UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported):   November 22, 2017

 

Marina Biotech, Inc.

 

(Exact name of registrant as specified in its charter)

 

Delaware   000-13789   11-2658569

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

17870 Castleton Street, Suite 250

City of Industry, CA

  91748
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code:   626-964-5788

 

N/A

 

Former name or former address, if changed since last report

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[  ]

Wr itten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

 

 

 

 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

On November 22, 2017, Marina Biotech, Inc. (the “Company”) entered into a Note Purchase Agreement (the “Purchase Agreement”) with a trust affiliated with Mr. Isaac Blech (the “Purchaser”) pursuant to which the Company will issue to the Purchaser a secured convertible promissory note in the aggregate principal amount of $500,000 (“Note”). The Note will become due and payable on March 31, 2018. Interest shall be paid on a monthly basis in cash or in shares of the common stock of the Company, at the option of the Company. The unpaid principal amount of the Note, together with any interest accrued but unpaid thereon, shall, in general, automatically be converted into the securities of the Company to be issued and sold at the closing of any financing transaction involving the sale by the Company of its equity securities (or securities exercisable for or convertible into the equity securities of the Company) yielding aggregate gross proceeds to the Company of not less than $5,000,000.

 

The Note is secured by the assets of the Company and certain of its wholly-owned subsidiaries pursuant to a Security Agreement by the Company and such subsidiaries in favor of the Purchaser dated as of November 22, 2017 (the “Security Agreement”), and an Intellectual Property Security Agreement by the Company and such subsidiaries in favor of the Purchaser dated as of November 22, 2017 (the “IP Security Agreement”).

 

The Security Agreement provides the Purchaser with a security interest in, but not limited to, all of the property, equipment and fixtures, accounts, negotiable collateral, cash, and cash equivalents of the Company and certain of its wholly-owned subsidiaries, subject to certain exceptions. The security interest created in the collateral will be first priority, subject to the permitted encumbrances provided in the Security Agreement, and will be perfected to the extent such security interest can be perfected by the filing of a financing statement and filings with the U.S. Patent and Trademark Office. The security interest created in the collateral will be removed at such time as the Note is paid in full.

 

A copy of each of the Purchase Agreement, the Security Agreement, the IP Security Agreement and the form of Note is attached hereto as Exhibits 10.1, 10.2, 10.3 and 4.1, respectively, and is incorporated herein by reference.

 

The foregoing summary of the transaction contemplated by the Purchase Agreement and the documents and instruments to be executed and/or issued in connection therewith, does not purport to be complete and is qualified in its entirety by reference to the definitive transaction documents, copies of which are attached as exhibits to this Current Report on Form 8-K.

 

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

In connection with the transaction described in Item 1.01 of this Current Report, which is incorporated into this Item 2.03, the Company has entered into the Purchase Agreement, dated as of November 22, 2017, pursuant to which it agreed to issue the Note to the Purchaser. The Note will be secured by the assets of the Company and certain of its wholly-owned subsidiaries, and will be due and payable on the earlier of March 31, 2018 or upon an acceleration in accordance with the Note. The Company may prepay the Note, without penalty or premium, at any time and from time to time. The obligations of the Company under the Note are secured pursuant to the Security Agreement and the IP Security Agreement. Payment of the obligations under the Notes may be accelerated, in general, upon any of the following events: (i) an uncured failure to pay any amount under the Notes when due; (ii) an uncured breach by the Company of its obligations under any of the offering documents; (iii) a material breach by the Company of its representations and warranties contained in the offering documents; (iv) certain proceedings are commenced against the collateral securing the payment of the Notes; (v) certain material judgments are rendered against the Company; (vi) the occurrence of certain voluntary and involuntary bankruptcy proceedings; and (vii) the occurrence of a change of control event with respect to the Company.

 

 

 

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

In connection with the transactions contemplated by the Purchase Agreement described in Item 1.01 of this Current Report on Form 8-K, the Board of Directors of the Company (the “Board”) elected Isaac Blech as a member of the Board, which election became effective November 22, 2017.

 

Mr. Blech currently serves on the Board of Directors of Contrafect Corporation, a biotech company specializing in novel methods to treat infectious disease. Mr. Blech also serves as Vice Chairman of Cerecor, Inc., a company focused on pediatrics and rare diseases, as Vice Chairman of Edge Therapeutics, Inc., a CNS company developing new treatments for conditions such as brain trauma, and as Vice Chairman of Diffusion Pharmaceuticals, Inc., an oncology company. Mr. Blech was a founder of some of the world’s leading biotechnology companies, such as Celgene Corporation, ICOS Corporation, Pathogenesis Corporation, Nova Pharmaceutical Corporation and Genetic Systems Corporation. These companies are responsible for major advances in oncology, infectious disease and cystic fibrosis. Mr. Blech received a B.A. in Medicine from Baruch College. The Company believes that Mr. Blech’s experience as a director of numerous public biotechnology companies gives him the qualifications, skills and financial expertise to serve on the Company’s Board of Directors.

 

In connection with the appointment of Mr. Blech as a director of the Company, the Company granted to Mr. Blech options to purchase up to 473,457 shares of the common stock of the Company under the Company’s 2014 Long-Term Incentive Plan. The options have an exercise price of $1.80 per share of common stock, and shall vest and become exercisable in twenty (20) equal (or as nearly equal as possible) installments on the last calendar day of each calendar quarter over a five-year period beginning on December 31, 2017. The options were issued pursuant to a Stock Option Agreement between the Company and Mr. Blech, a copy of which is attached hereto as Exhibit 4.2, and is incorporated herein by reference.

 

Other than as a result of the transactions described in Item 1.01 of this Current Report on Form 8-K, and as described in this Item 5.02, there are no arrangements or understandings between Mr. Blech and any other person pursuant to which he was selected as a director. Mr. Blech does not have any direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.

 

Item 9.01. Financial Statements and Exhibits.

 

Exhibit No.   Description
     
4.1   Form of Secured Convertible Promissory Note.
     
4.2*   Stock Option Agreement dated as of November 22, 2017 by and between Marina Biotech, Inc. and Isaac Blech.
     
10.1   Note Purchase Agreement dated as of November 22, 2017 by and between Marina Biotech, Inc. and River Charitable Remainder Unit Trust, FBO Isaac Blech, July 20, 2987, Isaac Blech Trustee.
     
10.2   Security Agreement, dated as of November 22, 2017, among Marina Biotech, Inc., IThenaPharma Inc., Cequent Pharmaceuticals, Inc., MDRNA Research, Inc. and River Charitable Remainder Unit Trust, FBO Isaac Blech, July 20, 2987, Isaac Blech Trustee.
     
10.3   Intellectual Property Security Agreement, dated as of November 22, 2017, by Marina Biotech, Inc., IThenaPharma Inc., Cequent Pharmaceuticals, Inc. and MDRNA Research, Inc. in favor of River Charitable Remainder Unit Trust, FBO Isaac Blech, July 20, 2987, Isaac Blech Trustee.

 

 

* Indicates management contract or compensatory plan or arrangement.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Marina Biotech, Inc.
     
November 24, 2017 By: /s/ Vuong Trieu
  Name: Vuong Trieu
  Title: Executive Chairman

 

 

 

 

EXHIBIT INDEX

 

Exhibit No.   Description
     
4.1   Form of Secured Convertible Promissory Note.
     
4.2*   Stock Option Agreement dated as of November 22, 2017 by and between Marina Biotech, Inc. and Isaac Blech.
     
10.1   Note Purchase Agreement dated as of November 22, 2017 by and between Marina Biotech, Inc. and River Charitable Remainder Unit Trust, FBO Isaac Blech, July 20, 2987, Isaac Blech Trustee.
     
10.2   Security Agreement, dated as of November 22, 2017, among Marina Biotech, Inc., IThenaPharma Inc., Cequent Pharmaceuticals, Inc., MDRNA Research, Inc. and River Charitable Remainder Unit Trust, FBO Isaac Blech, July 20, 2987, Isaac Blech Trustee.
     
10.3   Intellectual Property Security Agreement, dated as of November 22, 2017, by Marina Biotech, Inc., IThenaPharma Inc., Cequent Pharmaceuticals, Inc. and MDRNA Research, Inc. in favor of River Charitable Remainder Unit Trust, FBO Isaac Blech, July 20, 2987, Isaac Blech Trustee.

 

 

* Indicates management contract or compensatory plan or arrangement.

 

 

 

 

 

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT.

 

MARINA BIOTECH, INC.

 

CONVERTIBLE PROMISSORY NOTE

 

US$500,000 November 22, 2017

 

FOR VALUE RECEIVED, MARINA BIOTECH, INC., a corporation duly incorporated under the laws of the State of Delaware (the “ Company ”), hereby promises to pay to River Charitable Remainder Unit Trust, FBO Isaac Blech, July 20, 1987, Isaac Blech Trustee , or its permissible assigns (the “ Holder ”) the principal sum of $500,000.00, together with accrued and unpaid interest thereon, in the manner provided herein. This convertible promissory note (this “ Note ”) is being issued by the Company to the original Holder of this Note (the “ Original Holder ”) pursuant to that certain Note Purchase Agreement dated as of November 22, 2017 by and between the Company and the Original Holder (the “ Purchase Agreement ”). Each capitalized term used, but not defined, in this Note shall have the meaning ascribed to it in the Purchase Agreement.

 

1. Payment.

 

(a) Payment . Unless earlier converted as provided herein, all amounts outstanding and unpaid under this Note shall be due and payable on the earliest to occur of: (i) at the Company’s election or on demand by the Holder at any time on or after March 31, 2018 or (ii) on demand by the Holder at any time following an Event of Default (the earliest to occur of clauses (i) or (ii) being referred to herein as the “ Maturity Date ”). The Company waives demand, presentment, diligence, protest, notice of protest and notice of dishonor with respect to this Note. All payments will be made in lawful money of the United States of America at the principal office of the Company, or at such other place as the Holder may from time to time designate in writing to the Company.

 

(b) Pre-Payment . This Note may be prepaid at the election of the Company at any time without penalty upon five (5) days prior written notice to the Holder.

 

 

 

 

2. Interest . Interest on the unpaid principal amount shall accrue beginning on the issue date set forth above at a rate equal to eight percent (8%) per annum computed on the basis of the actual number of days elapsed and a year of 365 days from the date of this Note until the principal amount and all interest accrued thereon are paid or converted as provided in Section 3 hereof; provided , that if the Company does not consummate the Qualified Financing on or before December 15, 2017 (which deadline may be extended by fifteen (15) days upon mutual agreement between the Company and the placement agent with respect to the Qualified Financing), then the interest rate shall increase to twenty percent (20%) per annum, with such increased interest rate increasing by an additional two percent (2%) every month thereafter until this Note is repaid in full (up to a maximum interest rate of thirty percent (30%)). For purposes of this Note, “ Qualified Financing ” shall mean any financing transaction involving the sale by the Company of its equity securities (or securities exercisable for or convertible into the equity securities of the Company) yielding aggregate gross proceeds to the Company of not less than $5,000,000, which amount shall include not less than $2,500,000 from one or more strategic investors identified in writing by the Company to the Original Holder prior to the date of this Note. Except upon the earlier conversion in accordance with Section 3, interest be due and payable on a monthly basis on the last day of each such month (or the next business day thereafter) beginning on December 31, 2017, which interest shall be payable, at the option of the Company, either: (x) in cash or (y) in shares of Common Stock (with each share of Common Stock being valued based on the closing price of the Common Stock on the principal market on which the Common Stock is either traded or quoted at such time on the date immediately prior to the date on which the applicable interest payment is due and payable hereunder, or in the event the Common Stock is not then traded or quoted on any principal market, at the price per share equal to the then current fair market value of the Common Stock, as determined by an independent valuation expert selected jointly by the Company and the Holder, provided that the Company shall pay any such valuation expenses.

 

3. Conversion . The unpaid principal amount of this Note, together with any interest accrued but unpaid thereon, shall automatically be converted into the securities of the Company to be issued and sold at the closing of the Qualified Financing. Upon the conversion of this Note pursuant to this Section 3, the Holder shall be entitled to receive such number and amount of the securities of the Company to be issued upon such conversion equal to the quotient obtained by dividing (i) the unpaid principal amount of this Note (together with any interest accrued but unpaid thereon) by (ii) the price paid for such securities in the Qualified Financing. The issuance of securities pursuant to the conversion of this Note will be on, and subject to, the same terms and conditions applicable to the securities issued in the Qualified Financing.

 

4. Mechanics of Conversion .

 

(a) In the event that this Note is converted pursuant to Section 3, the Holder shall surrender this Note, duly endorsed, to the Company promptly following the closing of the Qualified Financing, and the Note shall thereupon be canceled. As soon as practicable following surrender of this Note (or a duly executed affidavit of loss with any indemnity reasonably requested by the Company) and at its expense, the Company will take such steps, and execute and deliver such agreements, documents and instruments, as may be reasonably necessary to issue and deliver to the Holder a certificate or certificates representing the securities of the Company to which the Holder is entitled upon such conversion.

 

2

 

 

(b) The Holder acknowledges that the conversion of this Note pursuant to Section 3 into the securities of the Company to be issued in the Qualified Financing may require the Holder’s execution of certain agreements relating to the purchase and sale of such securities, as well as registration rights, rights of first refusal and co-sale rights, rights of first offer and voting rights, if any, relating to such securities (collectively, the “ Financing Arrangements ”). The Holder agrees to execute all of the Financing Agreements in connection with the Qualified Financing as may be reasonably requested by the Company.

 

5. Termination of Rights . Upon payment in full of this Note, or conversion of this Note in accordance with Section 3, all rights with respect to this Note shall terminate, whether or not this Note has been surrendered for cancellation.

 

6. Events of Default . In case an Event of Default shall occur, then upon demand by the Holder (which demand shall not be required in the case of an Event of Default under Sections 6.1(b) or (c) of the Purchase Agreement), the entire outstanding principal amount, plus accrued and unpaid interest thereon, of this Note shall become immediately due and payable in the manner and with the effect provided in the Purchase Agreement and this Note.

 

7. Transfer; Successors and Assigns . The Holder may not sell, assign, pledge, dispose of or otherwise transfer this Note or any interest herein without the prior written consent of the Company, which shall not be unreasonably withheld; provided , however , a Holder that is a partnership, corporation, trust, joint venture, unincorporated organization or other entity may transfer this Note to any person that owns all (but not less than all) of the issued and outstanding voting securities of such entity without the prior written consent of the Company. Subject to the preceding sentence, this Note may be transferred only upon surrender of the original Note (or affidavit of loss with any indemnity reasonably requested by the Company) for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, a new note for the same principal amount and interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered Holder. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.

 

8. Security Interest . The Company’s obligations under this Note are secured pursuant to that certain Security Agreement, dated as of the date hereof, by the Company in favor of the Holder and that certain Intellectual Property Security Agreement, dated as of the date hereof, by the Company in favor of the Holder.

 

9. Governing Law . This Note shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction).

 

10. Notices . All notices required or permitted hereunder shall be given in accordance with Section 7.5 of the Purchase Agreement.

 

11. Amendments and Waivers . The terms and provisions of this Note may be amended or modified, and any provision hereof may be waived, only with the written consent of the Company and the Holder.

 

12. Headings . The headings in this Note are for purposes of reference only, and shall not limit or otherwise affect the meaning hereof.

 

3

 

 

13 . Cost of Collection . In the event that Holder is required to take legal or other action to enforce its rights or obtain collection under this Note, the Company shall pay the Holder hereof reasonable costs of collection, or enforcement of the terms hereof, including attorneys’ fees.

 

14. Maximum Payments . Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law (such as, without limitation, the usury laws), any payments in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company, or if no further amounts are owed by the Company to the Holder, shall be refunded to the Company. The Company hereby irrevocable consents to the reformation of this Note, as may be necessary by a court of law, so as to enable enforcement of this Note pursuant to summary judgment or summary proceeding. For avoidance of doubt, in the event that, for any reason, a finding by a court having jurisdiction over this Note is made that limits enforceability as a result of excessive interest or other origination or investment banking fees pursuant to the laws of any jurisdiction, then, such defense shall not be deemed to bar a summary proceeding or summary judgment on the Note but rather, the Note shall be fully and absolutely enforceable as to all principal and, the court having jurisdiction shall, after an inquest, have power to reform the Note so as to reduce interest amount to such amount as is immediately enforceable pursuant to summary judgment or summary proceeding and grant such award, plus any legal or enforcement fees of the Holder.

 

15. Construction and Enforcement . Each party acknowledges that its legal counsel participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any party against the other. This Note reflects an investment made by the Holder or its assignor to the Company. This Note is intended as, and shall be deemed an unconditional obligation of the Company for the payment of money only and, without limitation to any other remedies of the Holder (such as, without limitation, summary judgment after initiation of a proceeding, or equitable remedies), shall be enforceable against the Company by summary proceeding pursuant to New York Civil Procedure Law and Rules Section 3213 or any similar rule or statute in the jurisdiction where enforcement is sought. For purposes of such rule or statute, any other document or agreement to which the Holder and the Company parties or which the Company delivered to the Holder, which may be convenient or necessary to determine the Holder’s rights hereunder or the Company’s obligations to the Holder are deemed a part of this Note, whether or not such other document or agreement was delivered together herewith or was executed apart from this Note.

 

[ remainder of page intentionally left blank; signature page follows ]

 

4

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed and delivered.

 

MARINA BIOTECH, INC.  
   
By: /s/ Vuong Trieu  
Name: Vuong Trieu  
Title: Executive Chairman  

 

[Signature Page to Convertible Promissory Note]

 

 

 

 

 

STOCK OPTION AGREEMENT

 

THIS STOCK OPTION AGREEMENT (this “ Agreement ”) is entered into and effective as of November 22, 2017 (the “ Grant Date ”) by and between Marina Biotech, Inc., a Delaware corporation (the “ Company ”), and Isaac Blech (“ Optionee ”).

 

A. The Company has adopted the Marina Biotech, Inc. 2014 Long-Term Incentive Plan (as such plan may be amended from time to time, the “ Plan ”) authorizing the Board of Directors (the “ Board ”) of the Company, or a committee as provided for in the Plan (the Board or such a committee to be referred to as the “ Committee ”), to grant stock options, among other incentive awards, to certain individuals.

 

B. The Company desires to grant an option to purchase shares of common stock, par value $0.006 per share, of the Company (the “ Common Stock ”) to Optionee pursuant to the Plan.

 

C. All of the capitalized terms used in this Agreement not otherwise defined in this Agreement have the same respective meanings as defined in the Plan.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the Company and Optionee agree as follows:

 

1. Grant of Option; Exercise Price . The Company hereby grants to Optionee, upon the terms and subject to the conditions set forth in this Agreement and the Plan, and effective as of the Grant Date, an option (the “ Option ”) to purchase all or any portion of 473,457 shares (the “ Option Shares ”) of the Company’s Common Stock, at an exercise price equal to the closing price of the Common Stock on the OTCQB on the Grant Date (such exercise price, as adjusted from time to time pursuant to Section 5 of this Agreement and the Plan, the “ Exercise Price ”). The Option is not intended to be an “incentive stock option,” as that term is used in Section 422 of the Internal Revenue Code of 1986, as amended (the “ Code ”).

 

2. Vesting . The Option shall vest and become exercisable in twenty (20) equal (or as nearly equal as possible) installments on the last calendar day of each calendar quarter over a five-year period, beginning on December 31, 2017. Optionee shall receive a full quarter of vesting for the fourth calendar quarter of 2017.

 

3. Exercise of Option .

 

3.1. Notice; Payment . Subject to the terms and conditions set forth in this Agreement, including vesting of the Option in Section 2 of this Agreement and termination of the Option in Section 4 of this Agreement, and the Plan, the Option may be exercised, in whole or in part, at any time and from time to time, by delivery to the Company of written notice of the exercise of the Option, in substantially the form as provided by the Company, stating the number of Option Shares being purchased (the “ Purchased Shares ”), and accompanied by payment in full of the total aggregate Exercise Price of the Purchased Shares. The Exercise Price shall be payable in full in any one of the following alternative forms:

 

(a) Full payment in cash, personal check or certified bank or cashier’s check;

 

(b) Any broker assisted cashless exercise procedure which is acceptable to the Company; or

 

(c) Cashless net exercise.

 

  1  

 

 

Upon a cashless net exercise, Optionee shall receive the number of shares of Common Stock equal to a number (as determined below) of shares of Common Stock computed using the following formula:

 

 

 

Where

X

=

the number of shares of Common Stock to be issued to Optionee.  
       

 

Y

=

the number of Purchased Shares.  
       

 

A

=

the Exercise Price.  
       

 

B

=

the Fair Market Value of one share of Common Stock on the date of exercise.  

 

3.2. Issuance of Purchased Shares; No Fractional Shares . Subject to Section 3.5 below, following receipt of the exercise notice and the payment referred to above, the Company shall, as soon as reasonably practicable thereafter, cause certificates (or book-entry notations) representing the Purchased Shares (or such fewer number of Purchased Shares if a cashless net exercise is used) to be delivered to Optionee either at Optionee’s address set forth in the records of the Company or at such other address as Optionee may designate in writing to the Company or issue and deposit the Purchased Shares for Optionee’s benefit with any broker with which Optionee has an account relationship or the Company has engaged to provide such services under the Plan; provided , however , that the Company shall not be obligated to issue a fraction or fractions of a share otherwise issuable upon exercise of the Option, and may pay to Optionee, in cash or cash equivalent, the Fair Market Value of any such fraction or fractions of a share as of the date of exercise. If requested by the Company in connection with any exercise of the Option, Optionee shall also deliver this Agreement to the Company, which shall endorse hereon a notation of the exercise and, if the Option is exercised in part, shall return this Agreement to Optionee. The date of exercise of an Option that is validly exercised shall be deemed to be the date on which there shall have been delivered to the Company the notice referred to in Section 3.1 of this Agreement and full payment of the Exercise Price of the Purchased Shares. Optionee shall not be deemed to be a holder of any Purchased Shares pursuant to exercise of the Option until the date of issuance of a stock certificate or book-entry notation to Optionee for such shares following payment in full for the Purchased Shares.

 

3.3. Tax Withholding . The Company is entitled to (a) withhold and deduct from future wages of Optionee (or from other amounts that may be due and owing to Optionee from the Company or a Subsidiary), or make other arrangements for the collection of, all amounts the Company reasonably determines are necessary to satisfy any and all federal, foreign, state and local withholding and employment related tax requirements attributable to the Option, including, without limitation, the grant, exercise or vesting of, the Option; (b) withhold cash paid or payable or shares of Common Stock from the shares issued or otherwise issuable to Optionee in connection with the Option; or (c) require Optionee promptly to remit the amount of such withholding to the Company before taking any action, including issuing any shares of Common Stock, with respect to the Option. Shares of Common Stock issued or otherwise issuable to Optionee in connection with the Option that gives rise to the tax withholding obligation that are withheld for purposes of satisfying Optionee’s withholding or employment-related tax obligation will be valued at their Fair Market Value on the date on which the tax withholding obligation arises.

 

  2  

 

 

3.4. Remaining Option Shares . Option Shares will no longer be outstanding under the Option (and will therefore not thereafter be exercisable) following the exercise of the Option to the extent of (a) shares used to pay the Exercise Price of an Option under the “cashless net exercise” method, (b) shares actually delivered to Optionee as a result of such exercise and (c) any shares withheld for purposes of tax withholding.

 

3.5 Lock-Up .

 

(a) Prior to November 22, 2022 (the “ Expiration Time ”), Optionee shall not, directly or indirectly:

 

(i) transfer (except as may be specifically required by court order or by operation of law), grant an option with respect to, sell, exchange, pledge or otherwise dispose of (whether by actual disposition or effective economic disposition due to cash settlement or otherwise), or encumber, the Option or any Option Shares (collectively, the “ Lock-Up Securities ”), enter into any hedging transaction, or make any offer or enter into any agreement or binding arrangement or commitment providing for any of the foregoing, or publicly disclose the intention to take any of the foregoing actions;

 

(ii) grant any proxies or powers of attorney with respect to any of the Lock-Up Securities, deposit any of the Lock-Up Securities into a voting trust, or enter into a voting agreement or similar arrangement or commitment with respect to any of the Lock-Up Securities or make any public announcement that is in any manner inconsistent with this Section 3.5 ; or

 

(iii) take any action that may be reasonably expected to have the effect of impairing the ability of Optionee to perform his obligations under this Agreement.

 

(b) Notwithstanding the restrictions set forth in clause (a) of this Section 3.5 ;

 

(i) Nothing contained herein will be deemed to restrict the ability of Optionee to exercise, including any form of cashless exercise that results in the same or other transfer of any Option Shares in accordance with this Agreement and the Plan, any options or warrants to purchase Common Stock held by Optionee; and

 

(ii) Optionee may transfer exercised Option Shares to any member of Optionee’s immediate family, or to a trust for the benefit of Optionee or any member of Optionee’s immediate family for estate planning purposes; provided, that, in any such case it shall be a condition to the transfer or distribution that the transferee or distributee execute an agreement, in form and substance satisfactory to the Company, stating that the transferee or distributee is receiving and holding the Option Shares subject to the provisions of this Agreement and that the transferee or distributee agrees to be bound by the terms and conditions of this Agreement.

 

  3  

 

 

4. Termination of Option .

 

4.1. Time of Termination . Except as provided in this Section 4 and Section 5 of this Agreement, the Option shall terminate, no longer be exercisable and expire at 5:00 p.m., Eastern Time, on November 22, 2027 (the “ Time of Termination ”).

 

4.2. Termination for Cause . In the event Optionee’s service with the Company and all Subsidiaries is terminated by the Company for Cause (as defined below), the Option will immediately terminate (and vesting will immediately cease) without notice of any kind, and the Option will no longer be exercisable.

 

4.3. Termination Due to Death, Disability or Resignation . In the event Optionee’s service with the Company and all Subsidiaries is terminated by reason of Optionee’s death, disability or resignation, all vesting will immediately cease, and the Option will remain exercisable, to the extent exercisable as of the date of such termination, for a period of one (1) year after such termination (but in no event after the Time of Termination). For purposes of this Agreement, “disability” shall mean that Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. The existence of a disability shall be determined by the Board or the Committee, as applicable, in its sole and absolute discretion.

 

4.4. Termination for Other Reasons . In the event Optionee’s service with the Company and all Subsidiaries is terminated for any other reason (including, if Optionee is serving as a member of the Board (and not in another capacity with the Company or its Subsidiaries), the failure by the Company to nominate Optionee to continue to serve as a member of the Board, unless such failure is at the request of Optionee), the Option shall become immediately vested and exercisable upon such termination and remain exercisable through the Time of Termination.

 

4.5. Effect of Actions Constituting Cause or Adverse Action . Notwithstanding anything in this Agreement to the contrary, if Optionee is determined by the Committee, acting in its sole discretion, to have taken any action that would constitute Cause or an Adverse Action during or after the termination of employment or other service with the Company or a Subsidiary, irrespective of whether such action or the Committee’s determination occurs before or after termination of Optionee’s employment or other service with the Company or any Subsidiary and irrespective of whether or not Optionee was terminated as a result of such Cause or Adverse Action, (a) all rights of Optionee under the Option and this Agreement will terminate and be forfeited without notice of any kind, and (b) the Committee in its sole discretion will have the authority to rescind the exercise, vesting, settlement or issuance of, or payment in respect of, the Option that was exercised, vested, settled or issued, or as to which such payment was made, and to require Optionee to pay to the Company, within ten (10) days of receipt from the Company of notice of such rescission, any amount received or the amount of any gain realized as a result of such rescinded exercise, vesting, settlement, issuance or payment (including any dividends paid or other distributions made with respect to any shares of Common Stock subject to the Option). The Company may defer the exercise of the Option for a period of up to six (6) months after receipt of Optionee’s written notice of exercise or the issuance of Purchased Shares upon the vesting of the Option for a period of up to six (6) months after the date of such vesting in order for the Committee to make any determination as to the existence of Cause or an Adverse Action. The Company will be entitled to withhold and deduct from future wages of Optionee (or from other amounts that may be due and owing to Optionee from the Company or a Subsidiary) or make other arrangements for the collection of all amounts necessary to satisfy such payment obligations. This Section 4.5 will not apply to the Option following a Change of Control.

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For purposes of this Agreement:

 

(i) the term “ Adverse Action ” shall mean any action by Optionee that the Committee, in its sole discretion, determines to be injurious, detrimental, prejudicial or adverse to the interests of the Company or any Subsidiary, including: (x) disclosing confidential information of the Company or any Subsidiary to any person not authorized by the Company or Subsidiary to receive it, (y) engaging, directly or indirectly, in any commercial activity that in the judgment of the Committee competes with the business of the Company or any Subsidiary or (z) interfering with the relationships of the Company or any Subsidiary and their respective employees, independent contractors, customers, prospective customers and vendors; and

 

(ii) the term “ Cause ” shall mean “cause” as defined in any employment or other agreement or policy applicable to Optionee, or if no such agreement or policy exists, shall mean (w) dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each case related to the Company or any Subsidiary, (x) any unlawful or criminal activity of a serious nature, (y) any intentional and deliberate breach of a duty or duties that, individually or in the aggregate, are material in relation to Optionee’s overall duties, or (z) any material breach by Optionee of any employment, service, consulting, confidentiality, assignment of inventions, non-compete or non-solicitation agreement entered into with the Company or any Subsidiary.

 

4.6. Clawback/Forfeiture . The Option and Option Shares issued or issuable pursuant to the Option are subject to forfeiture or clawback by the Company to the extent required and allowed by law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the Sarbanes Oxley Act of 2002 and any implementing rules and regulations promulgated thereunder, and pursuant to any forfeiture, clawback or similar policy of the Company, as such laws, rules, regulations and policy may be in effect from time to time.

 

5. Adjustments . In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off), or any other similar change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation), will make appropriate adjustment (which determination will be conclusive) as to the number and kind of securities or other property (including cash) subject to, and the Exercise Price of, the Option in order to prevent dilution or enlargement of the rights of Optionee.

 

6. Change of Control . The Option shall become immediately vested and exercisable upon completion of a Change of Control and remain exercisable through the Time of Termination regardless of whether Optionee remains in the employment or service of the Company. Notwithstanding any of the foregoing, in connection with a Change in Control, the Committee, in its sole discretion, at any time after the grant of the Option, may take whatever action it deems appropriate pursuant to Section 13.3 of the Plan.

 

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For purposes of this Agreement, the term “ Change of Control ” shall mean:

 

(i) The acquisition by any individual, entity or group (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), or any successor provision) (any of the foregoing hereafter a “ Person ”) of forty percent (40%) or more of either (a) the then outstanding shares of the capital stock of the Company (the “ Outstanding Capital Stock ”) or (b) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Voting Securities ”), provided , however , that such an acquisition by one of the following shall not constitute a change of control: (1) the Company or any of its Subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Subsidiaries or (2) any Person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act, to file a statement on Schedule 13G with respect to its beneficial ownership of Voting Securities, whether or not such Person shall have filed a statement on Schedule 13G, unless such Person shall have filed a statement on Schedule 13D with respect to beneficial ownership of forty percent (40%) or more of the Voting Securities or (3) any corporation with respect to which, following such acquisition, more than sixty percent (60%) of both the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Capital Stock or Voting Securities immediately prior to such acquisition in substantially the same proportions as their ownership, immediately prior to such acquisition, of the Outstanding Capital Stock or Voting Securities, as the case may be; or

 

(ii) Individuals who, as of the Grant Date, constitute the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the Grant Date whose election or nomination for election by the Company’s shareholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A, or any successor section, promulgated under the Exchange Act); or

 

(iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation (a “ Business Combination ”), in each case, with respect to which all or substantially all holders of the Outstanding Capital Stock and Voting Securities immediately prior to such Business Combination do not, following such Business Combination, beneficially own, directly or indirectly, in substantially the same proportions, more than sixty percent (60%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from the Business Combination; or

 

(iv) A complete liquidation or dissolution of the Company; or

 

(v) A sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, following such sale or disposition, more than sixty percent (60%) of the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors are then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Capital Stock or Voting Securities immediately prior to such sale or disposition in substantially the same proportions as their ownership of the Outstanding Capital Stock and Voting Securities, as the case may be, immediately prior to such sale or disposition.

 

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7. Rights as a Stockholder . Optionee will have no rights as a stockholder of the Company unless and until all conditions to the effective exercise of the Option (including, without limitation, the conditions set forth in Section 3 of this Agreement) have been satisfied and Optionee has become the holder of record of such shares. No adjustment will be made for dividends or distributions with respect to the Option as to which there is a record date preceding the date Optionee becomes the holder of record of such shares, except as may otherwise be provided in the Plan or determined by the Committee in its sole discretion.

 

8. Restrictions on Transfer . Except pursuant to testamentary will or the laws of descent and distribution or as otherwise expressly permitted by the Plan, no right or interest of Optionee in the Option prior to exercise may be assigned or transferred, or subjected to any lien, during the lifetime of Optionee, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise. Optionee, however, will be entitled to designate a beneficiary to receive the Option upon Optionee’s death, and, in the event of Optionee’s death, exercise of the Option (to the extent permitted pursuant to Sections 2 and 4 of this Agreement) may be made by Optionee’s legal representatives, heirs and legatees.

 

9. Market Stand-off . Optionee, if so requested by the Company or any representative of the underwriters in connection with a firmly underwritten public offering of securities by the Company pursuant to a registration statement under the Securities Act following the date of this Agreement, shall not sell or otherwise transfer any Option Shares during the 180-day period following the effective date of such registration statement. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restriction until the end of such 180-day period. This Section 9 will not apply to the sale of any Option Shares to an underwriter pursuant to an underwriting agreement and shall only be applicable to Optionee if all then current executive officers and directors of the Company enter into similar agreements.

 

10. Service . Nothing in this Agreement or the Plan will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the service of Optionee at any time, nor confer upon Optionee any right to continue in the service with the Company or any Subsidiary.

 

11. Option Subject to Plan . The Option and the Option Shares granted and issued pursuant to this Agreement have been granted and issued under, and are subject to the terms of, the Plan. The terms of the Plan are incorporated by reference in this Agreement in their entirety, and Optionee, by execution of this Agreement, acknowledges having received a copy of the Plan. The provisions of this Agreement will be interpreted as to be consistent with the Plan, and any ambiguities in this Agreement will be interpreted by reference to the Plan. In the event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of the Plan will prevail. All of the capitalized terms used in this Agreement not otherwise defined in this Agreement have the same respective meanings as defined in the Plan.

 

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12. General Provisions .

 

12.1. Governing Law; Venue . This Agreement and all rights and obligations under this Agreement will be governed by and construed exclusively in accordance with the laws of the State of Delaware, notwithstanding the conflicts of laws principles of any jurisdictions. By acceptance of the Option, Optionee is deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of the State of Delaware to resolve any and all issues that may arise out of or relate to the Option or this Agreement.

 

12.2. Entire Agreement . This Agreement and the Plan set forth the entire agreement and understanding of the parties to this Agreement with respect to the grant and exercise of the Option and the administration of the Plan and supersede all prior agreements, arrangements, plans and understandings relating to the grant and exercise of the Option and the administration of the Plan.

 

12.3. Failure to Enforce Not a Waiver . The failure of the Company or Optionee to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

 

12.4. Notices . All notices, requests, demands and other communications (collectively, “ Notices ”) given pursuant to this Agreement shall be in writing, and shall be delivered by personal service, courier, facsimile transmission, email transmission of a pdf format data file or by United States first class, registered or certified mail, postage prepaid, addressed to the party at the address set forth on the signature page of this Agreement. Any Notice, other than a Notice sent by registered or certified mail, shall be effective when received; a Notice sent by registered or certified mail, postage prepaid return receipt requested, shall be effective on the earlier of when received or the third day following deposit in the United States mails. Any party may from time to time change its address for further Notices hereunder by giving notice to the other party in the manner prescribed in this Section 12.4 .

 

12.5. Successors and Assigns . Except to the extent specifically limited by the terms and provision of this Agreement, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and personal representatives.

 

12.6. Execution . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by email delivery of a “pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “pdf” signature page were an original thereof.

 

12.7. Titles, Captions and Sections . Titles and captions contained in this Agreement are inserted for convenience of reference only and do not constitute a part of this Agreement for any other purpose. References to Sections in this Agreement refer to Sections of this Agreement unless otherwise stated.

 

12.8. Nature of the Grant . In accepting the Option and by execution of this Agreement, Optionee acknowledges that:

 

(a) The Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company in its sole discretion at any time, unless otherwise provided in the Plan.

 

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(b) The grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future Option grants, or benefits in lieu of Option grants, even if Option grants have been granted repeatedly in the past.

 

(c) All decisions with respect to future Option grants, if any, will be at the sole discretion of the Company.

 

(d) Optionee is voluntarily participating in the Plan.

 

(e) The Option grant is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments and in no event shall be considered as compensation for, or relating in any way to, past services for the Company.

 

(f) The Option will not be interpreted to form an employment contract or relationship with the Company.

 

(g) The future value of the Common Stock is unknown and cannot be predicted with certainty and if the Option vests and Optionee exercises the Option in accordance with the terms of this Agreement and is issued Purchased Shares, the value of those shares may increase or decrease.

 

(h) In consideration of the grant of the Option, no claim or entitlement to compensation or damages shall arise from termination of the Option or diminution in value of the Option or Purchased Shares acquired upon exercise of the Option resulting from termination of Optionee’s employment or service by the Company (for any reason whatsoever and whether or not in breach of local labor laws) and Optionee irrevocably releases the Company and its Subsidiaries, and their respective directors, officers, employees and agents, from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by acceptance of the Option and execution of this Agreement, Optionee shall be deemed irrevocably to have waived his or her entitlement to pursue such claim.

 

(i) The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Optionee’s participation in the Plan, or Optionee’s purchase or sale of the underlying Option Shares.

 

(j) Optionee is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan or the Option.

 

[remainder of page intentionally left blank; signature page follows]

 

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IN WITNESS WHEREOF, the parties to this Agreement have executed this Agreement effective as of the Grant Date.

 

OPTIONEE:

  MARINA BIOTECH, INC.  

 

 

/s/ Isaac Blech   By:    /s/ Vuong Trieu
[Signature]    

    Name: Vuong Trieu
       
     Title: Executive Chairman

 

Name:

Isaac Blech    
       

Address:

 

4 World Trade Center

150 Greenwich Street, 49 th Floor

New York, NY 10007

Address:

 

17870 Castleton Street

Suite 250

City of Industry, CA 91748

 

By execution of this Agreement,

Optionee acknowledges having

received a copy of the Plan.

 

 

 

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NOTE PURCHASE AGREEMENT

 

THIS NOTE PURCHASE AGREEMENT (“ Agreement ”) is made as of November 22, 2017 (the “ Execution Date ”) by and between Marina Biotech, Inc. , a Delaware corporation (the “ Company ”), and River Charitable Remainder Unit Trust, FBO Isaac Blech, July 20, 1987, Isaac Blech Trustee (the “ Lender ”). Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Note (as defined below).

 

WHEREAS , the Lender wishes to provide financing to the Company through the issuance by the Company to the Lender of the Note (as defined below), and the Company desires to accept such financing and to issue the Note pursuant to the terms and conditions set forth below;

 

NOW THEREFORE , in consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Lender agree as follows:

 

1. Definitions.

 

(a) “ Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

(b) “ Change of Control ” shall mean:

 

(i) The acquisition by any individual, entity or group (within the meaning of Rule 13d-3 promulgated under the Exchange Act or any successor provision) (any of the foregoing hereafter a “ Person ”) of forty percent (40%) or more of either (a) the then outstanding shares of the capital stock of the Company (the “ Outstanding Capital Stock ”) or (b) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Voting Securities ”), provided , however , that such an acquisition by one of the following shall not constitute a change of control: (1) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (2) any Person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act, to file a statement on Schedule 13G with respect to its beneficial ownership of Voting Securities, whether or not such Person shall have filed a statement on Schedule 13G, unless such Person shall have filed a statement on Schedule 13D with respect to beneficial ownership of forty percent (40%) or more of the Voting Securities or (3) any corporation with respect to which, following such acquisition, more than sixty percent (60%) of both the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Capital Stock or Voting Securities immediately prior to such acquisition in substantially the same proportions as their ownership, immediately prior to such acquisition, of the Outstanding Capital Stock or Voting Securities, as the case may be; or

 

 

 

 

(ii) Individuals who, as of the date of issuance of the Note constitute the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the Closing Date whose election or nomination for election by the Company’s shareholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A, or any successor section, promulgated under the Exchange Act); or

 

(iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation (a “ Business Combination ”), in each case, with respect to which all or substantially all holders of the Outstanding Capital Stock and Voting Securities immediately prior to such Business Combination do not, following such Business Combination, beneficially own, directly or indirectly, in substantially the same proportions, more than sixty percent (60%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from the Business Combination; or

 

(iv) A complete liquidation or dissolution of the Company; or

 

(v) A sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, following such sale or disposition, more than sixty percent (60%) of the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors are then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Capital Stock or Voting Securities immediately prior to such sale or disposition in substantially the same proportions as their ownership of the Outstanding Capital Stock and Voting Securities, as the case may be, immediately prior to such sale or disposition.

 

(c) “ Commission ” shall mean the Securities and Exchange Commission.

 

(d) “ Common Stock ” shall mean the shares of the common stock, par value $0.006 per share, of the Company.

 

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(e) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

 

(f) “ Indebtedness ” means (x) any liabilities for borrowed money or amounts owed in excess of $25,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $25,000 due under leases required to be capitalized in accordance with GAAP (as hereinafter defined).

 

(g) “ IP Security Agreement ” shall mean that certain Intellectual Property Security Agreement dated as of the Closing Date by the Company in favor of the Lender.

 

(h) “ Liens ” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

(i) “ Maturity Date ” shall be as set forth in each Note (as defined below).

 

(j) “ Note ” shall mean the promissory note issued to the Lender pursuant to Section 2.1 below, in the aggregate principal amount of $500,000, the form of which is attached hereto as Exhibit A .

 

(k) “ Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

(l) “ Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

(m) “ Purchase Price ” shall mean $500,000.

 

(n) “ Securities Act ” shall mean the Securities Act of 1933, as amended.

 

(o) “ SEC Reports ” shall mean all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material).

 

(p) “ Security Agreement ” shall mean that certain Security Agreement dated as of the Closing Date by the Company in favor of the Lender.

 

(q) “ Subsidiary ” means any subsidiary of the Company as set forth in the SEC Reports (other than the Company’s non-operating subsidiary, Atossa HealthCare, Inc.) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

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(r) “ Transaction Documents ” means the Note, this Agreement, the Security Agreement and the IP Security Agreement.

 

2. Issuance of the Note .

 

2.1 General . In consideration of (and subject to) the payment of the Purchase Price by the Lender, the Company shall sell and issue the Note to the Lender on the Closing Date (as defined below). The Note shall be convertible as set forth in the Note.

 

3. Closing Mechanics .

 

3.1 Closing . The closing (the “ Closing ”) of the purchase and sale of the Note shall take place on the date of this Agreement or at such later time as the Company and the Lender agree upon orally or in writing. At the Closing, the Lender shall deliver the Purchase Price to the Company by wire transfer of immediately available funds to an account designated in writing by the Company to the Lender prior to the Closing, and the Company shall deliver to the Lender the Note duly executed by the Company, in return for the Purchase Price provided to the Company. Also at the Closing, the Company shall deliver a duly executed Security Agreement and IP Security Agreement to the Lender, and the Lender shall deliver a duly executed Security Agreement and IP Security Agreement to the Company. The date of the Closing shall be referred to herein as the “ Closing Date ”.

 

4. Representations and Warranties of the Company . In connection with the purchase and sale of the Note provided for herein, the Company hereby represents and warrants to the Lender that:

 

4.1 Organization, Good Standing and Qualification . The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “ Material Adverse Effect ”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

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4.2 Authorization . All Company action has been taken on the part of the Company necessary for the authorization, execution and delivery of this Agreement and the Note. Except as may be limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights, the Company has taken all action required to make all of the obligations of the Company reflected in the provisions of this Agreement and the other Transaction Documents, the valid and enforceable obligations they purport to be.

 

4.3 Compliance with Other Instruments . Neither the authorization, execution and delivery of this Agreement, nor the issuance and delivery of the Note, will constitute or result in a material default or violation of any law or regulation applicable to the Company or any material term or provision of the Company’s current Certificate of Incorporation (as amended and restated to date), By-laws (as amended and restated to date) or any material agreement or instrument by which it is bound or to which its properties or assets are subject.

 

4.4 Subsidiaries . All of the direct and indirect subsidiaries of the Company are as set forth in the SEC Reports. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

4.5 Filings, Consents and Approvals . The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “ Required Approvals ”).

 

4.6 [Intentionally omitted] .

 

4.7 Capitalization . The capitalization of the Company is as set forth on Schedule 4.7 . The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. Except as set forth on Schedule 4.7 , no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth on Schedule 4.7, and except as a result of the purchase and sale of the Note, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents or capital stock of any Subsidiary. The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities to any Person and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or “phantom stock” plans or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except as set forth on Schedule 4.7 , no further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

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4.8 SEC Reports; Financial Statements . The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “ SEC Reports ”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“ GAAP ”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

4.9 Material Changes; Undisclosed Events, Liabilities or Developments . Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) except as set forth on Schedule 4.9 , the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information. No event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.

 

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4.10 Litigation . Except as set forth on Schedule 4.10 , there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “ Action ”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Note or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

4.11 Labor Relations . No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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4.12 Compliance . Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

 

4.13 Environmental Laws . The Company and its Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “ Hazardous Materials ”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“ Environmental Laws ”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

 

4.14 Regulatory Permits . The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“ Material Permits ”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

4.15 Title to Assets . The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

 

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4.16 Intellectual Property . To the Company’s knowledge, the Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as described in the SEC Reports as necessary or required for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “ Intellectual Property Rights ”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

4.17 Insurance . The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Purchase Price. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

 

4.18 Transactions With Affiliates and Employees . Except as set forth on Schedule 4.18 , none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (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 the Company, 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 the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

 

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4.19 Sarbanes-Oxley; Internal Accounting Controls . The Company and the Subsidiaries are in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. Except as set forth on Schedule 4.19 , the Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as set forth on Schedule 4.19 , the Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “ Evaluation Date ”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.

 

4.20 Private Placement . Assuming the accuracy of the Lender’s representations and warranties set forth in Section 5, no registration under the Securities Act is required for the offer and sale of the Note by the Company to the Lender as contemplated hereby.

 

4.21 Investment Company . The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

4.22 No Disagreements with Accountants and Lawyers . Except as set forth on Schedule 4.22 , there are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.

 

4.23 Seniority . As of the Closing Date, no Indebtedness or other claim against the Company is senior to the Note 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).

 

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4.24 No Integrated Offering . Assuming the accuracy of the Lender’s representations and warranties set forth in Section 5, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Note to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

4.25 No Disqualification Events . With respect to the Note to be offered and sold hereunder in reliance on Rule 506 under the Securities Act, none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’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 the Company in any capacity at the time of sale (each, an “ Issuer Covered Person ” and, together, “ Issuer Covered Persons ”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “ Disqualification Event ”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Lender a copy of any disclosures provided thereunder.

 

5. Representations and Warranties of the Lender . In connection with the purchase and sale of Note provided for herein, the Lender hereby represents and warrants to the Company that:

 

5.1 Authorization . This Agreement constitutes the Lender’s valid and legally binding obligation, enforceable in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights and (ii) laws relating to the availability of specific performance, injunctive relief or other equitable remedies. The Lender represents that it has full power and authority to enter into this Agreement.

 

5.2 Purchase Entirely for Own Account . The Lender acknowledges that this Agreement is made with the Lender in reliance upon the Lender’s representation to the Company that the Note and the securities of the Company that may be issuable upon conversion of the Note (collectively, the “ Securities ”) will be acquired for investment for the Lender’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Lender has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Lender further represents that the Lender does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to the Securities.

 

5.3 Disclosure of Information . The Lender acknowledges that it has received all the information it considers necessary or appropriate for deciding whether to acquire the Securities. The Lender further represents that it has had an opportunity to ask questions of and receive answers from the Company regarding the terms and conditions of the offering of the Securities, and that such questions have been answered to the Lender’s satisfaction.

 

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5.4 Investment Experience . The Lender is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment 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. If other than an individual, the Lender also represents it has not been organized solely for the purpose of acquiring the Securities.

 

5.5 Accredited Investor . The Lender is an “accredited investor” within the meaning of Rule 501 of Regulation D of the Securities Act of 1933, as amended (the “ Securities Act ”), as presently in effect, and has checked the applicable box on Exhibit B attached to this Agreement as to the Lender’s qualification as an accredited investor.

 

5.6 Restricted Securities . The Lender understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company 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. The Lender represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

5.7 Legends . It is understood that the Securities may bear a legend substantially as follows:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.”

 

5.8 Bad Actor Representations . Neither the Lender nor any beneficial owner of the Lender that would be regarded as a beneficial owner of the Company’s outstanding voting equity securities (upon conversion of the Note):

 

(a) has been convicted, within ten (10) years before the date of this Agreement, of any felony or misdemeanor: (x) in connection with the purchase or sale of any security; (y) involving the making of any false filing with the Securities and Exchange Commission (the “ SEC ”); or (z) arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser, or paid solicitor of purchasers of securities;

 

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(b) is subject to any order, judgment or decree of any court of competent jurisdiction, entered within five (5) years before the date of this Agreement, that, as of the date of this Agreement, restrains or enjoins such person from engaging or continuing to engage in any conduct or practice: (x) in connection with the purchase or sale of any security; (y) involving the making of any false filing with the SEC; or (z) arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser, or paid solicitor of purchasers of securities;

 

(c) is subject to a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations, or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); an appropriate federal banking agency; the Commodity Futures Trading Commission; or the National Credit Union Administration that: (x) as of the date of this Agreement, bars the person from: (1) association with an entity regulated by such commission, authority, agency, or officer; (2) engaging in the business of securities, insurance or banking; or (3) engaging in savings association or credit union activities; or (y) constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within ten (10) years before the date of this Agreement;

 

(d) is subject to an order of the SEC entered pursuant to Section 15(b) or 15B(c) of the Exchange Act, or Section 203(e) or (f) of the Investment Advisers Act of 1940, as amended (the “ Advisers Act ”), that, as of the date of this Agreement: (x) suspends or revokes such person’s registration as a broker, dealer, municipal securities dealer, or investment adviser; (y) places limitations on the activities, functions or operations of such person; or (z) bars such person from being associated with any entity or from participating in the offering of any penny stock;

 

(e) is subject to any order of the SEC entered within five (5) years before the date of this Agreement that, as of the date of this Agreement, orders the person to cease and desist from committing or causing a violation or future violation of: (x) any scienter-based anti-fraud provision of the federal securities laws, including without limitation Section 17(a)(1) of the Securities Act, Section 10(b) of the Exchange Act, Section 15(c)(1) of the Exchange Act and Section 206(1) of the Advisers Act, or any other rule or regulation under any such law; or (y) Section 5 of the Securities Act;

 

(f) is suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade;

 

(g) has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A offering statement filed with the SEC that, within five (5) years before the date of this Agreement, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is, as of the date of this Agreement, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued; or

 

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(h) is subject to a United States Postal Service false representation order entered within five (5) years before the date of this Agreement, or is, as of the date of this Agreement, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.

 

The Lender agrees promptly to notify the Company should the Lender become aware of any change in the information set forth in this Section 5.8. The Lender acknowledges that the Company and/or its affiliates and/or any agents or representatives of the foregoing may be required to disclose to other prospective investors in the Company and/or affiliated issuers information provided by the Lender relating to any of such information, and consents to such disclosures.

 

5.9 Execution of Financing Documents . The Lender hereby acknowledges and agrees that, if the Note is converted in connection with a Qualified Financing (as defined in the Note), then the Lender shall be required to (and hereby agrees that it shall) execute and deliver to the Company, in connection with and as a condition to such conversion and the issuance by the Company of any securities of the Company as a result thereof, such agreements (or counterpart signature pages or joinders thereto, as applicable) relating to the purchase and sale of such securities as were executed and delivered by the purchasers of such securities in the Qualified Financing as may reasonably be requested by the Company.

 

6. Defaults and Remedies .

 

6.1 Events of Default . The following events shall be considered Events of Default with respect to the Note:

 

(a) The Company shall default in the payment of any part of the principal or unpaid accrued interest on the Note for more than twenty (20) days after such payments are due;

 

(b) The Company shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due, or shall file a voluntary petition for bankruptcy, or shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, dissolution or similar relief under any present or future statute, law or regulation, or shall file any answer admitting the material allegations of a petition filed against the Company in any such proceeding, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of the Company, or of all or any substantial part of the properties of the Company, or the Company or its directors shall take any action looking to the dissolution or liquidation of the Company;

 

(c) Within twenty (20) days after the commencement of any proceeding against the Company seeking any bankruptcy reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such proceeding shall not have been dismissed, or within twenty (20) days after the appointment without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial part of the properties of the Company, such appointment shall not have been vacated;

 

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(d) The Company shall fail to observe or perform any other obligation to be observed or performed by it under this Agreement or the other Transaction Documents within ten (10) days after written notice from the Lender to perform or observe such obligation;

 

(e) A Change of Control Event with respect to the Company shall have occurred;

 

(f) Any money judgment, writ or similar final process shall be entered or filed against the Company or any Subsidiary or any of their property or other assets for more than $250,000, and shall remain unvacated, unbonded, unappealed, unsatisfied, or unstayed for a period of 60 calendar days;

 

(g) A default by the Company under any one or more obligations (including, without limitation, any office lease or pre-existing loan currently outstanding) in an aggregate monetary amount in excess of $100,000 for more than 90 calendar days after the due date, unless the Company is contesting the validity of such obligation in good faith and has segregated cash funds equal to not less than one-half of the contested amount; or

 

(h) Any material representation or warranty of the Company made in the Agreement which is false or misleading in any material respect as of the Execution Date, except to the extent such representation or warranty is made as of a different date in which case such representation or warranty shall have been false or misleading in any material respect as of such date.

 

6.2 Remedies . Upon the occurrence of an Event of Default under Section 6.1 hereof, at the option and upon the declaration of the Lender, the entire unpaid principal and accrued and unpaid interest on the Note shall, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, and the Lender may, immediately and without expiration of any period of grace, enforce payment of all amounts due and owing under the Note and exercise any and all other remedies granted at law, in equity or otherwise.

 

7. Miscellaneous .

 

7.1 Successors and Assigns . Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

7.2 Governing Law . This Agreement and the Notes shall be governed by and construed under the laws of the State of New York as applied to agreements among New York residents, made and to be performed entirely within the State of New York. The Lender hereby expressly consents to the exclusive jurisdiction of the state and federal courts situated in the City, County and State of New York for all actions arising out of, or relating to this Agreement, and irrevocably waives the defense of inconvenient forum to the maintenance of such action or proceeding.

 

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7.3 Execution . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party execution (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

7.4 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.

 

7.5 Notices . All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not so confirmed, then on the next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the respective parties at the addresses set forth on the signature page hereto (or at such other addresses as shall be specified by notice given in accordance with this Section 7.5).

 

7.6 Expenses . If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. Each party hereto shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement.

 

7.7 Entire Agreement; Amendments and Waivers . This Agreement and the Note and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Any term of this Agreement or the Note may be amended and the observance of any term of this Agreement or the Note may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Lender. Any waiver or amendment effected in accordance with this Section shall be binding upon each party to this Agreement and any future holder of the Note.

 

7.8 Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

7.9 Acknowledgement . In order to avoid doubt, it is acknowledged that the Lender shall be entitled to the benefit of all adjustments in the number of shares of Common Stock of the Company issuable as a result of any splits, recapitalizations, combinations or other similar transaction affecting the Company’s common stock that occur prior to the conversion of the Note.

 

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7.10 Indemnity; Costs, Expenses and Attorneys’ Fees . The Company shall indemnify and hold the Lender harmless from any loss, cost, liability and legal or other expense, including attorneys’ fees of the Lender’s counsel, which the Lender may directly or indirectly suffer or incur by reason of the failure of the Company to perform any of its obligations under this Agreement, the Note, any agreement executed in connection herewith or therewith, any grant of or exercise of remedies with respect to any collateral at any time securing any obligations evidenced by this Agreement or the Note, or the Lender’s execution or performance of this Agreement or any agreement executed in connection herewith, provided, however, that the indemnity provided by this section shall not apply to liabilities that the Lender may directly or indirectly suffer or incur by reason of the Lender’s gross negligence, willful misconduct or fraud.

 

7.11 Further Assurance . From time to time, the Company shall execute and deliver to the Lender such additional documents and shall provide such additional information to the Lender as the Lender may reasonably require to carry out the terms of this Agreement and the Note, and any agreements executed in connection herewith or therewith.

 

7.12. Confidentiality . The Lender acknowledges and agrees that any information or data it has acquired from or about the Company, not otherwise properly in the public domain, was received in confidence. The Lender agrees not to divulge, communicate or disclose, except as may be required by law or for the performance of this Agreement, or use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any confidential information of the Company, including any technical, trade or business secrets of the Company and any technical, trade or business materials that are treated by the Company as confidential or proprietary, and confidential information obtained by or given to the Company about or belonging to third parties.

 

[ remainder of page intentionally left blank; signature page follows ]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

    THE COMPANY:
    Marina Biotech, Inc.
       
    By: /s/ Vuong Trieu
    Name: Vuong Trieu
    Title: Executive Chairman
       
  Address: 17870 Castleton Street, Suite 250
    City of Industry, CA 91748
     
    THE LENDER:
    River Charitable Remainder Unit Trust,
    FBO Isaac Blech, July 20, 1987,
    Isaac Blech Trustee
       
    /s/ Isaac Blech
    Name: Isaac Blech
    Title: Trustee
       
  Address: 4 World Trade Center
    150 Greenwich Street, 49 th Floor
    New York, NY 10007

 

 

 

 

EXHIBIT A

 

Form of Promissory Note

 

 

 

 

EXHIBIT B

 

ACCREDITED INVESTOR QUESTIONNAIRE

 

A. APPLICABLE TO INDIVIDUALS ONLY. Please answer the following questions concerning your financial condition as an “accredited investor” (within the meaning of Rule 501 of Regulation D). If the Lender is more than one individual, each individual must initial an answer where the question indicates a “yes” or “no” response, indicating to which individual it applies. The Lender must answer “yes” in response to question 1, 2 or 3 below to be considered an “accredited investor.” If the Lender is purchasing jointly with his or her spouse, one answer may be indicated for the couple as a whole:

 

  1. Does your net worth*, or joint net worth with your spouse, exceed $1,000,000?

 

  Yes______ No______

 

  2. Did you have an individual income ** in excess of $200,000, or joint income together with your spouse in excess of $300,000, in each of the two most recent years and do you reasonably expect to reach the same income level in the current year?

 

  Yes______ No______

 

  3. Are you an executive officer or director of the issuer?

 

  Yes______ No______

 

* For purposes hereof net worth shall be deemed to include ALL of your assets, liquid or illiquid (including such items as furnishings, automobile and restricted securities), exclusive of the value of your principal residence, MINUS any liabilities (including such items as home mortgages and other debts and liabilities).
   
** For purposes hereof the term “income” is not limited to “adjusted gross income” as that term is defined for federal income tax purposes, but rather includes certain items of income which are deducted in computing “adjusted gross income.” For investors who are salaried employees, the gross salary of such investor, minus any significant expenses personally incurred by such investor in connection with earning the salary, plus any income from any other source including unearned income, is a fair measure of “income” for purposes hereof. For investors who are self-employed, “income” is generally construed to mean total revenues received during the calendar year minus significant expenses incurred in connection with earning such revenues.

 

 

 

 

B. APPLICABLE TO CORPORATIONS, PARTNERSHIPS AND OTHER ENTITIES ONLY:

 

The Lender is an accredited investor because the Lender falls within at least one of the following categories (Check all appropriate lines):

 

  ______ (i) a bank as defined in Section 3(a)(2) of the Securities Act or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;
     
  ______ (ii) a broker-dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended;
     
  ______ (iii) an insurance company as defined in Section 2(13) of the Securities Act;
     
  ______ (iv) an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”) or a business development company as defined in Section 29(a)(48) of the Investment Company Act;
     
  ______ (v) a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended;
     
  ______ (vi) a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, where such plan has total assets in excess of $5,000,000;
     
  ______ (vii) an employee benefit plan within the meaning of Title 1 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), where the investment decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or an employee benefit plan that has total assets in excess of $5,000,000, or a self-directed plan the investment decisions of which are made solely by persons that are accredited investors;
     
  ______ (viii) a private business development company, as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended;
     
  ______ (ix) an organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;
     
  ______ (x) a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a “sophisticated” person, who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment;
     
  ______ (xi) an entity in which all of the equity investors are persons or entities described above (“accredited investors”). ALL EQUITY OWNERS MUST COMPLETE PART “A” ABOVE.

 

 

 

 

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT (this “ Agreement ”), dated as of November 22, 2017, among Marina Biotech, Inc., a Delaware corporation (the “ Company ”), IthenaPharma, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“ Ithena ”), Cequent Pharmaceuticals, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“ CPI ”), and MDRNA Research, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“ Research ” and, collectively with the Company, Ithena and CPI, the “ Grantors ” and each, individually, a “ Grantor ”), and River Charitable Remainder Unit Trust, FBO Isaac Blech, July 20, 1987, Isaac Blech Trustee (the “ Purchaser ”) under that certain Note Purchase Agreement dated as of the date hereof between the Company and the Purchaser (as it may be amended, restated, supplemented, replaced or otherwise modified from time to time, the “ Purchase Agreement ).

 

W I T N E S S E T H:

 

WHEREAS , the Company and the Purchaser are parties to the Purchase Agreement, and

 

WHEREAS , pursuant to the terms and conditions of the Purchase Agreement, the Purchaser has agreed to extend a loan to the Grantors through the purchase of one or more notes repayment of which is evidenced by the Note issued pursuant to the Purchase Agreement, and

 

WHEREAS , in order to induce the Purchaser to enter into the Purchase Agreement and the other Transaction Documents, the Grantors have agreed to execute and deliver to the Purchaser this Agreement and to grant the Purchaser a continuing security interest in and to the Collateral in order to secure the prompt and complete payment, observance and performance of, among other things, the Secured Obligations, and

 

NOW, THEREFORE , for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Defined Terms . All capitalized terms used herein (including in the preamble and recitals hereof) without definition shall have the meanings ascribed thereto in the Note, or if not expressly defined in the Note, then in the Purchase Agreement. Any terms used in this Agreement that are defined in the Code (whether or not capitalized) shall be construed and defined as set forth in the Code unless otherwise defined herein or in the Note or the Purchase Agreement; provided , however , that if the Code is used to define any term used herein and if such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern. In addition to those terms defined elsewhere in this Agreement, as used in this Agreement, the following terms shall have the following meanings:

 

  1  

 

 

(a) “ Account ” means an account as that term is defined in the Code.

 

(b) “ Account Debtor ” means an account debtor (as that term is defined in the Code).

 

(c) “ Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor statute.

 

(d) “ Books ” means books and records (including each Grantor’s Records indicating, summarizing, or evidencing such Grantor’s assets (including the Collateral) or liabilities, each Grantor’s Records relating to such Grantor’s business operations or financial condition, and each Grantor’s goods or General Intangibles related to such information).

 

(e) “ Chattel Paper ” means chattel paper (as that term is defined in the Code) and includes tangible chattel paper and electronic chattel paper.

 

(f) “ Closing Date ” has the meaning specified therefor in the Purchase Agreement.

 

(g) “ Code ” means the New York Uniform Commercial Code, as in effect from time to time; provided , however , that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to the Purchaser’s Liens on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.

 

(h) “ Collateral ” has the meaning specified therefor in Section 2 ; provided, however, that “Collateral” shall not include any Excluded Property; and provided, further, that if and when any property shall cease to be Excluded Property, such property shall be deemed at all times from and after the date hereof to constitute Collateral.

 

(i) “ Commercial Tort Claims ” means commercial tort claims (as that term is defined in the Code), and includes those commercial tort claims listed on Schedule 8 attached hereto.

 

(j) “ Company ” and “ Companies ” shall mean the Grantors.

 

(k) “ Copyrights ” means copyrights and copyright registrations, and also includes (i) the copyright registrations and applications listed on Schedule 2 attached hereto and made a part hereof (as the same may be amended or modified from time to time), (ii) all extensions or renewals thereof, (iii) all income, royalties, damage awards and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements thereof, (iv) the right to sue for past, present and future infringements thereof, and (v) all of each Grantor’s rights corresponding thereto throughout the world.

 

  2  

 

 

(l) “ Deposit Account ” means a deposit account (as that term is defined in the Code).

 

(m) “ Equipment ” means equipment (as that term is defined in the Code).

 

(n) “ Excluded Property ” means, collectively, (i) any permit, lease, license, contract, instrument or other agreement held by any Grantor that prohibits or requires the consent of any Person other than the Grantors which consent has not been obtained as a condition to the creation by such Grantor of a Lien thereon, or any permit, lease, license, contract or other agreement held by any Grantor to the extent that any applicable law, treaty, rule, or regulation or any change in the interpretation or application thereof by any Governmental Authority applicable thereto prohibits the creation of a Lien thereon, but only, in each case, to the extent, and for so long as, such prohibition is not terminated or rendered unenforceable or otherwise deemed ineffective by the Code, (ii) any “intent to use” Trademark applications for which a statement of use has not been filed (but only until such statement is filed), and (iii) Equipment owned by any Grantor that is subject to a purchase money Lien or capital lease (in each case, to the extent permitted under the Purchase Agreement) if the contract or other agreement in which such Lien is granted (or in the documentation providing for such capital lease) prohibits or requires the consent of any Person which consent has not been obtained other than the Grantors as a condition to the creation of any other Lien on such Equipment; provided, however, Excluded Property shall not include any Collateral described in subsection (i) and (iii) of this subsection (n) to the extent that any such consent or lapse, as applicable, (x) has not been waived or (y) would be rendered ineffective pursuant to Sections 9-406, 9-408, 9-409 of the Code or other applicable provisions of the Code of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code, when applicable) or principles of equity; provided, that immediately upon the ineffectiveness, lapse, termination or waiver of any such provision, the Collateral shall include, and each such Grantor shall be deemed to have granted a security interest in, all such right, title and interest as if such provision had never been in effect. “Excluded Property” shall not include any Proceeds, substitutions or replacements of Excluded Property (unless such Proceeds, substitutions or replacements would constitute Excluded Property). It is hereby understood, agreed and acknowledged that the patents covering the Company’s DiLA2 delivery system (with respect to which the Company has entered into a binding term sheet for the sale of the Company’s assets relating thereto), and the patents covering the Company’s Smarticles delivery technology (which patents were sold to Novosom Verwaltungs GmbH in September 2017, and which are no longer owned by the Company), are Excluded Property, and thus are not included in the Collateral.

 

(o) “ Event of Default ” has the meaning specified therefor in the Purchase Agreement.

 

  3  

 

 

(p) “ General Intangibles ” means general intangibles (as that term is defined in the Code).

 

(q) “ Governmental Authority ” means any federal, state, local, or other governmental or administrative body, instrumentality, board, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.

 

(r) “ Grantor ” and “ Grantors ” have the meanings specified therefor in the recitals to this Agreement.

 

(s) “ Insolvency Proceeding ” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement of other similar relief.

 

(t) “ Intellectual Property ” means Patents, Copyrights, Trademarks, the goodwill associated with such Trademarks, trade secrets and confidential and proprietary customer lists, and Intellectual Property Licenses.

 

(u) “ Intellectual Property Collateral ” means Grantors’ Patents, Trademarks and Copyrights, now owned or hereafter accrued, and all goodwill of the business connected with the use of, and symbolized by, such Trademarks.

 

(v) “ Intellectual Property Licenses ” means rights under or interests in any Patent, Trademark, Copyright or other Intellectual Property, including software license agreements with any other party (other than commercial off the shelf software), whether the applicable Grantor is a licensee or licensor under any such license agreement, including the license agreements listed on Schedule 3 attached hereto and made a part hereof.

 

(w) “ Intellectual Property Security Agreement ” means the Intellectual Property Security Agreement among Grantors and Agent, for the benefit of the Purchaser, dated the date hereof.

 

(x) “ Inventory ” means inventory (as that term is defined in the Code).

 

(y) “ Investment Related Property ” means investment property (as that term is defined in the Code).

 

(z) “ Negotiable Collateral ” means letters of credit, letter-of-credit rights, instruments, promissory notes, drafts, and documents.

 

(aa) “ Note ” has the meaning specified therefor in the Purchase Agreement.

 

  4  

 

 

(bb) “ Obligations ” means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or that are now or may be hereafter contracted or acquired, or owing, of any Grantor to the Purchaser under this Agreement, the other Transaction Documents, and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from the Purchaser as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) principal of, and interest on, the Note and the loans extended pursuant thereto; (ii) any and all other fees, legal fees and other expenses, indemnities, costs, obligations and liabilities of the Grantors from time to time under or in connection with this Agreement, the other Transaction Documents, and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith; and (iii) all amounts in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving any Grantor.

 

(cc) “ Organizational Documents ” means, with respect to each Grantor, the documents by which such Grantor was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Grantor (such as bylaws, a partnership agreement or an operating, limited liability or members agreement).

 

(dd) “ Patents ” means (i) the patents and patent applications listed on Schedule 4 attached hereto and made a part hereof (as the same may be amended or modified from time to time), (ii) all divisions, continuations, continuations-in-part, reissues and extensions thereof, (iii) all income, royalties, damage awards and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements thereof, (iv) the right to sue for past, present and future infringements thereof, and (v) all of each Grantor’s rights corresponding thereto throughout the world.

 

(ee) “ Permitted Encumbrances ” means (a) liens in favor of the Purchaser to secure the Secured Obligations, (b) liens (i) with respect to the payment of taxes, assessments or other governmental charges or (ii) of suppliers, carriers, materialmen, warehousemen, workmen or mechanics and other similar liens, in each case imposed by law and arising in the ordinary course of business, and securing amounts that are not yet due or that are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are maintained on the books of the applicable Grantor in accordance with GAAP and which do not involve, in the reasonable judgment of the Purchaser, any risk of the sale, forfeiture or loss of any of the Collateral, (c) liens existing on the date hereof and set forth on Schedule 9 hereto, (d) liens securing purchase money indebtedness, provided that (i) such liens exist prior to the acquisition of, or attach substantially simultaneous with, or within 30 days after the, acquisition, repair, improvement or construction of, such property financed by such indebtedness and (ii) such liens do not extend to any property of a Grantor other than the property (and proceeds thereof) acquired or built, or the improvements or repairs, financed by such indebtedness, and (e) licenses entered into in the ordinary course of business.

 

  5  

 

 

(ff) “ Person ” has the meaning specified therefor in the Purchase Agreement.

 

(gg) “ Proceeds ” has the meaning specified therefor in Section 2 .

 

(hh) “ Purchase Agreement ” has the meaning specified therefor in the recitals to this Agreement.

 

(ii) “ Records ” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.

 

(jj) “ Security Interest ” has the meaning specified therefor in Section 2 .

 

(kk) “ Secured Obligations ” means each and all of the following: (a) each and all of the present and future obligations of Grantors now existing or hereafter arising from this Agreement or the other Transaction Documents, and (b) all Obligations of the Grantors, including, in the case of each of clauses (a) and (b), reasonable attorneys fees and expenses and any interest, fees, or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any Insolvency Proceeding.

 

(ll) “ Secured Party’s Liens ” means the Liens granted by the Grantors to Secured Parties under the Transaction Documents.

 

(mm) “ Securities Account ” means a securities account (as that term is defined in the Code).

 

(nn) “ Stock ” means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Commission under the Exchange Act).

 

(oo) “ Supporting Obligations ” means supporting obligations (as such term is defined in the Code).

 

  6  

 

 

(pp) “ Trademarks ” means trademarks, trade names, trademark applications, service marks, service mark applications, and also includes (i) the registered or applied for trade names, trademarks, trademark applications, service marks, and service mark applications listed on Schedule 5 attached hereto and made a part hereof (as the same may be amended or modified from time to time), (ii) all renewals thereof, (iii) all income, royalties, damage awards and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future (A) infringements and dilutions thereof and (B) injury to the goodwill associated therewith, (iv) the right to sue for past, present and future (A) infringements and dilutions thereof and (B) injury to the goodwill associated therewith, (v) the goodwill of each Grantor’s business symbolized by the foregoing or connected therewith, and (vi) all of each Grantor’s rights corresponding thereto throughout the world.

 

(qq) “ Transaction Documents ” means this Agreement, the Purchase Agreement, the Note and the Intellectual Property Security Agreement.

 

(rr) “ URL ” means “uniform resource locator,” an internet web address.

 

2. Guaranty and Grant of Security . (A) Each Grantor, in consideration of the mutual benefits obtained thereby and for other valuable consideration hereby acknowledged, hereby unconditionally guarantees for the benefit of the Purchaser the prompt payment and performance of each and all of the Secured Obligations of the other, without setoff or counterclaim each of which are hereby waived.

 

(B) Each Grantor hereby unconditionally grants, assigns, and pledges to the Purchaser to secure the Secured Obligations a continuing security interest (herein referred to as the “ Security Interest ”) in all such Grantor’s right, title and interest in and to the following, whether now owned or hereafter acquired or arising and wherever located (the “ Collateral ”):

 

  (a) all of such Grantor’s Accounts;
     
  (b) all of such Grantor’s Books;
     
  (c) all of such Grantor’s Chattel Paper;
     
  (d) all of such Grantor’s Deposit Accounts;
     
  (e) all of such Grantor’s Equipment and fixtures;
     
  (f) all of such Grantor’s General Intangibles, including the Intellectual Property Collateral;
     
  (g) all of such Grantor’s Inventory;

 

  7  

 

 

  (h) all of such Grantor’s Investment Related Property;
     
  (i) all of such Grantor’s Negotiable Collateral;
     
  (j) all of such Grantor’s rights in respect of Supporting Obligations;
     
  (k) all of such Grantor’s Commercial Tort Claims;

 

(l) all of such Grantor’s money, cash equivalents, or other assets of each such Grantor that now or hereafter come into the possession, custody, or control of the Purchaser;

 

(m) all of the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims covering or relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, General Intangibles, Inventory, Investment Related Property, Negotiable Collateral, Supporting Obligations, money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition of any of the foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds, whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise with respect to any of the foregoing (the “ Proceeds ”). Without limiting the generality of the foregoing, the term “Proceeds” includes whatever is receivable or received when Investment Related Property or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity or guaranty payable to any Grantor or the Purchaser from time to time with respect to any of the Investment Related Property.

 

3. Security for Obligations . This Agreement and the Security Interest created hereby secures the Secured Obligations, whether now existing or arising hereafter. Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantors, or any of them, to the Purchaser but for the fact that they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Grantor.

 

4. Grantors Remain Liable; Third Party Licensees . (A) Anything herein to the contrary notwithstanding, (a) each of the Grantors shall remain liable under the contracts and agreements included in the Collateral to perform all of the duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Purchaser of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under such contracts and agreements included in the Collateral, and (c) the Purchaser shall not have any obligation or liability under such contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Purchaser be obligated to perform any of the obligations or duties of any Grantors thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. Until an Event of Default shall occur and be continuing, except as otherwise provided in this Agreement or the other Transaction Documents, Grantors shall have the right to possession and enjoyment of the Collateral for the purpose of conducting the ordinary course of their respective businesses, subject to and upon the terms hereof and of the other Transaction Documents.

 

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(B) The Purchaser acknowledges and agrees that the security interest arising hereunder in any Intellectual Property licensed by a Grantor to a third party in an arms-length transaction shall be subject to the rights of such third party licensee, whether such arms-length transaction is now existing or is entered into following the execution and delivery of this Agreement. Upon the request of a Grantor, the Purchaser shall provide an estoppel to such third party licensee with respect to the foregoing. The Purchaser hereby acknowledges that no security interest or right is granted by any Grantor in property to the extent that such property, including Intellectual Property, is not owned by said Grantor.

 

5. Representations and Warranties . As of the Closing, each Grantor hereby represents and warrants as follows:

 

(a) The exact legal name, jurisdiction of incorporation, organization or formation, organizational identification number, if any, and chief executive office of each of the Grantors is set forth on Schedule 1 attached hereto. No Grantor has trade names except as set forth on Schedule 1 attached hereto.

 

(b) Schedule 6 attached hereto sets forth all Real Property owned or leased by Grantors as of the Closing Date.

 

(c) As of the Closing Date, no Grantor has any interest in, or title to, any registered Copyrights, material Intellectual Property Licenses or Trademarks except as set forth on Schedules 2 , 3 and 5 , respectively, attached hereto. This Agreement is effective to create a valid and continuing Lien on such Copyrights, Intellectual Property Licenses, Patents and Trademarks and, upon filing of the Intellectual Property Security Agreement with the United States Copyright Office and filing of the Intellectual Property Security Agreement with the United States Patent and Trademark Office, and the filing of appropriate financing statements in the jurisdictions listed on Schedule 7 hereto, all action necessary or desirable to protect and perfect the Security Interest in the United States in and to each Grantor’s Patents, Trademarks, Copyrights or Intellectual Property Licenses constituting Collateral has been taken and such perfected Security Interest is enforceable as such as against any and all creditors of and purchasers from any Grantor, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or similar laws relating to or limiting creditors’ rights generally. No Grantor has any interest in any Copyright that is necessary in connection with the operation of such Grantor’s business, except for those Copyrights identified on Schedule 2 attached hereto which have been registered with the United States Copyright Office.

 

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(d) Each Grantor has the requisite corporate, partnership, limited liability company or other power and authority to enter into this Agreement and otherwise to carry out its obligations hereunder. The execution, delivery and performance by each Grantor of this Agreement have been duly authorized by all necessary action on the part of such Grantor and no further action is required by such Grantor. This Agreement has been duly executed by each Grantor. This Agreement constitutes the legal, valid and binding obligation of each Grantor, enforceable against such Grantor in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting the rights and remedies of creditors and by general principles of equity.

 

(e) No written claim has been received by any Grantor that any Collateral or any Grantor’s use of any Collateral violates the rights of any third party that has not been resolved to the satisfaction of such Grantor. There has been no adverse decision to any Grantor’s claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to such Grantor’s right to keep and maintain such Collateral in full force and effect, and there is no proceeding involving said rights pending or, to the knowledge of such Grantor, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority.

 

(f) Each Grantor shall at all times maintain its books of account and records relating to the Collateral at its principal place of business (except when temporarily kept at the offices of its attorneys or accountants) and may not relocate such books of account and records or tangible Collateral unless it delivers to the Purchaser at least thirty (30) days prior to such relocation (i) written notice of such relocation and the new location thereof (which must be within the United States) and (ii) evidence that appropriate financing statements under the Code and other necessary documents have been filed and recorded and other steps have been taken to perfect the Security Interests to create in favor of the Purchaser, subject to Permitted Encumbrances, a valid, perfected and continuing perfected first priority lien in the Collateral.

 

(g) The execution, delivery and performance of this Agreement by each Grantor does not (i) violate any of the provisions of the Organizational Documents of any Grantor or any judgment, decree, order or award of any court, governmental body or arbitrator or any applicable law, rule or regulation applicable to any Grantor or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing such Grantor’s debt or otherwise) or other understanding to which any Grantor is a party or by which any property or asset of any Grantor is bound or affected, except in all cases, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. If any, all required consents (including, without limitation, from stockholders or creditors of the Grantor) necessary for the Grantor to enter into and perform its obligations hereunder have been obtained.

 

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(h) This Agreement creates a valid security interest in the Collateral of each of Grantors, to the extent a security interest therein can be created under the Code, securing the payment of the Secured Obligations. Except to the extent a security interest in the Collateral cannot be perfected by the filing of a financing statement under the Code, all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken or will have been taken upon the filing of financing statements listing each applicable Grantor, as a debtor, and the Purchaser, as secured party, in the jurisdictions listed next to such Grantor’s name on Schedule 6 attached hereto. Upon the making of such filings, the Purchaser shall have, subject to Permitted Encumbrances, a first priority perfected security interest in the Collateral of each Grantor to the extent such security interest can be perfected by the filing of a financing statement. All action by any Grantor necessary to protect and perfect such security interest on each item of Collateral has been duly taken (to the extent such action is required under this Agreement).

 

(i) No consent, approval, authorization, or other order or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required (i) for the grant of a Security Interest by such Grantor in and to the Collateral pursuant to this Agreement or for the execution, delivery, or performance of this Agreement, except those consents, approvals, authorizations or other actions, the failure of which to obtain could not reasonably be expected to cause a material adverse effect to such Grantor, or (ii) for the exercise by the Purchaser of the voting or other rights provided for in this Agreement or any other Transaction Document with respect to the Investment Related Property or the remedies in respect of the Collateral pursuant to this Agreement or any other Transaction Document, except as may be required in connection with such disposition of Investment Related Property by laws affecting the offering and sale of securities generally.

 

6. Covenants . Each Grantor, jointly and severally, covenants and agrees with Purchaser for the benefit of the Purchaser that from and after the date of this Agreement and until the date of termination of this Agreement in accordance with the terms hereof :

 

(a) Possession of Collateral . In the event that any Collateral, including Proceeds, is evidenced by or consists of Negotiable Collateral, Investment Related Property, or Chattel Paper, with a value, individually or in the aggregate, in excess of Twenty-Five Thousand Dollars ($25,000), and if and to the extent that perfection or priority of the Purchaser’s Security Interest is dependent on or enhanced by possession, the applicable Grantor, promptly (and in any event within one (1) Business Day) upon the request of the Purchaser, shall execute such other documents and instruments as shall be reasonably requested by the Purchaser or, if applicable, endorse and deliver physical possession of such Collateral to the Purchaser or its representative, together with, if applicable, such undated powers endorsed in blank as shall be reasonably requested by the Purchaser;

 

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(b) Chattel Paper .

 

(i) In the event that the Grantors acquire electronic Chattel Paper with a value, individually or in the aggregate, in excess of Twenty-Five Thousand Dollars ($25,000), the applicable Grantor shall promptly (and in any event within two (2) Business Days) notify the Purchaser thereof, and upon the request of the Purchaser, take all steps reasonably necessary to grant the Purchaser control of all such electronic Chattel Paper in accordance with the Code and all “transferable records” as that term is defined in Section 16 of the Uniform Electronic Transaction Act and Section 201 of the federal Electronic Signatures in Global and National Commerce Act as in effect in any relevant jurisdiction;

 

(ii) If any Grantor retains possession of any Chattel Paper or instruments (which retention of possession shall be subject to the extent permitted hereby and by the Purchase Agreement), promptly upon the request of the Purchaser, such Chattel Paper and instruments shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are subject to the Security Interest of River Charitable Remainder Unit Trust, FBO Isaac Blech, July 20, 1987, Isaac Blech Trustee”;

 

(c) Letter-of-Credit Rights . Each Grantor that is or becomes the beneficiary of a letter of credit with a face value in excess of Twenty-Five Thousand Dollars ($25,000) shall promptly (and in any event within two (2) Business Days after becoming a beneficiary), notify the Purchaser thereof and, thereafter, upon the request by the Purchaser, except with respect to documentary letters of credit received by a Grantor from customers in the ordinary course of business if no Event of Default has occurred and is continuing, take such actions the Purchaser may reasonably request to grant the Purchaser control thereof;

 

(d) Commercial Tort Claims . Each Grantor shall promptly (and in any event within two (2) Business Days of receipt thereof), notify the Purchaser in writing upon becoming a plaintiff in respect of, or otherwise obtaining a Commercial Tort Claim after the date hereof and, upon request of the Purchaser, promptly amend Schedule 8 to this Agreement to describe such after-acquired Commercial Tort Claim in a manner that reasonably identifies such Commercial Tort Claim, and hereby authorizes the filing of additional financing statements or amendments to existing financing statements describing such Commercial Tort Claims, and agrees to do such other acts or things deemed necessary or desirable by Agent to give the Purchaser, subject to Permitted Encumbrances, a first priority perfected security interest in any such Commercial Tort Claim;

 

(e) Government Contracts . If any Account or Chattel Paper, individually or in the aggregate with a value in excess of Twenty-Five Thousand Dollars ($25,000), arises out of a contract or contracts with the United States of America or any department, agency, or instrumentality thereof, Grantors shall promptly (and in any event within two (2) Business Days of the creation thereof) notify the Purchaser thereof in writing and execute any instruments or take any steps reasonably required by the Purchaser, to the extent permitted under, and in accordance with, applicable law, in order that all moneys due or to become due under such contract or contracts shall be assigned to the Purchaser, and shall provide written notice thereof under the Assignment of Claims Act or other applicable law;

 

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(f) Intellectual Property .

 

(i) Upon request of the Purchaser, in order to facilitate filings with the United States Patent and Trademark Office and the United States Copyright Office, each Grantor shall execute and deliver to the Purchaser one or more Intellectual Property Security Agreements in form and substance reasonably satisfactory to further evidence the Purchaser’s Liens on such Grantor’s Patents, Trademarks, or Copyrights, and the General Intangibles of such Grantor relating thereto or represented thereby;

 

(ii) Each Grantor shall have the duty, to the extent necessary or economically desirable in the operation of its business, (A) to promptly sue for infringement, misappropriation, or dilution and to recover any and all awarded damages for such infringement, misappropriation, or dilution, (B) to prosecute diligently any trademark application or service mark application that is part of such Grantor’s Trademarks pending as of the date hereof or hereafter until the termination of this Agreement, (C) to prosecute diligently any patent application that is part of such Grantor’s Patents pending as of the date hereof or hereafter until the termination of this Agreement, and (D) to take all reasonable and necessary action to preserve and maintain all of such Grantor’s Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights therein, including the filing of applications for renewal, affidavits of use, affidavits of noncontestability and opposition and interference and cancellation proceedings. Each Grantor shall promptly file an application with the United States Copyright Office for any Copyright that has not been registered with the United States Copyright Office if such Copyright is necessary or economically desirable in the operation of such Grantor’s business. Any expenses incurred in connection with the foregoing shall be borne by the appropriate Grantor. Each Grantor further agrees not to abandon any Trademark, Patent, Copyright, or Intellectual Property License that is necessary or economically desirable in the operation of such Grantor’s business; provided, however that any such Copyright shall then be deemed to be included on Schedule 2 hereof;

 

(iii) Grantors acknowledge and agree that the Purchaser shall have no duties with respect to the Trademarks, Patents, Copyrights, or Intellectual Property Licenses. Without limiting the generality of this Section 6(f) , Grantors acknowledge and agree that the Purchaser shall not be under any obligation to take any steps necessary to preserve rights in the Trademarks, Patents, Copyrights, or Intellectual Property Licenses against any other Person, but the Purchaser may do so at its option from and after the occurrence and during the continuance of an Event of Default, and all expenses incurred in connection therewith (including reasonable fees and expenses of attorneys and other professionals) shall be for the sole account of the Company and shall be chargeable to the Company;

 

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(iv) In no event shall any Grantor, either itself or through any agent, employee, licensee, or designee, file an application for the registration of any Patent, Trademark, or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency without giving the Purchaser prompt (and in any event within ten (10) Business Days) written notice thereof. Promptly upon any such filing, each Grantor shall comply with Section 6(f)(i) hereof;

 

(g) Investment Related Property .

 

(i) If any Grantor shall receive or become entitled to receive any Investment Related Property after the Closing Date, it shall promptly (and in any event within five (5) Business Days of receipt thereof) take all actions necessary to cause such Investment Related Property to become Collateral hereunder and subject to a lien and security interest in favor of the Purchaser;

 

(ii) Upon the occurrence and during the continuance of an Event of Default, all sums of money and property paid or distributed in respect of the Investment Related Property which are received by any Grantor shall be held by the Grantors in trust for the benefit of the Purchaser segregated from such Grantor’s other property, and such Grantor shall deliver it forthwith to the Purchaser in the exact form received;

 

(iii) Each Grantor shall promptly deliver to the Purchaser a copy of each notice or other communication received by it in respect of any Investment Related Property;

 

(iv) Each Grantor agrees that it will cooperate with the Purchaser in obtaining all necessary approvals and making all necessary filings under federal, state, local, or foreign law in connection with the Security Interest on the Investment Related Property or any sale or transfer thereof;

 

(h) Transfers and Other Liens . Except as otherwise expressly permitted hereby or by the Purchase Agreement, Grantors shall not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, or (ii) create or permit to exist any Lien upon or with respect to any of the Collateral of any of Grantors, except for Permitted Encumbrances. The inclusion of Proceeds in the Collateral shall not be deemed to constitute the Purchaser’s consent to any sale or other disposition of any of the Collateral except as expressly permitted in this Agreement or the other Transaction Documents;

 

(i) Insurance . The Grantors shall maintain with financially sound and reputable insurers, insurance with respect to the Collateral, including Collateral hereafter acquired, against loss or damage of the kinds and in the amounts customarily insured against by entities of established reputation having similar properties similarly situated and in such amounts as are customarily carried under similar circumstances by other such entities and otherwise as is prudent for entities engaged in similar businesses but in any event sufficient to cover the full replacement cost thereof (it being agreed that the insurance policies and amounts maintained by Grantors as of the Closing Date are satisfactory). The Grantors shall cause each insurance policy issued in connection herewith to provide, and the insurer issuing such policy to certify to the Purchaser that (a) the Purchaser will be named as loss payee and additional insured under each such insurance policy; (b) if such insurance be proposed to be cancelled or materially changed for any reason whatsoever, such insurer will promptly notify the Purchaser and such cancellation or change shall not be effective as to the Purchaser for at least thirty (30) days after receipt by the Purchaser of such notice, unless the effect of such change is to extend or increase coverage under the policy; and (c) the Purchaser will have the right (but no obligation) at its election to remedy any default in the payment of premiums within thirty (30) days of notice from the insurer of such default. If no Event of Default exists and if the proceeds arising out of any claim or series of related claims do not exceed $100,000, loss payments in each instance will be available to the Grantors and applied by the Grantors to the repair and/or replacement of property with respect to which the loss was incurred. If no Event of Default exists and such proceeds exceed $100,000, and in any event after an Event of Default occurs, all proceeds then or thereafter in existence shall be paid to the Purchaser (for application to the Obligations) and, if received by any Grantor, shall be held in trust for the Purchaser and promptly paid over to the Purchaser (for application to the Obligations) unless otherwise directed in writing by the Purchaser.

 

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(j) Copies . The Grantors shall deliver copies of such policies or the related certificates evidencing that the Purchaser is listed as loss payee on property insurance and as additional insured on liability insurance within 10 days of closing and at the time any new policy of insurance is issued.

 

(k) Permitted Encumbrances . The Grantors shall not prepay or amend any obligations secured by the Permitted Encumbrances without the prior written consent of the Purchaser.

 

7. Relation to Other Security Documents . The provisions of this Agreement shall be read and construed with the other Transaction Documents referred to below in the manner so indicated.

 

(a) Purchase Agreement . In the event of any conflict between any provision in this Agreement and a provision in the Purchase Agreement, such provision of the Purchase Agreement shall control.

 

(b) Note . In the event of any conflict between any provision in this Agreement and a provision in the Note, such provision of the Note shall control.

 

(c) Intellectual Property Security Agreements . The provisions of any executed Intellectual Property Security Agreements are supplemental to the provisions of this Agreement, and nothing contained in the Intellectual Property Security Agreements shall limit any of the rights or remedies of the Purchaser hereunder.

 

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8. Further Assurances .

 

(a) Each Grantor agrees that from time to time, at its own expense, such Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Purchaser may reasonably request, in order to perfect and protect the Security Interest granted or purported to be granted hereby or to enable the Purchaser to exercise and enforce its rights and remedies hereunder with respect to any of the Collateral.

 

(b) Subject to Section 8(c), each Grantor authorizes the filing by the Purchaser of financing or continuation statements, or amendments thereto, and such Grantor will execute and deliver to the Purchaser such other instruments or notices, as may be necessary or as the Purchaser may reasonably request, in order to perfect and preserve the Security Interest granted or purported to be granted hereby.

 

(c) Each Grantor authorizes the Purchaser at any time and from time to time to file, transmit, or communicate, as applicable, financing statements and amendments (i) describing the Collateral as “all personal property of debtor” or “all assets of debtor” or words of similar effect, (ii) describing the Collateral as being of equal or lesser scope or with greater detail, or (iii) that contain any information required by part 5 of Article 9 of the Code for the sufficiency or filing office acceptance.

 

(d) Each Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement filed in connection with this Agreement without the prior written consent of the Purchaser, subject to such Grantor’s rights under Section 9-509(d)(2) of the Code.

 

9. Right to Perform Contracts, Exercise Rights, etc . Upon the occurrence and during the continuance of an Event of Default, the Purchaser (or its designee) (a) may proceed to perform any and all of the obligations of any Grantor contained in any contract, lease, or other agreement and exercise any and all rights of any Grantor therein contained as fully as such Grantor itself could, (b) shall have the right to use any Grantor’s rights under Intellectual Property Licenses in connection with the enforcement of the Purchaser’s rights hereunder, including the right to prepare for sale and sell any and all Inventory and Equipment now or hereafter owned by any Grantor and now or hereafter covered by such licenses, but only to the extent permitted by such licenses or the licensors thereunder or applicable law, and (c) shall have the right to request that any Stock that is pledged hereunder be registered in the name of the Purchaser or any of its nominees.

 

10. Appointed Attorney-in-Fact . Each Grantor hereby irrevocably appoints the Purchaser its attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, at such time as an Event of Default has occurred and is continuing under the Note, to take any action and to execute any instrument which the Purchaser may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including:

 

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(a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in connection with the Accounts or any Supporting Obligations in connection therewith or any other Collateral of such Grantor;

 

(b) to receive and open all mail addressed to such Grantor and to notify postal authorities to change the address for the delivery of mail to such Grantor to that of the Purchaser;

 

(c) to receive, indorse, and collect any drafts or other instruments, documents, Negotiable Collateral or Chattel Paper;

 

(d) to file any claims or take any action or institute any proceedings which the Purchaser may deem necessary or desirable for the collection of any of the Collateral of such Grantor or otherwise to enforce the rights of the Purchaser with respect to any of the Collateral;

 

(e) to repair, alter, or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any Person obligated to such Grantor in respect of any Account of such Grantor;

 

(f) to use any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, advertising matter or other industrial or intellectual property rights, in advertising for sale and selling Inventory and other Collateral and to collect any amounts due under Accounts, contracts or Negotiable Collateral of such Grantor; and

 

(g) the Purchaser shall have the right, but shall not be obligated, to bring suit in its own name to enforce the Trademarks, Patents, Copyrights and Intellectual Property Licenses and, if the Purchaser shall commence any such suit, the appropriate Grantor shall, at the request of the Purchaser, do any and all lawful acts and execute any and all proper documents reasonably required by the Purchaser in aid of such enforcement.

 

To the extent permitted by law, each Grantor hereby ratifies all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable until this Agreement is terminated.

 

11. Purchaser May Perform . If any of Grantors fails to perform any agreement contained herein, the Purchaser may perform, or cause performance of, such agreement, and the reasonable out-of-pocket expenses of the Purchaser incurred in connection therewith shall be payable severally by Grantors.

 

12. Collection of Accounts, General Intangibles and Negotiable Collateral . At any time upon the occurrence and during the continuance of an Event of Default, the Purchaser or its designee may notify Account Debtors of any Grantor that the Accounts, General Intangibles, Chattel Paper or Negotiable Collateral have been assigned to the Purchaser or that the Purchaser has a security interest therein, and (b) collect the Accounts, General Intangibles and Negotiable Collateral directly, and any collection costs and expenses shall constitute part of such Grantor’s Secured Obligations under the Transaction Documents.

 

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13. Remedies . Upon the occurrence and during the continuance of an Event of Default:

 

(a) The Purchaser may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein, in the other Transaction Documents, or otherwise available to it, all the rights and remedies of a secured party on default under the Code or any other applicable law. Without limiting the generality of the foregoing, each Grantor expressly agrees that, in any such event, the Purchaser without demand of performance or other demand, advertisement or notice of any kind (except a notice specified below of time and place of public or private sale) to or upon any of Grantors or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted by the Code or any other applicable law), may take immediate possession of all or any portion of the Collateral and (i) require Grantors to, and each Grantor hereby agrees that it will at its own expense and upon request of the Purchaser forthwith, assemble all or part of the Collateral as directed by the Purchaser and make it available to the Purchaser at one or more locations where such Grantor regularly maintains Inventory, and (ii) without notice except as specified below, sell or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale or other disposition, at any of the Purchaser’s offices or elsewhere, for cash, on credit, and upon such other terms as the Purchaser may deem commercially reasonable. Without limiting the generality of the foregoing, the Purchaser may disclaim any and all representations and warranties in connection with any such sale or other disposition. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to any of Grantors 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 and specifically such notice shall constitute a reasonable “authenticated notification of disposition” within the meaning of Section 9-611 of the Code. The Purchaser shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Purchaser 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) The Purchaser is hereby granted a license or other right to use, without liability for royalties or any other charge, each Grantor’s labels, Patents, Copyrights, rights of use of any name, trade secrets, trade names, Trademarks, service marks and advertising matter, URLs, domain names, industrial designs, other industrial or intellectual property or any property of a similar nature, whether owned by any of Grantors or with respect to which any of Grantors have rights under license, sublicense, or other agreements, (but only to the extent (i) such license, sublicense or agreement does not prohibit such use by the Purchaser and (ii) such Grantor will not be in default under such license, sublicense or other agreement as a result of such use by the Purchaser) as it pertains to the Collateral, in preparing for sale, advertising for sale and selling any Collateral, and each Grantor’s rights under all licenses and all franchise agreements shall inure to the benefit of the Purchaser.

 

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(c) Any cash held by the Purchaser as Collateral and all cash proceeds received by the Purchaser in respect of any sale of, collection from, or other realization in any manner upon all or any part of the Collateral shall be applied against the Secured Obligations in the order set forth as follows:

 

FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation, reasonable attorneys’ fees) of each of the Purchaser in connection with enforcing its rights under this Agreement and the other Transaction Documents; SECOND, to the payment of all accrued and unpaid fees and interest to the Purchaser on the Note; THIRD to the payment of the outstanding principal amount of the Note; and FOURTH to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.

 

In the event the proceeds of Collateral are insufficient to satisfy all of the Secured Obligations in full, each Grantor shall remain jointly and severally liable for any such deficiency.

 

(d) Each Grantor hereby acknowledges that the Secured Obligations arose out of a commercial transaction.

 

14. Remedies Cumulative . Each right, power, and remedy of the Purchaser as provided for in this Agreement or in the other Transaction Documents or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Agreement or in the other Transaction Documents or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by the Purchaser of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Purchaser of any or all such other rights, powers, or remedies.

 

15. Marshaling . The Purchaser shall not be required to marshal any present or future collateral security (including but not limited to the Collateral) for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, each Grantor hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of the Purchaser’s rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws.

 

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16. Indemnity and Expenses .

 

(a) Each Grantor agrees to indemnify the Purchaser from and against all claims, lawsuits and liabilities (including reasonable attorneys’ fees) growing out of or resulting from this Agreement (including enforcement of this Agreement) or any other Transaction Document to which such Grantor is a party, except claims, losses or liabilities resulting from the gross negligence or willful misconduct of the party seeking indemnification as determined by a final non-appealable order of a court of competent jurisdiction, and subject to any other express limitations set forth in the Transaction Documents. This provision shall survive the termination of this Agreement and the repayment of the Secured Obligations.

 

(b) Grantors, jointly and severally, shall, upon demand, pay to the Purchaser all the fees, costs, charges and expenses which the Purchaser may reasonably incur in connection with (i) the custody, preservation, use or operation of, or, upon an Event of Default, the sale of, collection from, or other realization upon, any of the Collateral in accordance with this Agreement and the other Transaction Documents, (ii) the exercise or enforcement of any of the rights of the Purchaser hereunder or (iii) the failure by any of Grantors to perform or observe any of the provisions hereof.

 

17. Merger, Amendments; Etc. THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No waiver of any provision of this Agreement, and no consent to any departure by any of Grantors herefrom, shall in any event be effective unless the same shall be in writing and signed by the Purchaser, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment of any provision of this Agreement shall be effective unless the same shall be in writing and signed by the Purchaser and each of Grantors to which such amendment applies.

 

18. Addresses for Notices . All notices and other communications provided for hereunder shall be given in the form and manner and delivered to the Purchaser at its address specified in the Purchase Agreement, and to any of the Grantors at their respective addresses specified in the Purchase Agreement, as applicable, or, as to any party, at such other address as shall be designated by such party in a written notice to the other party.

 

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19. Continuing Security Interest: Assignments under Credit Agreement . This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the Obligations have been indefeasibly paid in full or otherwise terminated in accordance with the provisions of the Note and the Purchase Agreement, (b) be binding upon each of Grantors, and their respective successors and assigns, and (c) inure to the benefit of, and be enforceable by, the Purchaser, and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), the Purchaser may, in accordance with the provisions of the Note and the Purchase Agreement, assign or otherwise transfer all or any portion of its rights and obligations under the Note and the Purchase Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Purchaser herein or otherwise without prior notice or consent to the Grantors. Upon indefeasible payment in full or other termination of the Obligations in accordance with the provisions of the Note and the Purchase Agreement, the Security Interest granted hereby shall automatically terminate and all rights to the Collateral shall automatically revert to Grantors or any other Person entitled thereto. At such time, upon the Grantors reasonable request, the Purchaser shall authorize the filing of appropriate termination statements to terminate such Security Interests and shall execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Grantors may reasonably request, in order to effectuate the foregoing termination of such Security Interests. No transfer or renewal, extension, assignment, or termination of this Agreement, any other Transaction Document, or any other instrument or document executed and delivered by any Grantor to the Purchaser nor any additional loans made by the Purchaser to the Grantors, or any of them, nor the taking of further security, nor the retaking or re-delivery of the Collateral to Grantors, or any of them, by the Purchaser, shall release any of Grantors from any obligation, except a release or discharge executed in writing by the Purchaser in accordance with the provisions of the Note and the Purchase Agreement. The Purchaser shall not by any act, delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder, unless such waiver is in writing and signed by the Purchaser and then only to the extent therein set forth. A waiver by the Purchaser of any right or remedy on any occasion shall not be construed as a bar to the exercise of any such right or remedy which the Purchaser would otherwise have had on any other occasion.

 

20. Governing Law .

 

(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER TRANSACTION DOCUMENT IN RESPECT OF SUCH OTHER TRANSACTION DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

  21  

 

 

(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK; PROVIDED , HOWEVER , THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE PURCHASER ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. PURCHASER AND EACH GRANTOR WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 21(b) .

 

(c) TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, PURCHASER AND EACH GRANTOR HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. PURCHASER AND EACH GRANTOR REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

21. Miscellaneous .

 

(a) This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other Transaction Document mutatis mutandis .

 

(b) Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction.

 

(c) Headings used in this Agreement are for convenience only and shall not be used in connection with the interpretation of any provision hereof.

 

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(d) The pronouns used herein shall include, when appropriate, either gender and both singular and plural, and the grammatical construction of sentences shall conform thereto.

 

(e) Unless the context of this Agreement or any other Transaction Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms “includes” and “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any other Transaction Document refer to this Agreement or such other Transaction Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Transaction Document, as the case may be. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in any other Transaction Document to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein or in the other Transaction Documents). Any reference herein to the satisfaction or repayment in full of the Obligations shall mean the repayment in full in cash (or cash collateralization in accordance with the terms hereof) of all Obligations other than unasserted contingent indemnification Obligations. Any reference herein to any Person shall be construed to include such Person’s successors and assigns. Any requirement of a writing contained herein shall be satisfied by the transmission of a Record and any Record so transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement by and through their duly authorized officers, as of the day and year first above written:

 

  MARINA BIOTECH, INC.
     
  By: /s/ Vuong Trieu
  Name: Vuong Trieu
  Title: Executive Chairman
     
  ITHENA PHARMACEUTICALS, INC.
     
  By: /s/ Vuong Trieu
  Name: Vuong Trieu
  Title: CFO
     
  CEQUENT PHARMACEUTICALS, INC.
     
  By: /s/ Vuong Trieu
  Name: Vuong Trieu
  Title: President
     
  MDRNA RESEARCH, INC.
     
  By: /s/ Vuong Trieu
  Name: Vuong Trieu
  Title: President
     
  RIVER CHARITABLE REMAINDER UNIT
  TRUST, F/B/O ISAAC BLECH, JULY 20, 1987,
  ISAAC BLECH TRUSTEE
     
  By: /s/ Isaac Blech
  Name: Isaac Blech
  Title: Trustee

 

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INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

This INTELLECTUAL PROPERTY SECURITY AGREEMENT (this “ Agreement ”), dated as of November 22, 2017, is made by MARINA BIOTECH, INC., a Delaware corporation (the “ Company ”), IthenaPharma, Inc., a Delaware corporation (“ Ithena ”), Cequent Pharmaceuticals, Inc., a Delaware corporation (“ CPI ”), and MDRNA RESEARCH, INC., a Delaware corporation (“ Research ” and, collectively with the Company, Ithena and CPI, “ Grantors ” and each, individually, “ Grantor ”), in favor of River Charitable Remainder Unit Trust, FBO Isaac Blech, July 20, 1987, Isaac Blech Trustee (the “ Purchaser ”).

 

W I T N E S S E T H:

 

WHEREAS , pursuant to that certain Note Purchase Agreement, dated as of even date herewith (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “ Purchase Agreement ”), between the Company and the Purchaser, the Purchaser has made a loan, through the purchase of one or more notes to the Company, upon the terms and subject to the conditions set forth therein; and

 

WHEREAS , in order to induce the Purchaser to enter into the Purchase Agreement and other Transaction Documents and to induce the Purchaser to purchase the Note as provided for in the Purchase Agreement, Grantors have agreed to pledge the Collateral to Purchaser in accordance herewith;

 

NOW, THEREFORE , in consideration of the premises and mutual covenants herein contained, and to induce the Purchaser to enter into the Purchase Agreement and to induce the Purchaser to purchase the Note issued by the Company thereunder, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

Section 1. Defined Terms . Capitalized terms used herein without definition are used as defined in the Security Agreement (the “ Security Agreement ”) dated as of even date herewith among the Purchaser and the Grantors.

 

Section 2. Grant of Security Interest in Intellectual Property Collateral . (A) Each Grantor, as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations hereby mortgages, pledges, assigns, grants and hypothecates to the Purchaser, and grants to the Purchaser a lien on and security interest in, all of its right, title and interest in, to and under the Intellectual Property Collateral of such Grantor, including without limitation, that Intellectual Property Collateral referred to on Schedule 1 hereto (the “ Intellectual Property Collateral ”), and all income, royalties, proceeds and liabilities at any time due or payable or asserted under and with respect to any of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.

 

(B) This Agreement and the security interests created hereby secure the payment and performance of the Secured Obligations, whether now existing or arising hereafter. Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantors, or any of them, to the Purchaser, whether or not they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Grantor.

 

 

 

 

Section 3. Purchase Agreement & Security Agreement . The security interest granted pursuant to this Agreement is granted in conjunction with, and in no way limiting, the security interest granted to the Purchaser pursuant to the Security Agreement, and each Grantor hereby acknowledges and agrees that the rights and remedies of the Purchaser with respect to the security interest in the Intellectual Property Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

 

Section 4. Authorization to Supplement . If any Grantor shall obtain rights to any new patentable inventions or become entitled to the benefit of any patent application or patent for any reissue, division, or continuation, of any patent, the provisions of this Agreement shall automatically apply thereto. Grantors shall give prompt (and in any event within fifteen (15) Business Days) notice in writing to the Purchaser with respect to any such new patent rights. Without limiting Grantors’ obligations under this Section 4, Grantors hereby authorize the Purchaser unilaterally to modify this Agreement by amending Schedule 1 to include any such new patent rights of Grantors. Notwithstanding the foregoing, no failure to so modify this Agreement or amend Schedule 1 shall in any way affect, invalidate or detract from Purchaser’s continuing Security Interest in all Collateral, whether or not listed on Schedule 1.

 

Section 5. Grantor Remains Liable . Grantors hereby agree that, anything herein to the contrary notwithstanding, Grantors shall retain full and complete responsibility for the prosecution, defense, enforcement or any other necessary or desirable actions in connection with their Intellectual Property subject to a security interest hereunder.

 

Section 6. Counterparts . This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature pages may be detached from multiple separate counterparts and attached to a single counterpart.

 

Section 7. Governing Law . This Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

 

[ remainder of page intentionally left blank; signature page follows ]

 

  2  

 

 

In witness whereof , each Grantor has caused this Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

  MARINA BIOTECH, INC.
     
  By: /s/ Vuong Trieu
  Name: Vuong Trieu
  Title: Executive Chairman
     
  ITHENA PHARMACEUTICALS, INC.
     
  By: /s/ Vuong Trieu
  Name: Vuong Trieu
  Title: CFO
     
  CEQUENT PHARMACEUTICALS, INC.
     
  By: /s/ Vuong Trieu
  Name: Vuong Trieu
  Title: President
     
  MDRNA RESEARCH, INC.
     
  By: /s/ Vuong Trieu
  Name: Vuong Trieu
  Title: President

 

ACCEPTED AND AGREED
as of the date first above written:

 

RIVER CHARITABLE REMAINDER UNIT

TRUST, F/B/O ISAAC BLECH, JULY 20,

1987, ISAAC BLECH TRUSTEE

 

By: /s/ Isaac Blech  
Name: Isaac Blech  
Title: Trustee  

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

SIGNATURE PAGE 

 

 

 

 

Schedule 1
to
Intellectual Property Security Agreement

 

REGISTERED COPYRIGHTS

 

None.

 

COPYRIGHT APPLICATIONS

 

None.

 

 

 

Trademark Registrations/Applications

 

Trademark registration number 3749697 with respect to Prestalia.

 

The tradenames “Symplmed”, “Prestalia”, “ACEON” and “DyrctAxess”.

 

 

 

 

Patents and Patent Applications

 

See attached.