by the Security Agent and make it available to the Security Agent at a place to be designated
by the Security Agent that is reasonably convenient to both Borrower and the Security Agent;

 

(iii)        enter
onto the property where any Collateral is located and take possession thereof without demand and without legal process;

 

    19

     

    

 

(iv)        without
notice except as specified below, lease, license, sell or otherwise dispose of the Collateral or any part thereof in one or more
parcels at public or private sale, at the Security Agent’s office or elsewhere, for cash, on credit or for future delivery,
and upon such other terms as the Security Agent may deem commercially reasonable. Borrower agrees that, to the extent notice of
sale shall be required by law, at least ten (10) days’ prior notice to Borrower of the time and place of any public sale
or the time after which any private sale is to be made shall constitute reasonable notification. The Security Agent shall not
be obligated to make any sale of Collateral regardless of notice of sale having been given. The Security Agent may adjourn any
public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.

 

(b)          All
cash proceeds received by the Security Agent in respect of any sale of, collection from, or other realization upon, all or any
part of the Collateral shall be applied to the Term Loans in the order set forth in Section 2.07 (c).

 

(c)          The
Security Agent may:

 

(i)          transfer
all or any part of the Collateral into the name of the Security Agent or the Lenders, with or without disclosing that such Collateral
is subject to the Lien hereunder;

 

(ii)         notify
the parties obligated on any of the Collateral to make payment to the Lenders or the Security Agent on behalf of the Lenders of
any amount due or to become due thereunder;

 

(iii)        withdraw,
or cause or direct the withdrawal, of all funds from any Deposit Account or Securities Account of Borrower;

 

(iv)        enforce
collection of any of the Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise
or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party
with respect thereto;

 

(v)         endorse
any checks, drafts, or other writings in Borrower’s name to allow collection of the Collateral;

 

(vi)        take
control of any proceeds of the Collateral;

 

(vii)       use,
license or sublicense following an Event of Default, any Intellectual Property now owned or hereafter acquired by Borrower; and

 

(viii)      execute
(in the name, place and stead of Borrower) endorsements, assignments, stock powers and other instruments of conveyance or transfer
with respect to all or any of the Collateral.

 

    20

     

    

 

ARTICLE
VIII

CONVERSION

 

SECTION
8.01.         Conversion of Term Loans. Subject to the other terms and provisions
of this Article VIII, upon the closing of the Qualified Offering, and compliance by Borrower with all components
comprising the Qualified Offering and provided that all Conversion Shares to be issued hereunder are registered for resale pursuant
to an effective registration statement on Form S-1, the entire outstanding principal amount of Term Loans together with all accrued
and unpaid interest thereon shall automatically convert, without any action on the part of the Lenders, into shares of common
stock of Borrower as are issued in the Qualified Offering at a conversion price equal to 80% of the Qualified Offering price (an
“Automatic Conversion”). Upon such Automatic Conversion, each Investor shall be deemed to be a purchaser
in the Qualified Offering and shall be granted all rights afforded to a purchaser in the Qualified Offering. Upon such Automatic
Conversion, Articles II, V, VI, and VII shall be of no further force and effect.

 

SECTION
8.02.         Conversion Limitation.
Notwithstanding Section 8.01,
in no event shall any portion of the Obligations due and owing to a Lender convert into Common Stock if it would cause such Lender’s
“beneficial ownership” (within the meaning of Section 13(d) of the Exchange Act), when taken together with other securities
of Borrower owned by such Lender (together with the Lender’s Affiliates, and any Persons acting as a group together with
the Lender or any of the Lender’s Affiliates), to exceed, at the written election of such Lender, either 4.99% or 9.99%
of the outstanding Common Stock (the “Beneficial Ownership Limitation”).
In such event, the portion of the Obligations that would cause such Lender to exceed the Beneficial Ownership Limitation, shall
instead be converted into a “common stock equivalent” preferred stock or special warrants which shall have terms customary
for “common stock equivalent” preferred stock or special warrants, as applicable, including, convertibility into a
number of shares of common stock that such Lender would have received under this Article VIII but for the Beneficial Ownership
Limitation, a Section 13(d) conversion blocker, participation rights with respect to dividends and distributions on the common
stock, and customary anti-dilution adjustments for stock splits, reverse splits, stock dividends and similar events.

 

ARTICLE
IX

Indemnification

 

SECTION
9.01.         Indemnification. Subject to the provisions of this Section, Borrower
will indemnify and hold each Lender and its directors, officers, shareholders, members, partners, employees and agents (and any
other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any
other title), each Person who controls such Lender (within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such
controlling persons (each, an “Indemnified Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such Indemnified Party may suffer or incur as a result of or relating
to (a) any breach of any of the representations, warranties, covenants or agreements made by Borrower in this Agreement or in
the other Facility Documents or (b) any action instituted against Indemnified Parties in any capacity, or any of them or their
respective Affiliates, by any stockholder of Borrower who is not an Affiliate of such Indemnified Party, with respect to any of
the transactions contemplated by the Facility Documents (unless such action is based upon a breach of such Indemnified Party’s
representations, warranties or covenants under the Facility Documents or any agreements or understandings such Indemnified Party
may have with any such stockholder or any violations by such Indemnified Party of state or federal securities laws or any conduct
by such Indemnified Party which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be
brought against any Indemnified Party in respect of which indemnity may be sought pursuant to this Agreement, such Indemnified
Party shall promptly notify Borrower in writing, and Borrower shall have the right to assume the defense thereof with one counsel
of its own choosing reasonably acceptable to the Indemnified Party. Any Indemnified Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party except to the extent that (i) the employment thereof has been specifically authorized by Borrower in
writing, (ii) Borrower has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such
action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of Borrower
and the position of such Indemnified Party, in which case Borrower shall be responsible for the reasonable fees and expenses of
no more than one such separate counsel. Borrower will not be liable to any Indemnified Party under this Agreement (y) for any
settlement by a Indemnified Party effected without Borrower’s prior written consent, which shall not be unreasonably withheld
or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Indemnified
Party’s breach of its representations, warranties or covenants under the Facility Documents, or any violations by such Indemnified
Party of state or federal securities laws or any conduct by such Indemnified Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance. The indemnification required by this Section 9.01 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity
agreements contained herein shall be in addition to any cause of action or similar right of any Indemnified Party against Borrower
or others and any liabilities Borrower may be subject to pursuant to law.

 

    21

     

    

 

ARTICLE
X

MISCELLANEOUS

 

SECTION
10.01.         Amendments. No amendment of any provision of this Agreement or
any other Facility Document shall be effective unless in writing signed by the Required Lenders and Borrower.

 

SECTION
10.02.         Notices; Effectiveness; Electronic Communications.

 

(a)          Notices
Generally. 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: (i) if to Borrower, to: PhaseRx, Inc., 410 W. Harrison
Street, Suite 300, Seattle, Washington 98119, Attn: Robert Overell, CEO, email: robert@phaserx.com, 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, and (ii) if to the Lenders or Security Agent, to: the addresses
and fax numbers indicated on the signature pages hereto, with an additional copy by personal delivery, fax or email only, to (which
shall not constitute notice): Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581, fax: (212) 697-3575,
email: counslers@aol.com.

 

    22

     

    

 

SECTION
10.03.         Waiver. No
waiver of any provision of this Agreement or any other Facility Document and no consent to any departure by Borrower
therefrom shall be effective unless in writing signed by the Required Lenders and Borrower, as the case may be, and each such
waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No waiver or
consent by any party shall operate or be construed as a waiver or consent in respect of any failure, breach or default not
expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or
after that waiver. No failure on the part of a Lender to exercise, and no delay in exercising any right hereunder or under
any other Facility Document shall operate as a waiver thereof nor shall the single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other right. No notice to or demand on Borrower in any
case shall entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver
of the rights of a Lender to any other or further action in any circumstances without notice or demand.

 

SECTION
10.04.         Equal Treatment of Lenders. No
consideration (including any modification of any Facility Documents) shall be offered or paid to any Person to amend or consent
to a waiver or modification of any provisions related to the Term Loans and Facility Documents unless the same consideration is
also offered to all Lenders. All payments hereunder shall be made pro rata among the Lenders based on the portion of the Term
Loans funded by each Lender as set forth on Annex A.

 

SECTION
10.05.         Costs and Expenses. Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by the Lenders and their Affiliates (including the reasonable fees, charges and disbursements of counsel) in
connection with the credit facilities provided for herein the preparation, negotiation, execution, delivery and administration
of the Facility Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated) and for being Escrow Agent in the amount set forth in the Escrow
Agreement, (ii) all out-of-pocket expenses incurred by the Lenders (including the fees, charges and disbursements of any counsel),
in connection with the enforcement or protection of its rights in connection with this Agreement and the other Facility Documents,
including their rights under this Section 10.05, including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of the Term Loans, and (iii) the fees, expenses and other obligations of the Borrower
pursuant to the placement agent agreement between the Borrower and Palladium Capital Advisors LLC dated December 17, 2015. Borrower
will also, upon demand, pay to the Security Agent the amount of any and all reasonable expenses, including the reasonable fees
and expenses of its counsel and of any experts and agents, which the Security Agent, for the benefit of the Lenders, may incur
in connection with (a) the enforcement of this Agreement, (b) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, or (c) the exercise or enforcement of any of the rights of the Lenders under
the Facility Documents.

 

SECTION
10.06.         Governing Law; Submission to Jurisdiction.

 

(a)          Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Facility Documents shall be
governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles
of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense
of the transactions contemplated by this Agreement and any other Facility Documents (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively
in the state and federal courts sitting in the City 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 (including with respect to the enforcement
of any of the Facility Documents), 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 Facility Documents, 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.

 

    23

     

    

 

(b)          WAIVER
OF JURY TRIAL. 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) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER FACILITY DOCUMENTS BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.06(d).

 

SECTION
10.07.         Severability. In case any provision in this Agreement or any other
Facility Document shall be held to be invalid, illegal or unenforceable, such provision shall be severable from the rest of this
Agreement or such other Facility Document, as the case may be, and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

 

SECTION
10.08.         Counterparts; Integration; Effectiveness; Electronic Execution.
This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other
Facility Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and
all previous agreements and understandings, oral or written, relating to the subject matter hereof. Delivery of an executed counterpart
of a signature page of this Agreement by PDF shall be effective as delivery of a manually executed counterpart of this Agreement.

 

SECTION
10.09.         Confidentiality. Each Lender agrees to maintain the confidentiality
of the Information (as defined below), except that Information may be disclosed (a) to such Lender’s Affiliates and to its
and its Affiliates’ respective partners, directors, officers, employees, agents, trustees, advisors and representatives
(it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information
and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority), (c) to the extent required by applicable Laws or regulations or
by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies under
any Facility Document or any action or proceeding relating to any Facility Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 10.09,
to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under
this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating
to Borrower or the Obligations, (g) with the consent of Borrower or (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes available to such Lender, or any of its Affiliates on a nonconfidential
basis from a source other than Borrower.

 

    24

     

    

 

For purposes
of this Section, “Information” means any and all information received from Borrower hereof relating
to Borrower or its business. Any Person required to maintain the confidentiality of Information as provided in this Section
10.09 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would accord to its own confidential information, but
in no event less than a reasonable degree of care. Each Lender acknowledges that (i) Borrower is under no obligation to disclose
Information except as expressly provided herein and (ii) such Lender may be required to enter into further non-disclosure agreements
in order to receive certain Information in Borrower’s possession that are subject to confidentiality obligations owed to
third parties. Notwithstanding anything contained herein to the contrary, the provisions of this Section 10.09 shall
survive the repayment of the Term Loans, any conversion of the Term Loans into capital stock of Borrower or any termination of
this Agreement.

 

SECTION
10.10.         Cumulative Remedies. In addition to being entitled to exercise
all rights provided herein or granted by law, including recovery of damages, each of the Lenders and Borrower will be entitled
to specific performance under the Facility Documents. The parties agree that monetary damages may not be adequate compensation
for any loss incurred by reason of any breach of obligations contained in the Facility Documents and hereby agree to waive and
not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

SECTION
10.11.         Independent Nature of Lenders’ Obligations and Rights. The
obligations of each Lender under any Facility Document are several and not joint with the obligations of any other Lender, and
no Lender shall be responsible in any way for the performance or non-performance of the obligations of any other Lender under
any Facility Document. Nothing contained herein or in any other Facility Document, and no action taken by any Lender pursuant
hereto or thereto, shall be deemed to constitute the Lenders as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Lenders are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Facility Documents. Each Lender shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this Agreement or out of the other Facility Documents, and
it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. Each Lender
has been represented by its own separate legal counsel in its review and negotiation of the Facility Documents. For reasons of
administrative convenience only, each Lender and its respective counsel have chosen to communicate with Borrower through Grushko
& Mittman, P.C. Borrower has elected to provide all Lenders with the same terms and Facility Documents for the convenience
of Borrower and not because it was required or requested to do so by any of the Lenders. It is expressly understood and agreed
that each provision contained in this Agreement and in each other Facility Document is between Borrower and a Lender, solely,
and not between Borrower and the Lenders collectively and not between and among the Lenders. In the event circumstances do not
enable or allow Borrower to fulfill its obligation in full to all Lenders, then Borrower shall fulfill its obligations to multiple
Lenders having the same rights, pro rata to each such affected Lender’s Subscription Amount actually delivered to Borrower.

 

SECTION
10.12.         Construction. The parties
agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Facility Documents
and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of the Facility Documents or any amendments thereto. In addition, each and every reference
to share prices and shares of common stock in any Facility Document shall be subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar transactions of the common stock that occur after the date of this
Agreement.

 

    25

     

    

 

SECTION
10.13.         Absolute Obligation. Except
as expressly provided herein, no provision of this Agreement shall alter or impair the obligation of Borrower, which is absolute
and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on the Term Loan at the time,
place, and rate, and in the coin or currency, herein prescribed. The Term Loan is a direct debt obligation of Borrower. The Term
Loan ranks pari passu with all other Term Loans now or hereafter issued under the terms set forth herein.

 

SECTION
10.14.         Entire Agreement. THIS
AGREEMENT 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.

 

[END
OF TEXT]

 

    26

     

    

 

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

 

	 	BORROWER:
	 	 
	 	PhaseRx, Inc.
	 	as Borrower
	 	 	 
	 	By:	/s/ Robert Overell
	 	 	 
	 	Name:	Robert Overell
	 	 	 
	 	Title:	President & CEO
	 	 	 
	 	Security Agent:
	 	 
	 	Titan Multi-Strategy Fund I, LTD.
	 	 	 
	 	By:	/s/ Jonathan Honig
	 	 	 
	 	Name:	Jonathan Honig
	 	 	 
	 	Title:	Manager
	 	 	 
	 	Address:	4263 NW 61st Lane
	 	 	Boca Raton, Fl 33496
	 	Fax: 561-241-4749

 

[Signature
pages of Lenders follow]

 

Signature Page to Loan and Security
Agreement

 

     

     

    

 

 [SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: RIDING THE BULL LLC

 

Signature
of Authorized Signatory of Lender: /s/ Mark E Groussman

 

Name
of Authorized Signatory: Mark E Groussman

 

Title
of Authorized Signatory: Manager

 

Email
Address of Authorized Signatory: ######@##############.###

 

Facsimile
Number of Authorized Signatory: ________________________________________

 

State
of Residence of Lender: ___##_____________________________________________

 

Address
for Notice to Lender: __#### ## ##### #####, ##### #####, ## #####___________

 

_________________________________________________________________________

 

_________________________________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_________________________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: __$1,050,000______________

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: _Alpha Capital Anstalt _________

 

Signature
of Authorized Signatory of Lender: _/s/ Konrad Ackermann___________________

 

Name
of Authorized Signatory: Konrad Ackermann__________________________________

 

Title
of Authorized Signatory: _Director__________________________________________

 

Email
Address of Authorized Signatory: __________________________________________

 

Facsimile
Number of Authorized Signatory: __Fax: ###-###-####_______________________

 

State
of Residence of Lender: #############

 

Address
for Notice to Lender: ALPHA CAPITAL ANSTALT

 

############
##

 

#### #####

 

############ ## #############

 

e-mail:
####@###########.###

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

ALPHA
CAPITAL ANSTALT

 

c/o
## ######### ######## ####.

 

###
####### ###### ##### ####

 

###
####, ## #####

 

Principal
Amount: __$500,000________________________

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

 

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Titan Multi-Strategy Fund I, LTD

 

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

 

Name
of Authorized Signatory: Jonathan Honig

 

Title
of Authorized Signatory: Manager

 

Email
Address of Authorized Signatory: #############@###.###

 

Facsimile
Number of Authorized Signatory: ###-###-####

 

State
of Residence of Lender: #######

 

Address
for Notice to Lender: #### ## #### ####

 

####
#####, ## #####

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_________________________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: $500,000

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Chesed Found Ltd.

 

Signature
of Authorized Signatory of Lender: /s/ Menachem Goldshmid

 

Name
of Authorized Signatory: Menachem Goldshmid

 

Title
of Authorized Signatory: Director 

 

Email
Address of Authorized Signatory: ############@#####.###

 

Facsimile
Number of Authorized Signatory: _______________________________________

 

State
of Residence of Lender: ######

 

Address
for Notice to Lender: #### ###, ### #####. ##. ####### ########. # ### #####

 

######.
#######.

 

####
####

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_________________________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: $400,000.000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Fame Associates

 

Signature
of Authorized Signatory of Lender: /s/ Abraham H. Fruchthandler

 

Name
of Authorized Signatory: Abraham H. Fruchthandler

 

Title
of Authorized Signatory: General Partner

 

Email
Address of Authorized Signatory: ###@##########.###

 

Facsimile
Number of Authorized Signatory: ### ### ####

 

State
of Residence of Lender: ### ####

 

Address
for Notice to Lender: c/o ### ######, ### ######## #### #####

 

###
###, #.#. #####

 

_________________________________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_________________________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: 250,000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: H&M MACHINE Co.

 

Signature
of Authorized Signatory of Lender: /s/ Hershel Parnes

 

Name
of Authorized Signatory: HERSHEL PARNES

 

Title
of Authorized Signatory: SECT/ TREAS

 

Email
Address of Authorized Signatory: #####@########.###

 

Facsimile
Number of Authorized Signatory: ________________________________________

 

State
of Residence of Lender: _##_______________________________________________

 

Address
for Notice to Lender: _________________________________________________

 

__##
### ###______________________________________________________________

 

__######,
## #####_________________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_________________________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: $250,000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: KUYKENDALL ASSOCIATES, LLC & RETIREMENT TRUST, FREDERICK T KUYKENDALL III TRUSTEE 

 

Signature
of Authorized Signatory of Lender: /s/ Frederick T. Kuykendall III

 

Name
of Authorized Signatory: Frederick T. Kuykendall III

 

Title
of Authorized Signatory: Trustee 

 

Email
Address of Authorized Signatory: ############@#####.###

 

Facsimile
Number of Authorized Signatory: ________________________________________

 

State
of Residence of Lender: _#######__________________________________________

 

Address
for Notice to Lender: __________________________________________________

 

__##
#### ###### #####_____________________________________________________

 

__######,
####### #####____________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

__####
###### #####_______________________________________________________

 

__######,
####### #####____________________________________________________

 

Principal
Amount: 250,000.00

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Israel Muller 

 

Signature
of Authorized Signatory of Lender: /s/ Israel Muller

 

Name
of Authorized Signatory: Israel Muller

 

Title
of Authorized Signatory: Self 

 

Email
Address of Authorized Signatory: #####@####.###

 

Facsimile
Number of Authorized Signatory: #####@####.###

 

State
of Residence of Lender: _######___________________________________________

 

Address
for Notice to Lender: __________________________________________________

 

__#
####### #####_________________________________________________________

 

__#######,
## ######_______________________________________________________

 

__######
_________________________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_____Same________________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: $150,000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Robert S. Colman Trust UDT 3/13/85

 

Signature
of Authorized Signatory of Lender: /s/ Robert S. Colman

 

Name
of Authorized Signatory: Robert S. Colman

 

Title
of Authorized Signatory: Trustee

 

Email
Address of Authorized Signatory: #######@###############.###/ #####@###############.###

 

Facsimile
Number of Authorized Signatory: _______________________________________

 

State
of Residence of Lender: _#####____________________________________________

 

Address
for Notice to Lender: __## ### ####, ####### ## #####______________________

 

_for
overnight delivery: ## ##### ##### ##, ####### ## #####________________________

 

__**please
confirm before sending**____________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

___________same__________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: $150,000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Joseph Hoch

 

Signature
of Authorized Signatory of Lender: /s/ Joseph Hoch

 

Name
of Authorized Signatory: Joseph Hoch

 

Title
of Authorized Signatory: __________________________________________________

 

Email
Address of Authorized Signatory: #####@##########.###

 

Facsimile
Number of Authorized Signatory: ###-###-####_____________________________

 

State
of Residence of Lender:    ### #####_________________________________________

 

Address
for Notice to Lender: __## #### #### ########____________________________

 

     ###-## ###### ####, ##### ###_____________________________________________

 

     ###
#######, ## #####____________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_________________________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: $100,000

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Point Capital Inc.

 

Signature
of Authorized Signatory of Lender: /s/ Eric Weisblum

 

Name
of Authorized Signatory: Eric Weisblum

 

Title
of Authorized Signatory: _President__________________________________________

 

Email
Address of Authorized Signatory: ####@###############.###

 

Facsimile
Number of Authorized Signatory: ###=###=####____________________________

 

State
of Residence of Lender: _##_______________________________________________

 

Address
for Notice to Lender: __### ##### ### #### #______________________________

 

__#########
## #####_____________________________________________________

 

_________________________________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_______same______________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: $100,000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Mordechai Belsky

 

Signature
of Authorized Signatory of Lender: /s/ Mordechai Belsky

 

Name
of Authorized Signatory: Mordechai Belsky

 

Title
of Authorized Signatory: Self_______________________________________________

 

Email
Address of Authorized Signatory: ####@##########.###

 

Facsimile
Number of Authorized Signatory: ________________________________________

 

State
of Residence of Lender: _### ####__________________________________________

 

Address
for Notice to Lender: __### ###### ### __________________________________

 

__########,
## #####______________________________________________________

 

_________________________________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_______same______________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: $100,000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: 2004 Leon Scharf Irrevocable Trust Corp

 

Signature
of Authorized Signatory of Lender: /s/ Willy Beer

 

Name
of Authorized Signatory: Willy Beer

 

Title
of Authorized Signatory: _Investment Trustee__________________________________

 

Email
Address of Authorized Signatory: #####@###############.###

 

Facsimile
Number of Authorized Signatory:    ###-###-####                                                                    

 

State
of Residence of Lender:    ##________________________________________________

 

Address
for Notice to Lender: __#### ######### ###. ##### ###, ########, ## #####_____

 

_______________________________________________________________________

 

   _______________________________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

____####
######### ###. ##### ###, ########, ## #####__________________________

 

_________________________________________________________________________

 

Principal
Amount: $50,000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Max M. Mizrachi

 

Signature
of Authorized Signatory of Lender: /s/ Max M. Mizrachi

 

Name
of Authorized Signatory: Max M. Mizrachi

 

Title
of Authorized Signatory: _Self______________________________________________

 

Email
Address of Authorized Signatory: ####@####.###

 

Facsimile
Number of Authorized Signatory: _(###) ###-####___________________________

 

State
of Residence of Lender: _### ####__________________________________________

 

Address
for Notice to Lender: __#### #### ### ###### _____________________________

 

########,
## #####________________________________________________________

 

_________________________________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_________________________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: $50,000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Erick Richardson

 

Signature
of Authorized Signatory of Lender: /s/ Erick Richardson

 

Name
of Authorized Signatory: Erick Richardson

 

Title
of Authorized Signatory: _Self______________________________________________

 

Email
Address of Authorized Signatory: ##@##################.###

 

Facsimile
Number of Authorized Signatory: ________________________________________

 

State
of Residence of Lender: _##_______________________________________________

 

Address
for Notice to Lender: __##### ###### #### _______________________________

 

###
######, ## #####______________________________________________________

 

_________________________________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_________________________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: 44,000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Chaim Gross

 

Signature
of Authorized Signatory of Lender: /s/ Chaim Gross

 

Name
of Authorized Signatory: Chaim Gross

 

Title
of Authorized Signatory: _Self______________________________________________

 

Email
Address of Authorized Signatory: ##########@#####.###

 

Facsimile
Number of Authorized Signatory:     ###-###-####                                                                  

 

State
of Residence of Lender: _##_______________________________________________

 

Address
for Notice to Lender: __#### ########## ##, ########, ## #####______________

 

________________________________________________________________________

 

     ______________________________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

_________________________________________________________________________

 

_________________________________________________________________________

 

Principal
Amount: $30,000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

  

[SIGNATURE PAGE
OF LENDERS TO LOAN AND SECURITY AGREEMENT]

  

Name
of Lender: Jacob Maziar Arjang

 

Signature
of Authorized Signatory of Lender: /s/ Jacob Maziar Arjang

 

Name
of Authorized Signatory: Jacob Maziar Arjang

 

Title
of Authorized Signatory: _Self______________________________________________

 

Email
Address of Authorized Signatory: #######@########.###

 

Facsimile
Number of Authorized Signatory: ___(###) ###-####_________________________

 

State
of Residence of Lender: _### ####__________________________________________

 

Address
for Notice to Lender: __## ####### #### __________________________________

 

##### ####, ## #####_______________________________________________________

 

_________________________________________________________________________

 

Address
for Delivery of Securities to Lender (if not same as address for notice):

 

__##
####### #### ________________________________________________________

 

##### ####, ## #####______________________________________________________

 

Principal
Amount: $26,000

 

Beneficial
Ownership Limitation: [4.99% or 9.99%]: ____________________

 

     

     

    

 

Annex A

 

Lenders

 

	 Riding the Bull, LLC	 	$	1,050,000	 
	Alpha Capital Anstalt	 	$	500,000	 
	Titan Multi-Strategy
Fund I, Ltd.1	 	$	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	 

  

1 Titan
Multi-Strategy Fund I, LTD.’s payment is being deemed paid by the cancellation of a promissory note, in the aggregate
principal amount of $500,000, dated as of December 11, 2015, issued by the Company to Titan Multi-Strategy Fund I,
LTD.

 

     

     

    

 

Annex B 

 

Execution
Copy

 

ESCROW AGREEMENT

 

This Agreement is dated
as of the 21st day of December, 2015 among PhaseRx, Inc., a Delaware corporation (the “Company”),
the parties identified on Schedule A hereto (each a “Lender”, and collectively “Lenders”),
and Grushko & Mittman, P.C. (the “Escrow Agent”):

 

WITNESSETH:

 

WHEREAS, the Company
and Lenders have entered into a Loan and Security Agreement calling for loans by the Lenders to the Company of an aggregate of
$4,000,000; and

 

WHEREAS, the parties
hereto require the Escrowed Payments (as defined below) to be delivered to the Escrow Agent, along with the other documents, instruments
and payments hereinafter described, to be held in escrow and released by the Escrow Agent in accordance with the terms and conditions
of this Agreement; and

 

WHEREAS, the Escrow
Agent is willing to serve as escrow agent pursuant to the terms and conditions of this Agreement;

 

NOW THEREFORE, the
parties agree as follows:

 

ARTICLE I

 

INTERPRETATION

 

1.1.          Definitions.
Capitalized terms used and not otherwise defined herein that are defined in the Loan and Security Agreement shall have the meanings
given to such terms in the Loan and Security Agreement. Whenever used in this Agreement, the following terms shall have the following
respective meanings:

 

§“Agreement”
means this Agreement and all amendments made hereto and thereto by written agreement between the parties;

 

§“Closing
Date” shall have the meaning set forth in Section 1 of the Loan and Security Agreement;

 

§"Escrowed
Payment" means an aggregate cash payment of $4,000,000 (or $3,500,000 in the circumstance described in Section 3.01(b)
of the Loan and Security Agreement);

 

§“Loan
and Security Agreement" means the Loan and Security Agreement (and the exhibits thereto) entered into or to be entered
into by the parties in reference to the Loans;

 

§“Security
Agent” shall mean Titan Multi-Strategy Fund I, LTD.;

 

§The
Company executed Loan and Security Agreement and the annexes and schedules thereto are referred to as "Company Documents";
and

 

§Collectively,
the Escrowed Payment, each Lender’s and Security Agent’s executed Loan and Security Agreement and the annexes and schedules
thereto are referred to as "Lenders Documents".

 

    1 

     

    

  

1.2.          Entire
Agreement. This Agreement along with the Company Documents and the Lenders Documents to which the Lenders and the Company or
Subsidiary are a party constitute the entire agreement between the parties hereto pertaining to the Company Documents and Lenders
Documents and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties.
There are no warranties, representations and other agreements made by the parties in connection with the subject matter hereof,
except as specifically set forth in this Agreement, the Company Documents and the Lenders Documents.

 

1.3.          Extended
Meanings. In this Agreement words importing the singular number include the plural and vice versa; words importing the masculine
gender include the feminine and neuter genders. The word “person” includes an individual, body corporate, partnership,
trustee or trust or unincorporated association, executor, administrator or legal representative.

 

1.4.          Waivers
and Amendments. This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions
hereof may be waived, only by a written instrument signed by all parties, or, in the case of a waiver, by the party waiving compliance.
Except as expressly stated herein, no delay on the part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude
any other or future exercise of any other right, power or privilege hereunder.

 

1.5.          Headings.
The division of this Agreement into articles, sections, subsections and paragraphs and the insertion of headings are for convenience
of reference only and shall not affect the construction or interpretation of this Agreement.

 

1.6.          Law
Governing this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of New
York without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction.
Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought
only in the state courts of New York or in the federal courts located in the state of New York. Both parties and the individuals
executing this Agreement and other agreements on behalf of the Company agree to submit to the jurisdiction of such courts and waive
trial by jury. The prevailing party (which shall be the party which receives an award most closely resembling the remedy or action
sought) shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any
provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision of any agreement.

 

1.7.          Specific
Enforcement, Consent to Jurisdiction. The Company and Lenders acknowledge and agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an injuction or injunctions to prevent or cure breaches
of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity. Subject to Section 1.6 hereof, each of the Company and
Lenders hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Nothing in this Section shall affect or limit any right to serve process in any other
manner permitted by law.

 

    2 

     

    

  

ARTICLE II

 

DELIVERIES TO THE ESCROW AGENT

 

2.1.          Company
Deliveries. On or before the Closing Date, the Company shall execute and deliver the Company Documents to the Escrow Agent.

 

2.2.          Lenders
Deliveries. (i) On or before the Closing Date, Lenders shall execute and deliver the Lenders Documents, shall cause the Security
Agent to execute and deliver the Loan and Security Agreement, and shall deliver the Escrowed Payment in cash, to the Escrow Agent.
The Escrowed Payment will be delivered pursuant to the following wire transfer instructions:

 

Citibank, N.A.

1155 6th Avenue

New York, NY 10036

ABA Number: ####-#####

For Credit to: Grushko & Mittman,
IOLA Trust Account

Account Number: ##########

 

2.3.          Intention
to Create Escrow Over Company Documents and Lenders Documents. The Lenders and Company intend that the Company Documents and
Lenders Documents shall be held in escrow by the Escrow Agent pursuant to this Agreement for their benefit as set forth herein.

 

2.4.          Escrow
Agent to Deliver Company Documents and Lenders Documents. The Escrow Agent shall hold and release the Company Documents and
Lenders Documents only in accordance with the terms and conditions of this Agreement.

 

ARTICLE III

 

RELEASE OF COMPANY DOCUMENTS AND LENDERS
DOCUMENTS

 

3.1.          Release
of Escrow. Subject to the provisions of Section 4.2, the Escrow Agent shall release the Company Documents and Lenders Documents
as follows:

 

(a)          On
the Closing Date, the Escrow Agent will simultaneously (A) release the Company Documents to the Lenders, (B) release the Lender
Documents to the Company and (C) release (i) to Palladium Capital Advisors LLC the amounts to be paid to Palladium Capital Advisors
LLC mutually agreed by Palladium Capital Advisors LLC and the Company, (ii) to itself the sum of $17,500 plus Escrow Agent’s
documented, out-of-pocket costs for filing UCC financing statements (which shall be in full satisfaction of the Company’s
obligations under clause (i) of Section 10.05 of the Loan and Security Agreement), (iii) such other amounts described in Section
10.05 of the Loan and Security Agreement pursuant to written instructions approved by the Company, Palladium Capital Advisors LLC
and Security Agent, and (iii) to the Company, the balance of the Escrowed Payment. The Escrow Agent may request any written
representations, certifications and documents in Escrow Agent’s absolute discretion before releasing any funds from escrow.

 

(b)          Notwithstanding
the above, upon receipt by the Escrow Agent of joint written instructions (“Joint Instructions”) signed by the
Company and the Lenders, it shall deliver the Company Documents and Lenders Documents in accordance with the terms of the Joint
Instructions.

 

    3 

     

    

  

(c)          Anything
herein to the contrary notwithstanding, upon receipt by the Escrow Agent of a final and non-appealable judgment, order, decree
or award of a court of competent jurisdiction (a “Court Order”), the Escrow Agent shall deliver the Company
Documents and Lenders Documents in accordance with the Court Order. Any Court Order shall be accompanied by an opinion of counsel
for the party presenting the Court Order to the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to the effect
that the court issuing the Court Order has competent jurisdiction and that the Court Order is final and non-appealable.

 

3.2.          The
Closing may take place on or before December 21, 2015. After December 21, 2015, the Escrow Agent will promptly return the applicable
Company Documents to the Company and return the Lenders Documents to the Lenders.

 

3.3.          Acknowledgement
of Company and Lenders; Disputes. The Company and the Lenders acknowledge that the only terms and conditions upon which the
Company Documents and Lenders Documents are to be released are set forth in Sections 3 and 4 of this Agreement. The Company and
the Lenders reaffirm their agreement to abide by the terms and conditions of this Agreement with respect to the release of the
Company Documents and Lenders Documents. Any dispute with respect to the release of the Company Documents and Lenders Documents
shall be resolved pursuant to Section 4.2 or by agreement between the Company and Lenders.

 

ARTICLE IV

 

CONCERNING THE ESCROW AGENT

 

4.1.          Duties
and Responsibilities of the Escrow Agent. The Escrow Agent’s duties and responsibilities shall be subject to the following
terms and conditions:

 

(a)          The
Lenders and Company acknowledge and agree that the Escrow Agent (i) shall not be responsible for or bound by, and shall not be
required to inquire into whether either the Lenders or Company is entitled to receipt of the Company Documents and Lenders Documents
pursuant to any other agreement or otherwise; (ii) shall be obligated only for the performance of such duties as are specifically
assumed by the Escrow Agent pursuant to this Agreement; (iii) may rely on and shall be protected in acting or refraining from acting
upon any written notice, instruction, instrument, statement, request or document furnished to it hereunder and believed by the
Escrow Agent in good faith to be genuine and to have been signed or presented by the proper person or party, without being required
to determine the authenticity or correctness of any fact stated therein or the propriety or validity or the service thereof; (iv)
may assume that any person believed by the Escrow Agent in good faith to be authorized to give notice or make any statement or
execute any document in connection with the provisions hereof is so authorized; (v) shall not be under any duty to give the property
held by Escrow Agent hereunder any greater degree of care than Escrow Agent gives its own similar property; and (vi) may consult
counsel satisfactory to Escrow Agent, the opinion of such counsel to be full and complete authorization and protection in respect
of any action taken, suffered or omitted by Escrow Agent hereunder in good faith and in accordance with the opinion of such counsel.

 

(b)          The
Lenders and Company acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and that the Escrow Agent
shall not be liable for any action taken by Escrow Agent in good faith and believed by Escrow Agent to be authorized or within
the rights or powers conferred upon Escrow Agent by this Agreement. The Lenders and Company, jointly and severally, agree to indemnify
and hold harmless the Escrow Agent and any of Escrow Agent’s partners, employees, agents and representatives for any action
taken or omitted to be taken by Escrow Agent or any of them hereunder, including the fees of outside counsel and other costs and
expenses of defending itself against any claim or liability under this Agreement, except in the case of gross negligence or willful
misconduct on Escrow Agent’s part committed in its capacity as Escrow Agent under this Agreement. The Escrow Agent shall
owe a duty only to the Lenders and Company under this Agreement and to no other person.

 

    4 

     

    

  

(c)          The
Lenders and Company jointly and severally agree to reimburse the Escrow Agent for reasonable outside counsel fees, to the extent
authorized hereunder and incurred in connection with the performance of its duties and responsibilities hereunder.

 

(d)          The
Escrow Agent may at any time resign as Escrow Agent hereunder by giving five (5) days prior written notice of resignation to the
Lenders and the Company. Prior to the effective date of the resignation as specified in such notice, the Lenders and Company will
issue to the Escrow Agent a Joint Instruction authorizing delivery of the Company Documents and Lenders Documents to a substitute
Escrow Agent selected by the Lenders and Company. If no successor Escrow Agent is named by the Lenders and Company, the Escrow
Agent may apply to a court of competent jurisdiction in the State of New York for appointment of a successor Escrow Agent, and
to deposit the Company Documents and Lenders Documents with the clerk of any such court.

 

(e)          The
Escrow Agent does not have and will not have any interest in the Company Documents and Lenders Documents, but is serving only as
escrow agent, having only possession thereof. The Escrow Agent shall not be liable for any loss resulting from the making or retention
of any investment in accordance with this Escrow Agreement.

 

(f)          This
Agreement sets forth exclusively the duties of the Escrow Agent with respect to any and all matters pertinent thereto and no implied
duties or obligations shall be read into this Agreement.

 

(g)          The
Escrow Agent shall be permitted to act as counsel for the Lenders in any dispute as to the disposition of the Company Documents
and Lenders Documents, in any other dispute between the Lenders and Company, whether or not the Escrow Agent is then holding the
Company Documents and Lenders Documents and continues to act as the Escrow Agent hereunder.

 

(h)          The
provisions of this Section 4.1 shall survive the resignation of the Escrow Agent or the termination of this Agreement.

 

4.2.          Dispute
Resolution: Judgments. Resolution of disputes arising under this Agreement shall be subject to the following terms and conditions:

 

(a)          If
any dispute shall arise with respect to the delivery, ownership, right of possession or disposition of the Company Documents and
Lenders Documents, or if the Escrow Agent shall in good faith be uncertain as to its duties or rights hereunder, the Escrow Agent
shall be authorized, without liability to anyone, to (i) refrain from taking any action other than to continue to hold the Company
Documents and Lenders Documents pending receipt of a Joint Instruction from the Lenders and Company, or (ii) deposit the Company
Documents and Lenders Documents with any court of competent jurisdiction in the State of New York, in which event the Escrow Agent
shall give written notice thereof to the Lenders and the Company and shall thereupon be relieved and discharged from all further
obligations pursuant to this Agreement. The Escrow Agent may, but shall be under no duty to, institute or defend any legal proceedings
which relate to the Company Documents and Lenders Documents. The Escrow Agent shall have the right to retain counsel if it becomes
involved in any disagreement, dispute or litigation on account of this Agreement or otherwise determines that it is necessary to
consult counsel.

 

    5 

     

    

  

(b)          The
Escrow Agent is hereby expressly authorized to comply with and obey any Court Order. In case the Escrow Agent obeys or complies
with a Court Order, the Escrow Agent shall not be liable to the Lenders and Company or to any other person, firm, corporation or
entity by reason of such compliance.

 

ARTICLE V

 

GENERAL MATTERS

 

5.1.          Termination.
This escrow shall terminate upon the release of all of the Company Documents and Lenders Documents or at any time upon the agreement
in writing of the Lenders and Company.

 

5.2.          Notices.
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 (including email transmission of a PDF file), 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), (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 or (c) if by e-mail upon confirmation of receipt by the recipient. The addresses
for such communications shall be:

 

(a)          If
to the Company, to:

 

PhaseRx, Inc.

410 W. Harrison Street, Suite 300

Seattle, Washington 98119

Attn: Robert Overell, CEO

Email: robert@phaserx.com

 

With a copy by personal delivery,
fax or email only, to (which shall not constitute notice):

 

Haynes and Boone, LLP

30 Rockefeller Plaza, 26th Floor

New York, NY 10112

Attn: Rich Werner, Esq.

Fax: (212) 884-8234

Email: Rick.Werner@haynesboone.com

 

(b)          If
to the Lenders: to: the addresses and fax numbers listed on Schedule A hereto.

 

With a copy by personal delivery,
fax or email only, to (which shall not constitute notice):

 

    6 

     

    

  

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

 

(c)          If
to the Escrow Agent, to:

 

Grushko &
Mittman, P.C.

515 Rockaway
Avenue

Valley Stream,
New York 11581

Attn: Edward
M. Grushko, Esq.

Fax: (212) 697-3575

 

or to such other address as any of them
shall give to the others by notice made pursuant to this Section 5.2.

 

5.3.          Interest.
The Escrowed Payment shall not be held in an interest bearing account nor will interest be payable in connection therewith. In
the event the Escrowed Payment is deposited in an interest bearing account, any interest earned on the Escrowed Payment will be
paid in the New York State Client Protection Fund or for a similar purpose.

 

5.4.          Assignment;
Binding Agreement. Neither this Agreement nor any right or obligation hereunder shall be assignable by any party without the
prior written consent of the other parties hereto. This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective legal representatives, successors and assigns.

 

5.5.          Invalidity.
In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid,
illegal, or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that
all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law.

 

5.6.          Counterparts/Execution.
This Agreement may be executed in any number of counterparts and by different signatories hereto on separate counterparts, each
of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.
This Agreement may be executed by e-mail transmission of a PDF or facsimile transmission and delivered by mail transmission of
a PDF facsimile transmission.

 

5.7.          Agreement.
Each of the undersigned states that he has read the foregoing Escrow Agreement and understands and agrees to it.

 

    7 

     

    

  

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

 

	 	COMPANY:
	 	PHASERX, INC.
	 	A Delaware corporation
	 	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 

 

	 	ESCROW AGENT:
	 	 
	 	GRUSHKO & MITTMAN, P.C.

 

    8 

     

    

 

[SIGNATURE PAGE OF LENDERS TO ESCROW AGREEMENT]

 

	Name of Lender:	 
	Signature of Authorized Signatory of Lender: 	 
	Name of Authorized Signatory:	 
	Title of Authorized Signatory: 	 
	Email Address of Authorized Signatory: 	 
	Facsimile Number of Authorized Signatory:	 
	State of Residence of Lender: 	 
	 	 
	Address for Notice to Lender: 	 
	 
	 
	 	 
	Address for Delivery of Securities to Lender (if not same as address for notice):
	 
	 

 

	Principal Amount: 	 

 

    9 

     

    

  

SCHEDULE A TO ESCROW AGREEMENT

 

	LENDER AND ADDRESS	 	LOAN
PRINCIPAL
	 
	 	 	 	 
	Riding the Bull, LLC
 #### ## ##### #####
 ##### #####, ## #####	 	$	1,050,000	 
	 	 	 	 	 
	Alpha Capital Anstalt
 ########## ## 
##-#### #####
 ########## #############	 	$	500,000	 
	 	 	 	 	 
	Titan Multi-Strategy Fund I, Ltd.1
 #### ## #### ####
 #### #####, ## #####	 	$	500,000	 
	 	 	 	 	 
	Chesed Found Ltd. 
#### ###, ### #####
 ##. ####### ########
 # ### ##### ###### #######
 #### ####	 	$	400,000	 
	 	 	 	 	 
	Fame Associates
 c/o ### ####### 
 ### ########, #### #####
 ### ####, ## #####	 	$	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
 c/o #### ##### ######## 
 ###-## ###### #########, ##### ###
 ### #######, ## #####	 	$	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	 

 

 

1 Titan Multi-Strategy Fund I, LTD.’s payment
is being deemed paid by the cancellation of a promissory note, in the aggregate principal amount of $500,000, dated as of December
11, 2015, issued by the Company to Titan Multi-Strategy Fund I, LTD.

 

    10 

     

    

 

Annex C

 

THE AGENT

 

1.          Appointment.
The Lenders (all capitalized terms used herein and not otherwise defined shall have the respective meanings provided in the Loan
and Security Agreement to which this Annex C is attached (the “Agreement”)), by their acceptance of
the benefits of the Agreement, hereby designate Titan Multi-Strategy Fund I, LTD. (the “Security Agent”)
as the Security Agent to act as specified herein and in the Agreement. Each Lender shall be deemed irrevocably to authorize the
Security Agent to take such action on its behalf under the provisions of the Agreement and any other Facility Documents and to
exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Security
Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Security Agent may perform
any of its duties hereunder by or through its agents or employees.

 

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

 

3.          Lack
of Reliance on the Security  Agent. Independently and without reliance upon the Security Agent, each Lender, to the extent
it deems appropriate, has made and shall continue to make (a) its own independent investigation of the financial condition and
affairs of Borrower in connection with such Lender’s investment in Borrower, the creation and continuance of the Obligations,
the transactions contemplated by the Facility Documents, and the taking or not taking of any action in connection therewith, and
(b) its own appraisal of the creditworthiness of Borrower, and of the value of the Collateral from time to time, and the Security
Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit,
market or other information with respect thereto, whether coming into its possession before any Obligations are incurred or at
any time or times thereafter.

 

The Security
Agent shall not be responsible to Borrower or any Lender for any recitals, statements, information, representations or warranties
herein or in any document, certificate or other writing delivered in connection herewith, or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of the Agreement or any other Facility
Documents, or for the financial condition of Borrower or the value of any of the Collateral, or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions or conditions of the Agreement or any other Facility
Documents, or the financial condition of Borrower, or the value of any of the Collateral, or the existence or possible existence
of any default or Event of Default under the Agreement or any of the other Facility Documents.

 

     

     

    

 

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

 

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

 

6.          Indemnification.
To the extent that the Security Agent is not reimbursed by Borrower, the Lenders will jointly and severally reimburse and indemnify
the Security Agent, in proportion to their respective principal amounts of the Term Loans, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against the Security Agent in performing its duties hereunder or under the Agreement
or any other Facility Documents, or in any way relating to or arising out of the Agreement or any other Facility Documents except
for those determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction to have resulted
solely from the Security Agent’s own gross negligence or willful misconduct. Prior to taking any action hereunder as Security
Agent, the Security Agent may require each Lender to deposit with it sufficient sums as it determines in good faith is necessary
to protect the Security Agent for costs and expenses associated with taking such action.

 

7.            Resignation
by the Security Agent.

 

(a)          The
Security Agent may resign from the performance of all its functions and duties under the Agreement and the other Facility Documents
at any time by giving thirty (30) days’ prior written notice to Borrower and the Lenders. Such resignation shall take effect
upon the appointment of a successor Security Agent pursuant to clauses (b) and (c) below.

 

     

     

    

 

(b)          Upon
any such notice of resignation, the Required Lenders shall appoint a successor Security Agent hereunder.

 

(c)          If
a successor Security Agent shall not have been so appointed within said 30-day period, the Security Agent shall then appoint a
successor agent who shall serve as Security Agent until such time, if any, as the Lenders appoint a successor agent as provided
above. If a successor agent has not been appointed within such 30-day period, the Security Agent may petition any court of competent
jurisdiction or may interplead Borrower and the Lenders in a proceeding for the appointment of a successor Security Agent, and
all fees, including, but not limited to, extraordinary fees associated with the filing of interpleader and expenses associated
therewith, shall be payable by Borrower on demand.

 

8.          Rights
with respect to Collateral. Each Lender agrees with all other Lenders and the Security Agent (a) that it shall not, and shall
not attempt to, exercise any rights with respect to its security interest in the Collateral, whether pursuant to any other agreement
or otherwise (other than pursuant to this Agreement), or take or institute any action against the Security Agent or any of the
other Lenders in respect of the Collateral or its rights hereunder (other than any such action arising from the breach of this
Agreement) and (b) that such Lender has no other rights with respect to the Collateral other than as set forth in this Agreement
and the other Facility Documents.

 

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

 

     

     

    

 

Annex D

 

SUBORDINATED
LENDERS

 

ARCH Venture Fund
VII, L.P.

Alexandria Equities,
LLC

Versant Venture
Capital III, L.P.

Versant Side Fund
III, L.P.

5AM Ventures II,
LP

5AM Co-Investors
II, LP

 

     

     

    

 

Annex E

 

EXCLUDED
COLLATERAL

 

		1)	Exclusive
                                         Patent License Agreement, dated as of December 6, 2006, by and between The University
                                         of Washington and PhaseRx, Inc., for Membrane Disruptive Polymers, as amended.

 

		2)	RAFT Non-Exclusive
                                         License Agreement, dated as of October 26, 2009, by and between the Commonwealth Scientific
                                         and Industrial Research Organisation and PhaseRx, Inc.

 

     

     

    

  

DISCLOSURE SCHEDULE

 

This Disclosure
Schedule is made and given pursuant to Section 4 of the Loan and Security Agreement, dated as of December 21, 2015 (the
“Agreement”), among PhaseRx, Inc., a Delaware corporation (the “Company”), the Investors
listed on Annex A thereto and Titan Multi-Strategy Fund I, LTD., as security agent, and shall be interpreted and applied as part
of the Agreement solely in connection with the Closing occurring on December 21, 2015. All capitalized terms used but not defined
herein shall have the meanings as defined in the Agreement, unless otherwise provided. The section numbers below correspond to
the section numbers of the representations and warranties in the Agreement; provided, however, that any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into any other section number under the Agreement where
such disclosure would be reasonably apparent from a reading of such disclosure item that it would also apply to such other representation
or warranty.

 

Nothing in
this Disclosure Schedule is intended to broaden the scope of any representation or warranty contained in the Agreement or to create
any covenant. Inclusion of any item in this Disclosure Schedule (1) does not represent a determination that such item is material
or establish a standard of materiality, (2) does not represent a determination that such item did not arise in the ordinary course
of business, (3) does not represent a determination that the transactions contemplated by the Agreement require the consent of
third parties, and (4) shall not constitute, or be deemed to be, an admission to any third party concerning such item.

  

     

     

    

 

Section 4.01(e). 

 

None.

 

Section 4.01(i). Capitalization

 

Capital Stock as of the Date of the Agreement

 

	Common Stock	 	 	5,678,408	 
	Common Stock Options	 	 	 	 
	Outstanding	 	 	4,808,646	 
	Available for Grant	 	 	243,042	 
	Preferred Stock	 	 	20,216,583	 
	Series A-1 Stock	 	 	5,500,000	 
	Bridge Notes*	 	 	19,368,623	 
	Common Stock Warrants	 	 	-	 
	Preferred Stock Warrants	 	 	3,614,761	 
	 	 	 	 	 
	Total	 	 	59,430,063	 

 

*Number
of shares of common stock issuable upon conversion of all of the convertible promissory notes set forth in Annex 4.01(p) as of
the date of the Agreement. 

 

Pro Forma Capitalization

 

	 	 	Shares	 	 	Amount ($)	 	 	Price	 	 	Ownership %	 	 	Ownership $	 	 	Ownership %	 	 	Ownership $	 
	Existing PhaseRx Shareholders(1)	 	 	7,393,939	 	 	 	 	 	 	 	 	 	 	 	66.28	%	 	$	44,363,636	 	 	 	58.99	%	 	$	39,483,636	 
	New PhaseRx Insider Investment	 	 	1,566,667	 	 	$	9,400,000	 	 	$	6.00	 	 	 	14.04	%	 	$	9,400,000	 	 	 	12.50	%	 	$	8,366,000	 
	Bridge Loan into Private Company	 	 	833,333	 	 	$	4,000,000	 	 	$	4.80	 	 	 	7.47	%	 	$	5,000,000	 	 	 	6.65	%	 	$	4,450,000	 
	IPO	 	 	1,250,000	 	 	$	7,500,000	 	 	$	6.00	 	 	 	11.20	%	 	$	7,500,000	 	 	 	9.97	%	 	$	6,675,000	 
	Palladium Capital Advisors	 	 	112,000	 	 	 	 	 	 	 	 	 	 	 	1.00	%	 	$	672,000	 	 	 	0.89	%	 	$	598,080	 
	Total	 	 	11,155,939	 	 	$	20,900,000	 	 	 	 	 	 	 	100.00	%	 	$	66,935,636	 	 	 	89.00	%	 	$	59,572,716	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	ESOP	 	 	1,378,824	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	11.00	%	 	$	7,362,920	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total	 	 	12,534,763	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	100.00	%	 	$	66,935,636	 

 

(1) Including 19,404,163 shares of common stock
issuable upon conversion of all of the convertible promissory notes set forth in Annex 4.01(p) as of December 31, 2015.

 

    -2- 

     

    

 

Section 4.01(m). 

 

None.

 

Section 4.01(n). Registration Rights

 

		1.	The Company is a party to the Second Amended and Restated Investors’ Rights Agreement (the
“IRA”), dated November 17, 2014, by and among the Company and the holders of shares of the Company’s convertible
preferred stock and certain warrants (including Lighthouse, as defined below) and Company’s founders listed on the exhibits
thereto, which provides such holders and founders certain registration rights over the shares of common stock held by the Company’s
founders and shares of common stock issued or issuable pursuant to the conversion of shares of Series A and Series A-1 convertible
preferred stock or upon exercise of certain warrants (collectively, the “Registrable Securities”).

 

Demand registration rights 

 

Under the IRA, the holders of not less than 20% of
the voting power of the Registrable Securities may, on not more than two occasions, request that the Company file a registration
statement to register all or a portion of their Registrable Securities, subject to certain marketing and other limitations.

 

Piggyback registration rights 

 

Holders of the Registrable Securities are entitled
to certain piggyback registration rights. If the Company registers any of its securities for its own account or the account of
other security holder or holders, the holders of Registrable Securities may require the Company to include their Registrable Securities
in the registration upon written request made within 10 days after notice of such registration is mailed by the Company, subject
to certain marketing and other limitations.

 

Form S-3 registration rights 

 

Holders of the Registrable Securities are entitled
to certain Form S-3 registration rights, provided that the Company has not already effected one such registration within the twelve-month
period preceding the date of such request. Such holders may make a request that the Company register their shares on Form S-3 if
the Company is qualified to file a registration statement on Form S-3. The Company is not obligated to effect such request for
registration if such request for registration on Form S-3 does not cover securities at an aggregate price to the public of less
than $1,000,000.

 

    -3- 

     

    

  

The Company will pay the registration
expenses, other than underwriting discounts and commissions, of the shares registered pursuant to the demand, piggyback and Form
S-3 registrations described above. Generally, in an underwritten offering, the underwriters have the right, subject to specified
conditions, to limit, or exclude entirely, the number of shares such holders may include. The demand, piggyback and Form S-3 registration
rights described above terminate upon the earliest to occur of: (i) such date, on or after the closing of the Company’s
first registered public offering of common stock, on which all shares of common stock subject to the registration rights can be
sold under Rule 144 during any ninety day period, (ii) the date that is four years after the closing of the Company’s firm
commitment underwritten public offering of the Company’s common stock registered under the Securities Act of 1933, as amended;
or (iii) upon termination of the IRA.

 

		2.	On December 1, 2010, the Company issued a Preferred Stock Purchase Warrant (the “Lighthouse
Warrant”) to purchase up to 112,520 shares of the Company’s Series A Preferred Stock to Lighthouse Capital Partners
VI, L.P. (“Lighthouse”) in connection with that certain Loan and Security Agreement with Lighthouse. Pursuant to Section
15 of the Lighthouse Warrant, the shares of common stock issuable upon conversion of shares of Series A Preferred Stock issuable
upon exercise of the Lighthouse Warrant are subject to the registration rights to the holders of Registrable Securities under the
IRA.

 

    -4- 

     

    

  

Section 4.01(p). Debt and Liens

 

Promissory Note, in the aggregate principal amount
of $500,000, dated as of December 11, 2015, held by Titan Multi-Strategy Fund I, LTD., which shall be due and payable on June 10,
2016. Upon and as part of the closing of the Term Loans, the Promissory Note will be surrendered and the outstanding principal
balance and all accrued interest thereunder will be automatically converted into a Term Loan.

 

Convertible promissory notes set forth in Annex 4.01(p).

 

[End of Document]

 

    -5- 

     

    

  

	 	 	 	PhaseRx, Inc.	Page 1 of 2
	Report Date	:	12/11/15	 	 
	 	 	 	Convertible Promissory Notes (Next Equity or A)	 
	Date Printed	:	12/11/15 at 4:03:33 PM	 	 
	 	 	 	(Alphabetic Listing of Outstanding Notes)	 

 

 

		 	Instr.	 	Instr.	 	Instr.	 	Principal	 	Interest	 	Interest	 	Compound	 	Principal
    Plus	 		 	Shares
    Issuable on	 	Shares Issued on
	 Noteholder	 	Number	 	Date	 	Due
    Date	 	Amount
    ($)	 	Rate	 	Type	 	Rate	 	Accrued
    Interest	 	 Convertible	 	Conversion
    of Notes	 	Conversion of Notes
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	5AM Co-Investors II, LP	 	 	 	02/01/12	 	02/01/13	 	37,960.11	 	8.0000	 	Simple	 	N-A	 	49,683.02	 	Y	 	 	 	 
	 	 	 	 	12/10/12	 	06/10/13	 	17,082.05	 	8.0000	 	Simple	 	N-A	 	21,185.49	 	Y	 	 	 	 
	 	 	 	 	04/09/13	 	06/10/13	 	17,082.05	 	8.0000	 	Simple	 	N-A	 	20,736.20	 	Y	 	 	 	 
	5AM Ventures II, LP	 	 	 	02/01/12	 	02/01/13	 	962,039.89	 	8.0000	 	Simple	 	N-A	 	1,259,138.82	 	Y	 	 	 	 
	 	 	 	 	12/10/12	 	06/10/13	 	432,917.95	 	8.0000	 	Simple	 	N-A	 	536,913.12	 	Y	 	 	 	 
	 	 	 	 	04/09/13	 	06/10/13	 	432,917.95	 	8.0000	 	Simple	 	N-A	 	525,526.79	 	Y	 	 	 	 
	Alexandria Equities, LLC	 	 	 	12/10/12	 	06/10/13	 	150,000.00	 	8.0000	 	Simple	 	N-A	 	186,032.87	 	Y	 	 	 	 
	 	 	 	 	04/09/13	 	06/10/13	 	150,000.00	 	8.0000	 	Simple	 	N-A	 	182,087.66	 	Y	 	 	 	 
	 	 	 	 	07/02/12	 	06/10/13	 	160,000.00	 	8.0000	 	Simple	 	N-A	 	204,081.09	 	Y	 	 	 	 
	 	 	 	 	09/19/13	 	03/19/14	 	140,000.00	 	8.0000	 	Simple	 	N-A	 	164,946.85	 	Y	 	 	 	 
	 	 	 	 	12/04/13	 	06/04/14	 	140,000.00	 	8.0000	 	Simple	 	N-A	 	162,614.79	 	Y	 	 	 	 
	 	 	 	 	04/29/15	 	10/29/15	 	75,000.00	 	8.0000	 	Simple	 	N-A	 	78,715.07	 	Y	 	 	 	 
	 	 	 	 	06/17/15	 	12/17/15	 	75,000.00	 	8.0000	 	Simple	 	N-A	 	77,909.59	 	Y	 	 	 	 
	 	 	 	 	08/04/15	 	12/17/15	 	75,000.00	 	8.0000	 	Simple	 	N-A	 	77,120.54	 	Y	 	 	 	 
	 	 	 	 	10/01/15	 	03/01/16	 	100,000.00	 	8.0000	 	Simple	 	N-A	 	101,556.16	 	Y	 	 	 	 
	ARCH Venture Fund VII, L.P.	 	 	 	12/10/12	 	06/10/13	 	450,000.00	 	8.0000	 	Simple	 	N-A	 	558,098.60	 	Y	 	 	 	 
	 	 	 	 	04/09/13	 	06/10/13	 	450,000.00	 	8.0000	 	Simple	 	N-A	 	546,262.99	 	Y	 	 	 	 
	 	 	 	 	06/28/13	 	12/28/13	 	500,000.00	 	8.0000	 	Simple	 	N-A	 	598,191.76	 	Y	 	 	 	 
	 	 	 	 	07/16/13	 	12/28/13	 	900,000.00	 	8.0000	 	Simple	 	N-A	 	1,073,194.49	 	Y	 	 	 	 
	 	 	 	 	07/02/12	 	06/10/13	 	1,440,000.00	 	8.0000	 	Simple	 	N-A	 	1,836,729.79	 	Y	 	 	 	 
	 	 	 	 	09/19/13	 	03/19/14	 	1,260,000.00	 	8.0000	 	Simple	 	N-A	 	1,484,521.62	 	Y	 	 	 	 
	 	 	 	 	12/04/13	 	06/04/14	 	400,000.00	 	8.0000	 	Simple	 	N-A	 	464,613.70	 	Y	 	 	 	 
	 	 	 	 	06/17/15	 	12/17/15	 	375,000.00	 	8.0000	 	Simple	 	N-A	 	389,547.93	 	Y	 	 	 	 
	 	 	 	 	04/29/15	 	10/29/15	 	375,000.00	 	8.0000	 	Simple	 	N-A	 	393,575.34	 	Y	 	 	 	 
	 	 	 	 	08/04/15	 	12/17/15	 	375,000.00	 	8.0000	 	Simple	 	N-A	 	385,602.72	 	Y	 	 	 	 
	 	 	 	 	10/01/15	 	03/01/16	 	1,100,000.00	 	8.0000	 	Simple	 	N-A	 	1,117,117.76	 	Y	 	 	 	 
	 	 	 	 	02/01/12	 	02/01/13	 	1,300,000.00	 	8.0000	 	Simple	 	N-A	 	1,701,468.39	 	Y	 	 	 	 

 

Report Name : NotealphaSpec.rpt

 

     

     

    

 

	 	 	 	 	 
	 	 	 	PhaseRx, Inc.	Page 2 of 2
	Report Date	:	12/11/15	 	 
	 	 	 	Convertible Promissory Notes (Next Equity or A)	 
	Date Printed	:	12/11/15 at 4:03:33 PM	 	 
	 	 	 	(Alphabetic Listing of Outstanding Notes)	 

  

	Noteholder	 	Instr.

Number	 	Instr.

Date	 	

                                                                                 Instr.

Due Date
	 	Principal

Amount
    ($)	 	Interest

Rate	 	Interest

Type	 	Compound

Rate	 	Principal
    Plus

Accrued
    Interest	 	Convertible	 	Shares
    Issuable on

    Conversion of Notes	 	Shares
    Issued on

Conversion
    of Notes
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Versant Side Fund III, L.P.	 	 	 	02/01/12	 	02/01/13	 	7,631.00	 	8.0000	 	Simple	 	N-A	 	9,987.62	 	Y	 	 	 	 
	 	 	 	 	12/10/12	 	06/10/13	 	2,641.50	 	8.0000	 	Simple	 	N-A	 	3,276.04	 	Y	 	 	 	 
	 	 	 	 	04/09/13	 	06/10/13	 	2,641.50	 	8.0000	 	Simple	 	N-A	 	3,206.56	 	Y	 	 	 	 
	 	 	 	 	12/04/13	 	06/04/14	 	5,870.00	 	8.0000	 	Simple	 	N-A	 	6,818.21	 	Y	 	 	 	 
	 	 	 	 	04/29/15	 	10/29/15	 	2,201.25	 	8.0000	 	Simple	 	N-A	 	2,310.29	 	Y	 	 	 	 
	 	 	 	 	06/17/15	 	12/17/15	 	2,201.25	 	8.0000	 	Simple	 	N-A	 	2,286.65	 	Y	 	 	 	 
	 	 	 	 	08/04/15	 	12/17/15	 	2,201.25	 	8.0000	 	Simple	 	N-A	 	2,263.49	 	Y	 	 	 	 
	Versant Venture Capital III, L.P.	 	 	 	02/01/12	 	02/01/13	 	1,292,369.00	 	8.0000	 	Simple	 	N-A	 	1,691,480.77	 	Y	 	 	 	 
	 	 	 	 	12/10/12	 	06/10/13	 	447,358.50	 	8.0000	 	Simple	 	N-A	 	554,822.57	 	Y	 	 	 	 
	 	 	 	 	04/09/13	 	06/10/13	 	447,358.50	 	8.0000	 	Simple	 	N-A	 	543,056.43	 	Y	 	 	 	 
	 	 	 	 	12/04/13	 	06/04/14	 	994,130.00	 	8.0000	 	Simple	 	N-A	 	1,154,716.03	 	Y	 	 	 	 
	 	 	 	 	04/29/15	 	10/29/15	 	372,798.75	 	8.0000	 	Simple	 	N-A	 	391,265.05	 	Y	 	 	 	 
	 	 	 	 	06/17/15	 	12/17/15	 	372,798.75	 	8.0000	 	Simple	 	N-A	 	387,261.28	 	Y	 	 	 	 
	 	 	 	 	08/04/15	 	12/17/15	 	372,798.75	 	8.0000	 	Simple	 	N-A	 	383,339.23	 	Y	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Total
    :	 	 	 	16,215,000.00	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	No. of Noteholders
    :	 	6	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

Report Name : NotealphaSpec.rptExhibit 4.3

 

EXECUTION COPY

 

PHASERX, INC.

 

SECOND AMENDED AND RESTATED

 

INVESTORS’ RIGHTS AGREEMENT

 

November 17, 2014

 

    	 	 	 

     

    

 

TABLE OF CONTENTS

 

	 	 	Page
	 	 	 
	Section 1 Definitions	1
	 	 	 
	1.1	Certain Definitions	1
	 	 	 
	Section 2 Registration Rights	4
	 	 	 
	2.1	Requested Registration	4
	2.2	Company Registration	6
	2.3	Registration on Form S-3	7
	2.4	Expenses of Registration	8
	2.5	Registration Procedures	8
	2.6	Indemnification	10
	2.7	Information by Holder	12
	2.8	Restrictions on Transfer	12
	2.9	Rule 144 Reporting	14
	2.10	Market Stand-Off Agreement	14
	2.11	Delay of Registration	15
	2.12	Transfer or Assignment of Registration Rights	15
	2.13	Limitations on Subsequent Registration Rights	15
	2.14	Termination of Registration Rights	15
	 	 	 
	Section 3 Covenants of the Company	15
	 	 	 
	3.1	Basic Financial Information and Inspection Rights	15
	3.2	Directors’ and Officers’ Liability Insurance	16
	3.3	Fire and Casualty Insurance	16
	3.4	Confidentiality	16
	3.5	Termination of Covenants	17
	 	 	 
	Section 4 Right of First Refusal	17
	 	 	 
	4.1	Right of First Refusal to Significant Holders	17
	 	 	 
	Section 5 Miscellaneous	19
	 	 	 
	5.1	Amendment	19
	5.2	Notices	19
	5.3	Governing Law	20
	5.4	Successors and Assigns	20
	5.5	Entire Agreement	20
	5.6	Delays or Omissions	20
	5.7	Severability	20
	5.8	Titles and Subtitles	20
	5.9	Counterparts	21
	5.10	Telecopy Execution and Delivery	21
	5.11	Jurisdiction; Venue	21
	5.12	Further Assurances	21
	5.13	Termination Upon Change of Control	21
	5.14	Conflict	21
	5.15	Aggregation of Stock	21
	5.16	Prior Rights Agreement	21
	5.17	Waiver of Right of First Offer	22

 

    	 	-i-	 

     

    

 

PHASERX, INC.

 

SECOND AMENDED AND RESTATED INVESTORS’
RIGHTS AGREEMENT

 

This Second Amended
and Restated Investors’ Rights Agreement (this “Agreement”) is made as of November 17, 2014, by and among
PhaseRx, Inc., a Delaware corporation (the “Company”), the persons and entities (each, a “Series A
Investor”) listed on Exhibit A hereto, the persons and entities (each, a “Series A-1 Investor”
and together with the Series A Investors, the “Investors”) listed on Exhibit A-1 hereto and the persons
(each, a “Founder” and collectively, the “Founders”) listed on Exhibit B hereto. The
Founders and Investors are referred to herein collectively as the “Stockholders.” Unless otherwise defined herein,
capitalized terms used in this Agreement have the meanings ascribed to them in Section 1 hereof.

 

Recitals

 

WHEREAS: The
Company and the Stockholders are parties to the Amended and Restated Investors’ Rights Agreement dated as of April 9, 2014
(the “Prior Rights Agreement”).

 

WHEREAS: The
Company and the Stockholders each desire to supersede and replace the Prior Rights Agreement in its entirety as provided herein.
Pursuant to Section 5.1 of the Prior Rights Agreement, any term of the Prior Rights Agreement may be amended or waived by the written
consent of the Company and the Holders (as defined in the Prior Rights Agreement) of a majority of the voting power of the shares
of Common Stock issued or issuable upon conversion of the Shares (as defined in the Prior Rights Agreement) (collectively, the
“Requisite Holders”).

 

NOW, THEREFORE:
In consideration of the mutual promises and covenants set forth herein, and other good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

 

Section 1

Definitions

 

1.1         Certain
Definitions.  As used in this Agreement, the following terms shall have the meanings set forth below:

 

(a)          “Charter”
shall mean the Third Amended and Restated Certificate of Incorporation of the Company as may be amended and/or restated from time
to time.

 

(b)          “Commission”
shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

 

(c)          “Common
Stock” shall mean the Common Stock of the Company.

 

(d)          “Conversion
Shares” shall mean shares of Common Stock issued upon conversion of the Series A Preferred Stock and Series A-1
Preferred Stock.

 

    	 	 	 

     

    

 

(e)          “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules
and regulations thereunder, all as the same shall be in effect from time to time.

 

(f)          “Founders’
Stock” shall mean the shares of Common Stock currently held, directly or indirectly, or hereafter acquired, directly
or indirectly, by Founders.

 

(g)          “Holder”
shall mean any Investor who holds Registrable Securities and any holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been duly and validly transferred in accordance with Section 2.12 of this Agreement
and shall include Lighthouse Capital Partners VI, L.P. (“Lighthouse”) only for purposes of Sections 2 (other
than Section 2.13), 3.1(a), 3.4, 3.5 and 5 (other than Section 5.1) of this Agreement; provided, however, that the
Founders shall be deemed Holders for the purposes of Section 2 (other than Sections 2.1 and 2.3).

 

(h)          “Indemnified
Party” shall have the meaning set forth in Section 2.6(c) hereto.

 

(i)          “Indemnifying
Party” shall have the meaning set forth in Section 2.6(c) hereto.

 

(j)          “Initial
Public Offering” shall mean the closing of the Company’s first firm commitment underwritten public offering of
the Company’s Common Stock registered under the Securities Act.

 

(k)          “Initiating
Holders” shall mean any Holder or Holders who in the aggregate hold not less than twenty percent (20%) of the voting
power of the outstanding Registrable Securities.

 

(l)          “Lighthouse
Warrant” shall mean the warrant to purchase up to 125,000 shares of the Company’s Series A Preferred Stock issued
to Lighthouse on December 1, 2010.

 

(m)          “New
Securities” shall have the meaning set forth in Section 4.1(a) hereto.

 

(n)          “Other
Selling Stockholders” shall mean persons other than Holders who, by virtue of agreements with the Company, are entitled
to include their Other Shares in certain registrations hereunder.

 

(o)          “Other
Shares” shall mean shares of Common Stock, other than Registrable Securities (as defined below), with respect to which
registration rights have been granted.

 

(p)          “Preferred
Directors” shall mean those directors that are designated pursuant to Section 2(b)(i) of the Voting Agreement entered
into among the Company, Founders, and Investors dated of even date herewith.

 

(q)          “Purchase
Agreements” shall mean the Purchase Agreement and any other purchase agreement between the Company and a Series A-1
Investor or its affiliates.

 

(r)          “Registrable
Securities” shall mean (i) shares of Common Stock issued or issuable pursuant to the conversion of the Shares or
upon exercise of the Warrants, (ii) for the purposes of Section 2 only (other than Sections 2.1 and 2.3), shares of Founders’
Stock, (iii) only for purposes of Sections 2 (other than Section 2.13), 3.4, 3.5 and 5 (other than Section 5.1) of this Agreement,
shares of Common Stock issued or issuable upon conversion of the shares of Series A Preferred Stock issued or issuable upon exercise
of the Lighthouse Warrant or any shares of Common Stock issued in respect of the Lighthouse Warrant and (iv) any Common Stock issued
as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in clauses (i)
through (iii) above; provided, however, that Registrable Securities shall not include any shares of Common Stock
described in clauses (i) through (iii) above the offer and sale of which have previously been registered or which have been sold
to the public either pursuant to a registration statement or Rule 144, or which have been sold in a private transaction in
which the transferor’s rights under this Agreement are not validly assigned in accordance with this Agreement.

 

    	 	-2-	 

     

    

 

(s)          The
terms “register,” “registered” and “registration” shall refer to a registration
effected by preparing and filing a registration statement in compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such registration statement.

 

(t)          “Registration
Expenses” shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company and one special counsel for the Holders, blue sky fees and expenses, and expenses of any regular or special audits
incident to or required by any such registration, but shall not include Selling Expenses, fees and disbursements of other counsel
for the Holders and the compensation of regular employees of the Company, which shall be paid in any event by the Company.

 

(u)          “Restricted
Securities” shall mean any Registrable Securities required to bear the first legend set forth in Section 2.8(c)
hereof.

 

(v)         “Requisite
Preferred Directors” shall have the meaning set forth in Article V, Section 1(l) of the Charter.

 

(w)          “Rule 144”
shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time,
or any similar successor rule that may be promulgated by the Commission.

 

(x)          “Rule
145” shall mean Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be amended
from time to time, or any similar successor rule that may be promulgated by the Commission

 

(y)          “Rule 415”
shall mean Rule 415 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time,
or any similar successor rule that may be promulgated by the Commission.

 

(z)          “Securities
Act” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.

 

(aa)         “Selling
Expenses” shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale
of Registrable Securities and fees and disbursements of counsel for any Holder (other than the fees and disbursements of one special
counsel to the Holders included in Registration Expenses).

 

(bb)         “Series A
Preferred Stock” shall mean the shares of Series A Preferred Stock of the Company.

 

    	 	-3-	 

     

    

 

(cc)         “Series A-1
Preferred Stock” shall mean the shares of Series A-1 Preferred Stock issued pursuant to any of the Purchase Agreements.

 

(dd)         “Shares”
shall mean the Company’s Series A Preferred Stock and Series A-1 Preferred Stock.

 

(ee)         “Significant
Holders” shall have the meaning set forth in Section 4.1 hereof.

 

(ff)         “Voting
Agreement” shall mean the second amended and restated voting agreement, of even date herewith, among the parties hereto,
as may be amended and/or restated from time to time.

 

(gg)         “Warrants”
shall mean the warrants issued by the Company pursuant to the Series A Preferred Stock, Note and Warrant Purchase Agreement dated
as of February 22, 2008, as amended; the Preferred Stock Purchase Warrant dated December 1, 2010 issued by the Company to Lighthouse
Capital Partners VI, L.P.; and the warrants issued by the Company in connection with convertible debt financings.

 

(hh)         “Withdrawn
Registration” shall mean a forfeited demand registration under Section 2.1 in accordance with the terms and conditions
of Section 2.4.

 

Section 2

Registration Rights

 

2.1         Requested
Registration. 

 

(a)          Request
for Registration. Subject to the conditions set forth in this Section 2.1, if the Company shall receive from Initiating
Holders a written request signed by such Initiating Holders that the Company effect any registration with respect to all or a part
of the Registrable Securities (such request shall state the number of shares of Registrable Securities to be disposed of by such
Initiating Holders), the Company shall:

 

(i)          promptly
give written notice of the proposed registration to all other Holders; and

 

(ii)         as
soon as practicable, file and use its commercially reasonable efforts to effect such registration (including, without limitation,
filing post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws, and appropriate
compliance with the Securities Act) and to permit or facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request received by the Company within twenty (20) days after such written
notice from the Company is mailed or delivered.

 

(b)          Limitations
on Requested Registration. The Company shall not be obligated to effect, or to take any action to effect, any such registration
pursuant to this Section 2.1:

 

(i)          prior
to one hundred and eighty (180) days following the effective date of the first registration statement filed by the Company covering
an underwritten offering of any of its securities to the general public (or the subsequent date on which all market stand-off agreements
applicable to the offering have terminated);

 

    	 	-4-	 

     

    

 

(ii)         in
any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting
such registration, qualification, or compliance, unless the Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act;

 

(iii)        after
the Company has initiated two (2) such registrations pursuant to this Section 2.1 (counting for these purposes only (x) registrations
which have been declared or ordered effective and pursuant to which securities have been sold, and (y) Withdrawn Registrations);

 

(iv)        during
the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a Company-initiated registration (or ending on the
subsequent date on which all market stand-off agreements applicable to the offering have terminated); provided that the
Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective;

 

(v)         if
the Initiating Holders propose to dispose of shares of Registrable Securities the offer and sale of which may be registered immediately
on Form S-3 pursuant to a request made under Section 2.3 hereof;

 

(vi)        if
the Initiating Holders do not request that such offering be firmly underwritten by underwriters selected by the Initiating Holders
(subject to the consent of the Company); and

 

(vii)       if
the Company and the Initiating Holders are unable to obtain the commitment of the underwriter described in clause (b)(vi) above
to firmly underwrite the offer.

 

(c)          Deferral.
If (i) in the good faith judgment of the Board of Directors of the Company, the filing of a registration statement covering
the Registrable Securities would be materially detrimental to the Company and the Board of Directors of the Company concludes,
as a result, that it is in the best interests of the Company to defer the filing of such registration statement at such time, and
(ii) the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be materially detrimental to the Company for such registration
statement to be filed in the near future and that it is, therefore, in the best interests of the Company to defer the filing of
such registration statement, then (in addition to the limitations set forth in Section 2.1(b)(iv) above) the Company shall
have the right to defer such filing for a period of not more than sixty (60) days after receipt of the request of the Initiating
Holders, and, provided further, that the Company shall not defer its obligation in this manner more than two (2) times in
any twelve-month period.

 

(d)          Other
Shares. The registration statement filed pursuant to the request of the Initiating Holders may, subject to the provisions of
Section 2.1(e), include Other Shares, and may include securities of the Company being sold for the account of the Company.

 

    	 	-5-	 

     

    

 

(e)          Underwriting.
The right of any Holder to include all or any portion of its Registrable Securities in a registration pursuant to this Section 2.1
shall be conditioned upon such Holder’s participation in an underwriting and the inclusion of such Holder’s Registrable
Securities to the extent provided herein. If the Company shall request inclusion in any registration pursuant to Section 2.1
of securities being sold for its own account, or if other persons shall request inclusion in any registration pursuant to Section 2.1,
the Initiating Holders shall, on behalf of all Holders, offer to include such securities in the underwriting and such offer shall
be conditioned upon the participation of the Company or such other persons in such underwriting and the inclusion of the Company’s
and such person’s other securities of the Company and their acceptance of the further applicable provisions of this Section 2
(including Section 2.10). The Company shall (together with all Holders and other persons proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or
underwriters selected for such underwriting by the Company, which underwriters are reasonably acceptable to a majority-in-interest
of the Initiating Holders.

 

Notwithstanding any
other provision of this Section 2.1, if the underwriters advise the Initiating Holders in writing that marketing factors require
a limitation on the number of shares to be underwritten, the number of Registrable Securities and Other Shares that may be so included
shall be allocated as follows: (i) first, among all Holders requesting to include Registrable Securities in such registration
statement based on the pro rata percentage of Registrable Securities held by such Holders, assuming conversion; (ii) second,
to the Other Selling Stockholders; and (iii) third, to the Company, which the Company may allocate, at its discretion, for
its own account, or for the account of other holders or employees of the Company.

 

If a person who has
requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall
be excluded therefrom by written notice from the Company, the underwriter or the Initiating Holders. The securities so excluded
shall also be withdrawn from registration. Any Registrable Securities or other securities excluded or withdrawn from such underwriting
shall also be withdrawn from such registration. If shares are so withdrawn from the registration and if the number of shares to
be included in such registration was previously reduced as a result of marketing factors pursuant to this Section 2.1(e),
then the Company shall then offer to all Holders and Other Selling Stockholders who have retained rights to include securities
in the registration the right to include additional Registrable Securities or Other Shares in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be allocated among such Holders and Other Selling Stockholders
requesting additional inclusion, as set forth above.

 

2.2         Company
Registration. 

 

(a)          Company
Registration. If the Company shall determine to register the offer and sale of any of its securities either for its own account
or the account of a security holder or holders, other than a registration pursuant to Section 2.1 or 2.3, a registration relating
solely to employee benefit plans, a registration relating to the offer and sale of debt securities, a registration relating to
a corporate reorganization or other Rule 145 transaction, or a registration on any registration form that does not permit secondary
sales, the Company will:

 

(i)          promptly
give written notice of the proposed registration to all Holders; and

 

(ii)         use
its commercially reasonable efforts to include in such registration (and any related qualification under blue sky laws or other
compliance), except as set forth in Section 2.2(b) below, and in any underwriting involved therein, all of such Registrable
Securities as are specified in a written request or requests made by any Holder or Holders received by the Company within ten (10)
days after such written notice from the Company is mailed or delivered. Such written request may specify all or a part of a Holder’s
Registrable Securities.

 

    	 	-6-	 

     

    

 

(b)          Underwriting.
If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company
shall so advise the Holders as a part of the written notice given pursuant to Section 2.2(a)(i). In such event, the right
of any Holder to registration pursuant to this Section 2.2 shall be conditioned upon such Holder’s participation in
such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein.
All Holders proposing to distribute their securities through such underwriting shall (together with the Company, the Other Selling
Stockholders and other holders of securities of the Company with registration rights to participate therein distributing their
securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter
or underwriters selected by the Company.

 

(A)         Notwithstanding
any other provision of this Section 2.2, if the underwriters advise the Company in writing that marketing factors require
a limitation on the number of shares to be underwritten, the underwriters may (subject to the limitations set forth below) limit
the number of Registrable Securities to be included in, the registration and underwriting. The Company shall so advise all holders
of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration
and underwriting shall be allocated, as follows: (i) first, to the Company for securities being sold for its own account,
(ii) second, to the Holders requesting to include Registrable Securities in such registration statement based on the pro rata
percentage of Registrable Securities held by such Holders, assuming conversion and (iii) third, to the Other Selling Stockholders
requesting to include Other Shares in such registration statement based on the pro rata percentage of Other Shares held by such
Other Selling Stockholders, assuming conversion. Notwithstanding the foregoing, no such reduction shall reduce the value of the
Registrable Securities of the Holders included in such registration below twenty five percent (25%) of the total value of securities
included in such registration, unless such offering is the Company’s Initial Public Offering and such registration does not
include shares of any other selling stockholders (excluding shares the offer and sale of which are registered for the account of
the Company), in which event any or all of the Registrable Securities of the Holders may be excluded.

 

If a person who has
requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall
also be excluded therefrom by written notice from the Company or the underwriter. The Registrable Securities or other securities
so excluded shall also be withdrawn from such registration. Any Registrable Securities or other securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration.

 

(c)          Right
to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under
this Section 2.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities
in such registration.

 

2.3         Registration
on Form S-3. 

 

(a)          Request
for Form S-3 Registration. After its initial public offering, the Company shall use its commercially reasonable efforts to
qualify for registration on Form S-3 or any comparable or successor form or forms. After the Company has qualified for the use
of Form S-3, in addition to the rights contained in the foregoing provisions of this Section 2 and subject to the conditions
set forth in this Section 2.3, if the Company shall receive from a Holder or Holders of Registrable Securities a written request
that the Company effect any registration on Form S-3 or any similar short form registration statement with respect to all or part
of the Registrable Securities (such request shall state the number of shares of Registrable Securities to be disposed of and the
intended methods of disposition of such shares by such Holder or Holders), the Company will take all such action with respect to
such Registrable Securities as required by Section 2.1(a)(i) and (ii).

 

    	 	-7-	 

     

    

 

(b)          Limitations
on Form S-3 Registration. The Company shall not be obligated to effect, or take any action to effect, any such registration
pursuant to this Section 2.3:

 

(i)          in
the circumstances described in either Sections 2.1(b)(i), 2.1(b)(ii) or 2.1(b)(iv);

 

(ii)         if
the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose
to sell Registrable Securities and such other securities (if any) on Form S-3 at an aggregate price to the public of less
than $1,000,000; or

 

(iii)        if,
in a given twelve-month period, the Company has effected one (1) such registration in such period.

 

(c)          Deferral.
The provisions of Section 2.1(c) shall apply to any registration pursuant to this Section 2.3.

 

(d)          Underwriting.
If the Holders of Registrable Securities requesting registration under this Section 2.3 intend to distribute the Registrable
Securities covered by their request by means of an underwriting, the provisions of Section 2.1(e) shall apply to such registration.
Notwithstanding anything contained herein to the contrary, registrations effected pursuant to this Section 2.3 shall not be
counted as requests for registration or registrations effected pursuant to Section 2.1.

 

2.4         Expenses
of Registration.  All Registration Expenses incurred in connection with registrations pursuant to Sections 2.1, 2.2
and 2.3 hereof shall be borne by the Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Sections 2.1 and 2.3 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the voting power of the Registrable Securities to be registered or because
a sufficient number of Holders shall have withdrawn so that the minimum offering conditions set forth in Sections 2.1 and
2.3 are no longer satisfied (in which case all participating Holders shall bear such expenses pro rata among each other based on
the number of Registrable Securities requested to be so registered), unless the Holders of a majority of the voting power of the
Registrable Securities agree to forfeit their right to a demand registration pursuant to Section 2.1; provided, however,
in the event that a withdrawal by the Holders is based upon material adverse information relating to the Company that is different
from the information known or available (upon request from the Company or otherwise) to the Holders requesting registration at
the time of their request for registration under Section 2.1, such registration shall not be treated as a counted registration
for purposes of Section 2.1 hereof, even though the Holders do not bear the Registration Expenses for such registration. All
Selling Expenses relating to securities registered on behalf of the Holders shall be borne by the holders of securities included
in such registration pro rata among each other on the basis of the number of Registrable Securities so registered.

 

2.5         Registration
Procedures.  In the case of each registration effected by the Company pursuant to Section 2, the Company will keep
each Holder advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the
Company will use its commercially reasonable efforts to:

 

(a)          keep
such registration effective for a period of ending on the earlier of the date which is sixty (60) days from the effective date
of the registration statement or such time as the Holder or Holders have completed the distribution described in the registration
statement relating thereto;

 

    	 	-8-	 

     

    

 

(b)          to
the extent the Company is a well-known seasoned issuer (as defined in Rule 405 under the Securities Act) (a “WKSI”)
at the time any request for registration is submitted to the Company in accordance with Section 2.3, (i) if so requested,
file an automatic shelf registration statement (as defined in Rule 405 under the Securities Act) (an “automatic shelf
registration statement”) to effect such registration, and (ii) remain a WKSI (and not become an ineligible issuer
(as defined in Rule 405 under the Securities Act)) during the period during which such automatic shelf registration statement is
required to remain effective in accordance with this Agreement;

 

(c)          prepare
and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement for the period set forth in subsection (a) above;

 

(d)          furnish
such number of prospectuses, including any preliminary prospectuses, and other documents incident thereto, including any amendment
of or supplement to the prospectus, as a Holder from time to time may reasonably request;

 

(e)          register
and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdiction
as shall be reasonably requested by the Holders; provided, that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

 

(f)          notify
each seller of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances
then existing, and following such notification promptly prepare and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing;

 

(g)          if
at any time when the Company is required to re-evaluate its WKSI status for purposes of an automatic shelf registration statement
used to effect a request for registration in accordance with Section 2.3 (i) the Company determines that it is not a
WKSI, (ii) the registration statement is required to be kept effective in accordance with this Agreement, and (iii) the
registration rights of the applicable Holders have not terminated, promptly amend the registration statement onto a form the Company
is then eligible to use or file a new registration statement on such form, and keep such registration statement effective in accordance
with the requirements otherwise applicable under this Agreement;

 

(h)          if
(i) a registration made pursuant to a shelf registration statement is required to be kept effective in accordance with this
Agreement after the third anniversary of the initial effective date of the shelf registration statement and (ii) the registration
rights of the applicable Holders have not terminated, file a new registration statement with respect to any unsold Registrable
Securities subject to the original request for registration prior to the end of the three year period after the initial effective
date of the shelf registration statement, and keep such registration statement effective in accordance with the requirements otherwise
applicable under this Agreement;

 

    	 	-9-	 

     

    

 

(i)          furnish,
on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through
underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration,
in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters,
if any, and reasonably satisfactory to a majority in interest of the voting power of the Holders requesting registration of Registrable
Securities and (ii) a “comfort” letter dated as of such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters;

 

(j)          provide
a transfer agent and registrar for all Registrable Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(k)          comply
with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act;

 

(l)          cause
all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed; and

 

(m)          in
connection with any underwritten offering pursuant to a registration statement filed pursuant to Section 2.1 hereof, enter
into an underwriting agreement in form reasonably necessary to effect the offer and sale of Common Stock, provided such
underwriting agreement contains reasonable and customary provisions, and provided further, that each Holder participating
in such underwriting shall also enter into and perform its obligations under such an agreement.

 

2.6         Indemnification. 

 

(a)          To
the extent permitted by law, the Company will indemnify and hold harmless each Holder, each of its officers, directors and partners,
legal counsel and accountants and each person controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been effected pursuant to this Section 2, and each underwriter,
if any, and each person who controls within the meaning of Section 15 of the Securities Act any underwriter, against all expenses,
claims, losses, damages and liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on:
(i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated by reference in any registration
statement, any prospectus included in the registration statement, any issuer free writing prospectus (as defined in Rule 433
of the Securities Act), any issuer information (as defined in Rule 433 of the Securities Act) filed or required to be filed
pursuant to Rule 433(d) under the Securities Act or any other document incident to any such registration, qualification or
compliance prepared by or on behalf of the Company or used or referred to by the Company, (ii) any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any
violation (or alleged violation) by the Company of the Securities Act, any state securities laws or any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the Company in connection with any offering covered by
such registration, qualification or compliance, and the Company will reimburse each such Holder, each of its officers, directors,
partners, legal counsel and accountants and each person controlling such Holder, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability or action; provided that the Company will not be liable in any such case
to the extent that any such claim, loss, damage, liability, or action arises out of or is based on any untrue statement or omission
based upon written information furnished to the Company by such Holder, any of such Holder’s officers, directors, partners,
legal counsel or accountants, any person controlling such Holder, such underwriter or any person who controls any such underwriter,
and stated to be specifically for use therein; and provided, further that, the indemnity agreement contained in this
Section 2.6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld).

 

    	 	-10-	 

     

    

 

(b)          To
the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as
to which such registration, qualification or compliance is being effected, indemnify and hold harmless the Company, each of its
directors, officers, partners, legal counsel and accountants and each underwriter, if any, of the Company’s securities covered
by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15
of the Securities Act, each other such Holder, and each of their officers, directors and partners, and each person controlling
each other such Holder, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based
on: (i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated by reference in any
prospectus, offering circular or other document (including any related registration statement, notification, or the like) incident
to any such registration, qualification or compliance, or (ii) any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and
such Holders, directors, officers, partners, legal counsel and accountants, persons, underwriters, or control persons for any legal
or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability
or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon
and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of such Holder hereunder shall not apply to amounts paid in settlement of
any such claims, losses, damages or liabilities (or actions in respect thereof) if such settlement is effected without the consent
of such Holder (which consent shall not be unreasonably withheld); and provided that in no event shall any indemnity under
this Section 2.6 exceed the net proceeds from the offering received by such Holder, except in the case of fraud or willful
misconduct by such Holder.

 

(c)          Each
party entitled to indemnification under this Section 2.6 (the “Indemnified Party”) shall
give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly
after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying
Party to assume the defense of such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party’s
expense; and provided further that the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 2.6, to the extent such failure is not prejudicial. No
Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified
Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.

 

    	 	-11-	 

     

    

 

(d)          If
the indemnification provided for in this Section 2.6 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense referred to herein, then the Indemnifying Party,
in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied
by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information,
and opportunity to correct or prevent such statement or omission. No person or entity will be required under this Section 2.6(d)
to contribute any amount in excess of the net proceeds from the offering received by such person or entity, except in the case
of fraud or willful misconduct by such person or entity. No person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity that was not guilty
of such fraudulent misrepresentation.

 

(e)          Notwithstanding
the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.

 

2.7         Information
by Holder.  Each Holder of Registrable Securities shall furnish to the Company such information regarding such Holder
and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required
in connection with any registration, qualification, or compliance referred to in this Section 2.

 

2.8         Restrictions
on Transfer. 

 

(a)          The
holder of each certificate representing Registrable Securities by acceptance thereof agrees to comply in all respects with the
provisions of this Section 2.8. Each Holder agrees not to make any sale, assignment, transfer, pledge or other disposition
of all or any portion of the Restricted Securities, or any beneficial interest therein, unless and until the transferee thereof
has agreed in writing for the benefit of the Company to take and hold such Restricted Securities subject to, and to be bound by,
the terms and conditions set forth in this Agreement, including, without limitation, this Section 2.8 and Section 2.10,
and:

 

(i)          there
is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or

 

    	 	-12-	 

     

    

 

(ii)         such
Holder shall have given prior written notice to the Company of such Holder’s intention to make such disposition and shall
have furnished the Company with a detailed description of the manner and circumstances of the proposed disposition, and, if requested
by the Company, such Holder shall have furnished the Company, at its expense, with (i) an opinion of counsel reasonably satisfactory
to the Company to the effect that such disposition will not require registration of such Restricted Securities under the Securities
Act or (ii) a “no action” letter from the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon
the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms
of the notice delivered by the Holder to the Company.

 

(b)          Notwithstanding
the provisions of Section 2.8(a), no such registration statement, opinion of counsel or “no action” letter shall
be necessary for (i) a transfer not involving a change in beneficial ownership, or (ii) transactions involving the distribution
without consideration of Restricted Securities by any Holder to (x) a parent, subsidiary or other affiliate of the Holder,
if the Holder is a corporation; (y) any of the Holder’s partners, members or other equity owners, or retired partners,
retired members or other equity owners, or to the estate of any of the Holder’s partners, members or other equity owners
or retired partners, retired members or other equity owners; or (z) a venture capital fund that is controlled by or under
common control with one or more general partners or managing members of, or shares the same management company with, the Holder;
provided, in each case, that the Holder shall give written notice to the Company of the Holder’s intention to effect
such disposition and shall have furnished the Company with a detailed description of the manner and circumstances of the proposed
disposition.

 

(c)          Each
certificate representing Registrable Securities shall (unless otherwise permitted by the provisions of this Agreement) be stamped
or otherwise imprinted with legends substantially similar to the following (in addition to any legend(s) required under applicable
state securities laws):

 

THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER
THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

THE SHARES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO (1) RESTRICTIONS ON TRANSFERABILITY AND RESALE, INCLUDING A LOCK-UP PERIOD IN THE EVENT
OF A PUBLIC OFFERING, AS SET FORTH IN AN INVESTORS’ RIGHTS AGREEMENT, AND (2) VOTING RESTRICTIONS AS SET FORTH IN A
VOTING AGREEMENT AMONG THE COMPANY AND THE ORIGINAL HOLDERS OF THESE SHARES, COPIES OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE
OF THE COMPANY.

 

The Holders consent
to the Company making a notation on its records and giving instructions to any transfer agent of the Restricted Securities in order
to implement the restrictions on transfer established in this Section 2.8.

 

    	 	-13-	 

     

    

 

(d)          The
first legend referring to federal and state securities laws identified in Section 2.8(c) hereof stamped on a certificate evidencing
the Restricted Securities and the stock transfer instructions and record notations with respect to such Restricted Securities shall
be removed and the Company shall issue a certificate without such legend to the holder of such Restricted Securities if (i) such
securities are registered under the Securities Act, or (ii) such holder provides the Company with an opinion of counsel reasonably
acceptable to the Company to the effect that a sale or transfer of the securities may be made without registration or qualification.

 

2.9         Rule 144
Reporting.  With a view to making available the benefits of certain rules and regulations of the Commission that may permit
the sale of the Restricted Securities to the public without registration, the Company agrees to use its commercially reasonable
efforts to:

 

(a)          make
and keep adequate current public information with respect to the Company available in accordance with Rule 144 under the Securities
Act, at all times from and after ninety (90) days following the effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the general public;

 

(b)          file
with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting requirements; and

 

(c)          so
long as a Holder owns any Restricted Securities, furnish to the Holder forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any time from and after ninety (90) days following
the effective date of the first registration statement filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy
of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as a Holder may reasonably
request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

 

2.10       Market
Stand-Off Agreement.  Each Holder hereby agrees that such Holder shall not sell or otherwise transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as
a sale, of any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration)
during the one hundred and eighty (180) day period following the effective date of the registration statement for the Company’s
Initial Public Offering filed under the Securities Act (or such other period as may be requested by the Company or an underwriter
to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst
recommendations and opinions, including, but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4),
or any successor provisions or amendments thereto) provided that all directors, officers and holders of one percent (1%)
or more of the Company’s outstanding capital stock are similarly bound. The obligations described in this Section 2.10
shall not apply to a registration relating solely to employee benefit plans on Form S-l or Form S-8 or similar forms that may be
promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated
in the future. The Company may impose stop-transfer instructions and may stamp each such certificate with the second legend set
forth in Section 2.8(c) hereof with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction
until the end of such one hundred and eighty (180) day (or other) period. Each Holder agrees to execute a market standoff agreement
with said underwriters in customary form consistent with the provisions of this Section 2.10.

 

    	 	-14-	 

     

    

 

2.11       Delay
of Registration.  No Holder shall have any right to take any action to restrain, enjoin, or otherwise delay any registration
as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

2.12       Transfer
or Assignment of Registration Rights.  The rights to cause the Company to register the offer and sale of securities granted
to a Holder by the Company under this Section 2 may be transferred or assigned by a Holder only to a transferee or assignee
of not less than 500,000 shares of Registrable Securities (as presently constituted and subject to subsequent adjustments for stock
splits, stock dividends, reverse stock splits, and the like); provided that (i) such transfer or assignment of Registrable
Securities is effected in accordance with the terms of Section 2.8 hereof, the Right of First Refusal and Co-Sale Agreement,
and applicable securities laws, (ii) the Company is given written notice prior to said transfer or assignment, stating the
name and address of the transferee or assignee and identifying the securities with respect to which such registration rights are
intended to be transferred or assigned and (iii) the transferee or assignee of such rights assumes in writing the obligations
of such Holder under this Agreement, including without limitation the obligations set forth in Section 2.10.

 

2.13       Limitations
on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior
written consent of Holders holding a majority of the voting power of the Registrable Securities, enter into any agreement with
any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights
the terms of which are pari passu with or senior to the registration rights granted to the Holders hereunder.

 

2.14       Termination
of Registration Rights.  The right of any Holder to request registration or inclusion in any registration pursuant to
Sections 2.1, 2.2 or 2.3 shall terminate on the earlier of (i) such date, on or after the closing of the Company’s
first registered public offering of Common Stock, on which all shares of Registrable Securities held or entitled to be held upon
conversion by such Holder may immediately be sold under Rule 144 during any ninety (90) day period, (ii) four (4) years
after the closing of the Company’s Initial Public Offering and (iii) upon termination of the Agreement as provided herein.

 

Section 3

Covenants of the Company

 

The Company hereby
covenants and agrees, as follows:

 

3.1         Basic
Financial Information and Inspection Rights. 

 

(a)          Basic
Financial Information. The Company will furnish the following reports to each Holder who owns at least 500,000 Shares and/or
Conversion Shares (as presently constituted and subject to subsequent adjustments for stock splits, stock dividends, reverse stock
splits, and the like):

 

(i)          as
soon as practicable after the end of each fiscal year of the Company, and in any event within one hundred twenty (120) days after
the end of each fiscal year of the Company, an audited consolidated balance sheet of the Company and its subsidiaries, if any,
as at the end of such fiscal year, and audited consolidated statements of income and cash flows of the Company and its subsidiaries,
if any, for such year, in each case audited by a firm approved by the Board of Directors including the Requisite Preferred Directors,
and prepared in accordance with U.S. generally accepted accounting principles consistently applied, and certified by the Chief
Financial Officer of the Company;

 

    	 	-15-	 

     

    

 

(ii)         as
soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company,
and in any event within forty-five (45) days after the end of the first, second, and third quarterly accounting periods in each
fiscal year of the Company, an unaudited consolidated balance sheet of the Company and its subsidiaries, if any, as of the end
of each such quarterly period, and unaudited consolidated statements of income and cash flows of the Company and its subsidiaries,
if any, for such period, prepared in accordance with U.S. generally accepted accounting principles consistently applied, subject
to changes resulting from normal year-end audit adjustments, but excluding footnotes; and

 

(iii)        at
least thirty (30) days prior to the beginning of each fiscal year an operating plan for such fiscal year.

 

(b)          Inspection
Rights. The Company will afford to (i) each Holder who (A) is entitled to designate a Preferred Director pursuant to the Voting
Agreement and who owns at least 500,000 Shares and/or Conversion Shares (as presently constituted and subject to subsequent adjustments
for stock splits, stock dividends, reverse stock splits, and the like) and (B) each Series A-1 Investor, so long as such Holder
owns at least 500,000 Shares and/or Conversion Shares (as presently constituted and subject to subsequent adjustments for stock
splits, stock dividends, reverse stock splits, and the like), and (ii) accountants and counsel to such Holders and Investors, reasonable
access during normal business hours to all of the Company’s respective properties, books and records. Each such Holder and
Investor shall have such other access to management for discussions and information as reasonably requested. The Company shall
not be required to disclose details of contracts with or work performed for specific customers and other business partners where
to do so would violate confidentiality obligations to those parties. Holders and Investors may exercise their rights under this
Section 3.1(b) only for purposes reasonably related to their interests under this Agreement and related agreements. The rights
granted pursuant to this Section 3.1(b) may not be assigned or otherwise conveyed by the Holders or Investors or by any subsequent
transferee of any such rights without the prior written consent of the Company except as authorized in this Section 3.1(b).

 

3.2         Directors’
and Officers’ Liability Insurance.  The Company shall purchase and maintain in full force and effect, directors
and officers liability insurance on reasonable terms and conditions reasonably acceptable to the directors designated by the Investors.

 

3.3         Fire
and Casualty Insurance.  The Company shall purchase and maintain in full force and effect, fire and casualty insurance
policies, sufficient in amount (subject to reasonable deductibles) to allow it to replace any of its material properties that may
be damaged or destroyed on reasonable terms and conditions reasonably acceptable to the directors designated by the Investors.

 

    	 	-16-	 

     

    

 

3.4         Confidentiality. 
Anything in this Agreement to the contrary notwithstanding, no party hereto by reason of this Agreement shall have access to any
trade secrets or classified information of the Company. The Company shall not be required to comply with any information rights
of Section 3.1 in respect of any Holder whom the Company reasonably determines to be a competitor or an officer, employee, director
or holder of more than ten percent (10%) of a competitor; provided, that none of Synageva BioPharma Corp. or its subsidiaries
shall be deemed a competitor under this Section 3.4. Each Holder acknowledges that the information received by them pursuant
to this Agreement may be confidential and for its use only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any other person (other than its employees or agents having
a need to know the contents of such information, and its attorneys), except in connection with the exercise of rights under this
Agreement, unless the Company has made such information available to the public generally or such Holder is required to disclose
such information by a governmental authority. Notwithstanding the foregoing, the Company (i) acknowledges that the Investors listed
in Exhibit A and Exhibit A-1 hereto as of the date of this Agreement are in the business of making investments in, and
have or may have investments in other businesses similar to and that may compete with the Company’s business (“Competing
Business”) and (ii) agrees that Holders shall have the unfettered right to make investments in or have relationships
with Competing Businesses independent of their investments in the Company; and accordingly such Investors shall have access to
information pursuant to Section 3.1 (except pursuant to the first sentence of this Section 3.4) provided that each such
Holder agrees to keep in confidence and prevent the use by or disclosure to any other person or entity of the confidential information
of the Company.

 

3.5         Termination
of Covenants.  The covenants set forth in this Section 3 shall terminate and be of no further force and effect after
the Company’s Initial Public Offering.

 

Section 4

Right of First Refusal

 

4.1         Right
of First Refusal to Significant Holders.  The Company hereby grants to each Holder who owns at least 500,000 Shares or
Conversion Shares (as presently constituted and subject to subsequent adjustments for stock splits, stock dividends, reverse stock
splits and the like) (the “Significant Holders”), the right of first refusal to purchase its pro rata
share of New Securities (as defined in this Section 4.1(a)) which the Company may, from time to time, propose to sell and
issue after the date of this Agreement. A Significant Holder’s pro rata share, for purposes of this right of first refusal,
is equal to the ratio of (a) the number of shares of Common Stock owned by such Significant Holder immediately prior to the
issuance of New Securities (assuming full conversion of the Shares and exercise of all outstanding convertible securities, rights,
options and warrants, directly or indirectly, into Common Stock held by said Significant Holder) to (b) the total number of
shares of Common Stock outstanding immediately prior to the issuance of New Securities (assuming full conversion of the Shares
and exercise of all outstanding convertible securities, rights, options and warrants, directly or indirectly). This right of first
refusal shall be subject to the following provisions:

 

(a)          “New
Securities” shall mean any capital stock (including Common Stock and/or Preferred Stock) of the Company whether now authorized
or not, and rights, convertible securities, options or warrants to purchase such capital stock, and securities of any type whatsoever
that are, or may become, exercisable or convertible into capital stock; provided that the term “New Securities”
does not include:

 

(i)          the
Shares and the Conversion Shares;

 

(ii)         up
to a number of shares of Common Stock or options convertible securities or other rights to purchase Common Stock equal to the Incentive
Securities Threshold Amount (as defined in the Charter) issued or issuable to officers, employees, directors, consultants, placement
agents, and other service providers of the Company (or any subsidiary) pursuant to stock grants, option plans, purchase plans,
agreements or other employee stock incentive programs or arrangements approved by the Board of Directors of the Company;

 

(iii)        securities
issued pursuant to the conversion or exercise of any outstanding convertible or exercisable securities as of this date of this
Agreement;

 

    	 	-17-	 

     

    

 

(iv)        securities
issued or issuable as a dividend or distribution on Preferred Stock of the Company or pursuant to any event for which adjustment
is made pursuant to paragraph 4(e), 4(f) or 4(g) of the Charter;

 

(v)         securities
offered pursuant to a bona fide, firmly underwritten public offering pursuant to a registration statement filed under the Securities
Act;

 

(vi)        securities
issued or issuable pursuant to the acquisition of another corporation by the Company by merger, purchase of substantially all of
the assets or other reorganization or to a joint venture agreement, provided, that such issuances are approved by the Board
of Directors of the Company, including the Requisite Preferred Directors;

 

(vii)       securities
issued or issuable to banks, equipment lessors or other financial institutions pursuant to a commercial leasing or debt financing
transaction approved by the Board of Directors of the Company including the Requisite Preferred Directors;

 

(viii)      securities
issued or issuable in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other
similar agreements or strategic partnerships approved by the Board of Directors of the Company, including the Requisite Preferred
Directors;

 

(ix)         securities
issued or issuable to suppliers or third party service providers in connection with the provision of goods or services pursuant
to transactions approved by the Board of Directors of the Company, including the Requisite Preferred Directors;

 

(x)          securities
of the Company which are otherwise excluded by the affirmative vote or consent of the holders of a majority of the shares of Preferred
Stock of the Company then outstanding or the Board of Directors of the Company, including the Requisite Preferred Directors; and

 

(xi)         any
right, option or warrant to acquire any security convertible into the securities excluded from the definition of New Securities
pursuant to subsections (i) through (x) above.

 

(b)          If
the Company proposes to undertake an issuance of New Securities, it shall give each Significant Holder written notice of its intention,
describing the type of New Securities, and their price and the general terms upon which the Company proposes to issue the same.
Each Significant Holder shall have fifteen (15) days after any such notice is mailed or delivered to agree to purchase such Holder’s
pro rata share of such New Securities for the price and upon the terms specified in the notice by giving written notice to the
Company, in substantially the form attached hereto as Schedule 1, and stating therein the quantity of New Securities
to be purchased.

 

(c)          If
the Holders fail to exercise fully the right of first refusal within said fifteen (15) day period (the “Election Period”),
the Company shall have ninety (90) days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within ninety (90) days from the date of said agreement) to sell that portion of the
New Securities with respect to which the Significant Holders’ right of first refusal option set forth in this Section 4.1
was not exercised, at a price and upon terms no more favorable to the purchasers thereof than specified in the Company’s
notice to Significant Holders delivered pursuant to Section 4.1(b). In the event the Company has not sold within such ninety
(90) day period following the Election Period, or such ninety (90) day period following the date of said agreement, the Company
shall not thereafter issue or sell any New Securities, without first again offering such securities to the Significant Holders
in the manner provided in this Section 4.1.

 

    	 	-18-	 

     

    

 

(d)          The
right of first refusal granted under this Agreement shall expire upon, and shall not be applicable to the Company’s Initial
Public Offering.

 

Section 5

Miscellaneous

 

5.1         Amendment. 
Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument referencing this Agreement and signed by the Company and (a) Holders holding a majority of the
voting power of the shares of Common Stock issued or issuable upon conversion of the Shares (excluding any of such shares that
have been sold to the public or pursuant to Rule 144), provided that each of the Shares held by the Series A-1 Investors
will be considered to have one tenth the voting power of one Share held by the Series A Investors in accordance with Article V,
Section 5(c) of the Charter; and provided, further, that if any amendment, waiver, discharge or termination operates
in a manner that treats any Holder different from other Holders, the consent of such Holder shall also be required for such amendment,
waiver, discharge or termination. Any such amendment, waiver, discharge or termination effected in accordance with this paragraph
shall be binding upon each Investor and each future holder of all such securities of Investor.

 

5.2         Notices. 
All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand or by messenger addressed:

 

(a)          if
to an Investor other than a Series A-1 Investor, at the Investor’s address, facsimile number or electronic mail address
as shown in the Company’s records, as may be updated in accordance with the provisions hereof;

 

(b)          if
to a Series A-1 Investor, at the Series A-1 Investor’s address, facsimile number or electronic mail address as
shown in the Company’s records, as may be updated in accordance with the provisions hereof, with a copy to Daniel T. Kajunski,
Esq., Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston, MA 02111 (facsimile) (617) 542-2241, which
copy shall not constitute notice;

 

(c)          if
to any Holder, at such address, facsimile number or electronic mail address as shown in the Company’s records, or, until
any such holder so furnishes an address, facsimile number or electronic mail address to the Company, then to and at the address,
facsimile number or electronic mail address of the last holder of such shares for which the Company has contact information in
its records; or

 

(d)          if
to the Company, at 410 W. Harrison Street, Suite 300, Seattle, WA 98119, or at such other address or facsimile number as the Company
shall have furnished to the Voting Parties in writing, with a copy, which shall not constitute notice, to Michael Nordtvedt, Wilson
Sonsini Goodrich & Rosati, P.C., 701 Fifth Avenue, Suite 5100, Seattle, WA 98104, (facsimile) (206) 883-2699.

 

With respect to any
notice given by the Company under any provision of the Delaware General Corporation Law or the Company’s charter or bylaws,
each party hereto agrees that such notice may be given by facsimile or by electronic mail.

 

    	 	-19-	 

     

    

 

Each such notice or
other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid or, if sent by facsimile, one
(1) business day after confirmation of facsimile transfer or, if sent by electronic mail, one (1) business day after confirmation
of delivery when directed to the electronic mail address set forth on the Schedule of Investors. In the event of any conflict between
the Company’s books and records and this Agreement or any notice delivered hereunder, the Company’s books and records
will control absent fraud or error.

 

5.3         Governing
Law.  This Agreement shall be governed in all respects by the internal laws of the State of Delaware as applied to agreements
entered into among Delaware residents to be performed entirely within Delaware, without regard to principles of conflicts of law.

 

5.4         Successors
and Assigns.  This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred,
delegated or sublicensed by any Investor without the prior written consent of the Company. Any attempt by an Investor without such
permission to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement shall
be void. Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

 

5.5         Entire
Agreement.  This Agreement and the exhibits hereto constitute the full and entire understanding and agreement between
the parties with regard to the subjects hereof. No party hereto shall be liable or bound to any other party in any manner with
regard to the subjects hereof or thereof by any warranties, representations or covenants except as specifically set forth herein.

 

5.6         Delays
or Omissions.  Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing
to any party to this Agreement upon any breach or default of any other party under this Agreement shall impair any such right,
power or remedy of such non-defaulting party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any
party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically
set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement,
shall be cumulative and not alternative.

 

5.7         Severability. 
If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement,
and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable
provision. The balance of this Agreement shall be enforceable in accordance with its terms.

 

5.8         Titles
and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and exhibits shall, unless
otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.

 

    	 	-20-	 

     

    

 

5.9         Counterparts. 
This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties that execute
such counterparts, and all of which together shall constitute one instrument.

 

5.10       Telecopy
Execution and Delivery.  A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more
parties hereto and delivered by such party by facsimile or any similar electronic transmission device pursuant to which the signature
of or on behalf of such party can be seen. Such execution and delivery shall be considered valid, binding and effective for all
purposes. At the request of any party hereto, all parties hereto agree to execute and deliver an original of this Agreement as
well as any facsimile, telecopy or other reproduction hereof.

 

5.11       Jurisdiction;
Venue.  The parties, by their execution of this Agreement, hereby irrevocably submit to the non-exclusive in persona
jurisdiction of the state courts of the State of Washington and of the United States District Courts that are located in King County,
Washington, for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement.

 

5.12       Further
Assurances.  Each party hereto agrees to execute and deliver, by the proper exercise of its corporate, limited liability
company, partnership or other powers, all such other and additional instruments and documents and do all such other acts and things
as may be necessary to more fully effectuate this Agreement.

 

5.13       Termination
Upon Change of Control.  Notwithstanding anything to the contrary herein, this Agreement (excluding any then-existing
obligations) shall terminate upon (a) the acquisition of the Company by another entity by means of any transaction or series
of related transactions to which the Company is party (including, without limitation, any stock acquisition, reorganization, merger
or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions
in which the holders of a majority of the total voting power of the voting securities of the Company outstanding immediately prior
to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being
converted into voting securities of the surviving entity), as a result of shares in the Company held by such holders prior to such
transaction, a majority of the total voting power represented by the voting securities of the Corporation or such surviving entity
outstanding immediately after such transaction or series of transactions; or (b) a sale, lease or other conveyance of all
substantially all of the assets of the Company.

 

5.14       Conflict. 
In the event of any conflict between the terms of this Agreement and the Company’s Certificate of Incorporation or its Bylaws,
the terms of the Company’s Certificate of Incorporation or its Bylaws, as the case may be, will control.

 

5.15       Aggregation
of Stock.  All securities held or acquired by affiliated entities (including affiliated venture capital funds) or persons
shall be aggregated together for purposes of determining the availability of any rights under this Agreement.

 

5.16       Prior
Rights Agreement. Effective and contingent upon the execution of this Agreement by the Company and the Requisite Holders, the
Prior Rights Agreement shall be superseded and replaced in its entirety as set forth in this Agreement, and this Agreement shall
constitute the entire agreement between the parties and shall supersede any other prior understandings or agreements concerning
the subject matter hereof.

 

    	 	-21-	 

     

    

 

5.17       Waiver
of Right of First Offer. Effective and contingent upon the execution of this Agreement by the Company and the Requisite Holders,
the Requisite Holders hereby waive, on behalf of themselves and all other Major Investors, the rights of first offer and notice
rights contained in Section 4 of the Prior Rights Agreement and this Agreement with respect to the sale and issuance of Series
A-1 Preferred Stock pursuant to the Purchase Agreements and the Common Stock issuable upon conversion thereof.

 

(signature page follows)

 

    	 	-22-	 

     

    

 

The parties hereto
have executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	COMPANY:
	 	 
	 	PHASERX, INC.,
	 	a Delaware corporation
	 	 
	 	By:	/s/ Robert W. Overell
	 	 	Name:  Robert W. Overell
	 	 	Title:  President and Chief Executive Officer

 

(Signature Page to PhaseRx, Inc. Second
Amended and Restated Investors’ Rights Agreement)

 

    	 	 	 

     

    

 

The parties hereto
have executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	INVESTOR:
	 	 
	 	SAVOY THERAPEUTICS CORP. 
	 	 	 
	 	By:	/s/ Thomas Butham
	 	Name: 	Thomas Butham
	 	Title:  	Secretary and Vice President

 

(Signature Page to PhaseRx, Inc. Second
Amended and Restated Investors’ Rights Agreement)

 

    	 	 	 

     

    

 

The parties hereto have
executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	INVESTORS:
	 	 
	 	VERSANT VENTURE CAPITAL III, L.P.
	 	VERSANT SIDE FUND III, L.P.
	 	 	 
	 	By:	Versant Ventures III, LLC
	 	Its:	General Partner
	 	 	 
	 	By:	/s/ Brian G. Atwood
	 	 	Name:  Brian G. Atwood
	 	 	Title:  Managing Director
	 	 
	 	5AM VENTURES II, LP
	 	5AM CO-INVESTORS II, LP
	 	 
	 	By:	5AM Partners II LLC
	 	Its:	General Partner
	 	 	 
	 	By:	/s/ John Diekman
	 	 	Name:  John Diekman
	 	 	Title:  Managing Member

 

	 	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
	 	 	 
	 	By:	Clinton W. Bybay
	 	 	Name: 	Clinton W. Bybay
	 	 	Title:	Managing Director

 

(Signature Page to PhaseRx, Inc. Second
Amended and Restated Investors’ Rights Agreement)

 

    	 	 	 

     

    

 

The parties hereto
have executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	INVESTOR:
	 	 
	 	FOUNDATION BIOVENTURES LLC
	 	 
	 	By:	/s/ Robert W. Overell
	 	 	Name:  Robert W. Overell
	 	 	Title:  President and Chief Executive Officer

 

(Signature Page to PhaseRx, Inc. Second
Amended and Restated Investors’ Rights Agreement)

 

    	 	 	 

     

    

 

The parties hereto
have executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	INVESTOR:
	 	 
	 	/s/ Steven Gillis
	 	Steven Gillis

 

(Signature Page to PhaseRx, Inc. Second
Amended and Restated Investors’ Rights Agreement)

 

    	 	 	 

     

    

 

The parties hereto
have executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	INVESTOR:
	 	 
	 	/s/ Allan Hoffman
	 	Allan Hoffman

 

(Signature Page to PhaseRx, Inc. Second
Amended and Restated Investors’ Rights Agreement)

 

    	 	 	 

     

    

 

The parties hereto
have executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	INVESTOR:
	 	 
	 	/s/ Pat Stayton
	 	Pat Stayton

 

(Signature Page to PhaseRx, Inc. Second
Amended and Restated Investors’ Rights Agreement)

 

    	 	 	 

     

    

 

The parties hereto
have executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	FOUNDER:
	 	 
	 	FOUNDATION BIOVENTURES LLC
	 	 
	 	By:	/s/ Robert W. Overell
	 	 	Name:  Robert W. Overell
	 	 	Title:  President and Chief Executive Officer

 

(Signature Page to PhaseRx, Inc. Second
Amended and Restated Investors’ Rights Agreement)

 

    	 	 	 

     

    

 

The parties hereto
have executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	FOUNDER:
	 	 
	 	/s/ Paul H. Johnson
	 	Paul H. Johnson

 

(Signature Page to PhaseRx, Inc. Investors’
Rights Agreement)

 

    	 	 	 

     

    

 

The parties hereto
have executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	FOUNDER:
	 	 
	 	OLIVER W. PRESS LLC
	 	 
	 	By:	/s/ Oliver W. Press
	 	Name: 	Oliver W. Press, MD Phd
	 	Title:	Member

 

(Signature Page to PhaseRx, Inc. Second
Amended and Restated Investors’ Rights Agreement)

 

    	 	 	 

     

    

 

The parties hereto
have executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	FOUNDER:
	 	 
	 	/s/ Allan Hoffman
	 	Allan Hoffman

 

(Signature Page to PhaseRx, Inc. Second
Amended and Restated Investors’ Rights Agreement)

 

    	 	 	 

     

    

 

The parties hereto
have executed this Second Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

	 	FOUNDER:
	 	 
	 	/s/ Pat Stayton
	 	Pat Stayton

 

    	 	 	 

     

    

 

EXHIBIT A

 

SERIES A INVESTORS

 

ARCH Venture Fund VII,
L.P.

8725 West Higgins Road, Suite 290

Chicago, Illinois 60631

(773) 380-6606 (facsimile)

(206) 674-3026 (facsimile)

sgillis@archventure.com (email)

mmcdonnell@archventure.com (email)

 

5AM Ventures II, LP

3000 Sand Hill Road

Building 4, Suite 230

Menlo Park, CA 94025

(650) 233-8923 (facsimile)

john@5amventures.com (email)

 

5AM Co-Investors II, LP

3000 Sand Hill Road

Building 4, Suite 230

Menlo Park, CA 94025

(650) 233-8923 (facsimile)

john@5amventures.com (email)

 

Versant Venture Capital III, L.P.

3000 Sand Hill Road

Bldg. 4, Suite 210

Menlo Park, CA 94025

650-854-9513 (facsimile)

brian@versantventures.com (email)

scross@versantventures.com (email)

 

Versant Side Fund III, L.P.

3000 Sand Hill Road

Bldg. 4, Suite 210

Menlo Park, CA 94025

650-854-9513 (facsimile)

brian@versantventures.com (email)

scross@versantventures.com (email

 

    	 	 	 

     

    

 

Foundation BioVentures LLC

Robert W. Overell, President

1854 NW 195th Street #302

Shoreline, WA 98177

(206) 546-6805 (facsimile)

roverell@aol.com (email)

 

Richard Dunham Smith & Patricia Ann

Smith, as Trustees of the Smith 1987

Family Trust, U/A DTD 9/28/87

2415 South Court

Palo Alto, CA 94301

(650) 327-0635 (facsimile)

dick2415@sbcglobal.net (email)

 

Pat Stayton

Box 355061

Department of Bioengineering

University of Washington

Seattle, WA 98195

(206) 616-3928 (facsimile)

stayton@u.washington.edu (email)

 

Oliver W. Press LLC

Oliver W. Press, Member

Fred Hutchinson Cancer Research Center

1100 Fairview Ave. N, D3-190

Seattle, WA 98109

(206) 667-1874 (facsimile)

press@u.washington.edu (email)

 

Allan Hoffman

Box 355061 – Foege, room N530R

University of Washington

Seattle, WA 98195

(206) 543-6124 (facsimile)

hoffman@u.washington.edu (email)

 

Steven Gillis, Ph.D.

8725 West Higgins Road, Suite 290

Chicago, Illinois 60631

(773) 380-6606 (facsimile)

(206) 674-3026 (facsimile)

sgillis@archventure.com (email)

 

    	 	 	 

     

    

 

	David Cosman	 
	 	 
	 	 
	 	 (facsimile)	 
	 	 (email)	 

 

    	 	 	 

     

    

 

Exhibit A-1

 

SERIES A-1 INVESTORS

 

Savoy Therapeutics Corp.

c/o Synageva BioPharma Corp.

33 Hayden Avenue

Lexington, MA 02421 USA

Attention: Thomas Beetham

Facsimile: 781-357-9901

Email: thomas.beetham@synageva.com

 

    	 	 	 

     

    

 

EXHIBIT B

 

FOUNDERS

 

Allan Hoffman

Foundation BioVentures LLC (Robert W. Overell, President)

Paul H. Johnson

Oliver W. Press LLC (Oliver W. Press, Member)

Richard Dunham Smith &
Patricia Ann Smith, as Trustees of the Smith 1987 Family Trust, U/A DTD 9/28/87

Pat Stayton

 

    	 	 	 

     

    

 

SCHEDULE 1

 

NOTICE AND WAIVER/ELECTION OF

RIGHT OF FIRST REFUSAL

 

I do hereby waive
or exercise, as indicated below, my rights of first refusal under the Amended and Restated Investors’ Rights Agreement dated
as of April 9, 2014 (the “Agreement”):

 

		1.	Waiver of [___] days’ notice period in which to exercise right of first refusal: (please
check only one)

 

		 ̈

	WAIVE in full, on behalf of all Holders, the [___]-day notice period provided to exercise
my right of first refusal granted under the Agreement.

 

		 ̈

	DO NOT WAIVE the notice period described above.

 

		2.	Issuance and Sale of New Securities: (please check only one)

 

		 ̈

	WAIVE in full the right of first refusal granted under the Agreement with respect to the
issuance of the New Securities.

 

		 ̈

	ELECT TO PARTICIPATE in $__________ (please provide amount) in New Securities proposed
to be issued by PhaseRx, Inc., a Delaware corporation, representing LESS than my pro rata portion of the aggregate of $[_______]
in New Securities being offered in the financing.

 

		 ̈

	ELECT TO PARTICIPATE in $__________ in New Securities proposed to be issued by PhaseRx,
Inc., a Delaware corporation, representing my FULL pro rata portion of the aggregate of $[_______] in New Securities being offered
in the financing.

 

		 ̈

	ELECT TO PARTICIPATE in my full pro rata portion of the aggregate of $[_______] in New Securities
being made available in the financing AND, to the extent available, the greater of (x) an additional $__________ (please
provide amount) or (y) my pro rata portion of any remaining investment amount available in the event other Significant
Holders do not exercise their full rights of first refusal with respect to the $[_______] in New Securities being offered in the
financing.

  

Date: ________________

	 	 
	 	(Print investor name)
	 	 
	 	 
	 	(Signature)
	 	 
	 	 
	 	(Print name of signatory, if signing for an entity)
	 	 
	 	 
	 	(Print title of signatory, if signing for an entity)

 

This is neither a commitment to purchase
nor a commitment to issue the New Securities described above. Such issuance can only be made by way of definitive documentation
related to such issuance. PhaseRx, Inc. will supply you with such definitive documentation upon request or if you indicate that
you would like to exercise your first offer rights in whole or in part.

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