Addendum to Security Agreement: Securities Account between Nastech Pharmaceutical Company Inc. and Wells Fargo Bank

Summary

This addendum is part of a Security Agreement between Nastech Pharmaceutical Company Inc. and Wells Fargo Bank, National Association, dated December 19, 2003. It sets rules for managing a securities account pledged as collateral for a loan. Nastech can receive interest and dividends from the account, but cannot withdraw or trade assets without the bank’s consent. The value of the collateral must always cover the loan balance, and Nastech must add assets or pay down the loan if the value drops. Certain assets, like Common Trust Funds, are excluded from the collateral.

EX-10.23 6 v96126exv10w23.txt EXHIBIT 10.23 Exhibit 10.23 ADDENDUM TO SECURITY AGREEMENT: SECURITIES ACCOUNT THIS ADDENDUM is attached to and made a part of that certain Security Agreement: Securities Account executed by NASTECH PHARMACEUTICAL COMPANY INC. ("Debtor") in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"), dated as of December 19, 2003 (the "Agreement"). The following provisions are hereby incorporated into the Agreement: 1. Securities Account Activity. So long as no Event of Default exists, Debtor, or any party authorized by Debtor to act with respect to the Securities Account, may receive payments of interest and/or cash dividends earned on financial assets maintained in the Securities Account. Without Bank's prior written consent, except as permitted by the preceding sentence, neither Debtor nor any party other than Bank may (a) withdraw or receive any distribution of any of the Collateral from the Securities Account, or (b) trade financial assets maintained in the Securities Account. The Collateral Value of the Securities Account shall at all times be equal to or greater than one hundred percent (100%) of the outstanding principal balance of the Indebtedness secured hereby. In the event the Collateral Value, for any reason and at any time, is less than the required amount, Debtor shall promptly make a principal reduction on the Indebtedness or deposit additional assets of a nature satisfactory to Bank into the Securities Account, in either case in amounts or with values sufficient to achieve the required Collateral Value. 2. "Collateral Value" means the percentage set forth below of the lower of the face or market value, or the lower of the face or redemption value, as appropriate, for each type of investment property held in the Securities Account at the time of computation, with such value and the classification of any particular investment property in all instances determined by Bank in its sole discretion, and excluding from such computation (a) all Common Trust Funds, (b) any stock with a market value of $10.00 or less, and (c) all investment property from an issuer if Bank determines such issuer to be ineligible.

-1- (b) rated AAA/Aaa, AA/Aa or SP-1 by a nationally recognized rating agency with maturities greater than 5 years but less than or equal to 10 years 80% (c) rated AAA/Aaa, AA/Aa or SP-1 by a nationally recognized rating agency with maturities greater than 10 years 75% (d) rated A, Baa, BBB or SP-2 by a nationally recognized rating agency with maturities less than or equal to 5 years 80% (e) rated A, Baa, BBB or SP-2 by a nationally recognized rating agency with maturities greater than 5 years but less than or equal to 10 years 75% (f) rated A, Baa, BBB or SP-2 by a nationally recognized rating agency with maturities greater than 10 years 70% COMMERCIAL PAPER: (a) rated A1 or P1 by a nationally recognized rating agency 80% (b) rated A2 or P2 by a nationally recognized rating agency 70% COMMON AND PREFERRED STOCK: (a) traded on the New York Stock Exchange 75% (b) traded on NASDAQ, the American Stock Exchange or a regional exchange: (i) with a market capitalization greater than $7.5B and ** rated A+, A or A- by a nationally recognized rating agency 75% ** rated B+ by a nationally recognized rating agency 60% ** rated B, B- or C by a nationally recognized rating agency 50% (ii) with a market capitalization greater than $1B but less than or equal to $7.5B and ** rated A+, A or A- by a nationally recognized rating agency 60% ** rated B+ by a nationally recognized rating agency 50% ** rated B, B- or C by a nationally recognized rating agency 40% (iii) with a market capitalization greater than or equal to $500MM but less than $1B and ** rated A+, A or A- by a nationally recognized rating agency 50% ** rated B+ by a nationally recognized rating agency 40% ** rated B, B- or C by a nationally recognized rating agency 30%

-2- MUTUAL FUNDS: (a) Listed Money Market 95% (b) Short Term Taxable or Tax Exempt Bonds 90% (c) Intermediate Term Taxable or Tax Exempt Bonds 85% (d) General Taxable Bonds 80% (e) Municipal Bonds, Single State Bonds or Long Term Corporate Taxable Bonds 75% (f) Balanced Stock and Bond Funds (includes flexible portfolio) 75% (g) Domestic Large Cap Stock 70% (h) Domestic Equity Income Stock 70% (i) Domestic Mortgage Taxable Bonds 70% (j) Multi Cap Growth, Value and Core Stock 60% (k) Mid Cap Growth, Value and Core Stock 60% (I) Small Cap Growth, Value and Core Stock 50% (m) Specialty Equity Stock 50% (n) Sector, International, High Yield Taxable and Tax Exempt Stocks and Bonds 50% (o) Listed NASDAQ Mutual Funds 50%

3. Exclusion from Collateral. Notwithstanding anything herein to the contrary, the terms "Collateral" and "Proceeds" do not include, and Bank disclaims a security interest in all Common Trust Funds now or hereafter maintained in the Securities Account. 4. "Common Trust Funds" means common trust funds as described in 12 CFR 9.18 and includes, without limitation, common trust funds maintained by Bank for the exclusive use of its fiduciary clients. -3- IN WITNESS WHEREOF, this Addendum has been executed as of the same date as the Agreement. WELLS FARGO BANK, NASTECH PHARMACEUTICAL NATIONAL ASSOCIATION COMPANY INC. By:/s/ Steven Quay By:/s/ Jeremy B. Smith --------------------- ----------------------------- Steven Quay, CEO Jeremy B. Smith, Vice President By:/s/ Greg Weaver --------------------- Greg Weaver, CFO -4-